COMMUNICATION FROM THE COMMISSION

COMMISSION NOTICE

Guidelines on vertical restraints

(2022/C 248/01)

TABLE OF CONTENTS

1. Introduction 3

1.1. Purpose and structure of these Guidelines 3

1.2. Applicability of Article 101 of the Treaty to vertical agreements 4

2. Effects of vertical agreements 6

2.1. Positive effects 6

2.2. Negative effects 9

3. Vertical agreements that generally fall outside the scope of Article 101(1) of the Treaty 10

3.1. No effect on trade, agreements of minor importance and small and medium sized undertakings 10

3.2. Agency agreements 11

3.2.1. Agency agreements that fall outside the scope of Article 101(1) of the Treaty 11

3.2.2. Application of Article 101(1) of the Treaty to agency agreements 15

3.2.3. Agency and the online platform economy 16

3.3. Subcontracting agreements 17

4. Scope of Regulation (EU) 2022/720 17

4.1. Safe harbour established by Regulation (EU) 2022/720 17

4.2. Definition of vertical agreements 18

4.2.1. Unilateral conduct falls outside the scope of Regulation (EU) 2022/720 18

4.2.2. The undertakings operate at different levels of the production or distribution chain 19

4.2.3. The agreement relates to the purchase, sale or resale of goods or services 19

4.3. Vertical agreements in the online platform economy 20

4.4. Limits to the application of Regulation (EU) 2022/720 21

4.4.1. Associations of retailers 21

4.4.2. Vertical agreements containing provisions on intellectual property rights (IPRs) 22

4.4.3. Vertical agreements between competitors 25

4.4.4. Vertical agreements with providers of online intermediation services that have a hybrid function 28

4.5. Relationship with other block exemption regulations 30

4.6. Specific types of distribution system 30

4.6.1. Exclusive distribution systems 31

4.6.2. Selective distribution systems 35

4.6.3. Franchising 40

5. Market definition and market share calculation 42

5.1. Market Definition Notice 42

5.2. The calculation of market shares under Regulation (EU) 2022/720 42

5.3. Calculation of market shares under Regulation (EU) 2022/720 43

6. Application of Regulation (EU) 2022/720 43

6.1. Hardcore restrictions under Regulation (EU) 2022/720 43

6.1.1. Resale price maintenance 45

6.1.2. Hardcore restrictions pursuant to Article 4, points (b), (c), (d) and (e) of Regulation (EU) 2022/720 49

6.1.3. Restrictions of the sales of spare parts 57

6.2. Restrictions that are excluded from Regulation (EU) 2022/720 57

6.2.1. Non-compete obligations exceeding a duration of five years 58

6.2.2. Post-term non-compete obligations 58

6.2.3. Non-compete obligations imposed on members of a selective distribution system 59

6.2.4. Across-platform retail parity obligations 59

7. Withdrawal and Disapplication 59

7.1. Withdrawal of the benefit of Regulation (EU) 2022/720 59

7.2. Disapplication of Regulation (EU) 2022/720 62

8. Enforcement policy in individual cases 63

8.1. The framework of analysis 63

8.1.1. Relevant factors for the assessment under Article 101(1) of the Treaty 64

8.1.2. Relevant factors for the assessment under Article 101(3) of the Treaty 66

8.2. Analysis of specific vertical restraints 67

8.2.1. Single branding 68

8.2.2. Exclusive supply 72

8.2.3. Restrictions on the use of online marketplaces 74

8.2.4. Restrictions on the use of price comparison services 75

8.2.5. Parity obligations 77

8.2.6. Upfront access payments 82

8.2.7. Category management agreements 83

8.2.8. Tying 83

1. INTRODUCTION

1.1. Purpose and structure of these Guidelines

(1) These Guidelines set out principles for the assessment of vertical agreements and concerted practices under Article 101 of the Treaty on the Functioning of the European Union ( 1 ) and Commission Regulation (EU) 2022/720 ( 2 ) . Unless stated otherwise, in these Guidelines the term ‘agreement’ also covers concerted practices ( 3 )

(2) By issuing these Guidelines, the Commission aims to help undertakings conduct their own assessment of vertical agreements under the Union’s competition rules and to facilitate the enforcement of Article 101 of the Treaty. However, these Guidelines should not be applied mechanically, as each agreement must be evaluated in the light of its own facts ( 4 ) . These Guidelines are also without prejudice to the case-law of the General Court and the Court of Justice of the European Union (hereinafter ‘Court of Justice of the European Union’).

(3) Vertical agreements may be concluded for intermediate or final goods and services. Unless stated otherwise, these Guidelines apply to all types of goods and services, and to all levels of trade. Furthermore, unless stated otherwise, the term ‘end user’ includes undertakings and final consumers, namely natural persons who are acting for purposes which are outside their trade, business, craft or profession.

(4) These Guidelines are structured as follows: — this first introductory section explains why the Commission provides guidance on vertical agreements and the scope of that guidance. It also explains the objectives of Article 101 of the Treaty, how Article 101 of the Treaty applies to vertical agreements, and the main steps in the assessment of vertical agreements under Article 101 of the Treaty; — the second section provides an overview of the positive and negative effects of vertical agreements. Regulation (EU) 2022/720, these Guidelines, and the Commission’s enforcement policy in individual cases are based on the consideration of those effects; — the third section deals with vertical agreements that generally fall outside Article 101(1) of the Treaty. While Regulation (EU) 2022/720 does not apply to those agreements, it is necessary to provide guidance on the conditions under which vertical agreements may fall outside Article 101(1) of the Treaty; — the fourth section provides further guidance on the scope of Regulation (EU) 2022/720, including explanations on the safe harbour established by the Regulation and the definition of a vertical agreement. That section also contains guidance on vertical agreements in the online platform economy, which plays an increasingly important role in the distribution of goods and services. That section also explains the limits of the application of Regulation (EU) 2022/720, as set out in Article 2(2), (3) and (4) of the Regulation. This includes the specific limits that apply to the exchange of information between a supplier and a buyer in scenarios of dual distribution, pursuant to Article 2(5) of the Regulation, and those that apply to agreements relating to the provision of online intermediation services where the provider of those services has a hybrid function, pursuant to Article 2(6) of the Regulation. The fourth section also explains how Regulation (EU) 2022/720 applies in cases where a vertical agreement falls within the scope of another block exemption regulation, as set out in Article 2(7) of the Regulation. Lastly, that section contains a description of certain common types of distribution system, in particular those which are the subject of specific provisions in Article 4 of the Regulation relating to hardcore restrictions; — the fifth section addresses the definition of the relevant markets and the calculation of market shares, by reference to the Market Definition Notice (5). This is relevant because vertical agreements may only benefit from the block exemption provided by Regulation (EU) 2022/720 if the market shares of the undertakings that are party to the agreement do not exceed the thresholds set out in Article 3 of Regulation (EU) 2022/720; — the sixth section covers the hardcore restrictions set out in Article 4 of Regulation (EU) 2022/720 and the excluded restrictions set out in Article 5 of the Regulation, including explanations as to why the qualification as ‘hardcore’ or ‘excluded’ restriction is relevant; — the seventh section contains guidance on the powers of the Commission and the competition authorities of the Member States (‘NCAs’) to withdraw the benefit of Regulation (EU) 2022/720 in individual cases, pursuant to Article 29 of Council Regulation (EC) No 1/2003 (6) and Article 6 of Regulation (EU) 2022/720, as well as guidance on the power of the Commission to adopt regulations declaring that Regulation (EU) 2022/720 does not apply, pursuant to Article 7 of Regulation (EU) 2022/720; — the eighth section describes the Commission’s enforcement policy in individual cases. To that end, it explains how vertical agreements that are not covered by Regulation (EU) 2022/720 are assessed under Article 101(1) and (3) of the Treaty, and provides guidance on various common types of vertical restraints.

1.2. Applicability of Article 101 of the Treaty to vertical agreements

(5) The objective of Article 101 of the Treaty is to ensure that undertakings do not use agreements, whether horizontal or vertical ( 7 ) , to prevent, restrict or distort competition on the market to the detriment of consumers ( 8 ) . Article 101 of the Treaty also pursues the wider objective of achieving an integrated internal market, which enhances competition in the Union. Undertakings may not use vertical agreements to re-establish private barriers between Member States where State barriers have been successfully abolished.

(6) Article 101 of the Treaty applies to vertical agreements and restrictions in vertical agreements that affect trade between Member States and that prevent, restrict or distort competition ( 9 ) . It provides a legal framework for the assessment of vertical restraints ( 10 ) , which takes into account the distinction between anti-competitive and pro-competitive effects. Article 101(1) of the Treaty prohibits agreements that appreciably restrict or distort competition. However, that prohibition does not apply to agreements that fulfil the conditions of Article 101(3) of the Treaty, notably where the agreement provides sufficient benefits to outweigh its anti-competitive effects, as indicated in the Article 101(3) Guidelines ( 11 )

(7) While there is no mandatory sequence for the assessment of vertical agreements, the assessment generally involves the following steps: — first, the undertakings involved need to establish the market shares of the supplier and the buyer on the relevant market where they respectively sell and purchase the contract goods or services; — if neither the market share of the supplier nor that of the buyer exceeds the 30 % market share threshold set out in Article 3 of Regulation (EU) 2022/720, the vertical agreement is covered by the safe harbour established by the Regulation, provided that the agreement does not contain hardcore restrictions within the meaning of Article 4 of the Regulation or any excluded restrictions within the meaning of Article 5 of the Regulation that cannot be severed from the rest of the agreement; — if the relevant market share of the supplier or the buyer exceeds the 30 % threshold or the agreement contains one or more hardcore restrictions or non-severable excluded restrictions, it is necessary to assess whether the vertical agreement falls within the scope of Article 101(1) of the Treaty; — if the vertical agreement falls within the scope of Article 101(1) of the Treaty, it is necessary to examine whether it fulfils the conditions of the exception provided by Article 101(3) of the Treaty.

