EU Regulation or UK Order that exempts a category of agreements, often according to their sector (e.g. Motor vehicle distribution agreements) from the prohibitions in Article 101(1) TFEU and section 2 of the Competition Act 1998
Block exemptions are designed to provide greater legal certainty to businesses on the application of EU and UK competition law and are provided to categories of agreements where the benefits they generate outweigh the anti-competitive effects. Agreements covered by a block exemption thereby satisfy the criteria for exemption from the prohibitions, in Articles 101(1) TFEU and section 2 of the Competition Act 1998, outlined in Article 101(3) TFEU and section 9 of the Competition Act 1998 respectively.
STOP PRESS—On 10 May 2022, the Commission adopted a new Vertical Block Exemption Regulation (Commission Regulation 2022/720) (EU VBER). The new EU VBER replaces the previous Regulation on 1 June 2022. This Practice Note will be updated shortly to reflect the new laws.Intellectual property (IP) agreements relating to, for example, licensing of technology and for the joint development of new technology, may have a restrictive effect on competition. However the pro-competitive benefits are recognised in block exemptions that provide a ‘safe harbour’ from the application of Article 101 TFEU. For agreements falling neatly within a block exemption, only a very cursory examination of Article 101 TFEU issues is needed. Unfortunately, several block exemptions may be potentially applicable and also identifying whether an agreement is definitely within a safe harbour can be difficult—a more practical approach to most commercial arrangements may be necessary.All block exemptions have a broadly similar structure. Familiarity with the overall structure will help in applying the rules. First the block exemption has a set of recitals, which explain broadly what its purpose is. These are supplemented by a definitions section. In practical terms, it is sensible to pay considerable attention to both the recitals and the definitions—they can be crucial in understanding the correct approach to applying the block exemption. The precise scope of the ‘safe harbour’
STOP PRESS—On 10 May 2022, the Commission adopted a new Vertical Block Exemption Regulation (Commission Regulation 2022/720) (EU VBER). The new EU VBER replaces the previous Regulation on 1 June 2022. This Practice Note will be updated shortly to reflect the new laws.The Vertical Restraints Block Exemption Regulation (VRBE, Regulation No 330/2010) defines a category of vertical agreements which the European Commission will normally regard as satisfying the conditions set out in Article 101(3) TFEU and will not therefore fall foul of Article 101 TFEU.This Practice Note sets out the main provisions of the VRBE. It examines the relevant market share thresholds which the parties to an agreement must fall within to be exempt under the VRBE; sets out the hardcore restrictions contained within the VRBE, the inclusion of which result in the agreement falling foul of the VRBE; and discusses the excluded restrictions which will not be covered by the VRBE.Finally, this Practice Note will look at what to consider if a vertical arrangement does not meet any of the conditions for the VRBE to apply.Agreements that are not capable of appreciably affecting trade between Member States or appreciably restricting competition by object or effect are not caught by Article 101(1) TFEU and therefore fall outside the scope of the block exemption. These may, however, fall to be assessed under
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Preferred supplier agreement (goods)—pro-customer STOP PRESS: The Retained Vertical Agreements Block Exemption, Retained Regulation (EU) No 330/2010 (UK VBER) expires on 31 May 2022. On 9 May 2022, the UK Government laid before Parliament The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022 (UK VABEO). The UK VABEO will replace the UK Retained VBER on 1 June 2022. See Practice Note: UK block exemptions revision—tracker. The EU Vertical Restraints Block Exemption, Regulation (EU) No 330/2010 (outgoing EU VBER) expires on 31 May 2022. On 10 May 2022, the European Commission adopted the EU Vertical Restraints Block Exemption, Regulation (EU) No [ref]/2022 (new EU VBER) and Vertical Guidelines that will replace the outgoing EU VBER on 1 June 2022. See Practice Note: EU block exemptions revision—tracker. This Precedent reflects the requirements of the outgoing block exemptions until 31 May 2022. It is under review and will be updated to reflect the requirements of the new block exemptions in due course. This Agreement is made on [date] Parties 1 [insert name of supplier] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Supplier); and 2 [insert name of customer] [of OR a company incorporated in [England and Wales] under number [insert registered number] whose registered office is at] [insert address] (Customer), each of the Supplier and the Customer
Competition law compliance—exclusive agreement checklist for staff Assessing whether exclusivity is likely to lead to anti-competitive effects is not a straightforward exercise—there are a number of factors to consider, and in many instances, exclusive arrangements may not be possible at all. This Competition law compliance—exclusive agreement checklist is intended to assist you in considering relevant competition law factors before entering into an exclusive agreement. It covers topics that are relevant for all undertakings, not just those that may be considered to be dominant. Always seek guidance from [insert, eg the legal team] before entering into agreements containing exclusivity provisions. 1 Exclusivity Factor Result Comments Is the buyer obliged or induced to concentrate its orders for a particular product or service with only one supplier (so-called single-branding/exclusive sourcing)?Note that even an obligation or inducement to purchase more than 80% of the requirements from one supplier counts as exclusivity. ☐ Yes☐ No [Insert comments] Has the supplier agreed to sell its products to only one distributor for resale in a particular territory (which in turn is limited in its ability to actively sell the product into other territories—so-called exclusive distribution)? ☐ Yes☐ No [Insert comments] Does the agreement contain a combination of exclusive sourcing and exclusive distribution obligations?Note that it is very unlikely that such a combination could be justified. ☐ Yes☐ No [Insert comments] 2 Market conditions
