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Block Exemption for Vertical Agreements: An Overview for Business Owners

For business owners, understanding the legal jargon around vertical agreements can be a daunting task. However, it is essential to ensure that agreements between companies and their suppliers/distributors comply with competition laws. This is where the concept of Block Exemption comes into play.

What is Block Exemption for Vertical Agreements?

Block Exemption Regulation (BER) is a legal provision that allows certain types of agreements to be exempted from EU competition laws. These agreements are vertical agreements between companies operating at different levels of the supply chain. In simpler terms, it includes agreements between suppliers and distributors or retailers.

Vertical agreements are those where one party agrees to supply goods or services to another party. Such agreements commonly include distribution agreements, licensing agreements, franchise agreements, and supply agreements.

The purpose of Block Exemption is to give some flexibility in these agreements while ensuring that competition laws are not compromised. It allows businesses to enter into agreements that may otherwise be prohibited by competition laws, as long as they meet the criteria.

How does Block Exemption work?

Block Exemption means that certain categories of vertical agreements are automatically exempted from competition laws. This means that businesses don`t need to worry about obtaining individual approval for their agreements from the European Commission.

This regulation simplifies the process for companies and promotes legal certainty. Businesses that comply with the criteria of Block Exemption are safe from legal challenges and fines for breach of competition law.

What are the criteria for Block Exemption?

The criteria for Block Exemption are outlined in the Vertical Block Exemption Regulation (VBER). The most important criteria are:

– The market share of the parties: The parties must have a combined market share of no more than 30% in the relevant market.

– No hard-core restrictions: The agreement must not include any hard-core restrictions. These are restrictions that are considered to be particularly harmful to competition. Examples include resale price maintenance, territorial restrictions, and restrictions on active and passive sales.

– Benefits for consumers: The agreement must have benefits for consumers, such as lower prices or better quality products.

Note that Block Exemption only applies to agreements that meet all the criteria. If an agreement includes hard-core restrictions, it will not be exempted from competition laws.

Conclusion

In conclusion, Block Exemption for vertical agreements is an essential provision for businesses. Complying with the criteria outlined in VBER ensures that businesses can enter into agreements with suppliers and distributors without worrying about violating competition laws. This, in turn, enables businesses to operate more efficiently, provide better quality products to consumers, and promote fair competition in the market.