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Horizontal And Vertical Agreement

A vertical agreement is a term used in competition law to refer to agreements between companies at different levels of the supply chain. For example, a consumer electronics manufacturer could have a vertical agreement with a retailer to promote its products in exchange for lower prices. Franchising is a form of vertical agreement and, under EU competition law, this falls within the scope of Article 101[1] Among the measures that could be covered by these prohibitions for vertical agreements: in order to benefit from the category exemption for vertical agreements, it must be a vertical agreement or a concerted practice between at least two companies that deals with the terms of purchase , the sale or sale of services or goods. The parties must operate at different levels of the production, supply and distribution chain within the meaning of the specific agreement. The class exemption does not apply where the agreement is between competing firms, unless competition is the result of only activities outside the agreement. The ECJ makes less of a distinction between horizontal and vertical cooperation than that of the United States. This is probably because the ECJ is influenced by strong principles of market integration. Under the category exemption and the Commission`s current guidelines, the above restrictions would normally be considered “hard-core.” The inclusion of a “hardcore” restriction automatically eliminates the potential benefits of safe port of the category exemption for the entire agreement. With regard to vertical agreements, the main exemption by EU category is the category exemption for vertical agreements, which excludes many vertical agreements from the prohibitions covered in Chapter I and Article 101 (see exemption by category for vertical agreements). The table below shows a specific text in the opinions of European jurisprudence and the GA on the differences between the horizontal and vertical agreement.

Another way to demonstrate that the ECJ does not make an important distinction between horizontal and vertical cooperation is that the Commission focuses on the economic benefits of vertical agreements, but that the Court of Justice does not examine market effects in all cases. In concrete terms, in the guidelines on vertical agreements, the Commission states that “certain types of vertical agreements can improve economic efficiency within a production or distribution chain … they can lead to lower transaction and distribution costs for the parties and to the optimization of their distribution and investment levels. [This] predominates of possible anti-competitive effects due to restrictions… [7] However, the ECJ does not consider the effects of competition restrictions when there is an object.