The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022

Hardcore restrictions U.K.

8.—(1) The block exemption applies to the agreement on condition that it does not contain a hardcore restriction.

(2) A hardcore restriction is one or more provisions which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object—

(a) the restriction of the buyer’s ability to determine its onward sale price, without prejudice to the possibility of the supplier imposing a maximum sale price or recommending a sale price, provided that any such provisions do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties;

(b) where the supplier operates an exclusive distribution system, the restriction of the geographical area into which, or of the customer groups to whom, one or a limited number of buyers, to which an exclusive geographical area or customer group has been allocated, may actively sell or passively sell the contract goods or services, but are not excepted restrictions set out in paragraph (3);

(c) where the supplier operates a selective distribution system—

(i) the restriction of the geographical area into which, or of the customer groups to whom, the members of the selective distribution system may actively sell or passively sell the contract goods or services, but are not excepted restrictions set out in paragraph (4),

(ii) the restriction of cross-supplies between the members of the selective distribution system operating at the same or different levels of trade, or

(iii) the restriction of active sales or passive sales to end users by members of the selective distribution system operating at the retail level of trade, except in the situation set out in paragraph (4)(a);

(d) where the supplier operates neither an exclusive nor a selective distribution system, the restriction of the geographical area into which, or of the customer group to whom, a buyer may actively sell or passively sell the contract goods or services, but are not excepted restrictions set out in paragraph (5);

(e) the restriction, agreed between a supplier of components and a buyer who incorporates those components, of the supplier’s ability to sell the components as spare parts to end-users or to repairers, wholesalers or other service providers not entrusted by the buyer with the repair or servicing of its goods;

(f) a wide retail parity obligation or measure that has the same effect as a wide retail parity obligation (which includes any course of action, including entering into agreements or engaging in concerted practices, which has the object of replicating the anti-competitive effects of a wide retail parity obligation).

(3) The excepted restrictions referred to in paragraph (2)(b) are—

(a) the restriction of active sales by the exclusive distributor, or the exclusive distributor and its customers that have entered into a distribution agreement with the supplier or with a party that was given distribution rights by the supplier, into a geographical area or to a customer group reserved to the supplier or allocated by the supplier exclusively to one or a limited number of other buyers,

(b) the restriction of active sales or passive sales by the exclusive distributor, or the exclusive distributor and its customers to unauthorised distributors located in a geographical area where the supplier operates a selective distribution system for the contract goods or services,

(c) the restriction of the exclusive distributor’s place of establishment,

(d) the restriction of active sales or passive sales to end users by an exclusive distributor operating at the wholesale level of trade, and

(e) the restriction of the exclusive distributor’s ability to actively sell or passively sell components, supplied for the purposes of incorporation to a product, to customers who would use them to manufacture the same type of goods as those produced by the supplier.

(4) The excepted restrictions referred to in paragraph (2)(c)(i) are—

(a) the restriction of active sales by the members of the selective distribution system, or the members of the selective distribution system and their customers that have entered into a distribution agreement with the supplier or with a party that was given distribution rights by the supplier, into a geographical area or to a customer group reserved to the supplier or allocated by the supplier exclusively to one or a limited number of buyers,

(b) the restriction of active sales or passive sales by the members of the selective distribution system or their customers to unauthorised distributors located within the geographical area where the selective distribution system is operated,

(c) the restriction of the place of establishment of the members of the selective distribution system,

(d) the restriction of active sales or passive sales to end users by members of the selective distribution system operating at the wholesale level of trade, and

(e) the restriction of the ability to actively sell or passively sell components, supplied for the purposes of incorporation into a product, to customers who would use them to manufacture the same type of goods as those produced by the supplier.

(5) The excepted restrictions referred to in paragraph (2)(d) are—

(a) the restriction of active sales by the buyer, or the buyer and its customers that have entered into a distribution agreement with the supplier or with a party that was given distribution rights by the supplier, into a geographical area or to a customer group reserved to the supplier or allocated by the supplier exclusively to one or a limited number of buyers,

(b) the restriction of active sales or passive sales by the buyer or its customers to unauthorised distributors located in a geographical area where the supplier operates a selective distribution system for the contract goods or services,

(c) the restriction of the buyer’s place of establishment,

(d) the restriction of active sales or passive sales to end users by a buyer operating at the wholesale level of trade, and

(e) the restriction of the buyer’s ability to actively sell or passively sell components, supplied for the purposes of incorporation into a product, to customers who would use them to manufacture the same type of goods as those produced by the supplier.

