Following a recent consultation period, the Competition and Markets Authority (CMA) has now published guidance to assist businesses in respect of the application of the Vertical Agreements Block Exemption Order ("VABEO"), effective between 1 June 2022 and 1 June 2028 (the "guidance"). The guidance sets out advice to businesses when assessing any vertical agreements that may benefit from the VABEO, and also provides commentary on the current legal framework and the types of agreements that will likely fall outside of the scope of any legislative prohibition.
Chapter 1 of the Competition Act 1998 (the "CA"), among other matters, prohibits agreements and concerted practices between undertakings which have as their object or effect, the prevention, restriction or distortion of competition within the UK (and which may impact on trade within the UK). It is generally recognised that some vertical agreements (i.e. agreements entered into by businesses operating at different levels of the supply chain), can be beneficial to consumers, with the CA including a limited exemption in respect of such agreements, provided certain conditions are met (section 9).
Further to this, the guidance notes that:
"Vertical agreements do not generally give rise to competition concerns unless one or more of the parties to the agreement possesses market power or the agreement forms part of a network of similar agreements. In recognition of this fact, by automatically exempting vertical agreements which meet specified conditions, the VABEO avoids placing on businesses the unnecessary burden of scrutinising a large number of essentially benign agreements..."
If you require any advice in respect of vertical agreements (including bespoke drafting and/or negotiation on specific terms), or guidance on any other competition law matters, please get in touch with our expert team.