Vertical agreements de minimis: Understanding the Concept
The term ‘vertical agreements de minimis’ may sound like a mouthful, but it is a significant concept in the world of competition law and business practices. In simple terms, vertical agreements de minimis refers to agreements between businesses that have minimal effect on competition and are therefore exempt from certain competition rules and regulations.
Vertical agreements are those between businesses operating at different levels of the production and distribution chain, such as suppliers, manufacturers, wholesalers, and retailers. De minimis, on the other hand, is a Latin phrase meaning ‘of minimum importance’. So, what does it mean when we put these two terms together?
Under Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), agreements between businesses are prohibited if they have the effect of restricting competition within the internal market. However, the European Commission has recognized that some vertical agreements are unlikely to have a significant impact on competition, and as such, they are de minimis.
In essence, vertical agreements de minimis are those that are too small or insignificant to have any significant impact on competition, and as such, they are exempt from certain competition rules. These agreements are generally analyzed on a case-by-case basis to determine whether they meet the de minimis criteria.
To qualify for the de minimis exemption, a vertical agreement must meet the following conditions:
1. The combined market share of the parties to the agreement must be below 10%
2. The agreement must not contain any hard-core restrictions, such as price-fixing, market allocation, or output restrictions
3. The agreement must not contain any restrictions on passive sales to end-users
If a vertical agreement meets these conditions, it will be considered de minimis and will be exempt from the prohibition of Article 101(1) of the TFEU.
The purpose behind the de minimis exemption is to strike a balance between promoting healthy competition and allowing businesses to operate efficiently. The European Commission recognizes that not all agreements between businesses have a negative impact on competition, and it is essential to avoid unnecessary regulatory burdens that may stifle innovation and growth.
In conclusion, vertical agreements de minimis refer to agreements between businesses that have minimal effect on competition and are therefore exempt from certain competition rules and regulations. These agreements are analyzed on a case-by-case basis and must meet specific conditions to qualify for the de minimis exemption. The purpose of the exemption is to strike a balance between promoting competition and allowing businesses to operate efficiently.