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Vertical Agreements - The European Union Competition Regime

On 1 June 2010, new rules governing the application of EU competition rules to vertical agreements came into effect. The new rules consist of a new Vertical Block Exemption Regulation (the “new Exemption”) which provides a legal “safe harbour” for certain agreements from the application of the EU rules and revised guidelines (the “new Guidelines”) (together the “new rules”) which assist parties in assessing the compatibility of their vertical agreements with EU competition law (particularly if the market share threshold for the application of the new Exemption is exceeded). 

The previous versions of the Vertical Block Exemption Regulation (the “previous Exemption”) and Guidelines (the “previous Guidelines”) (together the “previous rules”) had been in effect since 2000 and expired on 31 May 2010.

The new Exemption, like the previous Exemption, provides that a block exemption applies to vertical agreements where a market share threshold is satisfied and where the agreement in question does not contain any “hard-core” restrictions.  Vertical agreements are agreements between businesses operating at different levels of the production or distribution chain, including exclusive distribution, exclusive purchasing, selective distribution and franchising agreements. The EU competition rules (including the new Exemption and new Guidelines), only apply to agreements which affect trade between Member States and which are not regarded as agreements of minor importance.

Agreements that are not covered by the new Exemption do not automatically infringe the competition rules; such agreements must be individually assessed.