Competition and Markets Authority announces review of the EU vertical agreements block exemption

The UK Competition and Markets Authority (CMA) announced on 10 February 2021 that it is conducting a review of the future application of the EU vertical agreements block exemption in the UK.

The EU vertical agreements block exemption provides an automatic exemption from the prohibition of anti-competitive agreements under Article 101 of the Treaty on the Functioning of the European Union.

Although Article 101 no longer applies in the UK following the UK’s exit from the EU, the block exemption is one of a number that continue to apply in relation to the UK law equivalent of Article 101 (the Chapter I prohibition of the Competition Act 1998).   This will continue to be the case until the block exemption expires on 31 May 2022.

The block exemption covers agreements for the supply of goods or services between parties that operate at different levels of the supply chain.  As a result, it can cover a wide variety of supply arrangements, including distribution agreements. 

There are a number of conditions that have to be met in order for the block exemption to apply.  The principal conditions are that the agreement must not contain any serious restrictions of competition (known as “hardcore” restrictions), such as resale price maintenance, and the parties’ market shares must not exceed 30%.   

The European Commission is currently undertaking its own review process to establish whether the block exemption should be retained, amended or replaced when it expires.  However, any new or amended block exemption would not apply in the UK.

As a result, the CMA is conducting its own review, in order to provide advice to the UK Government on whether the block exemption should be replaced when it expires.

The CMA has invited comments and is planning to hold roundtables in spring 2021 to enable interested parties to share their views.  Subject to the comments it receives, the CMA’s current view is that the block exemption largely delivers what it was intended to deliver.  However, the CMA also considers that it should be examined rigorously to ensure that it takes account of any specific features of the UK economy.

The CMA plans to consult on its proposed recommendation in summer 2021.

Further details about the CMA’s review are available here.