by Ana Mayoral | Sep 14, 2023 | Niet gecategoriseerd
This article outlines the most important developments in Lithuanian competition policy which have taken place over the course of the summer 2023. Contrary to what may have been expected, Lithuanian Competition Council was very active during the hot summer months and many important decisions as well as other developments have taken place over this time. The most important ones are outlined below.
| Gun Jumping in Lithuania: Interim Measures Imposed on Estonian Company MM Grupp |
|
Lithuanian Competition Council (“Competition Council”) is currently investigating the actions of the Estonian company MM Grupp, which is suspected to have executed a concentration without obtaining the merger clearance decision from the Competition Council.
On March 8, 2021, the Competition Council received a notification regarding a concentration from MM Grupp. The intent of the Estonian company was to acquire 51% of the shares (which, together with its existing shares, would total 100%) of another Estonian company, Forum Cinemas Lithuania. This acquisition was intended to confer indirect control over the Lithuanian branch of Forum Cinemas.
Due to incomplete submission of necessary information by the companies involved in the transaction, the deadline for reviewing the notification was suspended. On October 14, 2021, in accordance with the provisions of the Lithuanian Competition Act, the Competition Council terminated the merger procedure and deemed the concentration notification as not having been submitted. The companies involved in the transaction were unable to proceed with the merger as they had not obtained the required clearance.
However, information available to the Competition Council indicated that despite the lack of merger clearance decision, MM Grupp opted to proceed with the transaction by effectively dividing the assets of Forum Cinemas Lithuania and transferring them in separate portions to related entities of MM Grupp. The Competition Council suspects that such actions are performed in order to avoid previously failed merger clearance procedure.
Consequently, on April 7, 2023 the Competition Council decided to impose the following interim measures on MM Grupp for a duration of one year:
(i) Mandate that all acquired assets and businesses from Forum Cinemas be operated and managed independently, solely for the benefit of the pertinent business, and not for the benefit of the broader MM Grupp group of companies.
(ii) Prohibit the transfer of control over the acquired assets and business of Forum Cinemas to any other entity or individual.
(iii) Refrain from any action that would directly or indirectly result in the acquisition of Forum Cinemas’ assets or business.
(iv) Enforce an obligation on MM Grupp and Forum Cinemas not to share any confidential business information, except where such disclosure is imperative for legal compliance.
In response to the imposition of interim measures, MM Grupp lodged an appeal within Lithuanian court. However, the court dismissed the appeal from the company, deeming it unfounded. Therefore, the imposed interim measures on MM Grupp remain in effect.
The decision to apply interim protection measures is unprecedented as it is almost never used in practice. Its application demonstrates increased enforcement activities in response to actions by market players, similarly as observed in the actions of the European Commission and other national competition authorities.
|
| Lithuanian Competition Council Imposed Fines on Skin Care Manufacturer and its Distributors for RPM practices |
|
On July 25, 2023, the Competition Council issued an infringement decision, imposing fines on cosmetics manufacturer and supplier, Oda LT, along with its distributors, for engaging in resale price maintenance (RPM) practices. These practices involved agreements not to sell Oda LT products to consumers at prices lower than those stipulated by the manufacturer.
The Competition Council concluded that the manufacturer collaborated with its distributors to enforce fixed retail prices for skincare products to consumers, as specified in price lists and conveyed through separate emails. Furthermore, distributors were instructed not to apply any discounts without prior negotiation with the manufacturer.
The main aspects of the infringement were the following:
(i) the manufacturer provided distributors with price lists featuring recommended retail prices using various headings, all of which contained identical retail prices for skincare products during the same period.
(ii) certain distributors signed agreements explicitly obliging them to adhere to the provided prices.
(iii) the manufacturer monitored market prices and discounts, issued warnings to distributors, and demanded the removal of unapproved promotions, displaying a clear intent to enforce its pricing policy.
(iv) distributors complied with the supplier’s pricing instruction. Emails documented instances where the manufacturer communicated with distributors, instructing them not to apply discounts without approval. Distributors acknowledged these instructions and cancelled promotions accordingly.
