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Vertical Agreements New Competition Rules for the Next Decade

Vertical Agreements: New Competition Rules for the Next Decade

Vertical agreements are contracts between companies at different levels of the supply chain. These agreements often include distribution, licensing, and franchising agreements. Vertical agreements are becoming more and more important in the digital age, where many companies are integrating their businesses and developing new business models. However, vertical agreements can also raise competition concerns.

In December 2018, the European Commission adopted a new set of rules for vertical agreements. These new rules will apply from June 1, 2022, and will replace the current rules that have been in place since 2010. The new rules are intended to take into account the changes in the digital economy and the growing importance of online sales.

One of the key changes in the new rules is the so-called “blacklist” of hardcore restrictions. These are restrictions that are considered to be always illegal and will not be allowed in any circumstances. The new blacklist will include pricing restrictions, restrictions on cross-border sales, and restrictions on the use of online marketplaces.

The new rules also introduce a new concept of “dual distribution”. This refers to situations where a supplier sells the same or similar products directly to consumers through its own website or physical stores, as well as through other retailers. The new rules clarify that dual distribution is generally legal, but that the supplier must ensure that the different channels of distribution are not used to engage in anti-competitive practices.

In addition, the new rules provide for a new safe harbor for small and medium-sized enterprises (SMEs). The safe harbor will apply to vertical agreements between SMEs and their customers or suppliers, provided that the market share of the parties does not exceed 30 percent.

The new rules also clarify the rules on resale price maintenance (RPM). RPM is a practice where a supplier sets a minimum price at which its products can be resold by its distributors. The new rules clarify that RPM is illegal, but that a supplier can set a maximum price or recommend a price.

Finally, the new rules provide for more flexibility for suppliers to defend their online sales models. The rules clarify that suppliers can impose restrictions on the use of their products and brands in online advertising, as long as these restrictions are proportionate and do not amount to an outright ban.

In conclusion, the new rules on vertical agreements are an important development for the competition law regime in the European Union. These rules will provide more clarity and certainty for businesses in the digital age, and will help ensure that competition is not unduly restricted by vertical agreements. Companies should review their existing agreements and ensure compliance with the new rules ahead of their entry into force in 2022.