Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices (Text with EEA relevance)
Date: 1999-12-22
Institutions: European Commission
Subjects: competition policy, vertical agreement

29. 12. 1999

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Official Journal of the European Communities

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COMMISSION REGULATION (EC) No 2790/1999

of 22 December 1999

on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted
practices

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

sufficient certainty that they satisfy the conditions of
Article 81(3).

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation No 19/65/EEC of 2 March
1965 on the application of Article 85(3) of the Treaty to
certain categories of agreements and concerted practices (1), as
last amended by Regulation (EC) No 1215/1999 (2), and in
particular Article 1 thereof,

Having published a draft of this Regulation (3),

Having consulted the Advisory Committee on Restrictive Prac-
tices and Dominant Positions,

Whereas:

(1)

(2)

(3)

(4)

Regulation No 19/65/EEC empowers the Commission to
apply Article 81(3) of the Treaty (formerly Article 85(3))
by regulation to certain categories of vertical agreements
and corresponding concerted practices falling within
Article 81(1).

Experience acquired to date makes it possible to define a
category of vertical agreements which can be regarded as
normally satisfying the conditions laid down in Article
81(3).

for

the
This category includes vertical agreements
purchase or sale of goods or services where these agree-
ments are concluded between non-competing undertak-
ings, between certain competitors or by certain associa-
tions of retailers of goods; it also includes vertical agree-
ments containing ancillary provisions on the assignment
or use of intellectual property rights; for the purposes of
this Regulation, the term ‘vertical agreements’ includes
the corresponding concerted practices.

For the application of Article 81(3) by regulation, it is
not necessary to define those vertical agreements which
are capable of falling within Article 81(1); in the indi-
vidual assessment of agreements under Article 81(1),
account has to be taken of several factors, and in partic-
ular the market structure on the supply and purchase
side.

(5)

The benefit of the block exemption should be limited to
vertical agreements for which it can be assumed with

(1) OJ 36, 6.3.1965, p. 533/65.
(2) OJ L 148, 15.6.1999, p. 1.
(3) OJ C 270, 24.9.1999, p. 7.

(6)

(7)

(8)

(9)

Vertical agreements of the category defined in this Regu-
lation can improve economic efficiency within a chain
of production or distribution by facilitating better coor-
dination between the participating undertakings;
in
particular, they can lead to a reduction in the transaction
and distribution costs of the parties and to an optimisa-
tion of their sales and investment levels.

The likelihood that such efficiency-enhancing effects will
outweigh any anti-competitive effects due to restrictions
contained in vertical agreements depends on the degree
of market power of the undertakings concerned and,
therefore, on the extent to which those undertakings
face competition from other suppliers of goods or
services regarded by the buyer as interchangeable or
substitutable for one another, by reason of the products'
characteristics, their prices and their intended use.

It can be presumed that, where the share of the relevant
market accounted for by the supplier does not exceed
30 %, vertical agreements which do not contain certain
types of severely anti-competitive restraints generally
lead to an improvement in production or distribution
and allow consumers a fair share of the resulting bene-
fits;
in the case of vertical agreements containing
exclusive supply obligations, it is the market share of the
buyer which is relevant in determining the overall effects
of such vertical agreements on the market.

Above the market share threshold of 30 %, there can be
no presumption that vertical agreements falling within
the scope of Article 81(1) will usually give rise to objec-
tive advantages of such a character and size as to
compensate for the disadvantages which they create for
competition.

(10)

This Regulation should not exempt vertical agreements
containing restrictions which are not indispensable to
the attainment of the positive effects mentioned above;
in particular, vertical agreements containing certain
types of severely anti-competitive restraints such as
minimum and fixed resale-prices, as well as certain types
of territorial protection, should be excluded from the
benefit of the block exemption established by this Regu-
lation irrespective of the market share of the undertak-
ings concerned.

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(11)

(12)

(13)

(14)

(15)

In order to ensure access to or to prevent collusion on
the relevant market, certain conditions are to be attached
to the block exemption; to this end, the exemption of
non-compete obligations should be limited to obliga-
tions which do not exceed a definite duration; for the
same reasons, any direct or indirect obligation causing
the members of a selective distribution system not to sell
the brands of particular competing suppliers should be
excluded from the benefit of this Regulation.

The market-share limitation,
the non-exemption of
certain vertical agreements and the conditions provided
for in this Regulation normally ensure that the agree-
ments to which the block exemption applies do not
enable
to eliminate
competition in respect of a substantial part of the prod-
ucts in question.

the participating undertakings

In particular cases in which the agreements falling under
this Regulation nevertheless have effects incompatible
with Article 81(3), the Commission may withdraw the
benefit of the block exemption; this may occur in partic-
ular where the buyer has significant market power in the
relevant market in which it resells the goods or provides
the services or where parallel networks of vertical agree-
ments have similar effects which significantly restrict
access to a relevant market or competition therein; such
cumulative effects may for example arise in the case of
selective distribution or non-compete obligations.

