The Government of Montenegro has adopted four block exemption decrees, two in the sphere of vertical agreements (general exemption decree and exemption for vertical agreements in the motor vehicle sector) and two applicable to horizontal agreements (specialization agreements and research and development agreements). The decrees came into force on 22 March 2014 and are instantly applicable. This means that all undertakings active on the Montenegrin market should now perform an assessment of their contractual arrangements for their compliance with the new exemption regulations. If an arrangement is assessed to be appreciably restrictive of competition and yet outside the block exemption, the parties should apply to the Montenegrin Agency for Protection of Competition for an individual exemption.

This blog post analyses the two vertical block exemption decrees.

General exemption for vertical agreements

Given that Montenegro is on the EU accession route, it does not surprise that the Decree on group exemption of vertical agreements from prohibition (“MNE Vertical BED”) heavily relies on the European Commission Regulation No 330/2010 (“EU Vertical BER”). However, given that some idiosyncrasies of the Serbian vertical block exemption decree (“Serbian Vertical BED”) can be spotted in the new Montenegrin decree, it appears that the drafters relied on the Serbian document as well.

The MNE Vertical BED contains an exempli causa list of the types of vertical agreements that are covered by the exemption. The list substantially corresponds to the vertical restraints described in the European Commission’s Guidelines on Vertical Restraints, with an important distinction that the Montenegrin list includes commercial agency agreements in which the agent does not bear any commercial risk. The provision echoes the Serbian Vertical BED, where one can find the same solution. However, the inclusion of genuine agency agreements within the list of agreements covered by exemption is misguided because such agreements are not restrictive at first place.

With respect to the market share threshold for block exemption, the MNE Vertical BED follows the EU approach, in that it provides exemption to vertical restrictive agreements where the respective market shares of the parties do not exceed 30%. For the purpose of calculating the market share of a supplier, one has to look at the downstream market, while with respect to the market share of a buyer, it is the upstream market that counts. The block exemption decree also regulates the situation in which the market threshold condition was initially satisfied but the threshold is subsequently exceeded. This is an issue in respect of which the Serbian Vertical BED unfortunately remains silent.

Perhaps the most notable peculiarity of the Montenegrin Vertical BED concerns a provision extending the block exemption protection to vertical restrictions which have as their object the setting of minimum or fixed resale prices “with the aim of securing economic stability of the market and competition between customers and suppliers of the subject-matter of the agreement, securing the established quality standards, protecting the business interest of the manufacturer and the end customer, provided the restraint is not of influence to prevention, restriction, or distortion of competition” and further provided that the four general conditions for exemption (efficiency gains, fair share for consumers, indispensability, no elimination of competition) are satisfied. The provision implies that vertical price fixing is not regarded as a restriction by object. It is unclear which policy stands behind this solution. It also remains questionable how the Agency will be able to determine the reasons behind a particular price fixing arrangement. It is further puzzling why the application of the block exemption to the described forms of price restraints is made subject to the presence of the four general conditions for exemption. A block exemption is not worth much if it requires assessment of the presence of general conditions for exemption. To the contrary, the goal of a block exemption regulation is to remove any uncertainties that naturally stem from such assessment, by providing for a presumption that the four conditions are met.

The MNE Vertical BED further provides that the networks of similar agreements which affect the changes on the relevant market do not enjoy the benefit of the exemption, inter alia, if they have a foreclosure effect on more than 40% of the market. The decree, however, fails to specify how the benefit of the block exemption is withdrawn – automatically or by a decision of the Government or the Agency to that effect. This is yet another example of apparent misguided reliance on the Serbian Vertical BED, which contains the same legal gap. Legal certainty would require that the block exemption cannot be withdrawn other than by a formal decision of the competent authority with an effect ex nunc.

The list of non-compete clauses carved-out from the block exemption substantially corresponds to the list from Article 5 of the EU Vertical BER. However, the Montenegrin decree differs from the EU counterpart in that it withholds the benefit of block exemption not only from the non-compete obligation of excessive duration but also from the entire vertical agreement containing the disputed obligation. This is also a copy paste from the Serbian Vertical BED.

Vertical agreements in the motor vehicle sector

Apart from the general vertical block exemption regulation, Montenegro has also introduced a special block exemption for vertical agreements in the motor vehicle sector – Decree on the group exemption from prohibition of agreements on distribution of spare parts and servicing of motor vehicles (“MNE MVBED”). In this respect, Montenegro is more advanced than Serbia, which does not have any industry-specific vertical block exemption regulation.

The relationship between the general and the motor vehicle-specific vertical block exemption regulations is left unclear because neither regulation refers to the other. The EU block exemption regulation for agreements in the motor vehicle sector (“EU MVBER”) expressly notes that, in order to be exempted, a vertical agreement covered by the EU MVBER must satisfy both the general conditions laid down in the EU Vertical BER and the special conditions from the sectoral regulation. A clarification to that effect would be welcome in Montenegro as well. Until then, one can note that the Montenegrin Government probably did not have an intention to make the general block exemption regulation inapplicable to the vertical agreements in the motor vehicle sector. This follows from that that the MNE MVBED does not provide a market share threshold for the application of the block exemption. It could not have been intended to make the motor vehicle block exemption applicable irrespective of the parties’ respective market shares.

The MNE MVBED covers vertical agreements concerning the distribution of spare parts and servicing of motor vehicles, but not the agreements for distribution of new motor vehicles. This is in line with the current approach in the EU on this matter.

Hardcore restraints derogating the block exemption are the same three restrictions that are listed in Article 5 of the EU MVBER plus the setting of minimum or fixed resale prices (which is in the EU contained in the general block exemption regulation) and the situation where the supplier of motor vehicles refuses to give independent operators access to technical information, diagnostic and other equipment, tools, including any relevant software, or training required for the repair and maintenance of these motor vehicles (which traces back to the old, 2002 EU motor vehicle block exemption regulation).

Finally, the block exemption provided by the MNE MVBED does not apply if parallel networks of similar vertical restraints cover more than 50% of the relevant market. Just like in the general exemption regulation, no procedure for withdrawal of the block exemption is provided, which makes the withdrawal regime incomplete.