V

Abstract

Abstract An agreement made between parties operating, at least for the purposes of the agreement, at different levels in the supply chain. Examples are distribution agreements, for example between producer and wholesaler, or wholesaler and retailer, or supply agreements, between the producer of a raw material or component and a manufacturer who purchases it for incorporation into his product. Intellectual and industrial property licences are also vertical agreements. Competition law treats most vertical agreements more generously than horizontal agreements, because economic theory predicts that restrictions agreed between non-competing firms will frequently be pro-competitive or neutral, whereas horizontal agreements, made between competing firms, are more likely to be damaging to competition. Like all agreements, a vertical agreement only infringes Art. 81 EC if it has an appreciable effect on trade between Member States (see further under Agreement of minor importance, Effect on trade between Member States) and restricts competition (see further under Restriction of competition). If it includes fixed or minimum resale prices or an absolute export ban (‘hard core’ restrictions), it will almost certainly be unenforceable and may attract fines. In the absence of hard core restrictions, and if the relevant market share does not exceed 30%, automatic exemption may be available (see further under Block exemption). Where the market share is over 30% its legality depends on the nature of the restrictive clauses it contains and their effects on the relevant market, and it can benefit from exemption only if the restrictions in the agreement can be justified in terms of economic efficiency (see further under Exemption).