New Block Exemption for Vertical Agreements
In general agreements are unlawful in the EU if their intent or effect is to distort or restrict competition. An agreement is exempt however if in spite of the restricitions contained within it it can be shown to be in the overall interest of consumers. It is up to the parties to assess whether a particular agreement is within this exemption but to help them the Commission issues block exemptions for particular types of agreement. If your agreement follows the rules laid down in the block exemption for your type of agreement you will normally be OK. Block exemptions are issued for a limited time and are then reviewed. This summer saw the previous block exemption for vertical agreements replaced with a new one (Regulation 330/2010) that is to remain in force until the end of May 2022. Vertical agreements are agreements between different levels in the supply chain – most commonly distribution agreements.
The new Regulation largely repeats the the arrangements authorised by the last one but there are three very important changes. Firstly the 30% market share is now extended to the purchaser as well as the seller ie. both parties must fall below this threshold for the agreement to be exempt. This will be helpful to smaller companies who may feel bullied by powerful purchasers into accepting terms they do not like. Secondly retail price maintenance is now permitted in specific circumstances such as for a new product launch. The other changes relate mainly to a growing recognition of the importance of on line trade. In general on line trade is considered passive and so sales outside an agreed territory cannot be banned or diverted by the supplier unless the distributer undertakes some more overt act such as mail shots into the other territory. Interestingly the guidelines say that merely making your website available in another language will not be considered soliciting trade in that other country – this seems very odd to me.
As ever you should take advice if you have concerns about any of your agreements. Agreements that were exempt under the old block exemption can remain in force until next May but must be reviewed by then if they are to continue to benefit from the dispensation.