For the category exemption to be applicable to vertical agreements, each party`s market share must be less than 30% on the (s) market in question (s) on which the agreement has fallen. If the market share of one or both parties is greater, the class exemption does not apply to vertical agreements and the parties themselves must decide whether the agreement violates the Chapter I or Section 101 prohibitions (depending on the authority). If the agreement contains one of the following characterized restrictions, the benefit of the category exemption for vertical agreements is lost for the whole agreement: horizontal agreements can have negative effects on the market in terms of price and product quality. On the other hand, horizontal cooperation can generate important economic benefits such as risk sharing, cost reduction, knowledge sharing and accelerated innovation exchanges. To determine whether a vertical agreement is anti-competitive, several issues need to be addressed. The answers can determine whether the vertical agreement falls under the COMPETITION regime of the United Kingdom and the EU and, if so, whether the category exemption applies to vertical agreements: among the main and most common types of horizontal anti-competitive agreements are price fixing, supply manipulation, market allocation/distribution and refusal to enter into an agreement (group boycott). These horizontal agreements generally have the form of an agreement, which is explained in a separate subcategory. If the class exemption for vertical agreements does not apply to an agreement, it may continue to be allowed, notwithstanding the prohibitions of Chapter I or Section 101, where the benefits of the agreement outweigh the anti-competitive effects. It should not be lost in mind that the category exemption for vertical agreements does not apply to Chapter II or section 102 prohibitions. Therefore, any dominant entity in the market should consider the potential for the removal of these provisions. However, where a practice is covered by the category exemption for vertical agreements, the parties must have met the review of market share thresholds and are therefore less likely to be considered “dominant” within the meaning of Chapter II or Section 102. The horizontal agreement is a cooperation agreement between two or more competing companies operating at the same level in the market. It is usually a matter of establishing a healthy relationship between competitors.
The key clauses of the agreement may contain guidelines on pricing, production and distribution. The agreement can also discuss the exchange of product and market information. Horizontal agreements can result in breaches of cartel and abuse of dominance rules, as these agreements may include competition limitation clauses. Vertical chords operate upstream/downstream, while horizontal chords operate at the same level. The threshold for the cumulative market share that contracting entities can achieve in order to qualify for a category exemption is 20% (for specialization agreements) or 25% (R and S; D). If these values are exceeded, research and development and specialisation agreements are not automatically prohibited, but must be assessed individually in light of the exemption under Article 101, paragraph 3, of the EUFS. Among the measures likely to be covered by these bans on vertical agreements are: see the “horizontal guidelines”: guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements (OJ L 101 of 17.12.2001, p. 1). (2) JO C 11, 14.1.2011, p.