Friday, July 23, 2010
Posted by D. Daniel Sokol
Kyriakos Fountoukakos & Kristien Geeurickx (Herbert Smith) explain The New Verticals Block Exemption Regulation and Guidelines—Practical Implications.
ABSTRACT: The new verticals block exemption Regulation and Guidelines came into force on June 1, 2010. Agreements which as of May 31, 2010 satisfied the exemption criteria of Regulation 2790/99 will continue to be exempt for another year, but any new agreements will need to comply with the new Regulation in order to benefit from the automatic exemption. The aim of this article is to look at the practical implications of the new regime for businesses.
The Commission's decision to renew the block exemption Regulation and Guidelines for vertical agreements has been widely welcomed. A clear analytical framework that provides guidance on the Commission's approach to vertical agreements is particularly important in the post-notification era where businesses need to assess by themselves the compatibility of their agreements with competition rules. The regime is also important for national competition authorities and national courts, by providing them with a common framework that contributes to a European wide level playing field.
Although it had been widely accepted that the previous regime has worked well in practice, the Commission, understandably, wanted to take the opportunity of the need to renew the block exemption Regulation and Guidelines to reflect its experience and introduce a number of changes that take account of market developments over recent years. The key changes, some of which were hotly debated during the consultation period, relate to the calculation of the relevant market share threshold, which now applies to both the supplier's and the buyer's market shares, additional guidance regarding online sales restrictions, and additional guidance on the efficiency defense under Article 101(3) which continues the theme of the Commission moving to a more economic, effects-based approach.
Some of these changes seem to have resulted in a stricter approach to vertical agreements whereas others would appear to indicate a relaxation of the rules. It is too early to tell whether on balance the new regime will be more or less strict than the previous one, as much will depend on how the framework is used in practice by businesses and their advisers and how competition authorities, in particular at the national level, apply the new rules.