Safe Harbour

Author:Mr Marco Hickey and Aoife Nic Lochlainn
Profession:LK Shields
 
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The European Commission takes a dim view of cartels, price-fixing and anti-competitive practices, but it does make exceptions for certain types of agreements made between undertakings operating at different levels of the supply chain. Marco Hickey and Aoife Nic Lochlainn explain. Under EU law (specifically article 101 of the Treaty on the Functioning of the European Union), there is a general ban on agreements and practices that might affect trade between EU member states and which might prevent, restrict or distort competition within the internal market. Article 101 provides a list of examples of such prohibited agreements, including price-fixing agreements, market-sharing arrangements and agreements to limit or control levels of production (all of which can loosely be described as cartel-type activities), as well as contracts which impose supplementary obligations on parties that have no connection to the contract (that is, tie-in arrangements).

Agreements banned under Article 101 are void and unenforceable. Nevertheless, contracting parties can benefit from an exception to the general prohibition either by satisfying certain conditions on a self-assessment basis or by fulfilling the requirements of the Block Exemption Regulation, which automatically exempts a defined category of agreement. The requirements that need to be satisfied for an exemption to apply are as follows:

The agreement contributes to improving the production or distribution of goods, or it promotes technical or economic progress, Consumers are allowed a fair share of the resulting benefit, The agreement does not impose unnecessary or disproportionate restrictions on the contracting parties, and The agreement does not give rise to the possibility of eliminating competition in respect of a substantial part of the products in question. An agreement which falls within the Block Exemption Regulation is deemed to satisfy these conditions. As a result, the parties to 'vertical agreements' - that is, agreements made between undertakings operating at different levels of the supply chain, such as distribution, supply and franchise agreements - should try to model their agreements so that they fall within the parameters of the Block Exemption Regulation.

New Block Exemption Regulation

Under the new Block Exemption Regulation which came into force on 1 June (and is valid until 31 May 2022) certain categories of vertical agreements and concerted practices are...

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