Vertical Agreements in EU Competition Law: An Overview
Vertical agreements refer to agreements between firms operating at different levels of the supply chain, such as manufacturers and distributors, or suppliers and retailers. These types of agreements may include clauses related to pricing, territories, or market access, among others. In the European Union, such agreements are subject to the competition rules of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). This article provides an overview of the key aspects of vertical agreements under EU competition law.
Article 101 TFEU: Prohibiting Anti-competitive Agreements
Article 101(1) TFEU prohibits all agreements between undertakings which either directly or indirectly restrict competition in the EU`s internal market. This includes vertical agreements that may harm competition, such as price fixing, territorial restrictions, resale price maintenance, or exclusive distribution clauses. However, not all vertical agreements are anti-competitive per se. In fact, Article 101(3) TFEU provides a framework for assessing the compatibility of such agreements with EU competition law, subject to certain conditions.
For a vertical agreement to benefit from the exemption under Article 101(3) TFEU, it must meet four cumulative conditions: (i) the agreement must contribute to improving the production or distribution of goods or to promoting technical or economic progress; (ii) consumers must receive a fair share of the resulting benefits; (iii) the agreement must not impose any unnecessary restrictions on competition; and (iv) it must not eliminate competition in a substantial part of the relevant market.
Article 101 TFEU also contains a `by object` clause which deems certain types of agreements as anti-competitive without the need for any further analysis. These include agreements that fix prices, limit output, allocate markets, or engage in bid rigging. Such agreements are considered so harmful to competition that there can be no justification for them, even if they may benefit consumers in the short term.
Article 102 TFEU: Prohibiting Abuses of Dominant Positions
Vertical agreements may also raise concerns under Article 102 TFEU, which prohibits firms with a dominant position in the market from abusing that position to restrict competition. This can happen when a dominant supplier imposes unfair trading conditions on its downstream customers, such as excessive prices, discriminatory practices, or tied sales. Similarly, a dominant buyer may engage in exploitative practices towards its upstream suppliers, such as forcing them to accept unfair terms or refusing to deal with them.
The assessment of abuses of dominance in vertical relationships involves a more complex analysis than in horizontal relationships, where competitors are involved. This is because vertical relationships may involve both pro-competitive and anti-competitive effects, and the assessment of these effects requires a thorough analysis of the relevant market conditions and the specific characteristics of the agreement.
Conclusion
Vertical agreements play an important role in the functioning of the EU`s internal market, as they facilitate the distribution of goods and services and promote innovation and efficiency. However, they may also have anti-competitive effects that harm consumers and other market participants. The EU competition rules provide a framework for assessing the compatibility of vertical agreements with competition law, based on a case-by-case analysis of their economic and legal context. As a professional, it is important to use relevant keywords such as “EU competition law” and “vertical agreements” in the article to increase its visibility and accessibility for readers interested in these topics.