Global enforcement priorities in vertical agreements

Investigating and identifying violations of competition law in vertical agreements has historically posed greater challenges under EU competition law compared to horizontal agreements. In recent years, vertical agreements have been at the top of the agenda for a number of antitrust authorities, with important legal reforms taking place in the EU.

Vertical agreements refer to agreements or concerted practices between companies at different levels of a supply chain, for example, between a manufacturer and a retailer, and which relate to the conditions under which the parties may purchase, sell or resell certain goods or services. While such agreements often reduce transaction costs and promote beneficial investments, they can violate competition law if they raise market barriers or otherwise restrict competition. In particular, vertical agreements which simply set basic terms (e.g. price or quantity) will usually not restrict competition, while restrictive effects may arise where agreements concern limitations on the ability to purchase or resell (e.g. limitations concerning who the product can be resold to).

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits restrictive agreements in the EU, but also allows exceptions to this rule when agreements do not eliminate competition completely, increase efficiency, and allow consumers to share in the benefits (Art.101(3) of the TFEU).

In order to ensure legal certainty for vertical agreements, the EU Commission has established “block exemptions” from Article 101 of the TFEU and issued guidelines on the application of these exemptions.

The latest development is the new Vertical Block Exemption (VBER) and the accompanying Guidelines on Vertical Restraints, which came into force on 1 June 2022. These follow an assessment carried out by the Commission focused on the increasing growth of online sales and the digital market and, in parallel to the rules governing horizontal agreements, the digital transition and the European Green Deal.

The new legislation takes account of the fact that the internet has become one of the central distribution channels for online sales and cross-border trade in recent years. Its growing importance is reflected in the new VBER by including limitations on online sales as a hardcore restriction if they have “the purpose, directly or indirectly [...], of preventing purchasers or their customers from using the Internet for the sale of contract goods or services”. The Commission has also sought to give suppliers more flexibility to design their distribution networks according to their needs.

With these new rules now settled in the EU, we can expect enforcement of anti-competitive vertical restraints to be high on the agenda of European competition authorities.

The guide gives a country-by-country overview of vertical restraints and distribution.

Estimation of total penalties for vertical anti-competitive practices (in EUR)¹

¹Please note that the amounts provided herein derive from the abuse of dominance practices that do not necessarily derive from vertical agreements, and there might be other cases that do not appear in the COFECE database.