(v) some distributors informed the manufacturer about competitors’ price disparities, expressing confusion regarding the pricing policy’s clarity.
The investigation was prompted by a leniency application, granting the applicant full immunity as permitted by Lithuanian competition law. The Competition Council imposed fines totalling 217,280 EUR on the supplier Oda LT and its distributors.
In conclusion, the enforcement decision comes as no surprise, given that resale price maintenance (RPM) is widely acknowledged as one of the most serious violations of competition law. This case comes as a reminder and underscores the significance of adhering to competition regulations and the decisive actions taken by the competition authorities to safeguard a level playing field in the marketplace.
More information about described case can be found here.
|
| Lithuanian Competition Council’s Findings on Online Marketplace Monitoring |
|
During 2022, the Competition Council conducted monitoring on the operations of online marketplaces within Lithuania. This initiative involved the examination of 16 online marketplaces, with responses received from 90 traders.
The rationale behind initiating this monitoring was the escalating prominence of electronic commerce in Lithuania and its pertinence within the realm of competition law. Within online marketplaces, companies offering competing services might encounter competition, as certain operators of online marketplaces also engage in selling through their respective platforms, thereby competing with other suppliers present on these marketplaces.
The Competition Council has published its findings on 19 July 2023 arrived at the subsequent conclusions:
(i) Certain online marketplaces enforce price parity obligations upon traders, essentially dictating the terms under which traders can distribute goods and services through alternate channels. These parity clauses could potentially curtail the entry or expansion prospects for new or smaller providers of online intermediation services. This restriction might hinder their capacity to offer distinct price-service combinations to buyers, concurrently limiting traders’ ability to conduct trade via direct sales channels.
(ii) Multiple online marketplaces impose limitations on merchant pricing by establishing maximum resale prices for specific merchant products. These price caps may curb distributors’ incentives to reduce prices by rendering them fixed. This rigidity could result in consumers being deprived of the opportunity to avail themselves of lower prices.
(iii) Certain online marketplaces implement restrictions intertwined with independent actions by the marketplaces themselves. Hybrid platforms can take advantage of their dual status (by both distributing goods or services themselves and allowing other distributors to trade on their platforms). In their pursuit of boosting the sales of their own offerings, hybrid platforms might confer superior positioning, visibility, or more favorable rankings to their products/services. They might also utilize data generated by distributors employing their platforms. Such scenarios could engender competition concerns, as hybrid platforms might erode competitors’ capacity to vie in presenting their own goods/services. This could consequently fortify the hybrid platform’s market standing, potentially leading to diminished consumer choice, elevated prices, and compromised product quality.
In conclusion, the data collected during the monitoring exercise shows that the number of businesses trading on online marketplaces is increasing year by year. This implies that the relevance of competition rules for marketplaces will increase in the future.
The monitoring process revealed the existence of price parity obligations and maximum resale prices within agreements between certain online marketplaces and traders. Moreover, it surfaced that specific online marketplaces might be imposing limitations linked to their independent actions. While all these practices aren’t inherently prohibited under competition law, they might still harbor the potential to stifle competition contingent on the circumstances of each distinct situation. The compatibility of such restrictions with competition regulations must be gauged on a case-by-case basis, following a full analysis of the individual cases.
|
| Enforcement of Investigation Obstruction: Maxima LT Case Highlights Serious Consequences and Implications |
|
On August 17, 2023, the Competition Council imposed a fine on Maxima LT for obstructing a document search during a dawn raid as part of an investigation into unfair commercial practices. The Competition Council discovered that in October 2022, during the dawn raid at MAXIMA LT’s premises, an employee of the company, despite being warned about the obligation to cooperate with officials authorized by the Competition Council, instructed another employee to delete a folder of documents. This instruction was carried out, resulting in the actual deletion of the folder.
