Whereas the contractual relations mentioned above are not prohibited by Article 101, paragraph 1, of the Treaty on the functioning of the EU (ex Article 81 TEC), the contractual relations mentioned below are in principle prohibited but can be exempted from the prohibition. Indeed, under paragraph 3 of Article 101, the Commission may declare the provisions of paragraph 1 inapplicable in the case of certain agreements or categories of agreements which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit. A Council Regulation empowers the Commission to apply Article 81(3) of the TEC (Article 101 § 3 TFEU) by regulation to certain categories of agreements, decisions and concerted practices falling within the scope of Article 81(1) [Regulation 2821/71]. Another Council Regulation lays down the conditions under which the Commission may declare by way of regulation that the provisions of Article 81(1) do not apply to certain categories of agreements and concerted practices [Regulation 19/65].
The instrument of the "block-exemption" regulation is used by the Commission to discharge a class of similar agreements whose pro-competitive benefits outweigh their anti-competitive effects. These Commission Regulations identify clearly-defined categories of agreements which automatically benefit from the exemption provision of Article 81, paragraph 3 of the TEC (Article 101 § 3 TFEU), provided that they do not seal off markets by preventing access and parallel trade. These block exemption Regulations are particularly useful for small and medium enterprises (SMEs) and were in many respects specifically designed for their benefit.
Following a 1997 Green Paper and a communication of the Commission on the application of the European competition rules to vertical restraints, Regulation No 17/62 and Regulation 19/65 have been amended with the aim of creating a single block exemption covering all vertical agreements or restraints [Regulations 1215/1999 and 1216/1999]. Indeed, the general exemption for certain vertical agreements has replaced three regulations, one on exclusive distribution, one on exclusive purchasing and one on franchise agreements. According to the ''Block Exemption Regulation'', the category of agreements which can be regarded as normally satisfying the conditions laid down in Article 101 § 3 of the TFEU includes vertical agreements for the purchase or sale of goods or services where those agreements are concluded between non-competing undertakings, between certain competitors or by certain associations of retailers of goods and where the market share held by each of the undertakings party to the agreement on the relevant market does not exceed 30%. Above the 30% threshold, agreements are not presumed to be unlawful but may require an individual examination [Regulation 330/2010].
Commission Guidelines on Vertical Restraints describe vertical agreements which generally fall outside Article 101 § 1, clarify the conditions for the application of the Block Exemption Regulation, describe the principles concerning the withdrawal of the block exemption and the disapplication of the Block Exemption Regulation, provide guidance on how to define the relevant market and calculate market shares and describe the general framework of analysis and the enforcement policy of the Commission in individual cases concerning vertical agreements.
Thus, a block exemption concerns the specialisation agreements, i.e. agreements under which the parties mutually undertake not to manufacture certain products themselves in order to specialise in the manufacture of other products [Regulation 1218/2010]. Agreements on specialisation in production generally contribute to improving the production or distribution of goods, because the undertakings concerned can concentrate on the manufacture of certain products and thus operate more efficiently and supply the products more cheaply. Agreements on specialisation in the provision of services can also be said to generally give rise to similar improvements. On condition that the combined market share of the participating undertakings does not exceed 20% of the relevant market, the exemption covers unilateral or reciprocal specialisation agreements as well as joint production agreements, by virtue of which two or more parties agree to produce certain products jointly.
Consumers can generally be expected to benefit from the increased volume and effectiveness of research and development through the introduction of new or improved products or services or the reduction of prices brought about by new or improved processes. Therefore a block exemption is granted, under certain conditions and a market share limitation of 25%, to agreements entered into between two or more undertakings, which pursue joint research and development of products or processes and/or joint exploitation of the results of that research and development [Regulation 1217/2010]. An exemption is also granted to technology transfer agreements (licences, patents, know-how and software copyright) entered into between two undertakings permitting the production of contract products [Regulation 772/2004]. Such agreements are usually considered to improve economic efficiency and be pro-competitive as they can reduce duplication of research and development, strengthen the incentive for the initial research and development, spur incremental innovation, facilitate diffusion and generate product market competition.
The regulations cited above, and regulations on exemption by category dealt with in the sections on insurance [see section 6.6.2], on various industrial sectors [see section 17.3.7], on maritime transport [see section 20.3.4] and air transport [see section 20.3.5] authorise, under certain conditions, the forms of cooperation between undertakings which are the most commonplace and which do not restrict competition in a manner which is incompatible with the rules of competition of the Treaty. They thus govern the vast majority of agreements existing in the Union, providing them with basic legal certainty. The Commission can therefore give its undivided attention to the prohibited agreements examined below, which are usually secret and which really impede free competition and trade in the common market.