Vertical agreements commission is a term used in the realm of competition law and refers to agreements entered into between companies at different levels of the supply chain, such as between manufacturers and distributors or between distributors and retailers.
The main aim of such agreements is to promote efficient distribution of goods and services by ensuring that each participant in the supply chain benefits from optimized costs, profits, and customer satisfaction levels.
The European Union (EU) has defined vertical agreements commission as an agreement or decision made by two or more companies operating at different levels in the supply chain, relating to the conditions under which such companies purchase, sell or resell certain goods or services.
The EU has taken steps to regulate such agreements by establishing guidelines for their formation. In particular, the EU has set out criteria that vertical agreements must meet to ensure they do not operate as anti-competitive or form cartels.
The Commission has identified two types of vertical agreements that are particularly risky in terms of competition law infringement. These are agreements that involve minimum resale prices, such as setting a fixed price at which distributors must sell to end customers; and exclusivity agreements – where a distributor is required to only purchase goods from one supplier.
The EU has established rules that such agreements must satisfy to avoid breaching competition law, such as not restricting competition unduly, providing benefits to consumers, and not having a negative impact on innovation in the market.
Companies must therefore ensure that any vertical agreements they enter into comply with EU regulations. Failure to do so could result in investigations by the European Commission, fines and reputational damage.
In conclusion, vertical agreements commission can be beneficial for businesses in the supply chain as long as they do not operate as anti-competitive or form cartels. Companies must ensure that any agreements they enter into comply with EU regulations to avoid breaching competition laws.