Meaning
European Union Regulation 2022/720 establishes the legal framework governing vertical agreements and concerted practices within the common market. This regulation defines the safe harbour conditions under which suppliers and distributors may coordinate terms of sale without triggering antitrust prohibition. It sets the criteria for market share thresholds that dictate whether an arrangement qualifies for block exemption from Article 101(1) of the Treaty on the Functioning of the European Union.
Suppliers utilize these guidelines to determine permissible constraints on resale pricing and territorial exclusivity in their distribution networks.
Vertical Constraints
The regulation specifies precise limitations on how brands may restrict their resellers from selling outside designated regions or across digital platforms. Active and passive sales restrictions operate under different legal tests, where the former remain subject to tighter oversight than the latter. A supplier may enforce a system of selective distribution provided that the network selection rests on objective qualitative criteria.
These rules balance the protection of brand image against the prevention of market partitioning that hampers consumer choice.
Compliance Thresholds
Market power assessments under the regulation rely on a thirty percent share of the relevant market held by both the supplier and the buyer. Agreements that exceed this limit lose the benefit of the block exemption, necessitating an individual assessment of their compatibility with competition laws. Legal entities must perform internal reviews of their contractual obligations to ensure they do not create hard core restrictions such as absolute territorial protection or illegal resale price maintenance.
Such measures prevent firms from shifting distribution costs onto weaker partners through the misuse of dominant market positions.
Commercial Enforcement
National competition authorities monitor adherence to these rules through the investigation of complaints filed by excluded dealers or damaged competitors. Non-compliance results in the voiding of restrictive clauses and exposes companies to significant financial penalties for violations of union trade law. Courts interpret these provisions by examining the actual impact of vertical agreements on cross-border trade and the competitive landscape of the sector.
The regulatory framework functions as the final authority on the legality of restrictive distribution practices throughout the single market.
