HP-2020-000016 - [2025] EWHC 1451 (Ch)

Cabo’s primary case on the VBER was that the agreements between MGA and the toy retailers did not relate to the purchase, sale or resale of LOL Surprise or other products supplied by MGA, and were therefore not vertical agreements within the definition set out in Article 1(a) of the VBER. Rather, Cabo said, the agreements solely related to Worldeez and the retailers’ agreements not to purchase it. Cabo also contended that on a purposive construction the VBER should not apply to agreements such as those in issue in the present case, which were nakedly exclusionary and provided no benefit to consumers.

I do not accept those submissions. Article 1(a) defines a vertical agreement covered by the VBER as an agreement between undertakings operating (for the purposes of the agreement) at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services. The terms of Article 5 make clear that the VBER in principle applies to vertical agreements which contain obligations not to stock competing products; if that were not the case, the provisions in Article 5 would be superfluous.

In the present case, the agreements between MGA and the toy retailers plainly fell within the Article 1(a) definition of a vertical agreement: they were agreements setting out the conditions under which the retailers could purchase LOL Surprise from MGA, the conditions being that the retailers would not stock (at least) the Worldeez globe.

Contrary to Cabo’s submissions, the agreements cannot sensibly be characterised as “freestanding agreement[s] not to purchase the goods of a competing supplier”. They were not simply agreements that the retailers would not stock Worldeez; rather, as is apparent from the description of MGA’s conduct at §§117–147 above, the entire purpose of the retailers’ agreements to MGA’s demands was to obtain supplies of LOL Surprise. That is demonstrated most clearly by the exchanges of messages between The Entertainer and MGA in 2017, but the same was also true of TRU and Smyths, considering the totality of the evidence as to those agreements.

While there is no doubt that the VBER, as with any EU Regulation, should be construed purposively, that does not provide a licence to read in additional qualifications to the terms of the VBER. It is apparent from the recitals to the VBER that the intention was to limit the benefit of the exemption to vertical agreements which can be assumed to satisfy the conditions of Article 101(3) TFEU, and that the exemption should not apply to agreements containing restrictions which are likely to restrict competition and harm consumers (see e.g. recitals (5) and (10)). That purpose was, however, intended to be achieved through the conditions in the Regulation, as recital (12) makes clear:

“The market-share limitation, the non-exemption of certain vertical agreements and the conditions provided for in this Regulation normally ensure that the agreements to which the block exemption applies do not enable the participating undertakings to eliminate competition in respect of a substantial part of the products in question” (emphasis added).

The recitals recognise that in particular cases an agreement to which the exemption applies may have effects that are incompatible with Article 101(3) TFEU. In such a case the benefit of the Regulation may be withdrawn by the Commission or the competition authority of a Member State, pursuant to Article 29 of Regulation 1/2003: recitals (13) and (14). The foreseen remedy for an agreement exempted under the VBER which is nevertheless considered to be anticompetitive is therefore the withdrawal of the benefit of the VBER, not the implication of additional terms limiting the scope of the VBER.

The agreements at issue in the present case therefore fell within the scope of the VBER as defined in Article 1(a).