- The government is replacing EU exemptions from competition
law for agreements between producers, distributors and retailers
with bespoke rules better suited to the UK
- the move follows expert advice from the Competition and
Markets Authority, the UK’s competition regulator
- a technical consultation on the wording of the legislation is
now open until 16 March 2022
A new law will help UK firms do business while maintaining strong
protections for consumers, the government has announced today
(Monday 21 February).
Currently, the UK has retained EU rules that exempt businesses
from competition law in certain circumstances. The government has
received expert advice from the UK’s Competition and Markets
Authority which recommended a new, bespoke competition law
exemption for the UK, replacing the retained EU rules which
expire on 31 May 2022.
The new rules will ensure competition law does not impose
unnecessary burdens, encouraging so-called ‘vertical agreements’
which are agreements between companies at different levels of the
supply chain, such as farmers and grocers.
These vertical agreements benefit consumers by encouraging
efficiencies, investment and innovation. Benefits of the new UK
system include:
- removing wide retail parity obligations from the exemptions.
These obligations specify that a product or service may not be
offered on better terms on any other indirect sales channels,
including through intermediaries, such as other distributors or
online platforms. For example, currently a travel agent might
require a hotel not to offer its rooms on any other sales channel
at a better price or on better terms and conditions, limiting the
incentives for travel agents to compete
- creating a more level playing field for high streets and
brick-and-mortar retailers by expanding the exemptions to cover
agreements that treat online and offline sales differently. This
includes charging the same distributor a higher price for
products intended to be resold online than for products intended
to be sold offline
- more flexibility for businesses to design their distribution
systems, for example by allowing a business to combine
distribution rights by allowing multiple retailers of its product
in one geographical area while having an exclusive arrangement
with another retailer in another area
The government is consulting on the legal
wording of the exemption. The Competition and Markets
Authority will publish further guidance to accompany this
legislation, the CMA Verticals
Guidance, in due course.
Additional information
The Business Secretary can make a ‘block exemption order’ to
exempt types of agreements from competition law because their
anti-competitive effects are outweighed by their benefits.
Following EU Exit, 7 EU block exemptions were retained in UK law,
with 6 due to expire in coming years. The Competition and Markets
Authority (CMA) last year
reviewed the retained Vertical Agreements Block Exemption
Regulation (retained VABER)
which expires in May 2022. It then recommended that BEIS
replace it with a Vertical Agreements Block Exemption Order
(VABEO), making
certain amendments to the current regime tailored to the needs of
UK consumers and businesses. Most respondents to the CMA’s consultation,
from across different industries and sectors, agreed with the
CMArecommendation to
make such a block exemption.
Vertical agreements are for the sale and purchase of goods or
services between businesses operating at different levels of the
production or distribution chain, for example, between
manufacturers and wholesalers or retailers. As they are therefore
not between direct competitors, such agreements are generally
considered to be benign or pro-competitive.
Wide retail parity obligations are defined as restrictions by
reference to any of the supplier’s indirect sales channels
(whether online or offline, for example online platforms or other
intermediaries), which ensure that the prices or other terms and
conditions at which a supplier’s goods or services are offered to
end users on a sales channel are no worse than those offered by
the supplier on another sales channel.