(8) Sustainable development is a core principle of the Treaty and a priority objective for the policies of the Union ( 12 ) , together with digitalisation and a resilient Single Market ( 13 ) . The notion of sustainability includes, but is not limited to, addressing climate change (for instance, through the reduction of greenhouse gas emissions), limiting the use of natural resources, reducing waste and promoting animal welfare ( 14 ) . The Union’s sustainability, resilience and digital objectives are furthered by efficient supply and distribution agreements between undertakings. Vertical agreements which pursue sustainability objectives or which contribute to a digital and resilient Single Market are not a distinct category of vertical agreements under Union competition law. These agreements must therefore be assessed using the principles set out in these Guidelines, while taking into account the specific objective that they pursue. Accordingly, the exemption provided by Article 2(1) of Regulation (EU) 2022/720 applies to vertical agreements that pursue sustainability, resilience and digital objectives, provided that they meet the conditions of the Regulation. These Guidelines include examples to illustrate the assessment of vertical agreements that pursue sustainability objectives ( 15 )

(9) Where a vertical agreement restricts competition within the meaning of Article 101(1) of the Treaty and Regulation (EU) 2022/720 does not apply, the agreement may nonetheless fulfil the conditions of the Article 101(3) exception ( 16 ) . This also applies to vertical agreements which pursue sustainability objectives or which contribute to a digital and resilient Single Market. While section 8 includes guidance on the assessment of such vertical agreements in individual cases, other Commission guidelines may also be relevant. That includes the Article 101(3) Guidelines, the Horizontal Guidelines ( 17 ) and any guidance that may be provided in future versions of those Guidelines. Those Guidelines may, in particular, provide guidance on the circumstances under which sustainability, digital or resilience benefits can be taken into account as qualitative or quantitative efficiencies under Article 101(3) of the Treaty.

2. EFFECTS OF VERTICAL AGREEMENTS

(10) For the purpose of assessing vertical agreements under Article 101 of the Treaty and applying Regulation (EU) 2022/720, it is necessary to take into account all relevant parameters of competition, such as prices, output in terms of product quantities, product quality and variety, and innovation. The assessment must also take into account that vertical agreements between undertakings operating at different levels of the production or distribution chain are generally less harmful than horizontal agreements between competing undertakings supplying substitutable goods or services ( 18 ) . In principle, this is due to the complementary nature of the activities carried out by the parties to a vertical agreement, which generally implies that pro-competitive actions by one party to the agreement will benefit the other party to the agreement and will ultimately benefit consumers. By contrast to horizontal agreements, the parties to a vertical agreement therefore tend to have an incentive to agree on lower prices and higher levels of service, which also benefit consumers. Similarly, a party to a vertical agreement usually has an incentive to oppose actions by the other party that may harm consumers, as such actions will typically also reduce the demand for the goods or services supplied by the first party. Moreover, the complementary nature of the activities of the parties to a vertical agreement in putting goods or services on the market also implies that vertical restraints provide greater scope for efficiencies, for example by optimising manufacturing and distribution processes and services. Examples of such positive effects are set out in section 2.1.

(11) Nevertheless, undertakings with market power may, in certain cases, use vertical restraints to pursue anti-competitive purposes that ultimately harm consumers. As further explained in section 2.2., vertical restraints can notably lead to foreclosure, softening of competition or collusion. Market power is the ability to maintain prices above competitive levels or to maintain output in terms of product quantities, product quality and variety or innovation below competitive levels for a not insignificant period of time ( 19 ) . The degree of market power required to establish a restriction of competition within the meaning of Article 101(1) of the Treaty is less than the degree of market power required for a finding of dominance under Article 102 of the Treaty.

2.1. Positive effects

(12) Vertical agreements may produce positive effects, including lower prices, the promotion of non-price competition and improved quality of services. Simple contractual arrangements between a supplier and a buyer which determine only the price and the quantity of a transaction can often lead to sub-optimal levels of investments and sales, as they do not take into account externalities arising from the complementary nature of the activities of the supplier and its distributors. These externalities fall into two categories: vertical externalities and horizontal externalities.

(13) Vertical externalities arise because the decisions and actions taken at different levels of the production or distribution chain determine aspects of the sale of goods or services, such as price, quality, related services and marketing, which affect not only the undertaking making the decisions but also other undertakings at other levels of the production or distribution chain. For instance, a distributor may not gain all the benefits of its efforts to increase sales, as some of those benefits may go to the supplier. This is because, for every extra unit that a distributor sells by lowering its resale price or by increasing its sales efforts, the supplier benefits if its wholesale price exceeds its marginal production costs. This represents a positive externality bestowed on the supplier by the distributor’s sales-enhancing actions. Conversely, there may be situations where, from the supplier’s perspective, the distributor may be pricing too high ( 20 ) , making insufficient sales efforts or both.

(14) Horizontal externalities may arise in particular between distributors of the same goods or services where a distributor is unable to fully appropriate the benefits of its sales efforts. For example, where demand-enhancing pre-sales services are provided by one distributor, such as personalised advice in relation to particular goods or services, this may lead to higher sales by competing distributors offering the same goods or services and thus create incentives among distributors to free-ride on costly services provided by others. In an omni-channel distribution environment, free riding can occur between the online and offline sales channels, and in both directions ( 21 ) . For example, customers may visit a brick and mortar shop to test goods or services or to obtain other useful information on which they base their decision to purchase, but then order the product online from a different distributor. Conversely, customers may gather information in the pre-purchase phase from an online store and then visit a brick and mortar shop, use the information they have gathered online to select and test particular goods or services, and ultimately purchase offline in a brick and mortar shop. Where such free riding is possible and where the distributor that provides pre-sales services is unable to fully appropriate the benefits, this may lead to sub-optimal provision of such pre-sales services in terms of quantity or quality.

(15) In the presence of such externalities, suppliers may have an incentive to control certain aspects of their distributors’ operations and vice versa . In particular, vertical agreements may be used to internalise such externalities, increase the joint profit of the vertical supply and distribution chain, and, under certain circumstances, consumer welfare.

(16) Although these Guidelines seek to give an overview of the various justifications for vertical restraints, they do not claim to be complete or exhaustive. The reasons that may justify the application of particular vertical restraints include the following: (a) to address the vertical externality issue. The setting of too high a price by the distributor, not taking into account the effect of its decisions on the supplier, can be avoided by the supplier imposing a maximum resale price on the distributor. Similarly, to increase the distributor’s sales efforts, the supplier may use selective or exclusive distribution; (b) to address the free-rider problem. Free riding between buyers may occur at the wholesale or retail level, in particular where it is not possible for the supplier to impose effective promotion or service requirements on all buyers. Free riding between buyers can only occur on pre-sales services and other promotional activities, but not on after-sales services for which the distributor can charge its customers individually. Pre-sales efforts on which free riding can occur may be important, for example, where the goods or services are relatively new, technically complex or of high value, or where the reputation of the goods or services is an important determinant of their demand (22). Restrictions in exclusive or selective distribution systems, or other restrictions may be helpful in avoiding or reducing such free riding. Free riding can also occur between suppliers, for instance where one manufacturer invests in promotion at the buyer’s premises that also attracts customers for the competitors of that manufacturer. Non-compete type restrictions can help to overcome free riding between suppliers (23); (c) to open up or enter new markets. Where a supplier wishes to enter a new geographic market, for instance by exporting to another country, this may involve special sunk investments by the distributor to establish the brand on the market. In order to persuade a local distributor to make these investments, it may be necessary to provide territorial protection so that the distributor can recoup its investments. This may justify restricting distributors located in other geographic markets from selling on the new market (see also paragraphs (118), (136) and (137)). This is a special case related to the free-rider problem set out in point (b); (d) to address the certification free-rider issue. In some sectors, certain distributors have a reputation for stocking only quality goods or providing quality services (so-called ‘premium distributors’). In such a case, selling through those distributors may be crucial, in particular for the successful launch of a new product. If the supplier cannot ensure that the distribution of its products is limited to such premium distributors, it runs the risk of not being listed by such distributors. In that scenario, the use of exclusive or selective distribution may be justified; (e) to address the hold-up problem. Either the supplier or the buyer may need to make relationship-specific investments (for example in specific equipment or training) which are sunk investments and have little or no value outside the specific vertical relationship. For instance, a component manufacturer may have to build specific machines to satisfy the requirements of one of its customers, but the machines may be unsuitable for use with other customers and it may be impossible to resell them. In the absence of an agreement, the investing party will find itself in a weak bargaining position once it has made the relationship-specific investment, as it risks being ‘held up’ during negotiations with its trading partner. The threat of such opportunistic hold-up may lead to sub-optimal investments by the investing party. Vertical agreements can eliminate the scope for hold-up (in particular when the investment can be fully contracted and all future contingencies can be foreseen) or they can reduce the scope for hold-up. For example, non-compete obligations, quantity forcing, or exclusive sourcing can lessen the hold-up problem when the relationship-specific investment is made by the supplier, whereas exclusive distribution, exclusive customer allocation or exclusive supply can lessen the hold-up problem when the investment is made by the buyer; (f) to address the specific hold-up problem that may arise where there is a transfer of substantial know-how. The provider of know-how may not wish the know-how to be used by or for the benefit of its competitors, for example in franchising. Insofar as the know-how was not readily available to the buyer, and it is substantial and indispensable for the implementation of the agreement, such a transfer may justify a non-compete restriction, which would generally fall outside Article 101(1) of the Treaty in such cases; (g) to achieve economies of scale in distribution. To have scale economies exploited and thereby see a lower retail price for its goods or services, the manufacturer may want to concentrate the resale of its goods or services on a limited number of distributors. To do so, the manufacturer could use exclusive distribution, quantity forcing in the form of a minimum purchasing requirement, selective distribution containing a minimum purchasing requirement or exclusive sourcing; (h) to ensure uniformity and quality standardisation. A vertical restraint can help to create or promote a brand image, by imposing a certain measure of uniformity and quality standardisation on the distributors. This can protect the reputation of the brand, increase the attractiveness of the goods or services concerned for end users and increase sales. Such standardisation can, for instance, be achieved through selective distribution or franchising; (i) to address capital market imperfections. Providers of capital such as banks and equity markets may provide capital sub-optimally when they have imperfect information on the solvency of the borrower or where there is an inadequate basis to secure the loan. The buyer or supplier may have better information and may be able, through an exclusive relationship, to obtain extra security for its investment. Where the supplier provides the loan to the buyer, this may lead to the imposition of a non-compete obligation or quantity forcing on the buyer. Where the buyer provides the loan to the supplier, this may be the reason for imposing exclusive supply or quantity forcing on the supplier.