Although the Investigation concluded on April 20, 2023, the Competition Council decided on the same day to initiate another investigation specifically related to the obstruction incident. As a result of their findings, the Competition Council determined that MAXIMA LT had not complied with the requirements set by the officials authorized by the Competition Council. These requirements were in place to facilitate the review and acquisition of necessary information for the investigation of the alleged violation. Consequently, the Competition Council opted to impose a penalty of EUR 10,000 on MAXIMA LT for their failure to comply.
Factual situation
During the dawn raid at Maxima’s premises, officials from the Competition Council opted to examine the data stored on devices belonging to Maxima’s employees, including computers and phones. During this inspection, the officials came across evidence indicating that one of Maxima’s employees had sent a message to other employee via Messenger. This message explicitly requested the deletion of files from the shared drive.
Subsequently, the mentioned employee proceeded to delete an entire folder of documents from Maxima’s shared drive upon receiving the aforementioned message.
Following this discovery, the officials inquired with the employees about the rationale behind their actions of deleting the folder. However, the employees were unable to provide specific reasons for their actions. Subsequently, one of the employees clarified that the folder primarily contained records of price templates, which they believed were irrelevant to the ongoing Investigation. The employee further explained that the information contained in the folder was dated and deemed unnecessary for the purposes of the officers conducting the investigation.
Competition Council’s evaluation
Even though the deleted folder of documents was subsequently restored, the Competition Council proceeded to initiate an Investigation into obstruction after closing the main investigation. Had the main investigation not been terminated, the Competition Council would likely have regarded the obstruction as an aggravating factor when determining any potential fines in the main infringement decision.
Maxima attempted to justify the actions of the employee by asserting that the deletion had occurred independently, contrary to Maxima’s internal protocols and employee obligations. As a result, Maxima argued that any consequences should be directed at the employee rather than the company. However, the Competition Council maintained the position, in accordance with both Lithuanian and EU case law, that the obstruction was executed by a Maxima employee, thereby making Maxima accountable for her actions.
Regarding the nature of the infringement committed by Maxima, the Competition Council deemed the violation to be more severe, a factor that influenced the fine calculation. This assessment was grounded in the following considerations:
(i) Maxima had deleted a folder of documents during the inspection;
(ii) The actions were not only attempted but successfully carried out, achieving the intended objective;
(iii) By deleting the folder, Maxima failed to adhere to the requirements and requests of the Competition Council’s officers during the dawn raid.
The Competition Council maintained that its evaluation of the infringement remained unaffected by Maxima’s arguments. Maxima’s attempt to distance itself from the employee’s actions and its subsequent efforts to restore the deleted folder and its contents were not seen as significant mitigating factors. This stance was rooted in the understanding that Maxima holds a statutory obligation to cooperate with the Competition Council under all circumstances. Consequently, the fact that Maxima adhered to other instructions from the Competition Council, such as the instruction to restore the deleted folder of documents, did not qualify as a reason to view these actions as mitigating circumstances. These actions were regarded as nothing more than compliance with mandatory instructions issued by the Competition Council officials.
Imposed fine
The Competition Council concluded that Maxima’s deletion of the folder constituted a failure to adhere to the requirements established by the officials authorized by the Competition Council. These requirements were crucial for the review and acquisition of essential information pertinent to the investigation. Consequently, Maxima was found to be in violation of the Lithuanian law on Unfair Commercial Practices in Retail.
In accordance with this law, a failure to comply with the directives issued by the officers can result in a fine of up to EUR 10,000. In light of the aggravating circumstances previously outlined and taking into consideration Maxima’s financial situation, the maximum possible fine was imposed. It’s worth noting that the initial fine, calculated using the stipulated formula for fine calculation, amounted to EUR 1,488,708. However, this sum was subsequently reduced to the highest allowable fine of EUR 10,000.
Outcome
This situation underscores the seriousness with which the Competition Council treats instances of obstructing investigations. Despite the fact that the deleted documents in Maxima’s case were ultimately recovered, the Competition Council chose to levy the maximum fine permissible. Moreover, even if the involved company demonstrates compliance with other instructions from the Competition Council and actively engages in restoring the deleted materials, these actions do not impact the assessment of the obstruction violation.
