EU Block Exemption for Vertical Agreements: What You Need to Know

The EU Block Exemption for Vertical Agreements is a legal framework that regulates agreements between businesses operating at different levels of the supply chain. Under this framework, certain types of agreements are exempted from the EU competition rules, provided they meet specific conditions.

What are vertical agreements?

Vertical agreements are contracts or arrangements between businesses that are operating at different levels of the supply chain. For example, a manufacturer and a distributor, or a supplier and a retailer.

These agreements can cover a wide range of issues, such as pricing, distribution, marketing, and intellectual property rights. They are usually designed to coordinate the behavior of the parties involved and to promote efficiency and innovation in the market.

However, vertical agreements can also limit competition, reduce consumer choice, and harm consumers` interests. Therefore, the EU has established a legal framework to regulate them and prevent anticompetitive behavior.

What is the EU Block Exemption for Vertical Agreements?

The EU Block Exemption for Vertical Agreements is a set of rules that allows businesses to enter into certain types of vertical agreements without infringing the EU competition rules. This means that these agreements are exempted from the prohibition of anticompetitive practices under Article 101 of the Treaty on the Functioning of the European Union (TFEU).

The present Block Exemption Regulation (330/2010) entered into force in 2010 and will expire on May 31, 2022. The Commission has launched a public consultation on the revision of the Regulation and is expected to adopt a new one in 2022.

Which agreements are covered by the Block Exemption?

The Block Exemption covers four categories of agreements. The first category includes agreements that provide for the purchase, sale, or resale of goods or services. The second category includes agreements that relate to the conditions under which the parties may use, produce, sell, or purchase goods or services.

The third category covers agreements that relate to the promotion or distribution of goods or services, such as selective distribution agreements or franchising agreements. The fourth category covers agreements that relate to intellectual property rights, such as licensing or transfer agreements.

To benefit from the Block Exemption, these agreements must meet a set of conditions laid down in the Regulation. For instance, they must not contain any hardcore restrictions, such as price-fixing or market-sharing, and they must not lead to a significant restriction of competition.

What are the benefits of the Block Exemption?

The Block Exemption provides businesses with legal certainty and reduces the risk of antitrust litigation. It also allows them to benefit from the efficiencies and synergies generated by vertical agreements, such as economies of scale, better quality control, or innovation.

Moreover, the Block Exemption encourages intra-brand competition, which means that different distributors or retailers can compete with each other to offer better services or prices to consumers. This enhances consumer choice and fosters innovation.

Conclusion

The EU Block Exemption for Vertical Agreements is a crucial legal framework that regulates the behavior of businesses operating at different levels of the supply chain. It strikes a balance between promoting efficiency and innovation and preventing anticompetitive behavior that harms consumers.

If you are a business owner or a legal professional operating in the EU, you need to be aware of the rules and conditions of the Block Exemption to ensure compliance with the EU competition law. You may also want to participate in the public consultation launched by the Commission to shape the future of the Block Exemption.