THE COMMISSION OF THE EUROPEAN COMMUNITIES,
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THE COMMISSION OF THE EUROPEAN COMMUNITIES,

REGULATION (EC) No 2790/1999 THE COMMISSION of 22 December 1999 on the application of Article 81, paragraph 3, of the Treaty to categories of agreements vertical and concerted practices

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation n ° 19/65 / EEC of 2 March 1965 concerning the application of Article 85 (3) of the Treaty to categories of agreements and concerted practices   as   last amended by Regulation (EC ) No 1215/1999 , and in particular Article 1 thereof after publication of the draft regulation, after consultation of the Advisory Committee on Restrictive Practices and Dominant Positions,   Whereas:

(1) Pursuant to Regulation No 19/65 / EEC the Commission is competent to apply,   by way of   r ules Article 81, paragraph 3 (ex Article 85, paragraph 3) of the Treaty to certain categories of agreements vertical and corresponding concerted practices falling within the scope of Article 81, paragraph 1.

(2) The experience acquired so far makes it possible to define a category of vertical agreements which can be considered to normally meet the conditions laid down in Article 81 (3).

(3) This category includes vertical agreements for the purchase or sale of goods or services when such agreements are concluded between non-competing enterprises, between certain competing enterprises or by certain associations of retailers of goods. It also includes the agreements vertical containing provisions accessories on the sale or use of intellectual property rights; for the purposes of this Regulation , the term vertical agreements includes the corresponding concerted practices.

(4) For the application of Article 81 (3) by regulation , it is not necessary to define the vertical agreements which are liable to fall under Article 81 (1). the individual assessment of agreements under Article 81, paragraph 1, requires the consideration of several factors, including the market structure of the supply side and demand.

(5) The benefit of the block exemption should be limited to vertical agreements for which it can be assumed with sufficient certainty that they meet the conditions laid down in Article 81 (3).

(6) Vertical agreements falling within the category defined in this Regulation can improve economic efficiency within a production or distribution chain through better coordination between participating companies; in particular, they can lead to a reduction in the transaction and distribution costs of the parties and ensure an optimal level of their investments and sales.

(7) The likelihood that such efficiency gains outweigh any anti-competitive effects of restrictions contained in vertical agreements depends on the market power of the undertakings concerned and, therefore, on the degree of competition from other suppliers of goods and services that the buyer considers interchangeable or substitutable because of their characteristics, their price and the use for which they are

intended.

(8) Where the supplier’s share in the relevant market does not exceed 30%, it can be assumed that vertical agreements which do not contain certain restrictions with serious anti-competitive effects generally have the effect of improving production or distribution and reserve for consumers a fair share of the resulting profit; in the case of vertical agreements which contain obligations of

exclusive supply, it is the buyer’s market share that has to be taken into account in order to determine the overall effect of these agreements on the market.

(9) It is not possible to presume that, above the market share threshold of 30%,   the agreements vertical falling under Article 81, paragraph 1, usually result in benefits character goals and of such size as to compensate for the disadvantages that   these agreements produce on the competition .

(10) This Regulation should not exempt vertical agreements containing restrictions which are not indispensable in order to achieve the positive effects mentioned above; in particular vertical agreements containing certain types of restrictions having serious anti-competitive effects, such as the imposition of a minimum sale price or a fixed sale price or certain types of territorial protection, must be excluded from the benefit of the block exemption provided for in this Regulation , regardless of market share

of the companies concerned.

(11) In order to ensure access to the relevant market or to prevent collusion on that market, the block exemption should be subject to certain conditions. To this end,   the exemption from non- compete obligations should be limited to obligations which do not exceed a certain duration; for the same reasons, any direct or   indirect obligation , requiring members of a selective distribution system not to sell   brands of specific competing suppliers must be excluded from the benefit of this

regulation .

(12) The market share threshold, the exclusion of certain vertical agreements from the exemption provided for by this Regulation and the conditions to which the exemption is subject generally ensure that the agreements to which the exemption applies by category will not give the participating undertakings the possibility of eliminating competition for a substantial part of the products in question.

(13) In specific cases where the agreements which fall under this Regulation  nevertheless have effects incompatible with Article 81 (3), the Commission may withdraw the benefit of the block exemption. This may in particular occur where the buyer   has significant market power in the relevant market in which he resells the goods or provides the services or when parallel networks of vertical agreements produce similar effects which significantly restrict the market. ‘access to the relevant market or competition  in this market; such cumulative effects may, for example, occur in cases of selective distribution or non- compete obligations .