The dawn raid and subsequent obstruction investigation were conducted under the framework of the Law on Unfair Commercial Practices in the Retail Sector. However, the arguments and interpretations put forth by the Competition Council in this case could hold relevance for other investigations that pertain to the Lithuanian Law on Competition. This law essentially incorporates provisions from the Treaty on the Functioning of the European Union.
More information about Maxima LT case can also be found here.
Dr. Darius Miniotas and Paulina Ambrasaitė |
by Lupicinio International Law Firm | Jan 27, 2023 | Niet gecategoriseerd
Introduction
The Irish Competition and Consumer Protection Commission (CCPC) has released its annual report on merger control for the year 2022. – As well as being a busy year for Phase 2 mergers, 2022 marked the twentieth year of merger review under Part 3 of the Irish Competition Act 2002. The legislative framework for Irish competition legislation was, however, subject to a number of important amendments which strengthen the review powers of the CCPC. In addition, the CCPC prohibited a proposed merger for the first time since its establishment.
The report provides an overview of the merger notifications received by the CCPC, the number of determinations issued, and the outcome of investigations. It also includes a breakdown of the sectors for merger notifications received and a list of extended Phase 1 and Phase 2 investigations.
Summary of key features of merger control law in Ireland
It is mandatory to notify mergers to the CCPC where the turnover of the merging parties exceeds €60 million in aggregate. At least two of the merging parties (together with their respective group companies which will form part of the merged entity) must individually achieve turnover in Ireland above €10 million. Turnover figures are assessed by reference to the most recently completed financial year.
The penalties under the Competition Act 2002 for failing to notify a merger to the CCPC in Ireland can be severe. Any person who fails to notify a merger in accordance with the Act is guilty of an offence and can be liable on summary conviction to a fine not exceeding €50,000 or on conviction on indictment to a fine not exceeding €4 million or imprisonment for a term not exceeding 5 years, or both.
Once a referral has been made and accepted, the CCPC must complete its first phase review within 30 working days. If the CCPC, at the end of its first stage review, considers the merger may lead to a substantial lessening of competition in Ireland, it must complete its more detailed second phase inquiry within 120 working days from the acceptance of the parties’ filing. Time can be prolonged in certain circumstances (e.g. while the CCPC awaits information from the parties).
Merger Notifications Received in 2022
The CCPC received 68 merger notifications in the 2022 calendar year, representing a decrease of approximately 16% compared to the number of notifications received in 2021, which was 81. Of the 68 merger notifications received in 2022, 37 were notified under the Simplified Merger Notification Procedure (SMNP).
Key statistics: investigations, determinations and sectors
The CCPC issued 70 Determinations during the course of 2022. 55 of these determinations were issued in respect of proposed transactions notified during 2022, and the remaining 15 were in respect of proposed transactions notified in 2021 that were carried over to 2022. Of the 70 Determinations issued, 39 were issued under the Simplified Merger Notification Procedure, representing approximately 56% of all determinations issued in 2022.
The Report states that in 2022, 18 investigations involved an extended Phase 1 review, seven of which were carried forward from 2021. Of the seven carried forward from 2021, a Phase 2 determination was issued in relation to six, and a Phase 1 determination issued in relation to the one. Of the remaining 11 extended investigations, Phase 1 determinations were made in respect of four, three were withdrawn, and four are still under consideration at the end of 2022.
The report states that in 2022, the most prominent sector for merger notifications was Professional Services (including legal, accountancy, consultancy, engineering, veterinary, etc.) with nine notifications received. This was followed by Grocery – Retail & Wholesale with seven notifications received. Other sectors that had a significant number of merger notifications were Manufacturing, Construction & Engineering, and Telecommunications.