(17) There is a large degree of substitutability between the various vertical restraints, meaning that the same inefficiency problem can be addressed using different vertical restraints. For instance, it may be possible to achieve economies of scale in distribution by using exclusive distribution, selective distribution, quantity forcing or exclusive sourcing. However, the negative effects on competition may differ between the various vertical restraints. This is taken into account when indispensability is assessed under Article 101(3) of the Treaty.

2.2. Negative effects

(18) The negative effects on the market which can result from vertical restraints and which Union competition law aims to prevent are, in particular, the following: (a) anti-competitive foreclosure of other suppliers or other buyers, by raising barriers to entry or expansion; (b) softening of competition between the supplier and its competitors and/or the facilitation of explicit or tacit collusion between competing suppliers, often referred to as the reduction of inter-brand competition; (c) softening of competition between the buyer and its competitors or the facilitation of explicit or tacit collusion between competing buyers, often referred to as the reduction of intra-brand competition where it concerns distributors of the goods or services of the same supplier (24); (d) the creation of obstacles to market integration, including, in particular, limitations on the consumer’s choice to purchase goods or services in any Member State.

(19) Foreclosure, softening of competition and collusion at the supplier level may harm consumers, in particular by: (a) increasing the prices charged to buyers of goods or services, which may in turn lead to higher retail prices; (b) limiting the choice of goods or services; (c) lowering the quality of goods or services; (d) reducing innovation or service at the supplier level.

(20) Foreclosure, softening of competition and collusion at the distributor level may harm consumers, in particular by: (a) increasing the retail prices of goods or services; (b) limiting the choice of price-service combinations and distribution formats; (c) lowering the availability and quality of retail services; (d) reducing the level of innovation at the distribution level.

(21) A reduction of intra-brand competition (i.e. competition between distributors of the goods or services of the same supplier) is by itself unlikely to lead to negative effects for consumers if inter-brand competition (i.e. competition between distributors of the goods or services of different suppliers) is strong ( 25 ) . In particular, in markets where individual retailers distribute the brand(s) of only one supplier, a reduction of competition between the distributors of the same brand will lead to a reduction of intra-brand competition between these distributors, but may not have a negative effect on competition between distributors in general.

(22) The possible negative effects of vertical restraints are reinforced where several suppliers and their buyers organise their trade in a similar way, leading to so-called cumulative effects ( 26 )

3. VERTICAL AGREEMENTS THAT GENERALLY FALL OUTSIDE THE SCOPE OF ARTICLE 101(1) OF THE TREATY

3.1. No effect on trade, agreements of minor importance and small and medium sized undertakings

(23) Before addressing the scope of Regulation (EU) 2022/720, its application, and more generally the assessment of vertical agreements under Article 101(1) and 101(3) of the Treaty, it is important to recall that Regulation (EU) 2022/720 applies only to agreements falling within the scope of Article 101(1) of the Treaty.

(24) Agreements that are not capable of appreciably affecting trade between Member States (no effect on trade) or which do not appreciably restrict competition (agreements of minor importance) fall outside the scope of Article 101(1) of the Treaty ( 27 ) . The Commission has provided guidance on the effect on trade in the Effect on Trade Guidelines ( 28 ) , and on agreements of minor importance in the De Minimis Notice ( 29 ) . The present Guidelines are without prejudice to the Effect on Trade Guidelines and the De Minimis Notice, or any future Commission guidance.

(25) The Effect on Trade Guidelines set out the principles developed by the Union Courts to interpret the effect on trade concept and indicate when agreements are unlikely to be capable of appreciably affecting trade between Member States. They include a negative rebuttable presumption that applies to all agreements within the meaning of Article 101(1) of the Treaty, irrespective of the nature of the restrictions included in such agreements, thus also applying to agreements containing hardcore restrictions ( 30 ) . According to that presumption, vertical agreements are in principle not capable of appreciably affecting trade between Member States when: (a) the aggregate market share of the parties on any relevant market within the Union affected by the agreement does not exceed 5 %, and (b) the aggregate annual Union turnover of the supplier generated with the products covered by the agreement does not exceed EUR 40 million or, in cases involving agreements concluded between a buyer and several suppliers, the buyer’s combined purchases of the products covered by the agreements does not exceed EUR 40 million (31). The Commission may rebut the presumption if an analysis of the characteristics of the agreement and its economic context demonstrates the contrary.

(26) As set out in the De Minimis Notice, vertical agreements entered into by non-competitors are generally considered to fall outside the scope of Article 101(1) of the Treaty if the market share held by each of the parties to the agreement does not exceed 15 % on any of the relevant markets affected by the agreement ( 32 ) . This general rule is subject to two exceptions. First, as regards restrictions of competition by object, Article 101(1) of the Treaty applies even if the market share held by each of the parties does not exceed 15 % ( 33 ) . This is because an agreement that may affect trade between Member States and which has an anti-competitive object may by its nature and independently of any concrete effect constitute an appreciable restriction on competition ( 34 ) . Second, the 15 % market share threshold is reduced to 5 % where, in a relevant market, competition is restricted by the cumulative effect of parallel networks of agreements. Paragraphs (257) to (261) deal with cumulative effects in the context of the withdrawal of the benefit of Regulation (EU) 2022/720. The De Minimis Notice clarifies that individual suppliers or distributors with a market share not exceeding 5 % are in general not considered to contribute significantly to a cumulative foreclosure effect ( 35 )

(27) Furthermore, there is no presumption that vertical agreements concluded by undertakings, one or more of which has an individual market share exceeding 15 % automatically fall within the scope of Article 101(1) of the Treaty. Such agreements may still have no appreciable effect on trade between Member States or may not constitute an appreciable restriction of competition ( 36 ) . They therefore need to be assessed in their legal and economic context. These Guidelines include criteria for the individual assessment of such agreements, as set out in section 8.

(28) In addition, the Commission considers that vertical agreements between small and medium-sized undertakings (‘SMEs’) ( 37 ) are rarely capable of appreciably affecting trade between Member States. The Commission also considers that such agreements rarely appreciably restrict competition within the meaning of Article 101(1) of the Treaty, as interpreted by the Court of Justice of the European Union, unless they include restrictions of competition by object within the meaning of Article 101(1) of the Treaty. Therefore, vertical agreements between SMEs generally fall outside the scope of Article 101(1) of the Treaty. In cases where such agreements nonetheless meet the conditions for the application of Article 101(1) of the Treaty, the Commission will generally refrain from opening proceedings, due to a lack of sufficient interest for the Union, unless the undertakings individually or collectively hold a dominant position in a substantial part of the internal market.

3.2. Agency agreements

3.2.1. Agency agreements that fall outside the scope of Article 101(1) of the Treaty

(29) An agent is a legal or natural person entrusted with the power to negotiate and/or conclude contracts on behalf of another person (‘the principal’), either in the agent’s own name or in the name of the principal, for the purchase of goods or services by the principal, or the sale of goods or services supplied by the principal.

(30) Article 101 of the Treaty applies to agreements between two or more undertakings. Under certain circumstances, the relationship between an agent and its principal may be characterised as one in which the agent no longer acts as an independent economic operator. This applies where the agent bears no significant financial or commercial risks in relation to the contracts concluded or negotiated on behalf of the principal, as further explained in paragraphs (31) to (34) ( 38 ) . In that case, the agency agreement falls wholly or partially outside the scope of Article 101(1) of the Treaty ( 39 ) . As this constitutes an exception to the general applicability of Article 101 of the Treaty to agreements between undertakings, the conditions for categorising an agreement as an agency agreement that falls outside the scope of Article 101(1) of the Treaty should be interpreted narrowly. For example, it is less likely that an agency agreement will be categorised as falling outside the scope of Article 101(1) of the Treaty where the agent negotiates and/or concludes contracts on behalf of a large number of principals ( 40 ) . The qualification given to their agreement by the parties or by national law is not material for this categorisation.

