Horizontal and Vertical Agreements

Horizontal and Vertical Agreements

1. Vertical

   • 'Do not generally give rise to competition concerns unless one/more possesses market power in relevant market'
   • EU/US - US never regards vertical agreements as 'anticompetitive'
   • Starting point - vertical agreements not as damaging
   • Consten v Grundig
     • Constant sold products to exclusive distributer and tied clause that they were prohibited from reselling goods
     • Tried to impose ban on both active and passive sales: 'absolute territorial restirction'
   • Regulation 2690/1999: towards a more 'effects based' approach

2. Vertical Restraints

   • Restraints can also have useful/competitive effects:
     • Tries to increase predictability in the market, sale incentives, can be seen as helping to ensure 'quality'
       • O2/iPhone agreement - increased quality in market
         • Exclusivity in an agreement prevents 'free riding' and gives more incentive to invest in a product
     • US SC: 'interbrand' competition is the primary concern of antitrust law
       • US 'rule of reason': weigh up pro-competitive and anti-competitive as balancing exercise
     • Evidence to suggest RPM has pro-competitive elements
   • Regulation 330/2010 - VBER
     • Market share thresholds determine applicability
       • Vertical agreements for purchase of goods or services - 'intermediate levels' in supply chain
         • Single branding agreements, exclusive distribution, selective agreements
     • Blacklist
       • Blacklist includes: RPM, ,territorial restriction (can never block passive sales), certain clauses within selective distribution agreements
       • Grey list
         • Obligations that are not exempt but severable from the main agreement, non-compete obligations for 5+ years

3. Franchising agreements

   • Generally provide for licensing of IP and 'know how'
   • Article 101(1): mainly concerned with attempts to impose RPM through franchising agreements