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COMPETITION• EUROPEAN LAW • RESTRICTIVE AGREEMENTS
According to the Guidelines on Horizontal Cooperation Agreements, production agreements may provide that production is carried out by two or more parties, through a flexible form of cooperation such as subcontracting, whereby one party (the "contractor") entrusts to another party (the "subcontractor") the production of a good. The Commission distinguishes between two types of subcontracting agreements. Horizontal subcontracting agreements are concluded between undertakings which operate on the same product market, whether they are actual or potential competitors, whereas vertical subcontracting agreements are concluded between undertakings which are active at different levels of the market.
Horizontal subcontracting agreements comprise unilateral and reciprocal specialization agreements as well as subcontracting agreements with a view to expanding production. Unilateral specialization agreements are agreements between two parties which are active on the same product market or markets, by virtue of which one party agrees to fully or partly cease production of certain products or to refrain from producing those products and to purchase them from the other party, which agrees to produce and supply the products. Reciprocal specialization agreements are agreements between two or more parties which are active on the same product market or markets, by virtue of which two or more parties agree, on a reciprocal basis, to fully or partly cease or refrain from producing certain but different products and to purchase those products from the other parties, which agree to produce and supply them. In the case of subcontracting agreements with a view to expanding production the contractor entrusts the subcontractor with the production of a good, while the contractor does not at the same time cease or limit its own production of the good.
Horizontal subcontracting agreements, regardless of their form, fall under the Guidelines on Horizontal Cooperation Agreements. Unilateral and reciprocal specialization agreements may benefit, under certain conditions, from the application of the Specialization Block Exemption Regulation. On the other hand, vertical subcontracting agreements are covered by the Guidelines on Vertical Restraints and may benefit, under certain conditions, from the application of Regulation No 330/2010 on vertical restraints. In addition, they may be covered by the Commission Notice on subcontracting of 18 December 1978.
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