(31) There are three types of financial or commercial risks that are material to the categorisation of an agreement as an agency agreement that falls outside the scope of Article 101(1) of the Treaty: (a) contract-specific risks, which are directly related to the contracts concluded and/or negotiated by the agent on behalf of the principal, such as the financing of stocks; (b) risks related to market-specific investments. Those are investments specifically required for the type of activity for which the agent has been appointed by the principal, that is, which are required to enable the agent to conclude and/or negotiate a specific type of contract. Such investments are usually sunk, which means that upon leaving that particular field of activity the investment cannot be used for other activities or sold other than at a significant loss; (c) risks related to other activities undertaken on the same product market, to the extent that the principal requires, as part of the agency relationship, the agent to undertake such activities not as an agent on behalf of the principal, but at the agent’s own risk.

(32) An agreement will be categorised as an agency agreement that falls outside the scope of Article 101(1) of the Treaty where the agent bears none of the types of risk listed in paragraph (31) or where it bears such risks only to an insignificant extent. The significance of any such risks assumed by the agent is generally to be assessed by reference to the remuneration earned by the agent for providing the agency services, for example its commission, rather than by reference to the revenues generated by the sale of the goods or services covered by the agency agreement. However, risks that are related to the activity of providing agency services in general, such as the risk of the agent’s income being dependent upon its success as an agent or general investments in for instance premises or personnel that could be used for any type of activity, are not material to the assessment.

(33) In light of the above, an agreement will generally be categorised as an agency agreement that falls outside the scope of Article 101(1) of the Treaty where all of the following conditions apply: (a) the agent does not acquire the property in the goods bought or sold under the agency agreement and does not itself supply the services bought or sold under the agency agreement. The fact that the agent may temporarily, for a very brief period of time, acquire the property in the contract goods while selling them on behalf of the principal, does not preclude the existence of an agency agreement that falls outside the scope of Article 101(1) of the Treaty, provided that the agent does not incur any costs or risks in relation to the transfer of property; (b) the agent does not contribute to the costs relating to the supply or purchase of the contract goods or services, including the costs of transporting the goods. This does not preclude the agent from carrying out the transport service, provided that the costs are covered by the principal; (c) the agent does not maintain at its own cost or risk stocks of the contract goods, including the cost of financing the stock and the cost of lost stock. The agent should be able to return unsold goods to the principal without charge, unless the agent is at fault, for example, because it fails to comply with reasonable security or anti-theft measures to avoid stock losses; (d) the agent does not take responsibility for the customers’ non-performance of the contract, with the exception of the loss of the agent’s commission, unless the agent is at fault (for example, failing to comply with reasonable security or anti-theft measures or failing to comply with reasonable measures to report theft to the principal or the police or to communicate to the principal all necessary information available to it on the customer’s financial reliability); (e) the agent does not assume responsibility towards customers or other third parties for loss or damage resulting from the supply of the contract goods or services, unless the agent is at fault; (f) the agent is not, directly or indirectly, obliged to invest in sales promotion, including through contributions to the advertising budget of the principal or to advertising or promotional activities specifically relating to the contract goods or services, unless such costs are fully reimbursed by the principal; (g) the agent does not make market-specific investments in equipment, premises, training of personnel or advertising, such as the petrol storage tank in the case of petrol retailing, specific software to sell insurance policies in the case of insurance agents, or advertising relating to routes or destinations in the case of travel agents selling flights or hotel accommodation, unless such costs are fully reimbursed by the principal; (h) the agent does not undertake other activities within the same product market required by the principal under the agency relationship (for example, the delivery of the goods), unless those activities are fully reimbursed by the principal.

(34) While the list set out in paragraph (33) is non-exhaustive, where the agent incurs one or more of the risks or costs mentioned in paragraphs (31) to (33), the agreement between the agent and principal will not be categorised as an agency agreement that falls outside the scope of Article 101(1) of the Treaty ( 41 ) . The question of risk must be assessed on a case-by-case basis and with regard to the economic reality of the situation, rather than the legal form of the agreement. For practical reasons, the risk analysis may start with the assessment of the contract-specific risks. If the agent incurs contract-specific risks which are not insignificant, that will be enough to conclude that the agent is an independent distributor. If the agent does not incur contract-specific risks, then it will be necessary to continue the analysis by assessing the risks relating to market-specific investments. Finally, if the agent does not incur any contract-specific risks or any risks relating to market-specific investments, the risks related to other activities required as part of the agency relationship within the same product market may have to be considered.

(35) A principal may use various methods to cover the relevant risks and costs, as long as such methods ensure that the agent does not bear any significant risks of the types set out in paragraphs (31) to (33). For example, a principal may choose to reimburse the precise costs incurred, or it may cover the costs by way of a fixed lump sum, or it may pay the agent a fixed percentage of the revenues generated by the sale of goods or services under the agency agreement. To ensure that all relevant risks and costs are covered, the method used by the principal should allow the agent to easily distinguish between the amount(s) intended to cover the relevant risks and costs and any other amount(s) paid to the agent, for example intended to remunerate the agent for providing the agency services. Otherwise, the agent may not be able to verify whether the method chosen by the principal covers its costs. It may also be necessary to provide a simple method for the agent to declare and request the reimbursement of any costs exceeding the agreed lump sum or fixed percentage. It may also be necessary for the principal to systematically monitor any changes to the relevant costs and to adapt the lump sum or fixed percentage accordingly. Where the relevant costs are reimbursed by way of a percentage of the price of the products sold under the agency agreement, the principal should also take into account the fact that the agent may incur relevant market-specific investment costs even where it makes limited or no sales for a certain period of time. Such costs have to be reimbursed by the principal.

(36) An independent distributor of some goods or services of a supplier may also act as an agent for other goods or services of the same supplier, provided that the activities and risks covered by the agency agreement can be effectively delineated, for example because they concern goods or services with additional functionalities or new features. For the agreement to be categorised as an agency agreement that falls outside the scope of Article 101(1) of the Treaty, the independent distributor must be genuinely free to enter into the agency agreement (for example, the agency relationship must not be de facto imposed by the principal through a threat to terminate or worsen the terms of the distribution relationship). Similarly, the principal must not directly or indirectly impose on the agent an activity as an independent distributor, unless such activity is fully reimbursed by the principal, as set out in paragraph (33), point (h). Moreover, as mentioned in paragraphs (31) to (33), all relevant risks linked to the sale of the goods or services covered by the agency agreement, including market-specific investments, must be borne by the principal.

(37) Where an agent undertakes other activities for the same supplier, not required by that supplier, at its own risk, there is a possibility that the obligations imposed on the agent in relation to its agency activity will influence its incentives and limit its decision-making independence when it sells products as an independent activity. In particular, there is a possibility that the pricing policy of the principal for the products sold under the agency agreement will influence the incentives of the agent/distributor to price independently the products that it sells as an independent distributor. In addition, the combination of agency and independent distribution for the same supplier creates difficulties in distinguishing between investments and costs that relate to the agency function, including market-specific investments, and those that relate solely to the independent activity. In such cases, the assessment of whether an agency relationship meets the conditions set out in paragraphs (30) to (33) may therefore be particularly complex ( 42 )

(38) The concerns described in paragraph (37) are more likely to arise where the agent undertakes other activities as an independent distributor for the same principal in the same relevant market. Conversely, those concerns are less likely to arise if the other activities undertaken by the agent as an independent distributor relate to a different relevant market ( 43 ) . More generally, the less interchangeable the products sold under the agency agreement and the products sold independently by the agent, the less likely it is that those concerns will arise. Where any objective differences between the characteristics of the products (for example, higher quality, novel features or additional functions) are insignificant, it may be more difficult to delineate the agent’s two types of activity, in which case there may be a significant risk of the agent being influenced by the terms of the agency agreement, in particular as regards price setting, for the products it distributes independently.

(39) To identify the market-specific investments to be reimbursed when entering into an agency agreement with one of its independent distributors that is already active on the relevant market, the principal should consider the hypothetical situation of an agent that is not yet active in the relevant market in order to assess which investments are relevant to the type of activity for which the agent is appointed. The principal would have to cover market-specific investments that are required in order to operate in the relevant market, including where those investments also concern differentiated products distributed outside the scope of the agency agreement but are not exclusively related to the sale of such differentiated products. The only case in which the principal would not have to cover market-specific investments on the relevant market would be when those investments relate exclusively to the sale of differentiated products that are not sold under the agency agreement, but are distributed independently. This is because the agent would incur all market-specific costs to operate on the market, but would not incur the market-specific costs that relate exclusively to the sale of the differentiated products if it did not also act as an independent distributor for those products (provided that the agent can operate on the relevant market without selling the differentiated products in question). To the extent that the relevant investments (for example, investments in activity-specific equipment) have already been depreciated, the reimbursement may be adjusted proportionately. Similarly, the reimbursement may also be adjusted if the market-specific investments made by the independent distributor significantly exceed the market-specific investments that are necessary for an agent to start operating on the relevant market, as a result of its activity as independent distributor.