Regulation No 19/65/EEC empowers the competent
authorities of Member States to withdraw the benefit of
the block exemption in respect of vertical agreements
having effects incompatible with the conditions laid
down in Article 81(3), where such effects are felt in their
respective territory, or in a part thereof, and where such
territory has the characteristics of a distinct geographic
market; Member States should ensure that the exercise
of this power of withdrawal does not prejudice the
uniform application throughout the common market of
the Community competition rules or the full effect of
the measures adopted in implementation of those rules.

In order to strengthen supervision of parallel networks
of vertical agreements which have similar restrictive
effects and which cover more than 50 % of a given
market, the Commission may declare this Regulation
inapplicable to vertical agreements containing specific
restraints relating to the market concerned,
thereby
restoring the full application of Article 81 to such agree-
ments.

(16)

This Regulation is without prejudice to the application
of Article 82.

(17)

In accordance with the principle of
the primacy of
Community law, no measure taken pursuant to national
laws on competition should prejudice the uniform
the
application throughout

the common market of

Community competition rules or the full effect of any
measures adopted in implementation of
those rules,
including this Regulation,

HAS ADOPTED THIS REGULATION:

Article 1

For the purposes of this Regulation:

(a) ‘competing undertakings’ means

actual or potential
suppliers in the same product market; the, product market
includes goods or services which are regarded by the buyer
as interchangeable with or substitutable for the contract
goods or services, by reason of the products' characteristics,
their prices and their intended use;

(b) ‘non-compete obligation’ means any direct or indirect obli-
gation causing the buyer not to manufacture, purchase, sell
or resell goods or services which compete with the contract
goods or services, or any direct or indirect obligation on
the buyer to purchase from the supplier or from another
undertaking designated by the supplier more than 80 % of
the buyer's total purchases of the contract goods or services
and their substitutes on the relevant market, calculated on
the basis of the value of its purchases in the preceding
calendar year;

(c) ‘exclusive supply obligation’ means any direct or indirect
obligation causing the supplier to sell the goods or services
specified in the agreement only to one buyer inside the
Community for the purposes of a specific use or for resale;

(d) ‘Selective distribution system’ means a distribution system
where the supplier undertakes to sell the contract goods or
services, either directly or indirectly, only to distributors
selected on the basis of specified criteria and where these
distributors undertake not to sell such goods or services to
unauthorised distributors;

(e) ‘intellectual property rights’

includes industrial property

rights, copyright and neighbouring rights;

(f) ‘know-how’ means a package of non-patented practical
information, resulting from experience and testing by the
supplier, which is secret, substantial and identified: in this
context, ‘secret’ means that the know-how, as a body or in
the precise configuration and assembly of its components,
‘substantial’
is not generally known or easily accessible;
means that the know-how includes information which is
indispensable to the buyer for the use, sale or resale of the
contract goods or services;
the
know-how must be described in a sufficiently compre-
hensive manner so as to make it possible to verify that it
fulfils the criteria of secrecy and substantiality;

‘identified’ means that

(g) ‘buyer’ includes an undertaking which, under an agreement
falling within Article 81(1) of the Treaty, sells goods or
services on behalf of another undertaking.

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Article 2

Article 3

1.
Pursuant to Article 81(3) of the Treaty and subject to the
provisions of this Regulation, it is hereby declared that Article
81(1) shall not apply to agreements or concerted practices
entered into between two or more undertakings each of which
operates, for the purposes of the agreement, 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 (‘vertical agreements’).

This exemption shall apply to the extent that such agreements
contain restrictions of competition falling within the scope of
Article 81(1) (‘vertical restraints’).

The exemption provided for in paragraph 1 shall apply to
2.
vertical agreements entered into between an association of
undertakings and its members, or between such an association
and its suppliers, only if all its members are retailers of goods
and if no individual member of the association, together with
turnover
its connected undertakings, has a total annual
exceeding EUR 50 million; vertical agreements entered into by
such associations shall be covered by this Regulation without
prejudice to the application of Article 81 to horizontal agree-
ments concluded between the members of the association or
decisions adopted by the association.

3.
The exemption provided for in paragraph 1 shall apply to
vertical agreements containing provisions which relate to the
assignment to the buyer or use by the buyer of intellectual
property rights, provided that those provisions do not consti-
tute the primary object of such agreements and are directly
related to the use, sale or resale of goods or services by the
buyer or its customers. The exemption applies on condition
that, in relation to the contract goods or services, those provi-
sions do not contain restrictions of competition having the
same object or effect as vertical restraints which are not
exempted under this Regulation.

