A vertical agreement is a term used in competition law to denote agreements between firms at different levels of the supply chain. For instance, a manufacturer of consumer electronics might have a vertical agreement with a retailer according to which the latter would promote their products in return for lower prices. Franchising is a form of vertical agreement, and under European Union competition law this falls within the scope of Article 101.
Whether a vertical agreement actually restricts competition and whether in that case the benefits outweigh the anti-competitive effects will often depend on the market structure.
EU competition law: block exemptions for vertical agreements
Vertical agreements that fulfil the conditions for exemption and do not contain any so-called "hardcore restrictions" of competition are exempted from the prohibition in Article 101(1) of the Treaty on the Functioning of the European Union by Regulation 330/2010 . The main exception is agreements for motor vehicle distribution, which remain subject to Regulation 1400/2002 until 31 May 2013, pursuant to a three-year extension granted in Regulation 461/2010. Although this latter regulation applies Regulation 330/2010 to agreements for the repair of motor vehicles and for the distribution of spare parts as of 1 June 2013, it also supplements Regulation 330 with three additional "hardcore" clauses