Introduction
Category management is a common feature of vertical cooperation in the retail sector. In a category management agreement, a supplier assists a retailer by managing or advising on an entire product category, aiming to improve assortment, shelf space, and promotions within that category.
As these agreements can have a significant impact on competition between both suppliers and retailers, they are closely scrutinized under EU competition law.
This blog reviews the legal status of category management under the Vertical Block Exemption Regulation (VBER) and Vertical Guidelines and sets out the key implications for businesses.
What is category management?
The European Commission defines category management agreements as arrangements where the distributor entrusts a supplier (the “category captain”) with the marketing of a category of products. Importantly, this may cover not only the supplier’s own products, but also those of competitors.
The category captain typically advises on or influences product selection, placement, shelf space, and promotional activities for the entire category within the retailer’s store.
Such agreements can increase efficiency, for example by giving retailers access to the supplier’s marketing expertise, reducing out-of-stocks, and optimising product ranges for consumers. However, they may also pose competition risks if they limit other suppliers’ ability to compete for shelf space within the category or if they facilitate collusion between competitors.
VBER: the legal framework
The VBER exempts vertical agreements, such as those between suppliers and retailers, from the cartel prohibition (Article 101(1) TFEU), subject to strict conditions.
To benefit from the VBER safe harbour, a category management agreement must:
• Qualify as a "vertical agreement" between undertakings operating at different levels of the supply chain;
• Not contain any "hardcore restrictions" (for example, fixed or minimum resale price maintenance, certain types of restrictions on customer groups or territories, or unjustified restrictions on effective online sales);
• Not include "excluded restrictions," such as non-compete obligations exceeding five years or post-termination non-compete clauses that unduly restrict competition;
• Be concluded between parties none of which has a market share exceeding 30% in their respective relevant markets (i.e. both the supplier, typically referred to as the "category captain," and the distributor must individually not exceed this threshold).
Provided these requirements are fulfilled, most category management agreements will generally benefit from the VBER safe harbour and will not require an individual assessment under Article 101(3) TFEU.
Category management and the Vertical Guidelines
The Vertical Guidelines provide guidance on the application of category management agreements under the VBER.
The Guidelines underscore that, particularly in markets with substantial inter-brand competition and low switching costs, category management may deliver considerable efficiencies and consumer benefits.
At the same time, competition law issues may arise where a category captain exerts excessive influence over decisions concerning product assortment or shelf space allocation, which can result in the exclusion of competing suppliers. Such risks are heightened in circumstances where category management practices are widespread or when the retailer offers both own-brand products and those managed by the category captain.
In addition, category management may present risks of facilitating collusion. This can occur either among retailers (if a single supplier serves as category captain for multiple retailers) or among suppliers, where the arrangement leads to the exchange of competitively sensitive information (such as promotional plans or pricing strategies) via the retailer. The VBER does not exempt exchanges of such sensitive information.
Practical takeaways
For suppliers and retailers entering into category management arrangements, the following principles are key:
• Check whether both supplier and retailer fall below the 30% market share threshold before relying on the VBER safe harbour.
• Avoid terms that amount to hardcore or excluded restrictions (in particular resale price maintenance or undue assortment restrictions).
• Stay alert to foreclosure risks, especially if the agreement could significantly limit rival suppliers’ access to the category.
• Prevent the use of category management to facilitate collusion or the exchange of commercially sensitive information between competitors.
• Where risks exist, consider safeguards such as independent assortment decisions or “Chinese walls” to mitigate concerns.
Conclusion
Category management may bring clear efficiencies, but only if implemented with due care. Agreements must remain within the VBER safe harbour and be consistent with the Vertical Guidelines. Where doubts arise about their competitive impact, specialist legal advice is advisable.
This blog is part of the EU Distribution Blog Series launched by Banning. The series follows the structure of the Vertical Guidelines and Vertical Block Exemption Regulation (VBER). New contributions are published on a regular basis.
If you have any questions about the contents of this note, please contact Minos van Joolingen, Martijn Jongmans, Sophia Wittkämper or Iris Graumans of Banning’s Competition & Regulatory Team, telephone number +31 73 692 77 52.
