CMA Vertical Agreements – Understanding the Basics
Vertical agreements involve contracts between businesses operating at different levels of a supply chain. These agreements typically involve manufacturers, wholesalers, and retailers. The Competition and Markets Authority (CMA) is responsible for enforcing legislation that regulates these agreements.
The primary aim of these agreements is to promote competition and protect consumers by preventing anti-competitive behavior. To achieve this goal, companies are required to comply with the provisions of the Competition Act 1998 and the Treaty on the Functioning of the European Union.
The CMA will consider a vertical agreement when it involves a restriction of competition. Such agreements may include:
1. Price fixing
Price fixing involves businesses at different levels of a supply chain agreeing on a fixed price for a particular product or service. This behavior violates competition law and can lead to a reduction in consumer welfare.
2. Market sharing
Market sharing is another type of anti-competitive behavior that involves companies dividing up a market or limiting each other`s access to customers. Such agreements can create monopolies that harm consumers.
3. Resale price maintenance
Resale price maintenance involves manufacturers dictating the minimum price at which their products can be sold by retailers. This can lead to higher prices for consumers and restrict competition.
When investigating vertical agreements, the CMA will assess whether they have an adverse effect on competition. The authority will consider factors such as the size of the market, the degree of market power, and the effect of the agreement on consumers.
In conclusion, CMA vertical agreements are an essential part of competition law that aim to promote competition and protect consumers. Companies that engage in anti-competitive behavior can harm consumers by restricting competition, raising prices and stifling innovation. By enforcing legislation that regulates vertical agreements, the CMA plays a vital role in ensuring that businesses operate within a fair and competitive marketplace.