Notable cases handled
Four cases were cleared with conditions. These were as follows:
- M/21/004 – AIB/BoI/PTSB – Synch Payments JV: behavioural commitments were put in place to set objective eligibility criteria for any banks or other financial institutions that wish to become participants in the Synch mobile payments service, and defined timelines for processing new applications by prospective licensees. Interoperability and a governance structure, including independent board members, were also implemented to prevent the exchange or disclosure of commercially sensitive information;
- M/21/021 – Bank of Ireland/Certain Assets of KBC: a hybrid commitment by Bank of Ireland to make €1 billion in total funding available to certain non-bank lenders through the purchasing of securities issued by them, to increase their funding capacity and reduce their cost of funding, and also to make €1 million in funding available for distribution to small and medium-sized enterprises;
- M/21/071 – Tesco Ireland/Joyce’s Supermarkets: Tesco Ireland agreed to divest one supermarket in Oranmore, Co. Galway as a going concern to a suitable purchaser to address local competition concerns.
- M/22/047 – BWG/McCarrick Brothers Wholesale: BWG gave a commitment to prevent the exchange of competitively sensitive information between BWG, Stonehouse and/or GRSL.
The CCPC also reached a determination prohibiting a merger since the its establishment in 2014. Having completed its full investigation in M/21/079 – Uniphar/NaviCorp, the CCPC determined that the proposed acquisition could not be put into effect on the grounds that it would result in a substantial lessening of competition in the markets for: (i) the provision of buying group services in Ireland and (ii) the provision of common management and branding services nationally.
Other cases of interest handled by the CPPC in 2022 included M/21/040, AIB and certain assets of Ulster Bank, was cleared (Phase 2 clearance); M/21/068, the merger between Heineken and Comans, (Phase 1 clearance); M/21/071, (Phase 2 clearance); M/21/076, which is the merger between PTSB and certain assets of Ulster Bank (Phase 2 clearance).
Time-frames
The Irish Competition Authority’s annual report for 2022 also includes information about the timeframes for completing the merger review process. The CCPC aims to complete the process in an efficient and effective manner, so that mergers that do not raise competition concerns are not unduly delayed. Between January 1, 2022 and December 31, 2022, the CCPC took an average of 17.9 working days to issue a Phase 1 decision, which is faster than the corresponding figure for 2021, which was 20.2. The timelines in individual cases that did not raise serious concerns varied from 11 to 30 working days depending on the complexity of the transaction and the nature of the competition issues involved.
Trend in Merger Notifications
The report also notes that there was a substantial increase in the number of mergers received in 2021, following the removal of Covid-19 restrictions, but a slight fall back in numbers received in 2022. The CCPC attribute this reduction to adjustments in financial thresholds for mandatory notification of proposed mergers or acquisitions that came into effect in January 2019. The report states that the fall in numbers is due to a decrease in the number of transactions that reach the threshold for mandatory notification.
Conclusion
The key take-away from the Report is that businesses involved in international m & a must take seriously the Irish merger control regime. As highlighted in the Report, Irish competition legislation has been subject to a number of important amendments which have strengthened the review powers of the CCPC, and given it more teeth as a result . The fact that the CCPC has now prohibited a proposed merger for the first time since its establishment indicates its willingness to intervene to protect markets. However, the CCPC aims to complete the process of merger review in an efficient and effective manner, with the average time for a Phase 1 decision being 17.9 working days. This suggests that the CCPC is indeed efficient in the majority of its review processes and the statistics demonstrate that the majority of procedures are cleared without a Phase 2 investigation. In a number of decisions, the CCPC has also shown an openness to addressing merger concerns with behavioural remedies, perhaps marking a different approach to the UK Competition and Markets Authority.
