Vertical agreements are agreements for the sale and purchase of goods or services between two or more companies operating at different levels of the supply chain for the purposes of the agreement (e.B. distribution agreements between a manufacturer and a distributor). Yes. The CMA intends to consult the Guidelines separately, but expects the Guidelines to contain not only general guidance on the specific provisions of the VABEO, but also clarifications on several specific issues that often raise questions when companies verify the compliance of their vertical agreements with VABEO: On 3 October 2021, the UK Competition and Markets Authority („CMA“) issued its recommendation to the Secretary of State for Economic Affairs. Energy and industrial strategy on whether the existing Vertical Agreement Block Exemption Regulation („VABER“), which is both in force in the EU and adopted from EU law after Brexit, should be renewed or amended in the UK. The retained VABER expires on 31 May 2022, so that without extension or amendment, an automatic exemption regime for vertical agreements would no longer apply to the United Kingdom. The retained VABER currently provides the framework for the review of so-called „vertical“ agreements (i.e. between parties at different levels of the supply chain, e.B a distribution agreement) under UK competition law. At EU level, vertical agreements are subject to the EU`s Vertical Block Exemption Regulation (DDPER), which the UK maintained when it left the EU. The CMA recommends that the general sales clauses be as good as possible (i.e., where a supplier may not offer the product or service on better terms on another platform or channel, including the provider`s website) constitute a hardcore restriction (i.e. take a vertical agreement outside the scope of the UK VABEO). Conversely, however, the CMA recommends that close most-favoured-nation treatment for retail customers (i.B if a supplier is not allowed to offer the product/service on better terms on its own website) remain exempt from the new UK VABEO. The CMA recommended that the VBEO maintain this exemption, but extend it to dual distribution agreements between wholesalers and importers.
This is another example of a possible divergence from the EU, which has proposed the introduction of a new market share ceiling for companies wishing to benefit from this exemption (i.e. to limit rather than broaden its scope). Possible options for the EU: Paragraph 64 of the EU Vertical Guidelines recognises that, although dual display of prices is inexhaustible under the Block Exemption Regulation, it may qualify for an individual exemption under Article 101(3) TFEU. This may be the case if online sales force manufacturers to bear significantly higher costs (. B installation, customer support or warranty claims) than with offline sales. The European Commission can amend vabers to allow the application of different criteria for online and offline sales in selective distribution agreements, while providing guidance on different restrictions that could restrict online sales and hinder customer choice. The CMA`s recommendation states that the exemption should also apply to dual distribution by wholesalers and importers. This is also the policy option proposed by the Commission in its revised draft Block Exemption Regulation.
However, contrary to the Commission`s stricter approach of proposing a lower market share threshold for dual distribution covered by the Block Exemption Regulation, the CMA does not recommend limiting the scope of the exemption. This is a welcome development for UK companies, which do not have to carry out a rigorous market definition to ensure that their agreements fall within the scope of VABEO. The CMA is also considering providing more guidance for the exchange of information on dual distribution; This is a matter of particular concern to businesses and further guidance would be welcome. The current situation: it is a condition of VABER that the market shares of each vertically connected party must not exceed 30%. As a retained EU law, VABER also offers protection in relation to the national equivalent of Article 101(1) TFEU, the prohibition in Chapter I of the UK Competition Act 1998 (`chapter I prohibition`). As a result, supply agreements concerning the UK market (but not affecting trade between EU Member States) covered by VABER remain exempt from the Chapter I prohibition. It should be noted that the vaber and any subsequent EU block exemption regulation will continue to apply to vertical agreements affecting intra-EU trade, regardless of future changes in UK competition law. CMA Proposal: The CMA intends to maintain its current position. Although it has been argued that VABER`s exclusions for these obligations are arbitrary, the parties are free to justify the restrictions.
Although an agreement may contain provisions to retroactively terminate a tacitly renewed obligation, Article 5 aims to ensure that channels are automatically opened at least every five years in order to ensure better access to suppliers and consumer choice. VBEO`s guidelines will address the post-termination provisions necessary to protect know-how and also to apply VBEO`s non-compete obligations in the context of franchise agreements. The proposed new VABEO is the UK`s first autonomous legal act on business-to-business agreements, and Eversheds Sutherland has been actively involved in the consultation process. We are happy to discuss any areas of concern for your company arising from the new regulations for vertical agreements. While the European Commission agrees to extend VABER`s advantage to dual distribution scenarios between wholesalers and importers, it also proposes to introduce a stricter common market share threshold (10%) at retail level in order to benefit from the derogation. This would mean that the block exemption would apply to all aspects of a dual distribution system, including all horizontal restrictions resulting from the exchange of information between competing parties. .