4.
The exemption provided for in paragraph 1 shall not
apply to vertical agreements entered into between competing
undertakings; however, it shall apply where competing under-
takings enter into a non-reciprocal vertical agreement and:

(a) the buyer has a total annual

turnover not exceeding

EUR 100 million, or

(b) the supplier is a manufacturer and a distributor of goods,
while the buyer is a distributor not manufacturing goods
competing with the contract goods, or

(c) the supplier is a provider of services at several levels of
trade, while the buyer does not provide competing services
at
trade where it purchases the contract
services.

the level of

5.
This Regulation shall not apply to vertical agreements the
subject matter of which falls within the scope of any other
block exemption regulation.

1.
Subject to paragraph 2 of this Article, the exemption
provided for in Article 2 shall apply on condition that the
market share held by the supplier does not exceed 30 % of the
relevant market on which it sells the contract goods or services.

2.
In the case of vertical agreements containing exclusive
supply obligations, the exemption provided for in Article 2
shall apply on condition that the market share held by the
buyer does not exceed 30 % of the relevant market on which it
purchases the contract goods or services.

Article 4

The exemption provided for in Article 2 shall not apply to
vertical agreements which, directly or indirectly, in isolation or
in combination with other factors under the control of the
parties, have as their object:

(a) the restriction of the buyer's ability to determine its sale
price, without prejudice to the possibility of the supplier's
imposing a maximum sale price or recommending a sale
price, provided that they do not amount to a fixed or
minimum sale price as a result of pressure from, or incen-
tives offered by, any of the parties;

(b) the restriction of

the
customers to whom, the buyer may sell the contract goods
or services, except:

the territory into which, or of

— the restriction of active sales into the exclusive territory
or to an exclusive customer group reserved to the
supplier or allocated by the supplier to another buyer,
where such a restriction does not limit sales by the
customers of the buyer,

— the restriction of sales to end users by a buyer operating

at the wholesale level of trade,

— the restriction of sales to unauthorised distributors by
the members of a selective distribution system, and

— the restriction of the buyer's ability to sell components,
to
the purposes of
supplied for
customers who would use them to manufacture the
same type of goods as those produced by the supplier;

incorporation,

(c) the restriction of active or passive sales to end users by
members of a selective distribution system operating at the
retail level of trade, without prejudice to the possibility of
prohibiting a member of the system from operating out of
an unauthorised place of establishment;

(d) the restriction of cross-supplies between distributors within
a selective distribution system, including between distribu-
tors operating at different level of trade;

(e) the restriction agreed between a supplier of components
and a buyer who incorporates those components, which
limits the supplier to selling the components as spare parts
to end-users or to repairers or other service providers not
entrusted by the buyer with the repair or servicing of its
goods.

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Article 5

Article 8

The exemption provided for in Article 2 shall not apply to any
of the following obligations contained in vertical agreements:

(a) any direct or indirect non-compete obligation, the duration
of which is indefinite or exceeds five years. A non-compete
obligation which is tacitly renewable beyond a period of
five years is to be deemed to have been concluded for an
indefinite duration. However, the time limitation of five
years shall not apply where the contract goods or services
are sold by the buyer from premises and land owned by the
supplier or leased by the supplier from third parties not
connected with the buyer, provided that the duration of the
non-compete obligation does not exceed the period of
occupancy of the premises and land by the buyer;

(b) any direct or indirect obligation causing the buyer, after
termination of
to manufacture,
purchase, sell or resell goods or services, unless such obli-
gation:

agreement, not

the

— relates to goods or services which compete with the

contract goods or services, and

— is limited to the premises and land from which the
buyer has operated during the contract period, and

— is indispensable to protect know-how transferred by the

supplier to the buyer,

and provided that the duration of such non-compete obli-
gation is limited to a period of one year after termination
of the agreement; this obligation is without prejudice to the
possibility of imposing a restriction which is unlimited in
time on the use and disclosure of know-how which has not
entered the public domain;

(c) any direct or indirect obligation causing the members of a
selective distribution system not to sell the brands of partic-
ular competing suppliers.

Article 6

The Commission may withdraw the benefit of this Regulation,
pursuant to Article 7(1) of Regulation No 19/65/EEC, where it
finds in any particular case that vertical agreements to which
this Regulation applies nevertheless have effects which are
incompatible with the conditions laid down in Article 81(3) of
the Treaty, and in particular where access to the relevant
market or competition therein is significantly restricted by the
cumulative effect of parallel networks of
similar vertical
restraints implemented by competing suppliers or buyers.

Article 7

Where in any particular case vertical agreements to which the
exemption provided for in Article 2 applies have effects incom-
patible with the conditions laid down in Article 81(3) of the
Treaty in the territory of a Member State, or in a part thereof,
which has all
the characteristics of a distinct geographic
market, the competent authority of that Member State may
withdraw the benefit of application of
this Regulation in
respect of that territory, under the same conditions as provided
in Article 6.