Further changes to the regulatory landscape can be expected in 2023. On 22 December 2022, the Dail Eireann (Irish Parliamentary lower house) passed the Screening of Third Country Transactions Bill 2022 (Bill 77 of 2022). Following on from EU Regulation (EU) 2019/452 the Bill, would for the first time enable Ireland establish a screening mechanism for third country investment. This Bill aims to address the national security concerns related to mergers and acquisitions by introducing a mandatory notification requirement for transactions that are likely to affect security or public order, even if the merger does not raise competition concerns. Failure to notify could result in a fine (up to a maximum of €4 million) or even a term of imprisonment under the proposals. These would also allow the CCPC to seek court injunctions to prevent the implementation of a merger pending a review. We will continue our scrutiny of the Irish regulatory framework with a more in-depth review of the Bill’s provisions in a future article.
Paul Henty
Partner
Beale & Company Solicitors LLP
by Moritz Lorenz | Jan 25, 2023 | Niet gecategoriseerd
The German Federal Cartel Office (FCO) had been examining Google News Showcase (Showcase) since summer 2021, after Corint Media – a copyright collective management organization – brought an antitrust complaint against Google. Showcase is a news offering that gives publishers opportunities to present content within the framework set by Google. The content made available is not selected based on Google’s mechanisms, but rather by the publishers themselves and influenced in its presentation. These “story panels” of the publishers are also displayed on Google Discover when people search for news in keywords via the search box. Corint Media’s complaint was related to the online news offering and the associated copyrights. The proceedings did not refer to the cooperation in the context of Showcase and the display of publisher content in Story Panels offered by Google as such. It was more problematic from an antitrust perspective that Google used the content to build up its own news product, which is given preferential treatment in existing Google offers or creates the risk of displacing publishers’ news offerings. For this reason, there were concerns about including Showcase content in Google search results.
The proceeding initiated in June 2021 was mainly based on the FCO’s new competences under the provisions for large digital companies which were introduced in early 2021, Section 19a of the German Competition Act, GWB. Just as the Digital Markets Act (DMA), this provision also serves to ensure the contestability and fairness of digital markets. In contrast to the DMA, which provides a regulatory framework, Section 19a GWB is an instrument of competition law at its core that enables the FCO to intervene. In December 2021, the FCO decided that Alphabet Inc., Mountain View, USA, and therefore also its subsidiary Google, is subject to extended abuse control by the competition authority pursuant to Section 19a (2) GWB. Google did not file a complaint against the market position decision itself, so that the circumstances which enable the FCO to open the proceeding pursuant to Section 19a (2) GWB were not at issue. Therefore, the only question arose as to whether the respective practice by Google was objectively justified. In this respect, the burden and proof lay with Google as the company with predominant cross-market significance for competition. Based on presented or known facts, a comprehensive balancing of interests had to be carried out by the FCO in light of the GWB. Furthermore, the interests of the publishers who decided to participate in the Showcase also had to be taken into account.
The FCO concluded the proceeding without binding commitments (Section 32b GWB), which would have a stronger effect for Google but also for the FCO. From the view of the FCO this might have been preferable since Google has already changed its conduct in many respects and that measures and clarifications still outstanding will be taken. According to the FCO, due to the proposed adjustment of the contracts by Google, there is now a clear separation between the participation in Showcase and the negotiations for the remuneration of the ancillary copyright beyond the Showcase content. Taking into account the changes made by Google in the course of the proceedings, no disadvantage relevant under antitrust law could be identified for publishers who have opted for collective enforcement of the ancillary copyright. On the one hand, the publishers can also participate in Showcase and receive remuneration for this. On the other hand, the publishers did not receive any payments for displaying press content in Google products, because no agreement has been entered between Google and the collective management organization Corint Media. However, Google has offered Corint Media compensation, also in form of an interim payment, which is comparable in its calculation and amount to what Google pays individual publishers under the Extended News Previews (ENP) agreements. Publishers in Germany can now license their ancillary copyright in relation to press content separately from a Showcase contract, similar to what had already been enforced by the antitrust authorities in France. The French competition authority had already issued a fine of around EUR 500 million against Google in the summer of 2021, after 121 publishers had lodged complaints against Showcase there. In addition to corresponding contract amendments, Google has now also formulated clarifications, e.g. if a publisher participates in Google’s Showcase and whether this has an effect on the ranking of the respective publisher’s content in Google Search.
