The UK Vertical Agreements Block Exemption Order: What You Need to Know
If you are a business owner or manager in the UK, you may have heard of the Vertical Agreements Block Exemption Order (VABEO). This order was introduced by the Competition and Markets Authority (CMA) in 2010 and sets out the rules for vertical agreements between businesses.
What is a vertical agreement?
A vertical agreement is a type of contract or arrangement between businesses that operate at different levels of the supply chain. For example, a manufacturer may have an agreement with a distributor to sell their products in a particular territory. Vertical agreements can also include agreements between wholesalers and retailers, or between suppliers and customers.
What does the VABEO do?
The VABEO sets out the conditions under which vertical agreements between businesses are exempt from certain competition laws. This means that if a vertical agreement meets the conditions set out in the VABEO, it is deemed to be legal and does not need to be notified to the CMA for approval.
What are the conditions for exemption?
There are a number of conditions that must be met for a vertical agreement to be exempt from competition law under the VABEO. These include:
– The agreement must not contain any hardcore restrictions, such as price fixing or market sharing.
– The agreement must not result in a significant reduction of competition in the relevant market.
– The parties to the agreement must have a combined market share of no more than 30%.
– The agreement must not last for more than five years.
– The agreement must not relate to goods or services that are subject to intellectual property rights.
Why is the VABEO important?
The VABEO is important because it provides guidance to businesses on the conditions under which their vertical agreements are legally compliant. This can help businesses to avoid breaching competition law and facing potentially costly penalties.
The VABEO also promotes competition in the market by allowing businesses to enter into agreements that benefit consumers without breaching competition law. For example, a manufacturer may be able to offer lower prices to consumers by entering into an agreement with a distributor to sell their products exclusively in a particular territory.
The UK Vertical Agreements Block Exemption Order is an important tool for businesses that operate in the UK`s supply chain. By providing guidance on the conditions under which vertical agreements are legally compliant, the VABEO helps businesses to avoid breaching competition law and promotes competition in the market. If you are a business owner or manager who is considering entering into a vertical agreement, it is important to ensure that the agreement meets the conditions set out in the VABEO to avoid potential penalties.