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The Vertical Agreements Regulation: A Critical Appraisal
Published online by Cambridge University Press: 27 October 2017
Extract
The Vertical Agreements Regulation may be judged in one of two ways, each yielding a different conclusion. It may be regarded, on the one hand, merely as a limited measure required at a particular time in the development of competition policy to correct some of the more obvious errors of previous Regulations. On the other hand, it may be assessed for its potential as a template for future Regulations. Is it to be regarded as a means of rectifying historic block exemptions or is it at the cutting edge of progressive policy? Without doubt it appears chronologically at one of the most important shifts in competition policy in decades and that is why there is much to be gained from reviewing the Regulation critically for improvements that can be carried forward into future Regulations.
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- Copyright © Centre for European Legal Studies, Faculty of Law, University of Cambridge 2000
References
1 Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the application of Art. 81(3) of the Treaty to categories of vertical agreements and concerted practices, OJ 1999 L. 336/21.
2 Commission Notice, Guidelines on Vertical Restraints, OJ 2000 C 291/1, Guideline 65.
3 Guidelines 66 to 67.
4 White Paper on Modernisation of the Rules Implementing Arts. 81 and 82 of the Treaty, COM 99/027, now reflected in the proposals for the Implementing Regulation published September 2000.
5 Green Paper on Vertical Restraints in EC Policy COM (96).
6 COM (99) 687 final.
7 Directive 97/7 of the European Parliament and of the Council of May, 1997 On the Protection of Consumers in Respect of Distant Selling OJ 1997, L 144/19.
8 99/33/EC.
9 Supra, n 6.
10 Respectively, Regulation (EEC) No 1983/83 of 22 June 1983 on the application of Art. 81(3) of the Treaty to categories of exclusive distribution agreements, OJ L173 1; Regulation (EEC) No 1984/83 on the application of Art. 81(3) of the Treaty to categories of exclusive purchasing agreements, OJ L 173 5; Regulation (EEC) No 4087/88 of 30 November 1988 on the application of Art. 81(3) of the Treaty to categories of franchise agreements [1988] OJ 359 46.
11 Council Regulation 19/65 of 2 March, 1965 on the application of Art. 81(3) of the Treaty to certain categories of agreements and concerted practices [1965] JO 533/65.
12 Art. l(l)(a).
13 Art. 1(2)(b).
14 Council Regulation 17/62, First Regulation implementing Arts. 81 and 82 of the Treaty, [1962] OJ L 13/204.
15 Council Regulation (EC) No 1216/1999 of 10 June 1999 amending Regulation 17: First Regulation implementing Arts. 81 and 82 of the Treaty, [1999] OJ L 148/5.
16 In fact the range of vertical agreements in Art. 4(2) is wider than that covered by the Regulation.
17 There is no prescribed form for comfort letters which simply state that an agreement does not fall within Art. 81(1) or is within the terms of a block exemption but all too often the Commission inserts limitations in its comfort letters such as the right to keep matters under review if the industry in question is unstable or emerging.
18 Guideline 25.
19 Art. 2(2) and Guidelines 28 to 29.
20 Art. 2(3) and Guidelines 30 to 37.
21 The term “connected undertakings” is defined in Art. 11 by reference to corporate control. Article 10 sets out the principles for measuring turnover, borrowing from other Commission materials that specify methods of turnover calculation.
22 Supra, n 13.
23 See Guideline 27.
24 Certain ambiguity exists in the text of Art. 3 as to whether the supplier’s market share threshold (in Art. 3(1)) and the buyer’s market share threshold (in Art. 3(2)) are alternative or cumulative requirements. The words, “Subject to paragraph 2” in Art. 3(1) could mean, “save in the case of vertical agreements containing exclusive supply obligations, to which paragraph 2 applies” or “subject to the further requirements of paragraph 2 in the case of vertical agreements containing exclusive supply obligations”. Recital 8 of the Regulation offers some clarification by stating that, “in the case of vertical agreements containing exclusive supply obligations, it is the market share of the buyer which is relevant in determining the overall effects of such vertical agreements on the market”. Guideline 89 puts the matter beyond doubt by stating: “Only in the case of exclusive supply…is it the market share of the buyer, and only that market share, which is decisive for the application of the Block Exemption Regulation” (emphasis added).
25 Art. 9(2).
16 Commission Notice of 9 December 1997 on the definition of relevant market for the purposes of Community competition law, [1997] OJ C 372/5.
27 Pasteur Merteux-Merck Decision 94/770, OJ [1994] L 309.
28 WorldCom/MCI, [1999] OJ L 116/1.
29 Bayer v. Commission, Case T-41/96, Judgment of the Court of First Instance of 26 October 2000, para. 173.
30 For further discussion, see Vajda, C. and Gahnstrom, A., “E.C. Competition Law and the Internet” [2000] ECLR 94 Google Scholar; Abell, M. and Scott, A., “The e-commerce Challenge for Franchising”, Managing Intellectual Property July/August 2000, Issue 101, 34 Google Scholar.
31 Note, however, that non-compete provisions may no longer be imposed on distributors and franchisees as previously under Regs. 1983/83 and 4087/88 for the duration of the agreement but only for a maximum of five years.
32 For these and other questions see Abell, M. and Scott, A., “The e-commerce Challenge for Franchising”, Managing Intellectual Property July/August 2000, Issue 101, 34 Google Scholar.
33 For further discussion, see Vajda, C. and Gahnstrora, A., “E.C. Competition Law and the Internet” [2000] ECLR 21(2), 94 Google Scholar.
34 Although not hard-core under Art. 4, a non-compete clause for the duration of the agreement would be outside Art. 5 and severable.
35 See Guidelines 30 to 37. (Compare especially Guidelines 32 and 35).
36 Notice on Subcontracting, OJ 1979 C 1/2.
37 Commission Notice of December 24, 1962 on exclusive dealing contracts with commercial agents [1962] JO 139/2921
38 For further commentary on the Regulation, see Whish, R. “Recent Developments in Community Competition Law 1998/99”, (2000) 25 ELRev, 219 Google Scholar; Whish, R. “Regulation 2790/99: The Commission’s ‘New Style’ Block Exemption for Vertical Agreements”, (2000) Common Market Law Review 37, 889 CrossRefGoogle Scholar.