(40) Example of how costs can be allocated in the case of a distributor that also acts as agent for certain products for the same supplier. Products A, B and C are generally sold by the same distributor(s). Products A and B belong to the same product and geographic market, but are differentiated and present objectively different characteristics. Product C belongs to a different product market. A supplier that generally distributes its products using independent distributors wishes to use an agency agreement for the distribution of its product A, which features a new functionality. It offers this agency agreement to its independent distributors (for product B) already operating in the same product and geographic market, without legally or factually requiring them to enter into this agreement. For the agency agreement not to fall within the scope of Article 101(1) of the Treaty and to meet the conditions set out in paragraphs (30) to (33), the principal must cover all investments relating to the activity of selling each of products A and B (and not only product A) as the two products belong to the same product and geographic market. For example, the costs incurred to adapt or furnish a shop in order to display and sell products A and B are likely to be market-specific. Similarly, the costs of training personnel in order to sell products A and B and costs relating to specific storage equipment needed for products A and B are also likely to be market-specific. Those relevant investments, which would generally be required for an agent to enter the market and start selling products A and B, should be borne by the principal even if the specific agent is already established on the relevant market as an independent distributor. The principal would however not have to cover investments relating to the sale of product C, which does not belong to the same product market as products A and B. Moreover, where the sale of product B requires specific investments that are not necessary for the sale of product A, for example, investments in dedicated equipment or staff training, such investments would not be relevant and would therefore not have to be covered by the principal, provided that a distributor can operate on the relevant market comprising products A and B by selling only product A. As regards advertising, investments in advertising for the agent’s shop as such, as opposed to advertising that is specific to product A, would benefit both the agent’s shop in general as well as the sales of products A, B and C, whereas only product A is sold under the agency agreement. These costs would therefore be partly relevant for the assessment of the agency agreement, to the extent that they relate to the sale of product A which is sold under the agency agreement. The cost of an advertising campaign relating exclusively to products B or C would however not be relevant and therefore would not have to be covered by the principal, provided that a distributor can operate on the relevant market by selling only product A. The same principles apply to investments in a website or online store, since part of those investments would not be relevant, as they would have to be made irrespective of the products sold under the agency agreement. Therefore, the principal would not have to reimburse general investments in the design of the agent’s website, insofar as the website itself could be used to sell products other than those belonging to the relevant product market, for example, product C or, more generally, products other than A and B). However, investments relating to the activity of advertising or selling on the website products belonging to the relevant product market, that is to say both products A and B, would be relevant. Therefore, depending on the level of investment required to advertise and sell products A and B on the website, the principal would have to cover part of the costs of setting up and/or operating the website or online store. Any investments relating specifically to the advertising or sale of product B would not have to be covered, provided that a distributor can operate on the relevant market by selling only product A.

3.2.2. Application of Article 101(1) of the Treaty to agency agreements

(41) Where an agreement meets the conditions to be categorised as an agency agreement that falls outside the scope of Article 101(1) of the Treaty, the selling or purchasing function of the agent forms part of the principal’s activities. Since the principal bears the commercial and financial risks related to the selling and purchasing of the contract goods or services, all obligations imposed on the agent in relation to the contracts concluded and/or negotiated on behalf of the principal fall outside Article 101(1) of the Treaty. The assumption by the agent of the obligations listed in this paragraph is considered to form an inherent part of an agency agreement, as those obligations relate to the ability of the principal to determine the scope of the agent’s activity in relation to the contract goods or services. This is essential if the principal is to assume the risks in respect of the contracts concluded and/or negotiated by the agent on the principal’s behalf. Thus, the principal is able to determine the commercial strategy in relation to: (a) limitations on the territory in which the agent may sell the contract goods or services; (b) limitations on the customers to whom the agent may sell the contract goods or services; (c) the prices and conditions at which the agent must sell or purchase the contract goods or services.

(42) By contrast, where the agent bears one or more of the relevant risks described in paragraphs (31) to (33), the agreement between agent and principal does not constitute an agency agreement that falls outside the scope of Article 101(1) of the Treaty. In that situation, the agent will be treated as an independent undertaking and the agreement between agent and principal will be subject to Article 101(1) of the Treaty, like any other vertical agreement. For that reason, Article 1(1), point (k) of Regulation (EU) 2022/720 clarifies that an undertaking which, under an agreement falling within the scope of Article 101(1) of the Treaty, sells goods or services on behalf of another undertaking is a buyer.

(43) Even if the agent bears no significant risks of the type described in paragraphs (31) to (33), it remains a separate undertaking from the principal and therefore provisions governing the relationship between the agent and the principal may fall within Article 101(1) of the Treaty, irrespective of whether they form part of the agreement governing the sale or purchase of goods or services or a separate agreement. Such provisions can benefit from the exemption provided by Article 2(1) of Regulation (EU) 2022/720, provided that the conditions of the Regulation are fulfilled. Outside the scope of Regulation (EU) 2022/720, such provisions require an individual assessment under Article 101 of the Treaty, as described in section 8.1, in particular to determine whether they produce restrictive effects within the meaning of Article 101(1) of the Treaty and, if so, whether they satisfy the conditions of Article 101(3) of the Treaty. For instance, agency agreements may contain a provision preventing the principal from appointing other agents in respect of a given type of transaction, customer or territory (exclusive agency provisions) or a provision preventing the agent from acting as an agent or distributor for undertakings that compete with the principal (single branding provisions). Exclusive agency provisions will, in general, not result in anti-competitive effects. However, single branding provisions and post-term non-compete provisions, which concern inter-brand competition, may restrict competition within the meaning of Article 101(1) of the Treaty where, in isolation or by way of cumulative effects, they result in foreclosure of the relevant market where the contract goods or services are sold or purchased (see in particular sections 6.2.2 and 8.2.1).

(44) An agency agreement may also fall within the scope of Article 101(1) of the Treaty even if the principal bears all the relevant financial and commercial risks, in cases where the agreement facilitates collusion. That could be the case, for instance, where a number of principals use the same agents while collectively excluding other principals from using those agents, or where principals use the agents to collude on marketing strategy or to exchange sensitive market information.

(45) In the case of an independent distributor that also acts as an agent for certain goods or services of the same supplier, compliance with the requirements set out in paragraphs (36) to (39) has to be assessed strictly. This is necessary to avoid misuse of the agency model in scenarios where the supplier does not actually become active at the retail level via the agency agreement and take all associated commercial decisions and assume all related risks, in accordance with the principles set out in paragraphs (30) to (33) , but rather uses the agency model as a means to control retail prices for those products that allow high resale margins. Since resale price maintenance (‘RPM’) is a hardcore restriction under Article 4 of Regulation (EU) 2022/720, as set out in section 6.1.1, and a restriction by object under Article 101(1) of the Treaty, the agency relationship should not be misused by suppliers to circumvent the application of Article 101(1) of the Treaty.

3.2.3. Agency and the online platform economy

(46) Agreements entered into by undertakings active in the online platform economy generally do not meet the conditions to be categorised as agency agreements that fall outside the scope of Article 101(1) of the Treaty. Such undertakings generally act as independent economic operators and not as part of the undertakings for which they provide services. In particular, undertakings active in the online platform economy often serve a very large number of sellers, which prevents them from effectively becoming part of any of the sellers’ undertakings. In addition, strong network effects and other features of the online platform economy can contribute to a significant imbalance in the size and bargaining power of the contracting parties. This can result in a situation where the conditions under which goods or services are sold and the commercial strategy are determined by the undertaking active in the online platform economy rather than by the sellers of the goods or services. In addition, undertakings active in the online platform economy typically make significant market-specific investments, for example, in software, advertising and after-sales services, indicating that those undertakings bear significant financial or commercial risks associated with the transactions that they intermediate.

3.3. Subcontracting agreements

(47) Subcontracting agreements are defined in the Subcontracting Notice ( 44 ) as agreements under which one firm, called ‘the contractor’, whether or not in consequence of a prior order from a third party, entrusts to another, called ‘the subcontractor’, the manufacture of goods, the supply of services or the performance of work under the contractor’s instructions, to be provided to the contractor or performed on his behalf. As a general rule, subcontracting agreements fall outside the scope of Article 101(1) of the Treaty. The Subcontracting Notice includes further guidance on the application of that general rule. In particular, the Subcontracting Notice states that Article 101(1) of the Treaty does not apply to clauses limiting the use of technology or equipment that the contractor provides to a subcontractor, on condition that the technology or equipment is necessary to enable the subcontractor to produce the products concerned ( 45 ) . The Subcontracting Notice also clarifies the scope of application of that general rule and in particular, that other restrictions imposed on the subcontractor can fall within the scope of Article 101 of the Treaty, such as the obligation not to conduct or exploit the subcontractor’s own research and development or not to produce in general for third parties ( 46 )

4. SCOPE OF REGULATION (EU) 2022/720

4.1. Safe harbour established by Regulation (EU) 2022/720

(48) The exemption provided by Article 2(1) of Regulation (EU) 2022/720 establishes a safe harbour for vertical agreements within the meaning of the Regulation, provided that the market shares held by the supplier and the buyer on the relevant markets do not exceed the thresholds set out in Article 3 of the Regulation (see section 5.2.)and the agreement does not include any of the hardcore restrictions set out in Article 4 of the Regulation (see section 6.1.) ( 47 ) . The safe harbour applies as long as the benefit of the block exemption has not been withdrawn in a particular case by the Commission or by an NCA pursuant to Article 29 of Regulation (EC) No 1/2003 (see section 7.1.). The fact that a vertical agreement falls outside the safe harbour does not mean that the agreement falls within the scope of Article 101(1) of the Treaty or that it does not fulfil the conditions of Article 101(3) of the Treaty.

