Vertical restraints under EC Competition Law In the light of the new block exemption and guidelines on vertical restraints

Abstract

On 1 June 2000 Commission Regulation 2790/1999, the general EC block exemption for vertical restraints, entered into force, replacing and to a great extent surpassing the former block exemptions for exclusive distribution, exclusive purchasing and franchising agreements. Together with the accompanying Commission Guidelines on Vertical Restraints it embodies a more analytic and economics-based approach towards the assessment of the legality of vertical agreements under Article 81 EC. The distinctive features of the new vertical restraints block exemption include the stipulation of a 30 per cent market share threshold for its application, reflecting the Commission's endorsement of recent economic thinking regarding the crucial bearing of market power on the impact of vertical restraints on competition; its omission of a 'white list' of permitted provisions and its application on the basis of a broad, general definition of 'vertical restraints'. However Regulation 2790/1999 still contains certain unmistakable elements of the previous form-based regime, most notably the inclusion of a 'black-list' of hardcore restraints which prevent the block exemption from applying to the entire agreement wherein they are contained irrespective of the market share of the parties, and certain other conditions which effectively limit its application to potentially efficiency-enhancing vertical agreements. This thesis provides a critical review of the central provisions of the vertical restraints block exemption and the relevant interpretation thereof provided by the Guidelines, in an attempt to identify the redeeming virtues of the Commission's reformed policy concerning vertical agreements; to compare its approach to that taken by the Community Courts in certain landmark judgements and to suggest its shortcomings from the viewpoint of the attainment of the ultimate objectives of EC competition policy - the promotion of economic efficiency and the further integration of the single market.