New law to make doing business simpler while protecting consumers

21 Feb 2022 12:50 PM

The government is replacing EU exemptions from competition law for agreements between producers, distributors and retailers with bespoke rules better suited to the UK.

A new law will help UK firms do business while maintaining strong protections for consumers, the government has announced today (Monday 21 February).

Currently, the UK has retained EU rules that exempt businesses from competition law in certain circumstances. The government has received expert advice from the UK’s Competition and Markets Authority which recommended a new, bespoke competition law exemption for the UK, replacing the retained EU rules which expire on 31 May 2022.

The new rules will ensure competition law does not impose unnecessary burdens, encouraging so-called ‘vertical agreements’ which are agreements between companies at different levels of the supply chain, such as farmers and grocers.

These vertical agreements benefit consumers by encouraging efficiencies, investment and innovation. Benefits of the new UK system include:

The government is consulting on the legal wording of the exemption. The Competition and Markets Authority will publish further guidance to accompany this legislation, the CMA Verticals Guidance, in due course.

Additional information

The Business Secretary can make a ‘block exemption order’ to exempt types of agreements from competition law because their anti-competitive effects are outweighed by their benefits.

Following EU Exit, 7 EU block exemptions were retained in UK law, with 6 due to expire in coming years. The Competition and Markets Authority (CMA) last year reviewed the retained Vertical Agreements Block Exemption Regulation (retained VABER) which expires in May 2022. It then recommended that BEIS replace it with a Vertical Agreements Block Exemption Order (VABEO), making certain amendments to the current regime tailored to the needs of UK consumers and businesses. Most respondents to the CMA’s consultation, from across different industries and sectors, agreed with the CMA recommendation to make such a block exemption.

Vertical agreements are for the sale and purchase of goods or services between businesses operating at different levels of the production or distribution chain, for example, between manufacturers and wholesalers or retailers. As they are therefore not between direct competitors, such agreements are generally considered to be benign or pro-competitive.

Wide retail parity obligations are defined as restrictions by reference to any of the supplier’s indirect sales channels (whether online or offline, for example online platforms or other intermediaries), which ensure that the prices or other terms and conditions at which a supplier’s goods or services are offered to end users on a sales channel are no worse than those offered by the supplier on another sales channel.