(14) Regulation No 19/65 / EEC empowers the competent authorities of the Member States to   withdraw the benefit of the block exemption from vertical agreements having certain effects incompatible with the conditions laid down in Article 81 (3), where these effects are perceptible on all or part of the territory of these Member States, and that this territory presents the characteristics of a distinct geographic market; the Member States must ensure that the exercise of this power of withdrawal does not prejudice the uniform application throughout the common market,

(15) In order to strengthen the control 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 restrictions which are practiced in the market concerned, thus restoring the full application of Article 81 with regard to these agreements .

(16) This Regulation applies without prejudice to the application of Article 82.

(17) In accordance with the principle of the primacy of Community law, no measure   taken in application of national competition law should prejudice the uniform application of Community competition rules in the common market and the useful effect   of any measure taken in application of these rules, including this Regulation ,

HAS ADOPTED THIS REGULATION :

First article

For the application of this regulation :

  1. a) “competing companies” are actual or potential suppliers on the same product market: the product market includes the goods or services that the buyer considers to be interchangeable or substitutable with the contractual goods or services   because of their characteristics, their price and the use for which they are intended;
  2. b) “obligation of non-competition’means any direct or indirect obligation causing   the buyer not to manufacture, purchase, sell or resell goods or services which   are in competition with the contract goods or services, or any direct or   indirect obligation requiring the purchaser to acquire from the supplier or another company   designated by the supplier more than 80% of its annual purchases of contractual goods or services   and substitutable goods and services on the market relevant, calculated on the   basis of the value of purchases made during the previous calendar year:
  3. c) “exclusive supply obligation” means any direct or indirect obligation requiring the supplier to sell the goods or services specified in the agreement only to a buyer within the Community for a specific use or resale;
  4. d) a “selective distribution system” is a distribution system in which the supplier undertakes to sell the contractual goods or services, directly or indirectly, only to distributors selected on the basis of defined criteria, and   in which these distributors undertake not to sell these goods or services to   unauthorized distributors;
  5. e) “Intellectual property rights” include industrial property rights, copyright and related rights:
  6. f) “know-how” means a secret, substantial and identified body of non-patented practical information , resulting from the experience of the supplier and tested by the latter: in   this context, “secret” means that the know-how , as a whole or in the   precise configuration and assembly of its components, is not generally known or easily accessible; “Substantial” means that the know-how must include information   essential to the purchaser for the use, sale or resale of the contracted goods   or services; “Identified” means that the know-how must be described in a sufficiently comprehensive manner to allow verification that it fulfills the conditions of secrecy and   substantiality;

(g) “buyer” means: an enterprise which, by virtue of an agreement falling within the scope   of Article 81 (1) of the Treaty, sells goods or services on behalf of another enterprise .

Article 2

  1. In accordance with Article 81 (3) of the Treaty, and subject to the provisions of this Regulation , Article 81 (1) of the Treaty is declared inapplicable to agreements or concerted practices which are concluded between two or more of two companies each of which   operates, for the purposes of the agreement, at a different level of the production or distribution chain, and which relate to the conditions under which the parties may buy, sell or   resell certain goods or services (according to referred to as ” vertical agreements “).

This exemption applies insofar as these agreements contain restrictions   of competition falling under Article 81 (1) (hereinafter referred to as   “vertical restrictions”).

  1. The exemption provided for in paragraph 1 shall apply only toverticalagreements concluded between an association of undertakings and its members, or between such an association and its suppliers, if all of its members are retailers of goods and provided that no the individual members of the association, together with its connected undertakings, has a total annual turnover exceeding EUR 50 million; of agreements vertical concluded by these associations are covered by this Regulation without prejudice to the application of Article 81 to agreements concluded by the horizontal members and the decisions        adopted by the association.
  2. The exemption provided for in paragraph 1 shall apply toverticalagreements containing provisions concerning the assignment to the purchaser or the use by the purchaser of intellectual property rights, provided that these provisions do not constitute the main object. such agreements and whether they are directly related to the use, sale or resale of goods or services by the buyer or its customers. The exemption applies to the said provisions provided that in relation to the goods or the contractual services, they do not include

restrictions of competition having the same object or effect as   vertical restraints not exempted under this Regulation .

