The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022
| Jurisdiction | UK Non-devolved |
| Citation | SI 2022/516 |
| Year | 2022 |
2022 No. 516
Competition
The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022
Made 4th May 2022
Laid before Parliament 9th May 2022
Coming into force 1st June 2022
The Competition and Markets Authority has recommended that the Secretary of State make an order specifying certain categories of vertical agreements for the purposes of section 6 of the Competition Act 19981(“the Act”).
In accordance with section 8 of the Act2, before making the recommendation the Competition and Markets Authority published details of the proposed recommendation and considered the representations about it which were made to it3.
The Secretary of State has decided to give effect to the recommendation without modifications and makes the following Order in exercise of the powers conferred by sections 6(2), (5), (6) and (7) and 71(3) of the Act.
Citation and commencement
1. This Order—
(a) may be cited as the Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022, and
(b) comes into force on 1st June 2022.
Interpretation
2.—(1) In this Order—
“block exemption” means the exemption from the Chapter 1 prohibition4arising by virtue of this Order for the category of agreements specified in this Order;
“buyer” means the purchaser of the contract goods or services and includes an undertaking which, under an agreement to which the Chapter 1 prohibition applies, sells goods or services on behalf of another undertaking;
“connected undertakings”, in relation to a party to an agreement, means—
(a) undertakings in relation to which the party to the agreement, directly or indirectly—
(i) has the power to exercise more than half the voting rights,
(ii) has the power to appoint more than half the members of the supervisory board, board of management or bodies legally representing the undertaking, or
(iii) has the right to manage the undertaking’s affairs;
(b) undertakings which directly or indirectly have, in relation to the party to the agreement, any of the rights or powers listed in paragraph (a);
(c) undertakings in relation to which an undertaking referred to in paragraph (b) has, directly or indirectly, any of the rights or powers listed in paragraph (a);
(d) undertakings in relation to which the party to the agreement together with one or more of the undertakings referred to in paragraph (a), (b) or (c), or in relation to which two or more of the undertakings referred to in paragraph (b) or (c), jointly have any of the rights or powers listed in paragraph (a);
(e) undertakings in relation to which any of the rights or the powers listed in paragraph (a) are jointly held by—
(i) parties to the agreement or their respective connected undertakings referred to in paragraphs (a) to (d), or
(ii) one or more of the parties to the agreement or one or more of their respective connected undertakings referred to in paragraphs (a) to (d) and one or more third parties;
“the contract goods or services” has the meaning given in article 3(2);
“customer”, in relation to a buyer, means an undertaking not party to the agreement which purchases the contract goods or services from a buyer which is party to the agreement;
“excluded restriction” has the meaning given in article 10(2);
“hardcore restriction” has the meaning given in article 8(2);
“know-how” means a package of non-patented practical information, resulting from experience and testing by the supplier, which is—
(a) not generally known or easily accessible,
(b) significant and useful to the buyer for the use, sale or resale of the contract goods or services, and
(c) described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria in paragraphs (a) and (b);
“online intermediation service” means a service that allows undertakings to offer goods or services to other undertakings or to end users with a view to facilitating direct transactions between such undertakings or between such undertakings and end users, irrespective of whether and where those transactions are ultimately concluded and that constitutes an information society service within the meaning of Article 1(1)(b) of Directive (EU) 2015/1535 of the European Parliament and of the Council of 9 September 2015 laying down a procedure for the provision of information on the field of technical regulations and of rules on Information Society services (codification)5;
“selective distribution system” means a distribution system where the supplier undertakes to sell the contract goods or services, either directly or indirectly, only to distributors selected on the basis of specified criteria and where these distributors undertake not to sell such goods or services to distributors not authorised by the supplier within the geographical area reserved by the supplier in the agreement in order to operate that system;
“supplier” includes an undertaking that provides online intermediation services irrespective of whether it is a party to the transaction it facilitates;
“vertical agreement” has the meaning given in article 3(2);
“vertical restraint” means a restriction on competition in a vertical agreement to which the Chapter 1 prohibition applies.
(2) In this Order, references to “the agreement” are to be read as references to the vertical agreement claiming the benefit of the block exemption.
(3) For the purposes of this Order, the terms “undertaking”, “supplier” and “buyer” include their respective connected undertakings.
Block Exemption
3.—(1) The category of agreements identified in paragraph (2) as vertical agreements is specified for the purposes of section 6 of the Competition Act 19986.
(2) Subject to paragraphs (3), (4), (5) and (6), for the purposes of this Order vertical agreements are agreements or concerted practices entered into between two or more undertakings each of which operates, for the purposes of the agreement or the concerted practice concerned, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell, or resell certain goods or services (“the contract goods or services”).
(3) Vertical agreements entered into between an association of undertakings and its members, or between such an association and its suppliers, are specified provided—
(a)
(a) all members of the association are retailers of goods, and
(b)
(b) subject to article 4(2), the annual turnover of each individual member of the association, when combined with the annual turnover of its respective connected undertakings, does not exceed £44 million.
(4) Vertical agreements containing provisions which relate to the assignment to the buyer or use by the buyer of intellectual property rights are specified provided that—
(a)
(a) those provisions do not constitute the primary object of such agreements and are directly related to the use, sale or resale of goods or services by the buyer or its customers, and
(b)
(b) in relation to the contract goods or services, those provisions do not contain restrictions of competition having the same object as vertical restraints which are not exempted by virtue of this Order.
(5) Vertical agreements entered into between competing undertakings are specified only to the extent that they are non-reciprocal, and the supplier—
(a)
(a) is a manufacturer and a distributor of goods, while the buyer is a distributor and not a competing undertaking at the manufacturing level,
(b)
(b) is a provider of services at several levels of trade, while the buyer provides its goods or services at the retail level and is not a competing undertaking at the level of trade where it purchases the contract services,
(c)
(c) is a wholesaler and a distributor of goods, while the buyer is a distributor and not a competing undertaking at the wholesale level, or
(d)
(d) is an importer and a distributor of goods, while the buyer is a distributor and not a competing undertaking at the level of trade where it purchases the goods or at the importation level.
(6) This Order does not apply to—
(a)
(a) vertical agreements the subject matter of which falls within the scope of any retained block exemption regulation7or of any block exemption order8, unless otherwise provided for in such a regulation or order;
(b)
(b) rent and lease agreements where no goods or services are being sold by the supplier to the buyer.
(7) In this article—
“actual competitor” means an undertaking active on the same relevant market;
“competing undertaking” means an actual competitor or a potential competitor;
“intellectual property rights” includes industrial property rights, know-how, copyright and neighbouring rights;
“potential competitor” means an undertaking that, in the absence of the agreement, would, on realistic grounds and not just as a mere theoretical possibility, be likely to undertake, within a short period of time, the necessary additional investments or other necessary switching costs to enter the relevant market.
Calculation of annual turnover
4.—(1) For the purpose of calculating the combined annual turnover within the meaning of article 3(3)—
(a)
(a) the turnover achieved during the previous financial year by the relevant member of the association and the turnover achieved by its connected undertakings in respect of all goods and services, excluding all taxes and other duties, are to be added together;
(b)
(b) no account is to be taken of dealings between the member of the association and its connected undertakings or between its connected undertakings.
(2) The block exemption remains applicable where, for any period of two consecutive financial years, the combined annual turnover does not exceed the combined annual turnover threshold by more than 10%.
Conditions and consequences of breach of conditions
Block exemption subject to conditions and...
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