(49) Where a supplier uses the same vertical agreement to distribute several types of goods or services, the application of the market share thresholds set out in Article 3(1) of Regulation (EU) 2022/720 may result in the exemption provided by Article 2(1) of the Regulation applying in respect of some goods or services but not in respect of others. As regards the goods or services to which Article 2(1) of the Regulation does not apply, an individual assessment under Article 101 of the Treaty is necessary.

4.2. Definition of vertical agreements

(50) Article 101(1) of the Treaty refers to agreements between undertakings. It makes no distinction regarding whether the undertakings operate at the same level or at different levels of the production or distribution chain. Article 101(1) of the Treaty thus applies to both horizontal and vertical agreements ( 48 )

(51) Pursuant to the power conferred on the Commission by Article 1 of Regulation No. 19/65/EEC to declare by regulation that Article 101(1) of the Treaty shall not apply to certain categories of agreements between undertakings, Article 1(1), point (a) of Regulation (EU) 2022/720 defines a vertical agreement as ‘an agreement or concerted practice entered into between two or more undertakings, each of which operates, for the purposes of the agreement or the concerted practice, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services’ ( 49 )

4.2.1. Unilateral conduct falls outside the scope of Regulation (EU) 2022/720

(52) Regulation (EU) 2022/720 does not apply to unilateral conduct by undertakings. Unilateral conduct can, however, fall within the scope of Article 102 of the Treaty, which prohibits the abuse of a dominant position ( 50 )

(53) Regulation (EU) 2022/720 applies to vertical agreements. For there to be an agreement within the meaning of Article 101 of the Treaty, it is sufficient that the parties have expressed their joint intention to conduct themselves on the market in a specific way (a so-called concurrence of wills). The form in which that intention is expressed is irrelevant, as long as it constitutes a faithful expression of the parties’ intention ( 51 )

(54) If there is no explicit agreement expressing the parties’ concurrence of wills, a party or authority that alleges an infringement of Article 101 of the Treaty must prove that the unilateral policy of one party receives the acquiescence of the other party. As regards vertical agreements, acquiescence to a specific unilateral policy may be either explicit or tacit: (a) explicit acquiescence can be deduced from the powers conferred upon the parties in a general agreement drawn up in advance. If the terms of that agreement provide for or authorise one party to subsequently adopt a specific unilateral policy that is binding on the other party, the acquiescence to that policy by the other party can be established on that basis (52). (b) for tacit acquiescence, it is necessary to show that one party explicitly or implicitly requires the cooperation of the other party for the implementation of its unilateral policy and that the other party has complied with that requirement by implementing that unilateral policy in practice (53). For instance, if after a supplier’s announcement of a unilateral reduction of supplies in order to prevent parallel trade, distributors immediately reduce their orders and stop engaging in parallel trade, it can be concluded that those distributors tacitly acquiesce to the supplier’s unilateral policy. However, such a conclusion cannot be reached if the distributors continue to engage in parallel trade or try to find new ways to engage in parallel trade.

(55) In light of the above, the imposition of general terms and conditions by one party amounts to an agreement within the meaning of Article 101(1) of the Treaty where such terms and conditions have been explicitly or tacitly accepted by the other party ( 54 )

4.2.2. The undertakings operate at different levels of the production or distribution chain

(56) Regulation (EU) 2022/720 applies to agreements between two or more undertakings, irrespective of their business model. The Regulation does not apply to agreements entered into with natural persons who are acting for purposes which are outside their trade, business, craft or profession, as such persons are not undertakings.

(57) To qualify as a vertical agreement within the meaning of Article 1(1), point (a) of Regulation (EU) 2022/720, an agreement must be entered into between undertakings operating, for the purposes of the agreement, at different levels of the production or distribution chain. For example, a vertical agreement exists where one undertaking produces a raw material or provides a serviceand sells it to another undertaking that uses it as an input, or where a manufacturer sells a product to a wholesaler that resells it to a retailer. Likewise, a vertical agreement exists where one undertaking sells goods or services to another undertaking which is the end user of the goods or services.

(58) As the definition in Article 1(1), point (a) of Regulation (EU) 2022/720 refers to the purpose of the specific agreement, the fact that one undertaking party to the agreement is active at more than one level of the production or distribution chain does not preclude the application of Regulation (EU) 2022/720. However, where a vertical agreement is entered into between competing undertakings, Regulation (EU) 2022/720 does not apply, unless the conditions of Article 2(4) of the Regulation are fulfilled (see sections 4.4.3. and 4.4.4.).

4.2.3. The agreement relates to the purchase, sale or resale of goods or services

(59) To qualify as a vertical agreement within the meaning of Article 1(1), point (a) of Regulation (EU) 2022/720, the agreement must relate to the conditions under which the parties “may purchase, sell or resell certain goods or services”. Pursuant to the purpose of block exemption regulations to provide legal certainty, Article 1(1), point (a) of Regulation (EU) 2022/720 must be interpreted broadly as applying to all vertical agreements, irrespective of whether they relate to intermediate or final goods or services. For the purpose of applying the Regulation to a particular agreement, both the goods or services supplied and, in the case of intermediate goods or services, the resulting final goods or services, are considered contract goods or services.

(60) Vertical agreements in the online platform economy, including those entered into by providers of online intermediation services, as referred to in Article 1(1), point (d) of Regulation (EU) 2022/720, are covered by Article 1(1), point (a) of Regulation (EU) 2022/720. In the case of vertical agreements relating to the provision of online intermediation services, both the online intermediation services and the goods or services that are transacted via the online intermediation services are considered as contract goods or services for the purpose of applying Regulation (EU) 2022/720 to the agreement.

(61) Regulation (EU) 2022/720 does not apply to vertical restraints that do not relate to the conditions under which goods or services may be purchased, sold or resold. Such restraints must therefore be assessed individually, namely it is necessary to determine whether they fall within the scope of Article 101(1) of the Treaty and, if so, whether they fulfil the conditions of Article 101(3) of the Treaty. For example, Regulation (EU) 2022/720 does not apply to an obligation that prevents the parties from carrying out independent research and development, even though the parties may have included it in their vertical agreement. Another example concerns rent and lease agreements. Although Regulation (EU) 2022/720 applies to agreements for the sale and purchase of goods for the purpose of renting them to third parties, rent and lease agreements as such are not covered by the Regulation, because in that case there is no sale or purchase of goods.

4.3. Vertical agreements in the online platform economy

(62) Undertakings active in the online platform economy play an increasingly important role in the distribution of goods and services. They enable new ways of doing business, some of which are not easy to categorise using the concepts applied to vertical agreements in the brick and mortar environment.

(63) Undertakings active in the online platform economy are often qualified as agents in contract or commercial law. However, this qualification is not material for the categorisation of their agreements under Article 101(1) of the Treaty ( 55 ) . Vertical agreements entered into by undertakings active in the online platform economy will only be categorised as agency agreements that fall outside the scope of Article 101(1) of the Treaty where they fulfil the conditions set out in section 3.2. Due to the factors mentioned in section 3.2.3., those conditions will generally not be fulfilled in the case of agreements entered into by undertakings active in the online platform economy.

(64) Where a vertical agreement entered into by an undertaking active in the online platform economy does not meet the conditions to be categorised as an agency agreement falling outside the scope of Article 101(1) of the Treaty, it is necessary to consider whether the agreement relates to the provision of online intermediation services. Article 1(1), point (e) of Regulation (EU) 2022/720 defines online intermediation services as information society services ( 56 ) which allow undertakings to offer goods or services to other undertakings or to final consumers, with a view to facilitating the initiating of direct transactions between undertakings or between an undertaking and a final consumer, irrespective of whether and where the transactions are ultimately concluded ( 57 ) . Examples of online intermediation services may include e-commerce marketplaces, app stores, price comparison tools and social media services used by undertakings.

(65) In order to qualify as a provider of online intermediation services, an undertaking must facilitate the initiating of direct transactions between two other parties. In principle, the functions performed by the undertaking must be assessed separately for each vertical agreement that the undertaking enters into, notably because undertakings active in the online platform economy often apply different business models in different sectors or even within the same sector. For example, in addition to providing online intermediation services, such undertakings may buy and resell goods or services, in some cases performing both functions vis-à-vis a single counterparty.

(66) The fact that an undertaking collects payments for transactions that it intermediates, or offers ancillary services in addition to its intermediation services, for example, advertising services, rating services, insurance or a guarantee against damage, does not preclude it from being categorised as a provider of online intermediation services ( 58 )

(67) For the purpose of applying Regulation (EU) 2022/720, undertakings that are party to vertical agreements are categorised as either suppliers or buyers. Pursuant to Article 1(1), point (d) of the Regulation, an undertaking that provides online intermediation services within the meaning of Article 1(1), point (e) of the Regulation is categorised as a supplier in respect of those services and an undertaking that offers or sells goods or services via online intermediation services is categorised as a buyer in respect of those online intermediation services, irrespective of whether it pays to use the online intermediation services ( 59 ) . This has the following consequences for the application of Regulation (EU) 2022/720: (a) the undertaking that provides the online intermediation services cannot be categorised as a buyer within the meaning of Article 1(1), point (k) of the Regulation in respect of goods or services offered by third parties using those online intermediation services; (b) for the purpose of applying the market share thresholds set out in Article 3(1) of the Regulation, the market share of the undertaking that provides the online intermediation services is calculated on the relevant market for the supply of those services. The scope of the relevant market depends on the facts of the case, in particular the degree of substitutability between online and offline intermediation services, between intermediation services used for different categories of goods or services and between intermediation services and direct sales channels; (c) restrictions imposed by the undertaking that provides the online intermediation services on buyers of those services relating to the price at which, the territories to which, or the customers to whom the intermediated goods or services may be sold, including restrictions relating to online advertising and online selling, are subject to the provisions of Article 4 of the Regulation (hardcore restrictions). For example, pursuant to Article 4, point (a) of the Regulation, the exemption provided by Article 2(1) of the Regulation does not apply to an agreement under which a provider of online intermediation services imposes a fixed or minimum sale price for a transaction that it facilitates; (d) pursuant to Article 5(1), point (d) of the Regulation, the exemption provided by Article 2(1) of the Regulation does not apply to across-platform retail parity obligations imposed by the undertaking that provides the online intermediation services on buyers of those services; (e) pursuant to Article 2(6) of the Regulation, the exemption provided by Article 2(1) of the Regulation does not apply to agreements relating to the provision of online intermediation services where the provider of the services is a competing undertaking on the relevant market for the sale of the intermediated goods or services (hybrid function). As set out in section 4.4.4., such agreements must be assessed under the Horizontal Guidelines as regards possible collusive effects and under section 8 of these Guidelines as regards any vertical restraints.

