Meaning
A European Union regulatory framework establishes antitrust exemptions for vertical agreements and distribution contracts between businesses operating at different supply chain levels. Compliance under regulation 2022 720 determines whether distribution contracts and territorial sales restrictions meet European competition law standards. The regulation sets clear safe harbour limits based on supplier and buyer market shares, provided the agreement contains no hardcore restrictions.
Agreements falling outside the safe harbour require individual self-assessment under general competition rules.
Distribution Safe Harbour
Vertical agreements qualify for automatic exemption from competition prohibitions when neither party holds a market share exceeding thirty percent in the relevant market. Within this safe harbour, suppliers can implement selective distribution systems or allocate exclusive territories to specific channel partners. The rules under regulation 2022 720 modernised the treatment of online sales restrictions and dual distribution scenarios where manufacturers sell both directly and through independent distributors.
Information exchange between competing dual distributors must remain strictly limited to aspects directly necessary to implement the supply contract. Exceeding market share thresholds removes automatic protection, exposing commercial clauses to regulatory scrutiny.
Hardcore Restriction
Certain anti-competitive clauses completely invalidate the block exemption and expose contracting parties to severe financial penalties. Resale price maintenance, which prevents distributors from setting their own retail prices, remains a severe breach under competition law. Restrictions on passive sales into exclusive territories, where a distributor merely fulfills unsolicited customer orders, are strictly prohibited.
Non-compete obligations that exceed five years in duration also fall outside the safe harbour protection. Including hardcore restrictions creates substantial legal risk and renders affected contractual clauses unenforceable.
Territorial Boundary
Supply agreements must carefully delineate active sales restrictions from prohibited passive sales bans across member states. Suppliers can restrict active soliciting in exclusive territories assigned to other distributors, protecting early channel investment. However, online storefronts cannot be geo-blocked or prevented from serving cross-border customers within the internal market.