(6) In paragraph (2), a reference to a restriction of an active sale or passive sale, or to a restriction of actively selling or passively selling, in relation to the selling of goods and services online, includes a restriction that, directly or indirectly, in isolation or combination with other factors, has as its object—

(a) the prevention of buyers or their customers effectively using the internet for the purposes of selling their goods or services online or from effectively using one or more online advertising channels,

(b) the restriction of the geographical area into which or the customer group to whom the buyers may sell the contract goods or services, or

(c) in the case of selective distribution, the restriction of active sales or passive sales to end users by members of the selective distribution system operating at the retail level of trade.

(7) In this article—

“active sales” means—

(a)

actively targeting customers by for instance calls, e-mails, letters, visits or other direct means of communication,

(b)

targeted advertising and promotion, by means of print or digital media, offline or online, including online media, digital comparison tools or advertising on search engines targeting customers in specific geographical areas or customer groups,

(c)

advertisement or promotion that is only attractive for the buyer if it (in addition to reaching other customers) reaches a specific group of customers or customers in a specific geographical area (and is considered active selling to that customer group or customers in that geographical area),

(d)

offering on a website language options different to the ones commonly used in the geographical area in which the distributor is established, or

(e)

using a domain name corresponding to a geographical area other than the one in which the distributor is established,

and the expressions “actively sell” and “actively selling” should be construed accordingly;

[F1 “devolved Scottish authority” has the same meaning as in section 2 of the Procurement Act 2023;]

“digital comparison tools” means online intermediation services used by end users to compare prices, quality or other characteristics of, and potentially to switch or purchase, goods or services from a range of businesses;

“exclusive distribution system” means a distribution system where the supplier allocates a geographical area or customer group exclusively to itself or to one or a limited number of buyers, determined in proportion to the allocated geographical area or customer group in such a way as to secure certain volumes of business that preserves their investment efforts, and restricts other buyers from actively selling into the exclusive geographical area or to the exclusive customer group;

“passive sales” means—

(a)

sales in response to unsolicited requests from individual customers, including delivery of goods or services to such customers without the sale having been initiated through advertising actively targeting the particular customer group or geographical area,

(b)

general advertising or promotion that reaches customers in other distributors’ geographical areas or customer groups (whether exclusive or not) but which is a reasonable way to reach customers not in those other distributors’ geographical areas or customer groups (whether exclusive or not), for instance to reach customers in a supplier’s own geographical area(1), or

(c)

participating in a public procurement exercise undertaken in accordance with—

(i)

[F2 the Procurement Act 2023, or

(ii)

in respect of a public authority that is a devolved Scottish authority, the Public Contracts (Scotland) Regulations 2015, the Concession Contracts (Scotland) Regulations 2016 or the Utilities Contracts (Scotland) Regulations 2016,]

and the expressions “passively sell” and “passively selling” should be construed accordingly;

[F3 “public authority”has the same meaning as in section 2(2) of the Procurement Act 2023;]

“wide retail parity obligation” means a restriction by reference to any of the supplier’s indirect sales channels (whether online or offline, for instance online platforms or other intermediaries), which ensures that the prices or other terms and conditions at which the supplier’s goods or services are offered to end users on a sales channel are no worse than those offered by the supplier on another sales channel.

Textual Amendments

F1 Words in art. 8(7) inserted (24.2.2025) by The Procurement Act 2023 (Consequential and Other Amendments) Regulations 2025 (S.I. 2025/163), regs. 1(2), 26(2)(a)

F2 Words in art. 8(7) substituted (24.2.2025) by The Procurement Act 2023 (Consequential and Other Amendments) Regulations 2025 (S.I. 2025/163), regs. 1(2), 26(2)(b)

F3 Words in art. 8(7) inserted (24.2.2025) by The Procurement Act 2023 (Consequential and Other Amendments) Regulations 2025 (S.I. 2025/163), regs. 1(2), 26(2)(c)

Commencement Information

I1 Art. 8 in force at 1.6.2022, see art. 1(b)

(1)

General advertising or promotion is considered a reasonable way to reach such customers if it would be attractive for the buyer to incur those costs even if they would not reach customers in other distributors’ geographical areas or customer groups (whether exclusive or not).