(68) Undertakings active in the online platform economy that do not provide online intermediation services within the meaning of Article 1(1), point (e) of Regulation (EU) 2022/720 may be categorised as either suppliers or buyers for the purpose of applying the Regulation. For example, such undertakings may be categorised as suppliers of upstream input services or as (re)sellers of goods or services downstream. This categorisation may affect, in particular, the definition of the relevant market for the purpose of applying the market share thresholds set out in Article 3(1) of the Regulation, the applicability of Article 4 of the Regulation (hardcore restrictions), and the applicability of Article 5 of the Regulation (excluded restrictions).

4.4. Limits to the application of Regulation (EU) 2022/720

4.4.1. Associations of retailers

(69) Article 2(2) of Regulation (EU) 2022/720 provides that vertical agreements entered into by an association of undertakings that fulfils certain conditions can benefit from the safe harbour, thereby excluding from the safe harbour vertical agreements entered into by all other associations. More specifically, vertical agreements entered into between an association and individual members, or between an association and individual suppliers, fall within the scope of Regulation (EU) 2022/720 only if all the members are retailers, selling goods (and not services) to final consumers, and if each individual member of the association has an annual turnover not exceeding EUR 50 million ( 60 ) . However, where only a limited number of the members of the association have an annual turnover exceeding the EUR 50 million threshold and where those members together represent less than 15 % of the collective turnover of all the members, this will generally not change the assessment under Article 101 of the Treaty.

(70) An association of undertakings may involve both horizontal and vertical agreements. The horizontal agreements must be assessed according to the principles set out in the Horizontal Guidelines. If the conclusion of that assessment is that a cooperation between undertakings in the area of purchasing or selling does not raise concerns, in particular because it meets the conditions set out in those Guidelines relating to purchasing and/or commercialisation agreements, a further assessment will be necessary to examine the vertical agreements concluded by the association with individual suppliers or individual members. That further assessment must be conducted in accordance with the rules of Regulation (EU) 2022/720, and in particular with the conditions laid down in Articles 3, 4 and 5 thereof, and with these Guidelines. For instance, horizontal agreements concluded between the members of the association or decisions adopted by the association, such as the decision to require the members to purchase from the association or the decision to allocate exclusive territories to the members must first be assessed as a horizontal agreement. Only if that assessment leads to the conclusion that the horizontal agreement or decision is not anti-competitive is it necessary to assess the vertical agreements between the association and individual members or between the association and individual suppliers.

4.4.2. Vertical agreements containing provisions on intellectual property rights (IPRs)

(71) Article 2(3) of Regulation (EU) 2022/720 provides that vertical agreements containing certain provisions which relate to the assignment or use of IPRs can benefit from the exemption provided by Article 2(1) of the Regulation, subject to certain conditions. Accordingly, Regulation (EU) 2022/720 does not apply to other vertical agreements containing IPR provisions.

(72) Regulation (EU) 2022/720 applies to vertical agreements containing IPR provisions where all of the following conditions are fulfilled: (a) the IPR provisions must be part of a vertical agreement, that is, an agreement with conditions under which the parties may purchase, sell or resell certain goods or services; (b) the IPRs must be assigned to or licensed for use by the buyer; (c) the IPR provisions must not constitute the primary object of the agreement; (d) the IPR provisions must be directly related to the use, sale or resale of goods or services by the buyer or its customers. In the case of franchising where marketing forms the object of the exploitation of the IPRs, the goods or services are distributed by the master franchisee or the franchisees; (e) the IPR provisions, in relation to the contract goods or services, must not contain restrictions of competition having the same object as vertical restraints that are not exempted under Regulation (EU) 2022/720.

(73) These conditions ensure that Regulation (EU) 2022/720 applies to vertical agreements where the use, sale or resale of goods or services can be performed more effectively because IPRs are assigned to or licensed for use by the buyer. This means that restrictions concerning the assignment or use of IPRs benefit from the exemption provided by Article 2(1) of the Regulation where the main object of the agreement is the purchase or distribution of goods or services.

(74) The first condition, set out in paragraph (72), point (a), makes clear that the IPRs must be provided in the context of an agreement to purchase or distribute goods, or an agreement to purchase or provide services, and not an agreement concerning the assignment or licensing of IPRs for the manufacture of goods, nor a pure licensing agreement. Regulation (EU) 2022/720 does not cover for instance: (a) agreements where a party provides another party with a recipe and licenses the other party to produce a drink with that recipe; (b) the pure licence of a trade mark or sign for the purposes of merchandising; (c) sponsorship contracts concerning the right to advertise oneself as being an official sponsor of an event; (d) copyright licensing such as broadcasting contracts concerning the right to record or broadcast an event.

(75) It follows from the second condition, set out in paragraph (72), point (b), that Regulation (EU) 2022/720 does not apply where the IPRs are provided by the buyer to the supplier, regardless of whether the IPRs concern the manner of manufacture or of distribution. An agreement relating to the transfer of IPRs to the supplier and containing possible restrictions on the sales made by the supplier is not covered by Regulation (EU) 2022/720. This means that subcontracting involving the transfer of know-how to a subcontractor is not covered by Regulation (EU) 2022/720 (see also section 3.3). However, vertical agreements under which the buyer merely provides specifications to the supplier which describe the goods or services to be supplied are covered by Regulation (EU) 2022/720.

(76) The third condition, set out in paragraph (72), point (c), requires that the primary object of the agreement is not the assignment or licensing of IPRs. The primary object must be the purchase, sale or resale of goods or services, and the IPR provisions must serve the implementation of the vertical agreement.

(77) The fourth condition, set out in paragraph (72), point (d), requires that the IPR provisions facilitate the use, sale or resale of goods or services by the buyer or its customers. The goods or services for use or resale are usually supplied by the licensor, but they may also be purchased by the licensee from a third party supplier. The IPR provisions will generally concern the marketing of goods or services. An example would be a franchise agreement where the franchisor sells to the franchisee goods for resale and licenses the franchisee to use its trademark and know-how to market the goods, or where the supplier of a concentrated extract licenses the buyer to dilute and bottle the extract before selling it as a drink.

(78) The fifth condition, set out in paragraph (72), point (e), requires that the IPR provisions do not have the same object as any of the hardcore restrictions listed in Article 4 of Regulation (EU) 2022/720 or any of the restrictions that are excluded from the benefit of the Regulation pursuant to Article 5 of the Regulation (see section 6).

(79) IPRs relevant to the implementation of vertical agreements within the meaning of Article 2(3) of Regulation (EU) 2022/720 generally concern three main areas: trademarks, copyright and know-how.

4.4.2.1. Trademarks

(80) A trademark licence to a distributor may be related to the distribution of the licensor’s products in a particular territory. If it is an exclusive licence, the agreement amounts to exclusive distribution.

4.4.2.2. Copyright

(81) Resellers of goods or services covered by copyright (for example, books and software) may be obliged by the copyright holder to only resell under the condition that the buyer, irrespective of whether it is another reseller or the end user, does not infringe the copyright. To the extent that they fall within the scope of Article 101(1) of the Treaty, such obligations on the reseller are covered by Regulation (EU) 2022/720.

(82) As mentioned in paragraph 62 of the Technology Transfer Guidelines ( 61 ) , the licensing of software copyrights for the purpose of mere reproduction and distribution of the protected work is not covered by Commission Regulation (EU) No 316/2014 ( 62 ) but is instead covered by analogy by Regulation (EU) 2022/720 and these Guidelines.

(83) Furthermore, agreements under which hard copies of software are supplied for resale and the reseller does not acquire a licence to any rights in the software but only has the right to resell the hard copies, are to be regarded as agreements for the supply of goods for resale for the purpose of Regulation (EU) 2022/720. Under that form of distribution, the licensing of the software only takes place between the copyright owner and the user of the software. It may take the form of a “shrink wrap” licence, that is, a set of conditions included in the package of the hard copy, which the end user is deemed to accept by opening the package.

(84) Buyers of hardware incorporating software protected by copyright may be obliged by the copyright holder not to infringe the copyright and must therefore not make copies and resell the software or make copies and use the software in combination with other hardware. To the extent that they fall within the scope of Article 101(1) of the Treaty, such restrictions on use are covered by Regulation (EU) 2022/720.