  1. The exemption provided for in paragraph 1 shall not apply toverticalagreements concluded between competing undertakings; however, the exemption applies when competing companies enter into a non-reciprocal vertical agreement with each other and:
  2. a) the buyer’s total annual turnover does not exceed EUR 100 million or b) the supplier is a producer and distributor of goods while the buyer is a distributor who does not manufacture competing goods contractual goods or that
  3. c) the supplier is a supplier of services at several levels of trade while the buyer does not provide competing services at the level of trade where he purchases the contractual services.
  4. ThisRegulationdoes not apply to vertical agreements which are the subject of another block exemption regulation .

Article 3

  1. Subject to paragraph 2 of this Article, the exemption provided for in Article 2 shall apply provided that the market share held by the supplier does not exceed 30% of the relevant market in which he sells the goods or services. contractual.
  2. In the case ofverticalagreements containing exclusive supply obligations, the exemption provided for in Article 2 shall apply provided that the market share held by the purchaser does not exceed 30% of the relevant market in which it purchases the contracted goods or services.

Article 4

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

  1. a) the restriction of the buyer’s ability to determine his selling price, without prejudice to the possibility for the supplier to impose a maximum selling price or to recommend a   selling price, provided that these do not equal not at a fixed or minimum selling price as a result of pressure exerted by one of the parties or of incentives taken by   it;
  2. b) the restriction concerning the territory in which, or the customers to whom, the purchaser can

sell the contracted goods or services, except:

– the restriction of active sales to an exclusive territory or to an exclusive clientele   reserved for the supplier or conceded by the supplier to another buyer, when such a restriction does not limit sales by the buyer’s clients,

– restriction of sales to end users by a buyer who operates as a wholesaler in the market,

– the restriction of sales by members of a selective distribution system to unauthorized distributors and

– restriction of the buyer’s ability to sell components intended for   incorporation to customers who could use these components for the manufacture of goods   similar to those produced by the supplier of the components;

  1. c) the restriction of active sales or passive sales to end users by members of a selective distribution system who operate as retailers in the market, without prejudice to the possibility of prohibiting a member of the system from operating from   an unauthorized place of establishment;

(d) the restriction of cross-deliveries between distributors within a   selective distribution system, including between distributors operating at different stages of   trade;

  1. e) the restriction agreed between a supplier of components and a purchaser who incorporates these components when the supplier is restricted in the sale of these components as   spare parts to end users or to repairers or other service   providers who have not been designated by the buyer for the repair or maintenance of his

Article 5

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

  1. a) any direct or indirect non-competeobligation , the duration of which is indefinite or   exceeds five years; a non- competition obligation tacitly renewable beyond a   period of five years must be considered as having been entered into for an   indefinite period ; this limitation of the period to five years is however not applicable when the   contractual goods or services are sold by the buyer from premises and land owned by   the supplier or which the supplier rents to third parties unrelated to the supplier. ‘buyer,   provided that the duration of these non- compete obligations does not exceed the period  occupation of premises and land by the buyer;
  2. b) any direct or indirect obligation prohibiting the purchaser, upon expiration of the agreement, from making, buying, selling or reselling goods or services, unless such obligation:

– relates to goods or services which are in competition with the contractual goods or services and

– is limited to the premises and land from which the buyer has operated during the term of the contract and

– is essential for the protection of know-how transferred by the supplier to the buyer,   provided that the duration of such a non- competition obligation is limited to one year from the expiry of the agreement ; this obligation is without prejudice to the possibility of imposing, for an indefinite period, a restriction on the use and disclosure of know-how which has not fallen into the public domain;

(c) any direct or indirect obligation imposed on members of a selective distribution system not to sell brands of specific competing suppliers.

Article 6

In accordance with Article 7 (1) of Regulation No 19/65 / EEC, the Commission may withdraw the benefit of the application of this Regulation if it finds that, in a specific case, vertical agreements exempted under the This Regulation , however, have effects which are incompatible with the conditions laid down in Article 81 (3) of the Treaty, 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 practiced by competing suppliers or buyers.

Article 7

Where, in a given case, vertical agreements to which the exemption provided for in Article 2 applies produce effects incompatible with the conditions provided for in Article 81 (3) of the Treaty on the territory of a Member State , or in a part of that territory which has all the characteristics of a distinct geographical market, the competent authority of that Member State may withdraw the benefit of the application of this Regulation on that territory, under the conditions provided for in article 6.

