De Minimis Vertical Agreements

In the world of business, vertical agreements are a common occurrence. These agreements are made between parties at different levels of the supply chain, for example, between a manufacturer and a distributor or a wholesaler and a retailer. However, not all vertical agreements are equal. Some may be deemed anti-competitive while others fall under the category of de minimis vertical agreements.

De minimis vertical agreements refer to agreements that are too small or insignificant to have any substantial effect on competition. These agreements are typically considered to not have a material impact on the market and are therefore not subject to scrutiny by competition authorities.

To be considered a de minimis vertical agreement, the agreement must meet certain criteria. First and foremost, the agreement must not contain any hardcore restrictions, such as price-fixing or market-sharing. Furthermore, the market share of the parties involved must not exceed certain thresholds. In the EU, for example, the parties` combined market share must not exceed 20%, while in the US, the threshold is 30%.

De minimis vertical agreements are important to businesses as they allow for flexibility and efficiency in the distribution chain. For example, a manufacturer may offer exclusive distribution rights to a distributor who specializes in a specific region or market. This allows the manufacturer to focus on production while the distributor takes care of sales and marketing in their designated area. This arrangement can be beneficial for both parties and ultimately benefit consumers as well.

It`s important to note that not all jurisdictions have the same rules regarding de minimis vertical agreements. For example, in Japan, agreements between competitors are generally prohibited, regardless of their size or impact on the market. It`s important for businesses to be aware of the regulations in their respective jurisdictions to avoid potential legal consequences.

In conclusion, de minimis vertical agreements are agreements that are too insignificant to have a substantial impact on competition. These agreements can be beneficial for businesses and consumers alike, as they allow for flexibility and efficiency in the distribution chain. However, it`s important to ensure that these agreements meet the criteria set forth by competition authorities in their respective jurisdictions.

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