Block Exemption Horizontal Agreements: What You Need to Know

In the world of business competition law, block exemption rules allow businesses to enter into certain types of agreements without violating competition laws. One such rule is the block exemption for horizontal agreements, which allows businesses to enter into agreements with their competitors without fear of antitrust legal action.

Horizontal agreements are contracts entered into by businesses that operate at the same level in the supply chain. These can include agreements on production, purchasing, distribution, or other aspects of business operations. Examples of horizontal agreements include price-fixing, output limitation, market-sharing, and bid-rigging.

Under the block exemption rule, businesses can engage in these types of agreements without fear of antitrust legal action, provided they meet certain criteria. These criteria include:

1. The agreement must not exceed a certain market share threshold. This threshold is usually 15-20% of the relevant market.

2. The agreement must not contain any “hardcore” antitrust clauses. Hardcore clauses include price-fixing, customer allocation, and market-sharing agreements.

3. The agreement must contribute to improving production or distribution efficiency, technical or economic progress, or benefit consumers.

It is important to note that block exemption rules only apply to horizontal agreements. Vertical agreements, which are agreements between businesses at different levels in the supply chain, are not covered by the block exemption rule.

Businesses that enter into horizontal agreements that do not meet the criteria for block exemption risk facing antitrust legal action from regulatory authorities. In such cases, the authorities will investigate the agreement to determine if it meets the criteria for block exemption. If it does not, the businesses involved may be fined for violating competition laws.

In conclusion, block exemption horizontal agreements are a useful tool for businesses that want to enter into agreements with their competitors without violating competition laws. However, it is important to ensure that these agreements meet the criteria set out by the block exemption rule to avoid legal action from regulatory authorities. As a professional, it is important to keep up to date with competition law developments to ensure your clients are legally compliant in their business operations.