[New] Competition Law changes

On 1 June 2022, the following entered into force, without much fanfare:- a) The UK’s Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022 (VABEO) It will cease to have effect on 1st June 2028

UK Guidelines on vertical restraints CMA guidance b) EU Commission Regulation (EU) 2022/720 of 10 May 2022 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices (VBER).

Official Journal

L 134, 11.5.2022, p. 4–13

It will cease to have effect on 31 May 2034.

EU Guidelines on Vertical Restraints (2022/C 248/01)

For businesses operating across the UK and the EU, diverging competition law regimes means increased compliance costs. The CMA’s approach to its review has therefore been to balance the advantages of divergence from the EU to address peculiarities of UK markets and better protect UK consumers with the benefits of consistency between the EU and the UK Block Exemptions. The result is a great deal of similarity in the rules, interspersed with some key differences in approach.

Both the EU’s VBER and UK’s VABEO provide for a one year transitional period (ending 1 June 2023) for existing vertical agreements which met the conditions for exemption under the previous rules.

The Block Exemptions provide widely-applicable safe harbours for vertical agreements from the EU and UK prohibitions on anti-competitive agreements, provided that the parties have market shares of less than 30% on their respective markets and provided that the agreement does not contain any banned “hard-core” restrictions of competition. If an agreement does not benefit from a Block Exemption then the agreement will need to be assessed individually for compliance with relevant competition law. It may be that separate agreements are needed for UK-only agreements and EU-only agreements, if so, this will have a knock-on effect on e-commerce trading websites, and T’s and C’s in website contracts, as well as usual hard-copy contracts.

Other aspects of change include Commercial Agency, Retail Price Maintenance, Minimum Advertised Pricing, Online Intermediation Services (O.I.S.), Active and Passive sales, and the points below. More extensive details can be found in the two sets of Guidelines.

Comparing the EU and UK approaches

See below for highlights of some of the areas of divergence between the EU and UK approaches.

Parity obligations

EU: “Wide” parity obligations for OIS are excluded restrictions. All other types of Most Favoured Nations clauses imposed by suppliers of Online Intermediation Services are covered by the EU Block Exemption.

UK: Online and offline “Wide” parity obligations imposed by any type of company are banned hardcore restrictions. Any agreements containing Wide parity clauses will need to be assessed individually for compliance with UK competition law.

Non-compete obligations

EU: The EU Block Exemption applies to non-compete obligations which are tacitly renewable beyond five years.

UK: Non-compete obligations which are tacitly renewable beyond five years are excluded from the UK Block Exemption and therefore need to be assessed individually.

Selective and Exclusive distribution

EU: Combining Selective Distribution and Exclusive Distribution in the same EU territory will not benefit from the EU Block Exemption.

UK: Selective distribution may be combined with Exclusive distribution in the same territory, provided that the two operate at different levels of the supply chain.

Agreements which subsequently exceed market share threshold

EU: If a relevant market share rises above 30%, then the agreement will continue to benefit from the exemption for two calendar years after the year in which the relevant market share threshold is exceeded.

UK: If the relevant market share rises above 30%, then the agreement will continue to benefit from the exemption for two calendar years after the year in which the relevant market share threshold is exceeded unless the market share exceeds 35% in which case the exemption will only apply for one year after the threshold is exceeded.