Whether a vertical agreement effectively restricts competition and whether, in this case, the benefits outweigh the anti-competitive effects often depends on the structure of the market. Any agreement, horizontal or vertical, which is not subject to a block exemption, must be examined by the parties themselves in order to determine whether the agreement is anti-competitive. To this end, the European Commission has published guidelines (see Guidelines on Vertical Restraints) on the main factors to be taken into account. Article 101(1) of the Treaty on the Functioning of the European Union prohibits agreements between undertakings which have the aim or effect of restricting, preventing or distorting competition within the EU and which concern trade between EU Member States. This prohibition applies to all agreements concluded between two or more undertakings, whether they are competitors. (1) Infringement in itself – does not require further study of the actual impact of the practice on the market or the intentions of the persons involved in the practice (i.e. horizontal market sharing or customer allocation agreements). Community competition law contains various block exemptions which exclude certain agreements from the prohibition laid down in Article 101. These block exemptions shall also apply to agreements which may be covered by the prohibition in Chapter I. Although they are not considered essential restrictions, some other provisions are also not covered by the block exemption for vertical agreements. However, unlike basic restrictions, such restrictions may, as far as possible, be separated from the agreement.
Therefore, the block exemption remains valid for the rest of the agreement. Careful drafting is therefore necessary to avoid it being covered by one of the restricted provisions and to ensure that severance pay is possible. 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 enter into a vertical agreement with a retailer under which the retailer would advertise its products for lower prices. . . .