A vertical agreement is one entered into between two or more parties, each of which operates for the purposes of the agreement at a different level of the production chain, where the primary purpose of the agreement is to purchase, sell or resell goods or services.
In the EU, any agreement between businesses that has as its object or effect the prevention, restriction or distortion of competition in the internal market is generally prohibited. That prohibition is set out in Article 101 of the Treaty on the Functioning of the EU (TFEU) and can be applied to vertical agreements.
However, the TFEU provides for certain agreements to be exempted from the prohibition on anti-agreements. The Vertical Agreements Block Exemption (VABE) is one such exemption, containing criteria that, if satisfied, provide vertical agreements with an exemption from the prohibition on anti-competitive agreements contained in the TFEU, although prohibitions concerning dominant companies continue to apply.
Some vertical agreements are outside the scope of exemption, however. These include vertical agreements which have as their object the restriction of passive sales into an exclusive territory reserved to the supplier or allocated to another buyer.
Earlier this week, the European Commission opened a consultation aimed at collecting "evidence and views from stakeholders" on the VABER and relevant provisions under the TFEU that underpins it.
The consultation is part of a broader evaluation exercise that the Commission is in the middle of to determine whether the VABER is "still effective, efficient, relevant, in line with other EU legislation and adds value". The Commission has said it will use the evaluation "to decide whether to let the Regulation lapse, to prolong or to revise it".
The VABER is due to expire on 31 May 2022.
The VABER is just one of the seven EU block exemptions that will carried across into UK domestic law as "retained exemptions" to account for Brexit. The exemption will apply in the UK until the expiry of the current VABER.
Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said UK businesses would benefit from more guidance on how certain 'passive sales' made through vertical agreements will be treated under UK competition law post-Brexit.