4.4.2.3. Know-how

(85) Franchise agreements, with the exception of industrial franchise agreements, are an example of know-how being communicated to the buyer for marketing purposes ( 63 ) . Franchise agreements contain licences of IPRs relating to trademarks or signs, and know-how for the use and distribution of goods or the provision of services. In addition to the licence of IPRs, the franchisor usually provides the franchisee with commercial or technical assistance for the duration of the agreement, such as procurement services, training, advice on real estate and financial planning. The licence and the assistance provided are integral components of the business method being franchised.

(86) Licensing contained in franchise agreements is covered by Regulation (EU) 2022/720 where all five conditions listed in paragraph (72) are fulfilled. This is usually the case, as under most franchise agreements, including master franchise agreements, the franchisor provides goods and/or services, in particular commercial or technical assistance services, to the franchisee. The IPRs help the franchisee to resell the products supplied by the franchisor or by a supplier designated by the franchisor, or to use those products and sell the resulting goods or services. Where the franchise agreement concerns solely or primarily the licensing of IPRs, it is not covered by Regulation (EU) 2022/720, but the Commission will, as a general rule, apply the principles set out in Regulation (EU) 2022/720 and these Guidelines to such an agreement.

(87) The following IPR-related obligations are generally considered necessary to protect the franchisor’s IPRs and, where such obligations fall within the scope of Article 101(1) of the Treaty, they are also covered by Regulation (EU) 2022/720: (a) an obligation on the franchisee not to engage, directly or indirectly, in any similar business; (b) an obligation on the franchisee not to acquire financial interests in the capital of a competing undertaking such as to give the franchisee the power to influence the economic conduct of such undertaking; (c) an obligation on the franchisee not to disclose to third parties the know-how provided by the franchisor as long as such know-how is not in the public domain; (d) an obligation on the franchisee to communicate to the franchisor any experience gained in exploiting the franchise and to grant the franchisor and other franchisees a non-exclusive licence for the know-how resulting from that experience; (e) an obligation on the franchisee to inform the franchisor of infringements of licensed IPRs, to take legal action against infringers or to assist the franchisor in any legal actions against infringers; (f) an obligation on the franchisee not to use know-how licensed by the franchisor for purposes other than the exploitation of the franchise; (g) an obligation on the franchisee not to assign the rights and obligations under the franchise agreement without the franchisor’s consent.

4.4.3. Vertical agreements between competitors

(88) As regards vertical agreements between competitors, it should first be noted that, pursuant to Article 2(7) of Regulation (EU) 2022/720, on which guidance is provided in section 4.5., the Regulation does not apply to vertical agreements the subject matter of which falls within the scope of any other block exemption regulation, unless otherwise provided for in such other regulation.

(89) Article 2(4), first sentence, of Regulation (EU) 2022/720 establishes the general rule that the exemption provided by Article 2(1) of the Regulation does not apply to vertical agreements between competing undertakings.

(90) Article 1(1), point (c) of Regulation (EU) 2022/720 defines a competing undertaking as an actual or potential competitor. Two undertakings are treated as actual competitors if they are active on the same relevant (product and geographic) market. An undertaking is treated as a potential competitor of another undertaking if, absent the vertical agreement between the undertakings, it is likely that the former would, within a short period of time (normally not longer than one year), make the additional necessary investments or incur other necessary costs to enter the relevant market in which the latter undertaking is active. This assessment must be based on realistic grounds, having regard to the structure of the market and the economic and legal context. The mere theoretical possibility of entering a market is not sufficient. There must be real and concrete possibilities for the undertaking to enter the market and no insurmountable barriers to entry. Conversely, there is no need to demonstrate with certainty that the undertaking will in fact enter the relevant market and that it will be capable of retaining its place there ( 64 )

(91) Vertical agreements between competing undertakings that do not fall within the exceptions set out in Article 2(4), second sentence, of Regulation (EU) 2022/720, on which guidance is provided in paragraphs (93) to (95), must be individually assessed under Article 101 of the Treaty. These Guidelines are relevant for the assessment of any vertical restraints in such agreements. The Horizontal Guidelines may provide relevant guidance for the assessment of possible collusive effects.

(92) A wholesaler or retailer that provides specifications to a manufacturer to produce goods for sale under the brand name of that wholesaler or retailer is not considered a manufacturer of such own-brand goods and consequently not a competitor of the manufacturer for the purpose of applying Article 2(4), point (a) of Regulation (EU) 2022/720. Therefore, the exemption provided by Article 2(1) of the Regulation can apply to a vertical agreement entered into between, on the one hand, a wholesaler or retailer that sells own-brand goods that have been manufactured by a third party (and not in-house) and, on the other hand, a manufacturer of competing branded goods ( 65 ) . By contrast, wholesalers and retailers that manufacture goods in-house for sale under their own brand name are considered to be manufacturers and therefore the exemption provided by Article 2(1) of the Regulation does not apply to vertical agreements entered into by such wholesalers or retailers with manufacturers of competing branded goods.

(93) Article 2(4), second sentence, of Regulation (EU) 2022/720 contains two exceptions to the general rule that the block exemption does not apply to agreements between competing undertakings. More specifically, the second sentence of Article 2(4) provides that the exemption provided by Article 2(1) of the Regulation applies to non-reciprocal vertical agreements between competing undertakings that fulfil the conditions of either Article 2(4), point (a) or point (b) of the Regulation. Non-reciprocal means in particular that the buyer of the contract goods or services does not also supply competing goods or services to the supplier.

(94) The two exceptions set out in the second sentence of Article 2(4) of Regulation (EU) 2022/720 both concern scenarios of dual distribution, namely where a supplier of goods or services is also active at the downstream level, thereby competing with its independent distributors. Article 2(4), point (a) of the Regulation concerns the scenario where the supplier sells the contract goods at several levels of trade, namely at the upstream level as a manufacturer, importer or wholesaler and at the downstream level as an importer, wholesaler or retailer, whereas the buyer sells the contract goods at a downstream level, namely as an importer, wholesaler or retailer, and is not a competing undertaking at the upstream level where it buys the contract goods. Article 2(4), point (b) of the Regulation concerns the scenario where the supplier is a provider of services operating at several levels of trade, whereas the buyer provides services at the retail level and is not a competing undertaking at the level of trade where it purchases the contract services.

(95) The rationale for the exceptions set out in Article 2(4), points (a) and (b) of Regulation (EU) 2022/720 is that, in a dual distribution scenario, the potential negative impact of the vertical agreement on the competitive relationship between the supplier and the buyer at the downstream level is considered to be less important than the potential positive impact of the vertical agreement on competition in general at the upstream or downstream levels. As Article 2(4), points (a) and (b) are exceptions to the general rule that Regulation (EU) 2022/720 does not apply to agreements between competitors, those exceptions should be construed narrowly.

(96) If the conditions set out in Article 2(4), point (a) or (b) of Regulation (EU) 2022/720 are fulfilled, the exemption provided by Article 2(1) of the Regulation applies to all aspects of the vertical agreement in question, including, in general, exchanges of information between the parties relating to the implementation of the agreement ( 66 ) . Information exchange can contribute to the pro-competitive effects of vertical agreements, including the optimisation of production and distribution processes. This also applies in scenarios of dual distribution. However, not all exchanges of information between a supplier and buyer in a dual distribution scenario are efficiency-enhancing. For this reason, Article 2(5) of Regulation (EU) 2022/720 provides that the exceptions set out in Article 2(4), points (a) and (b) do not apply to the exchange of information between a supplier and buyer that is either not directly related to the implementation of the vertical agreement or is not necessary to improve the production or distribution of the contract goods or services, or which meets neither of those conditions. Article 2(5) of the Regulation and the guidance provided in paragraphs (96) to (103) only concern information exchange in the context of dual distribution, namely information exchange between the parties to a vertical agreement that fulfils the conditions of Article 2(4), point (a) or (b) of the Regulation.

(97) For the purpose of applying Article 2(5) of the Regulation and these Guidelines, information exchange includes any communication of information by one party to the vertical agreement to the other party, irrespective of the characteristics of the exchange, for instance whether the information is communicated by only one party or by both parties, or whether the information is exchanged in writing or orally. It is also immaterial whether the form and content of the information exchange is expressly agreed in the vertical agreement or if it takes place on an informal basis, including, for example, where one party to the vertical agreement communicates information without a request from the other party.

(98) Whether an exchange of information in a dual distribution scenario is directly related to the implementation of the vertical agreement and necessary to improve the production or distribution of the contract goods or services within the meaning of Article 2(5) of Regulation (EU) 2022/720 may depend on the particular model of distribution. For example, under an exclusive distribution agreement, it may be necessary for the parties to exchange information relating to their respective sales activities in particular territories or in respect of particular customer groups. Under a franchise agreement, it may be necessary for the franchisor and franchisee to exchange information relating to the application of a uniform business model across the franchise network ( 67 ) . In a selective distribution system, it may be necessary for the distributor to share information with the supplier relating to its compliance with the selection criteria and with any restrictions on sales to unauthorised distributors.

(99) The following is a non-exhaustive list of examples of information that may, depending on the particular circumstances, be directly related to the implementation of the vertical agreement and necessary to improve the production or distribution of the contract goods or services ( 68 ) (a) technical information relating to the contract goods or services, including information relating to the registration, certification, handling, use, maintenance, repair, upgrading or recycling of the contract goods or services, notably where such information is required to comply with regulatory measures, and information that enables the supplier or buyer to adapt the contract goods or services to the requirements of the customer; (b) logistical information relating to the production and distribution of the contract goods or services at the upstream or downstream levels, including information relating to production processe