Google will implement further measures in the coming weeks. In particular, it will provide even clearer information about the essential framework conditions of Showcase. This includes explaining how Showcase works and what the actual requirements for publishers to participate are. This will work towards non-discriminatory access to this platform, the details of which will then be subject to media supervision under the German State Media Treaty. According to the President of the FCO, the measures promised by Google would be constantly reviewed for effectiveness with the help of the market participants concerned.
While the proceedings of the FCO – the first of their kind in Germany – have now ended without an injunction, Corint Media, three publishers’ associations and Google are still arguing in parallel about the appropriate remuneration for the publishing products used by Google. For the question of the appropriate level of remuneration for ancillary copyrights, the legislator provides for special arbitration proceedings at the German Patent and Trademark Office under the German Collecting Societies Act (VGG). The parties have also initiated such proceedings in the meantime. The FCO has the opportunity to participate in the proceedings as “amicus curiae”.
Finally, the FCO does not expect potential changes in the presentation of Showcase content or the granting of access to Showcase to remain undetected for long as this will be is safeguarded by Google’s reporting obligations. Also from this point of view, the conclusion of the proceedings without an injunction may still leave scope for further actions in the future. In addition, it appears that this is just one of many cases that the FCO is now dealing with because of Google on the basis of Section 19a GWB. Thus, the FCO recently issued a notice to Google and sent its preliminary legal assessment in the proceedings because of Google’s conditions for data processing. In a press release dated January 11, the FCO states that Google will have to adjust its data processing conditions and the practices based on them. This request is also based on Section 19a GWB.
by Paul Stone | Dec 8, 2022 | Niet gecategoriseerd
Introduction
This note highlights a key change introduced by the new UK competition law block exemption for vertical agreements in relation to the treatment of parity obligations.
Background
Vertical agreements are agreements between businesses that operate at a different level of the supply chain, such as a manufacturer and a distributor.
Prior to the UK’s exit from the EU, the old EU vertical agreements block exemption applied in the UK. Following the UK’s exit from the EU, the old EU block exemption continued to apply until its expiry at the end of May 2022. On its expiry, the UK introduced a new UK block exemption for vertical agreements. This provides an automatic exemption from the UK law which prohibits anti-competitive agreements (the Chapter I prohibition of the Competition Act 1998) for vertical agreements that meet the conditions of the block exemption.
The UK competition authority (the CMA) has also issued guidance to accompany the UK block exemption, which provides guidance on the scope of the UK block exemption and the application of the Chapter I prohibition to vertical agreements that do not benefit from the block exemption.
The news rules applied as from 1 June 2022, although there is a transitional period of one year applying to vertical agreements that met the conditions of the old EU block exemption but do not meet the conditions of the new block exemption.
Parity obligations
Parity obligations, also known as Most Favoured Nation (MFN) clauses, are restrictions that require one party to an agreement to offer the other party goods or services on terms that are no worse than those offered to third parties.
The term retail parity obligation is used to describe restrictions that apply in the retail context where a party is offering, selling or reselling goods or services to end users.
All types of parity obligations were covered by the old EU block exemption.
Parity obligations and the new UK block exemption
Under the new UK block exemption, wide retail parity obligations are treated as a hardcore restriction. This means that an agreement which includes such an obligation does not benefit from the block exemption.
A wide retail parity obligation for these purposes is a restriction by reference to any of the supplier’s indirect sales channels (whether online or offline, for example online platforms or other intermediaries), which ensures that the prices (or other terms and conditions) at which a supplier’s products are offered to end users on a sales channel are no worse than those offered by the supplier on another sales channel.
Wide retail parity obligations are often contrasted with narrow retail parity obligations, which only apply to the supplier’s direct sales channels (such as its own website).
The UK guidance confirms that, with the exception of wide retail parity obligations, which are treated as hardcore restrictions, the UK block exemption applies to all other types of parity obligations in vertical agreements, including narrow retail parity obligations.