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Can a non-exclusive distributor appointed to a territory be prevented from selling outside that territory? In this Q&A we are referring to restrictions on sales into territories within EEA. Agreements between companies operating at different levels in the supply chain are often called ‘vertical agreements’. Vertical agreements may also be described as distribution agreements, although this does not reflect their full range and diversity. However, certain types of distribution arrangement may be prohibited under competition law, some examples of which include: • exclusive distribution—where the supplier agrees to sell to only one distributor for resale in a particular territory (see Practice Note: Competition law and exclusive distribution agreements) • selective distribution—where the supplier agrees to supply only specified approved distributors, who in return agree to sell on only to other approved distributors and end users (see Practice Note: EU competition law and selective distribution) • exclusive customer allocation—where the supplier agrees to sell to each distributor for resale only to an exclusive class of customers Article 101 TFEU and the vertical restraints block exemption Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements which have as their object or effect the prevention, restriction or distortion of competition within the internal market. It does not apply to agreements within the same corporate group so that agreements between a company and its subsidiaries who may act as distributors
Is a del credere agent considered a ‘genuine’ agent for the purposes of UK and EU competition law? A ‘genuine’ agency relationship will fall outside the scope of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) and the Chapter 1 prohibition of the UK Competition Act 1998. Note that the Competition (Amendment etc) (EU Exit) Regulations 2019, SI 2019/93 retained Commission Regulation (EU) No 330/2010 (the Vertical Agreements Block Exemption Regulation (VRBE)) until it expires on 31 May 2022, as the UK VRBE. A genuine agent for the purposes of UK and EU competition law occurs where: • the property does not vest in the agent/the agent does not supply the contract services itself, and • the agent does not bear any (or bears only insignificant) commercial or financial risk A genuine agent working for the benefit of a principal ‘may…be treated as an auxiliary organ forming an integral part of the latter’s undertaking, who must carry out his principal’s instructions and thus, like a commercial employee, forms an economic unity with his undertaking’ (see Daimler Chrysler v Commission at para ). The principal and agent are effectively regarded as one economic entity. As such, the relationship is outside the scope of UK and EU competition law. Case law has made it clear that the risk requirement is strict and paragraphs
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Welcome to this week’s edition of the In-house weekly highlights, a curated summary of news analysis and new content from across the legal landscape. These highlights focus on key risk & compliance, commercial, corporate, information law and employment developments that will be relevant to most in-house lawyers.
This week's edition of Commercial weekly highlights includes: analysis of the Court of Appeal judgment in Candey Ltd v Bosheh and Salfiti which held that there was no implied duty of good faith in a conditional fee agreement, analysis of the High Court decision in Costa v DissociaDID Ltd considering if a valid contract was made between the parties whilst producing YouTube videos and analysis of the court’s decision relating to jurisdiction over COVID-19 related business interruption claims in Al Mana Lifestyle Trading LLC and others v United Fidelity Insurance Company PSC and others.
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One of the main advantages of a distribution agreement for a supplier is that the supplier will have only one source, or at least a limited number of sources, of credit risk, in the relevant territory. All the supplier needs to check is the credit-worthiness of the distributor, not the people to whom the distributor distributes. Naturally, the main commercial advantage for a distributor is the exclusive right to re-sell products in a defined territory. The distributor bears the risk of the failure to find customers or customers failing to pay.The supplier does not
69 SeverabilityIt should be provided that any part of the agreement that is held to be illegal or unenforceable is severable from the remainder of the agreement and in no way adversely affects it. The franchisor may however wish to procure that if certain key clauses are struck out then it has the option to terminate.
Block exemption is referenced 3 in Encyclopaedia of Forms and Precedents
Where the CMA1 is considering whether to make a reference2 of a completed or anticipated merger3, and it has reasonable grounds for suspecting that it is or may be the case that two or more enterprises have ceased to be distinct or that arrangements are in progress or in contemplation which, if carried into effect, will result in two or more enterprises ceasing to be distinct4, the CMA may by order, for the purpose of preventing pre-emptive action5: (1) prohibit or restrict the
Block exemption is referenced 1 in Halsbury's Laws of England
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