Article 8

  1. In accordance with Article 1a ofRegulationNo 19/65 / EEC, the Commission may declare,   by means of a regulation , when parallel networks of similar vertical restraints   cover more than 50% of a relevant market, whereas this Regulation does not apply to vertical agreements which contain specific restrictions concerning this market.
  2. Anyregulationadopted under paragraph 1 shall apply only after at least six months from its adoption.

Article 9

  1. The 30% market share provided for in Article 3 (1) shall be calculated on the basis of the sales value, in the market, of the contractual goods or services as well as of other goods or services sold by the supplier that the buyer considers to be interchangeable   or substitutable because of their   characteristics, their price and the use for which they are intended; in the absence of data relating to the value of sales in the market, the   determination of the market share of the company concerned may be made on the basis   of estimates based on other reliable information relating to the market, including including the   sales volume on this one. For the purposes of applying Article 3 (2), it is  respectively the value of purchases on the market or its estimate which is used to   calculate the market share.
  2. For the purposes of applying the market level threshold provided for in Article 3, the following rules apply;

(a) the market share is calculated on the basis of data relating to the previous calendar year;

  1. b) market share includes goods or services supplied to integrated distributors for the purpose of sale:
  2. c) if the market share crosses the threshold of 30%, but does not exceed 35%, the exemption provided for in Article 2 shall continue to apply for two consecutive calendar years following   the year in which the threshold exceeded 30 %;
  3. d) if the market share crosses the threshold of 30% and exceeds the threshold of 35%, the exemption provided for in Article 2 shall continue to apply for a calendar year following the year in   which the level of 35% has been exceeded:
  4. e) the benefit of points c) and d) cannot be combined so as to exceed a period of two calendar years

Article 10

  1. The calculation of the total annual turnover within the meaning of Article 2, paragraph 2, and Article 2, paragraph 4, results from the addition of the turnover, excluding taxes and other fees, realized during the previous financial year by the party concerned to the vertical agreement and the turnover achieved by the companies related to it, with regard to all goods and services.To this end, no account shall be taken of transactions between the party to  the vertical agreement and the companies linked to it, nor of those between these parties.

latest companies.

  1. The exemption provided for in Article 2 shall remain applicable if, for a period of two consecutive financial years, the threshold for total annual turnover is not exceeded by more than 10   %.

Article 11

  1. For the purposes of thisRegulation, the terms “undertaking”, “supplier” and “purchaser” include their respective related undertakings.
  2. The following are considered to be related companies:
  3. a) companies in which part of the agreement provides directly or indirectly

– more than half of the voting rights or

– the power to appoint more than half of the members of the supervisory board or the board of directors or bodies legally representing the company, or

–       the right to manage the affairs of the company;

  1. b) undertakings which have directly or indirectly in an undertaking party to the agreement the rights or powers listed in point a);

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

  1. d) undertakings in which an undertaking party to the agreement and one or more of the undertakings referred to in points a), b) or c) or in which two or more of the latter undertakings together have the rights or powers listed in point at);
  2. e) undertakings in which the rights or powers listed in point a) are jointly held by

– the parties to the agreement or their respective affiliated undertakings referred to in points a) to d) or

– one or more of the parties to the agreement or one or more of their affiliated companies referred to

in points a) to d) and one or more third parties.

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

Article 12

  1. The exemptions provided for by Regulations (EEC) No 1983/83of theCommission continue to apply until May 31, 2000.
  2. The prohibition set out in Article 81 (1) of the Treaty does not apply, during the period from 1 June 2000 to 31 December 2001, to agreements already in force on 31 May 2000   which do not meet the conditions. exemption provided for in this Regulation , but which   meet the conditions for exemption provided for in Regulations (EEC) No 1983/83, (EEC) No 1984/83 or (EEC) No 4087/88.

Article 13

These regulations come into force on January 1, 2000.

It is applicable from 1 st June 2000, with the exception of Article 12, paragraph 1, which is   applicable from 1 st January 2000.

These rules expire on May 31, 2010.

These regulations are binding in their entirety and directly applicable in

any Member State.

Done in Brussels on December 22, 1999.

For the Commission

Mario MONTI

Member of the Commission

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