EU Block Exemption Regulations

EU Block Exemption Regulations

Concept and significance

Block Exemption Regulations of the European Union (EU) are normative legal acts in the field of European competition law. Their purpose is to regulate under which conditions certain agreements, decisions of associations of undertakings, or concerted practices, which are in principle prohibited under Art. 101(1) of the Treaty on the Functioning of the European Union (TFEU), may be exempted from this prohibition by regulation (“exempted”). The objective is to promote competitiveness, efficiency, and innovation, without losing control over anti-competitive practices.

The core focus is on so-called block exemption regulations, which broadly exempt certain categories of horizontal and vertical agreements from the prohibition on cartels, provided they meet the conditions specified in the regulation.

Legal basis and systematics

Primary legal basis

The key legal basis is Art. 101 TFEU. While paragraph 1 prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices that may affect trade between Member States and have the object or effect of restricting competition, paragraph 3 sets out exemptions. According to Art. 101(3) TFEU, agreements and practices that contribute to improving the production or distribution of goods or to promoting technical or economic progress may be allowed under certain conditions.

Secondary law: Empowerment of the Commission

On the basis of Art. 103 TFEU, the European Commission is empowered to exempt, by regulation, certain groups of agreements from the general prohibition in Art. 101(1) TFEU (block exemption). The issued block exemption regulations thus specify the application of the prohibition on cartels and provide legal certainty for practice.

Types of block exemption regulations

Block Exemption Regulations

Block exemption regulations (BER) govern standardized exemptions for certain categories of agreements. Well-known examples include:

• Vertical Block Exemption Regulation (VBER): (Regulation (EU) 2022/720, formerly Regulation (EU) 330/2010) – relating to distribution agreements, franchises, and other vertical relationships between market participants at different levels of the supply chain.
• Motor Vehicle Block Exemption Regulation (MVBER): (Regulation (EU) 461/2010) – specifically for agreements in the motor vehicle sector.
• Research and Development Block Exemption Regulation: (Regulation (EU) 2023/1066) – for R&D cooperations.
• Technology Transfer Block Exemption Regulation (TTBER): (Regulation (EU) 316/2014) – for technology transfer licensing agreements.
• Specialisation Block Exemption Regulation: (Regulation (EU) 2023/1067) – for production and specialisation agreements between undertakings.

Individual exemptions

In addition, the European Commission may grant an individual exemption under Art. 101(3) TFEU if the specific conditions are met. However, such individual exemptions have become less common in practice as block exemption regulations now cover broad areas and the principle of legal exception (self-assessment) has strengthened the responsibility of companies.

Requirements and effects

Factual requirements

The application of a block exemption regulation requires that an agreement or conduct is in principle prohibited under Art. 101(1) TFEU, but falls within the scope of the relevant block exemption regulation and complies with all conditions stipulated therein, e.g., market share thresholds, does not contain any hardcore restrictions, and fulfills any additional requirements (such as disclosure obligations).

Effects of exemption

Fulfilling the conditions means that the prohibition on cartels does not apply to the respective agreement or conduct, so no sanctions or prohibitions are imposed. Companies obtain legal certainty in contract design and do not need to wait for individual prohibition or exemption decisions by the Commission.

If the conditions or prohibitions of the regulation are violated, the agreement loses its exemption effect ex tunc (from the outset). If national competition authorities or the Commission determine that the requirements are not met in specific individual cases, the exemption may also be withdrawn retroactively.

Scope of block exemption regulations

Block exemption regulations typically contain the following elements:

• Scope of application: Specifies which agreements or conducts are covered.
• Market share thresholds: The exemption applies only as long as the participating undertakings do not exceed certain market share limits (e.g. 30%).
• Hardcore restrictions: Certain restrictions (e.g. price fixing, territorial agreements) are always excluded from protection and result in the loss of the exemption.
• Conditions and quality requirements: Additional requirements, including information duties, transparency obligations, or certain behavioral standards.
• Withdrawal clauses: Option for the Commission or national authorities to withdraw the exemption in individual cases.

Development and adaptation

Block exemption regulations are reviewed and updated periodically to adapt them to market developments, case law, and economic theory (so-called modernization of competition law). Since 2010, changes have been made to better reflect digitalization processes and innovations, especially in distribution, licensing, and cooperation.

Relationship with national law

Block exemption regulations have direct effect in the member states (Art. 288 TFEU). They set binding interpretative standards for national competition authorities and courts. National regulations must generally conform to European requirements and must not undermine or impede the application of Union law.

Significance for corporate practice

Block exemption regulations provide companies with important guidelines for permissible contract and cooperation arrangements within the internal market. They enable efficient, competition-promoting agreements, offer legal certainty, and reduce the complexity of notification and approval procedures.