1.
Pursuant to Article 1 a of Regulation No 19/65/EEC, the
Commission may by regulation declare that, where parallel
networks of similar vertical restraints cover more than 50 % of
a relevant market, this Regulation shall not apply to vertical
agreements containing specific restraints
relating to that
market.

A regulation pursuant to paragraph 1 shall not become

2.
applicable earlier than six months following its adoption.

Article 9

The market share of 30 % provided for in Article 3(1)
1.
shall be calculated on the basis of the market sales value of the
contract goods or services and other goods or services sold by
the supplier, which are regarded as interchangeable or substi-
tutable by the buyer, by reason of the products' characteristics,
their prices and their intended use; if market sales value data
are not available, estimates based on other reliable market
information, including market sales volumes, may be used to
establish the market share of the undertaking concerned. For
the purposes of Article 3(2), it is either the market purchase
value or estimates thereof which shall be used to calculate the
market share.

For the purposes of applying the market share, threshold

2.
provided for in Article 3 the following rules shall apply:

(a) the market share shall be calculated on the basis of data

relating to the preceding calendar year;

(b) the market share shall

include any goods or services
supplied to integrated distributors for the purposes of sale;

(c) if the market share is initially not more than 30 % but
subsequently rises above that level without exceeding 35 %,
the exemption provided for in Article 2 shall continue to
two consecutive calendar years
apply for a period of
following the year
share
threshold was first exceeded;

in which the 30 % market

(d) if the market share is initially not more than 30 % but
subsequently rises above 35 %, the exemption provided for
in Article 2 shall continue to apply for one calendar year
following the year in which the level of 35 % was first
exceeded;

(e) the benefit of points (c) and (d) may not be combined so as

to exceed a period of two calendar years.

Article 10

For the purpose of calculating total annual

turnover
1.
within the meaning of Article 2(2) and (4),
the turnover
achieved during the previous financial year by the relevant
party to the vertical agreement and the turnover achieved by its
connected undertakings in respect of all goods and services,
excluding all taxes and other duties, shall be added together.
For this purpose, no account shall be taken of dealings between
the party to the vertical agreement and its connected undertak-
ings or between its connected undertakings.

2.
The exemption provided for in Article 2 shall remain
applicable where, for any period of two consecutive financial
years, the total annual turnover threshold is exceeded by no
more than 10 %.

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Article 11

For the purposes of this Regulation, the terms ‘underta-
respective
shall

‘supplier’ and ‘buyer’

include their

1.
king’,
connected undertakings.

2.

‘Connected undertakings’ are:

(a) undertakings in which a party to the agreement, directly or

indirectly:
— has the power to exercise more than half the voting

rights, or

— has the power to appoint more than half the members
the supervisory board, board of management or

of
bodies legally representing the undertaking, or
— has the right to manage the undertaking's affairs;

(b) undertakings which directly or indirectly have, over a party
to the agreement, the rights or powers listed in (a);

(c) undertakings in which an undertaking referred to in (b) has,
directly or indirectly, the rights or powers listed in (a);

(d) undertakings in which a party to the agreement together
with one or more of the undertakings referred to in (a), (b)
or (c), or in which two or more of the latter undertakings,
jointly have the rights or powers listed in (a);

(e) undertakings in which the rights or the powers listed in (a)

are jointly held by:
— parties to the agreement or their respective connected

— one or more of the parties to the agreement or one or
more of their connected undertakings referred to in (a)
to (d) and one or more third parties.

3.
For the purposes of Article 3, the market share held by
the undertakings referred to in paragraph 2(e) of this Article
shall be apportioned equally to each undertaking having the
rights or the powers listed in paragraph 2(a).

Article 12

The exemptions provided for in Commission Regulations
(EEC) No 1984/83 (2) and (EEC) No

1.
(EEC) No 1983/83 (1),
4087/88 (3) shall continue to apply until 31 May 2000.

The prohibition laid down in Article 81(1) of the EC
2.
Treaty shall not apply during the period from 1 June 2000 to
31 December 2001 in respect of agreements already in force
on 31 May 2000 which do not satisfy the conditions for
exemption provided for in this Regulation but which satisfy the
conditions for exemption provided for in Regulations (EEC) No
1983/83, (EEC) No 1984/83 or (EEC) No 4087/88.

Article 13

This Regulation shall enter into force on 1 January 2000.

It shall apply from 1 June 2000, except for Article 12(1) which
shall apply from 1 January 2000.

undertakings referred to in (a) to (d), or

This Regulation shall expire on 31 May 2010.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 22 December 1999.

For the Commission

Mario MONTI

Member of the Commission

(1) OJ L 173, 30.6.1983, p. 1.
(2) OJ L 173, 30.6.1983, p. 5.
(3) OJ L 359, 28.12.1988, p. 46.