Vertical Block Exemptions – An Overview

Chapter 2 of the Competition Act 1998 (for UK) incorporates Article 101 of the Treaty on the Functioning of the European Union (TFEU) – (formally 81 of the EC Treaty) which covers abuse by an undertaking of a dominant position within the UK/EU market).

For a dominant position to occur the supplier or purchaser must have 30% or more of the relevant market share but this figure can be less in the EU.Â

Financial penalties can be 10% of world wide turnover for abuse.Â

Territorial restrictions, export bans, customer restrictions and price fixing are all known as hardcore restrictions and all come under article 101 TFEU (ie do not fall within the scope of the new block exemption – commission regulation no 330/2010).

Parties must operate on a different level… ie distribution/agency

Block exemptions exist so that is so the Commission does not have to investigate agreements which appear to infringe art 101 TFEU but do not impose serious restrictions on competition in the EU and which may in fact stimulate trade and benefit customers (ie exclusive agreements).

If an agreement falls within the terms of a block exemption it falls outside art 101.

Hardcore restrictions also include price setting and excluding unsolicited sales.

To fall within the safety of vertical block exemption 330/2010a you must (1) be dealing with a vertical agreement (i.e. distributor / agency), (2) the suppliers and buyers market share must be less than 30% and (3) there must be no hardcore restrictions ie price fixing, export bans, territorial restrictions.

Vertical agreements that fulfill the conditions for exemption and do not contain any “hardcore restrictions” of competition are exempted from the prohibition in Article 101(3) of the Treaty on the Functioning of the European Union by Regulation 330/2010.

Notice on Agreements of Minor Importance

If there is an agreement between competitors and their combined market share is less than 10% of market then the agreement will not be effected by article 101 TFEU.

If the agreement is between non competitors less and their market share is less than 15% each then the agreement will not be effected by article 101.

But there can be no hardcore restrictions such as price fixing, customer and territorial restrictions, export bans.

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