Relevant legal acts (selection)

• Vertical Block Exemption Regulation (Regulation (EU) 2022/720)
• Research and Development Block Exemption Regulation (Regulation (EU) 2023/1066)
• Specialisation Block Exemption Regulation (Regulation (EU) 2023/1067)
• Technology Transfer Block Exemption Regulation (Regulation (EU) 316/2014)
• Motor Vehicle Block Exemption Regulation (Regulation (EU) 461/2010)

Literature and web links

• Treaty on the Functioning of the European Union (notably Art. 101 and 103 TFEU)
• Official websites of the European Commission on competition law (ec.europa.eu/competition/antitrust/legislation)
• Guidelines and communications of the Commission on Art. 101 TFEU and the block exemption regulations

Note: The information reflects the status of legislation and practice as of June 2024. Adjustments as a result of subsequent changes in the legal situation or additional guidelines from the Commission are possible.

Frequently asked questions

When and how do EU Block Exemption Regulations apply?

EU Block Exemption Regulations, especially in cartel law, apply whenever certain conditions are met that justify a block exemption from the cartel prohibition set out in Art. 101(1) TFEU. Application requires that a specific agreement, a decision by associations of undertakings, or a concerted practice in principle falls under the cartel ban, but the agreement can be assigned to one of the categories defined in the relevant block exemption regulation (e.g. vertical or horizontal cooperations). Companies must fully comply with the relevant conditions, which include market share thresholds, clauses on prohibited hardcore restrictions, and specific requirements regarding price fixing and exclusivity agreements. As a general rule, application is through self-assessment by the companies, which is, however, always subject to the risk of subsequent review and possible sanctions by the European Commission or national competition authorities.

What role do market share thresholds play in the EU Block Exemption Regulations?

Market share thresholds are a key element in all EU block exemption regulations because they define the scope and thus the automatic applicability of the block exemption. They aim to ensure that only those agreements are exempted which, according to the lawmaker, are not expected to have a significant impact on competition. For example, under the Vertical Block Exemption Regulation (Regulation 2022/720), the market share of the participating companies usually may not exceed 30%. If the market share exceeds this threshold, the block exemption regulation no longer applies. In this case, companies lose the benefit of the block exemption and would have to subject their agreement to an individual exemption assessment under Art. 101(3) TFEU.

To what extent do national courts and competition authorities influence the interpretation of block exemption regulations?

National courts and competition authorities play an important role in enforcing and interpreting block exemption regulations, although the exclusive power of interpretation lies with the European Court of Justice (ECJ) and the European Commission. In practice, national bodies apply the regulations independently and can initiate proceedings, particularly in cases of suspected abuse, exceeding of market share thresholds, or the presence of hardcore restrictions. In ongoing proceedings, they are obliged to interpret and apply relevant Union provisions—including block exemption regulations. In case of doubt, they have the option (and sometimes the duty) to refer questions to the ECJ for a binding interpretation via a preliminary ruling procedure under Art. 267 TFEU.

What are the consequences of non-compliance with provisions of a block exemption regulation?

Non-compliance with conditions or prohibitions of a block exemption regulation results, under the so-called severability principle, in the (partial or total) withdrawal of the exemption. Especially if so-called hardcore restrictions (e.g. price fixing, market or customer allocations) are part of the agreement, the block exemption does not apply to the entire agreement. Unlawful clauses therefore result in either the nullity of the whole cartel arrangement, or—if severable—only the invalidity of the relevant parts. Furthermore, companies face fines and further antitrust scrutiny, as the agreement would then be assessed under Art. 101(1) TFEU and would have to be subjected to an individual exemption assessment if applicable.

How is compliance with block exemption regulations monitored in practice?

Compliance with the provisions of block exemption regulations is monitored by competition authorities both at the level of the European Commission and nationally (e.g. by the Federal Cartel Office). In practice, this involves regular market analyses, random checks, and the investigation of tips from companies or market participants. Companies themselves bear the burden of proof and demonstration for compliance with the conditions of the respective block exemption regulation, particularly in the event of official review or cartel proceedings. If a violation is established, the respective agreement can be declared void retroactively, with significant financial sanctions imposed.

What are the typical durations and evaluation mechanisms for EU block exemption regulations?

Block exemption regulations are generally of limited duration and are subject to regular evaluations by the European Commission. The term is typically 10 to 12 years, with extensions or amendments possible following consultation and evaluation processes. During these reviews, the efficiency, competitive effects, and market changes are comprehensively analyzed, and the regulations are adjusted, repealed, or replaced to reflect the current state of the internal market and competition policy.

Are there transitional provisions when block exemption regulations are amended or expire?

When an existing block exemption regulation is amended or repealed, the EU generally provides clear transitional provisions. These give companies a certain period—often between six months and a year—to adapt their agreements to the new requirements. During this time, existing contracts remain exempt either under the old or new law, depending on the rules in each case. The aim is to ensure legal certainty and a smooth transition. If a company fails to adjust within the transition period, it loses the exemption retroactively and risks antitrust penalties.