Vertical agreements are agreements made between two or more parties at different levels of the supply chain. These agreements are often made to ensure a steady supply of goods or services and to maintain a certain level of quality. However, not all vertical agreements are exempt from competition law. In this article, we’ll discuss what would disqualify a vertical agreement from block exemptions.

Block Exemptions

Block exemptions are exemptions from competition law that allow companies to enter into certain types of agreements without fear of breaching competition law. These exemptions are granted by the European Union (EU) and are designed to help promote competition while still allowing companies to make agreements that will benefit consumers.

The Vertical Agreements Block Exemption Regulation (VABER) is a specific block exemption that applies to certain types of vertical agreements. These types of agreements include distribution agreements, franchising agreements, and supply agreements. However, not all vertical agreements are exempt from competition law, and if an agreement fails to meet certain criteria, it can be disqualified from block exemptions.

Qualifying Criteria for Block Exemptions

To qualify for a block exemption, vertical agreements must meet certain criteria. Firstly, the agreement must not contain any restrictions that prevent a party from selling to any customer or territory. This means that suppliers cannot restrict their buyers from selling goods or services to certain customers or territories.

Secondly, the agreement must not contain any restrictions on passive sales. Passive sales refer to sales that are made without any active solicitation or marketing. For example, if a retailer receives an order from a customer outside of their designated territory, they should be able to fulfill the order without breaching the agreement.

Thirdly, the agreement must not contain any restrictions on the supply of components or parts. This means that suppliers cannot prevent buyers from obtaining components or parts from other suppliers to use in their products.

Lastly, the market share of the parties involved must not exceed certain thresholds. If the market share exceeds these thresholds, the agreement will be disqualified from block exemptions.

What Can Disqualify an Agreement from Block Exemptions?

If a vertical agreement fails to meet any of the qualifying criteria for block exemptions, it can be disqualified. Additionally, if an agreement contains any clauses that are considered anti-competitive or unfair, it can also be disqualified.

One example of an agreement that could be disqualified is an exclusivity clause. An exclusivity clause would prevent a buyer from purchasing products from any other supplier. This would give the supplier too much control over the market, and prevent other suppliers from entering the market.

Another example of an agreement that could be disqualified is a minimum resale price clause. This clause would prevent a buyer from selling products below a certain price. This would prevent competition between retailers, and raise prices for consumers.

Conclusion

In conclusion, not all vertical agreements are exempt from competition law. For an agreement to qualify for block exemptions, it must meet certain criteria, including the absence of certain types of restrictions and a market share below certain thresholds. If an agreement fails to meet these criteria or contains anti-competitive clauses, it can be disqualified from block exemptions. As a professional, it is important to understand the implications of vertical agreements and the criteria for block exemptions.