Vertical restraints

Vertical distribution agreements are agreements between companies at different levels of trade or industry. They concern the parties' feasibility of buying, selling, or reselling certain goods or services.

Vertical agreements can have both negative and positive effects on competition. In the case that positive effects outweigh the negative ones, European competition law provides the possibility to allow contract terms which may restrict competition. Vertical restraints to which the vertical Block Exemption Regulation (vertical BER) applies are considered to have predominantly positive effects on competition. It raises the question, is the Block Exemption Regulation applicable or not?

The exemption, covering all vertical agreements, requires that the market share held by the supplier and the buyer does not exceed 30%. 

The dependence between the market share and the block exemption brings the need to correctly define the relevant market and applying economic analyses. Undertakings, wishing to assess whether their agreements are exempt or not, have to define their market share on the relevant market as outlined in the European Commission's notice on the definition of the relevant market. A correct and appropriate market definition is a chance for undertakings to gain legal certainty about their agreements. A market definition which is not suitable will lead to errors about the market shares and, therefore, to legal uncertainty instead. Consequently, a correct definition of the relevant market is essential.

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