Individual exemptions under Article 101(3) TFEU

The following Competition practice note provides comprehensive and up to date legal information covering:

  • Individual exemptions under Article 101(3) TFEU
  • Restrictive agreements and the ‘efficiency defence’
  • First condition for an individual exemption—economic benefits
  • Economic benefits—introduction
  • Cost efficiencies and qualitative efficiencies
  • Link between efficiencies and relevant market
  • Second condition for an individual exemption—pass on
  • Third condition for an individual exemption—indispensability
  • Fourth condition for an individual exemption—elimination of competition
  • Block exemptions

Individual exemptions under Article 101(3) TFEU

There are often legitimate reasons why companies enter into agreements that contain provisions or obligations that risk restricting competition. In particular, this will be the case where arrangements are concluded in order to generate or promote beneficial effects (so-called 'efficiencies') which, absent the restriction contained in the agreements, would not arise.

In general, such efficiencies derive from vertically or horizontally aligned companies working together to achieve something that individually they could not otherwise achieve—or at least not as efficiently (due to financial, technical, and/or logistical issues). Research and development, production, purchase and distribution/sales activities represent distinct stages in the supply chain—with firms at each stage deciding whether to undertake the given process alone or with others.

Where collective rather than individual action is deemed optimal, parties might agree restraints or obligations deemed necessary to protect an investment in relation to, for example, the development of a geographical market, a technology, a production plant or an industrial process or to increase the parties' purchasing power vis-à-vis a powerful supplier. More commonly, restraints may be required simply to facilitate day-to-day business activities such as distribution or supply/purchasing arrangements.

Absent the inclusion of ‘hardcore’ stipulations (ie price-fixing, market or customer sharing provisions, etc), most such agreements will be competitively benign and will be viewed positively regardless of the exact nature or scope of the

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