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New law helps firms do business while protecting consumers

23 Feb 2022

    • A new law will help UK firms do business while maintaining strong protections for consumers, the Government has announced.

    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 that 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:

    • Removing wide retail parity obligations from the exemptions. These obligations specify that a product or service may not be offered on better terms on any other indirect sales channels, including through intermediaries, such as other distributors or online platforms. For example, currently a travel agent might require a hotel not to offer its rooms on any other sales channel at a better price or on better terms and conditions, limiting the incentives for travel agents to compete.
    • Creating a more level playing field for high streets and brick-and-mortar retailers by expanding the exemptions to cover agreements that treat online and offline sales differently. This includes charging the same distributor a higher price for products intended to be resold online than for products intended to be sold offline.
    • More flexibility for businesses to design their distribution systems, for example by allowing a business to combine distribution rights by allowing multiple retailers of its product in one geographical area while having an exclusive arrangement with another retailer in another area.

    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 and further informationis available here.