Part 5: New Rules On Cooperation Between Competing Undertakings - Cartels, Monopolies

On 1 June 2023, the European Commission adopted final revised versions of the block exemptions for certain categories of research and development agreements ("R&D") and specialisation agreements, as well as guidelines on the application of the cartel rules to horizontal cooperation agreements ("Horizontal Guidelines").

The Commission's review is of great practical importance as the block exemptions and guidelines set the framework for the Commission's enforcement of the prohibition of anti-competitive agreements – both in relation to cooperations covered by the block exemptions and those not covered.

The Block Exemption Regulations and the related chapters of the Horizontal Guidelines

The market share thresholds for applying the block exemptions have not been changed but are combined with different market share calculation principles. For example, average figures from the previous three calendar years may be used if the preceding calendar year is not representative.

An attempt has been made to simplify the R&D block exemption in order to make it more SME-friendly and to increase the protection of innovation competition. It has therefore been clarified that parties to agreements who do not compete in markets for existing products or technologies may be competitors in terms of innovation.

The revision extends the scope of the specialisation block exemption to production agreements between more than two parties. It is also clarified that the block exemption covers all types of horizontal subcontracting relationships and not only those aimed at expanding production.

Joint ventures

Following the revision, the Horizontal Guidelines now state that, as a general rule, the Commission will not apply the prohibition of anti-competitive agreements to agreements between joint venture subsidiaries and their parent companies where the agreements concern relevant markets in which the joint venture is active and where the parent companies can exercise decisive influence over the joint venture. See in this respect the judgment of the Court of Justice of the European Union in Case C-172/12 P, EI du Pont de Nemours and Company, paragraph 47, and in Case C-622/15 P, Electronics Inc. And Koninklijke Phillips Electronics NV, paragraphs 71 and 74-76.

However, the Commission may continue to apply the prohibition to the joint venture agreement itself and other agreements only between the parent companies (and possibly third parties), irrespective of whether they concern the services or geographical area(s) in which the joint venture is active.

Information exchange

The guidelines on exchange of information have been updated to reflect recent case law and provide more up-to-date guidance on when information may be commercially sensitive and when the exchange may infringe the prohibition of anti-competitive agreements.

For example, the Commission has updated the list of types of information where its exchange would normally constitute an infringement by object, referring to the judgment of the General Court in Case T-758/14 RENV, Infineon Technologies, and clarified that a direct link between the information exchanged and consumer prices is not required for an infringement by object, referring to the judgment of the Court of Justice of the European Union in Case C-883/19 P, HSBC Holdings and Others, paragraphs 120-121.

The Commission has increased its focus on "unilateral" and indirect information exchange, for example the publication on websites or through input into common digital tools or through a common trading partner.

The Commission also provides guidance on sharing digital content and data, as well as examples of concrete actions to prevent possible infringements, such as clean teams or independent administrators.

Additional guidance on buyer cartels and bid rigging

The Commission now provides further guidance on the concepts of buyer cartels and bid rigging.

"Buyer cartels" are mainly agreements between buyers, without joint negotiation with a supplier, to coordinate or influence their individual behaviour on the buyer market, individual negotiations or purchases, or otherwise influence relevant parameters of competition between them.

"Joint purchasing" or "joint procurement", on the other hand, consists of a system where purchasing terms are negotiated jointly and subsequent individual and independent purchases. It is now clear that it is not only the joint purchasing, but also the related negotiations that are covered by the guidelines and that the guidelines cover all sectors and services.

"Bid rigging" or "bidding cartels" usually consist of bid coordination but can also consist of the submission of a joint bid and discussions thereon. This will notably be the case if one or more of the participants in a bidding consortium could have placed a bid on parts or the entirety of e.g., a public contract. It is therefore necessary to make a concrete assessment of whether the individual undertakings would realistically be able to bid for the entire or parts of the public contract.

New chapter on sustainability agreements

One of the most significant innovations is a whole new chapter on "sustainability agreements". These are agreements, such as R&D agreements or joint purchasing agreements, that pursue sustainability goals. In this chapter, the Commission provides, for the first time, detailed guidance on the concept of "sustainability" and how such cooperation can be implemented in accordance with the prohibition of anti-competitive agreements.

It establishes a soft "safe harbour" rule, according to which sustainability standardisation agreements are generally not presumed to restrict competition if they meet a number of criteria. The Commission also describes how sustainability agreements may be exempted on the basis of the efficiency gains that such agreements can provide through both direct benefits from the use of, for example, sustainable products, but also indirect benefits from avoiding the use of, for example, polluting products, or through collective benefits – to some extent even if the benefits are obtained in a different market than the one which is the subject of the agreement.

Bech-Bruun's comments

The revision of the block exemptions and the Horizontal Guidelines is first and foremost an update in the light of developments in case law from the Court of Justice, but also as a response to technological and societal developments in recent years – both the challenges and the opportunities that have arisen as a result.

For example, the Commission is aware of the increased risks of collusion through indirect or unilateral information exchange. It is a legitimate concern that such coordination is facilitated by technological advances that eases the collection of information, e.g., large and easily accessible amounts of data, big data, and automated collection, e.g., through web scraping, as well as adjustments of own pricing via algorithms responding to publicly available information on competitors' web shops.

It is also to be expected that the Commission will have an increased focus on unilateral information exchange and take a restrictive approach to unilateral statements. For example, the Commission argues that information made publicly available due to legitimate reasons is generally not considered to be commercially sensitive, but conversely, that the publication does not in itself result in information ceasing to be commercially sensitive. Therefore, a significant self-assessment task has been left to the undertakings before they communicate publicly.

However, the Commission also provides guidance to undertakings on avoiding illegal information exchange when the need to communicate with one another arises, in particular through clean teams, which are already a known tool for business transfers.

The Commission recognises that cooperation between competing undertakings may bring significant gains for consumers and society through increased innovation from research and development, but also by cooperating on joint purchasing or procurement and bidding. It is therefore a positive development that, per example, the Commission elaborates on the concept of bid rigging or bidding cartels – an issue that has been relevant in Denmark in connection with the so-called Road Line case. However, the Commission is also making its assessment of bid rigging more rigorous as reference is no longer made to specific types of conduct for bid rigging to constitute a restriction by object, such as price coordination, limitation of production or market sharing, but merely to the fact that the conduct amounts to bid rigging.

In relation to sustainability agreements, the Commission adopts a broad interpretation of "sustainability" based on the UN Sustainable Development Goals and therefore provides a wide scope for undertakings to apply these guidelines to address sustainability challenges. The Commission explains that, as a general rule, several types of agreements will not give rise to competition law concerns. For example, an agreement on a common database containing general information on suppliers that have sustainable value chains or production processes may fall outside the scope of anti-competitive agreements as long as the undertakings are not prohibited from or obliged to use these suppliers.

The Commission also opens to more non-traditional efficiency gains that may justify an individual exemption of a sustainability agreement, such as reduction of air pollution or consumption, to be taken into account.

Originally published 23 June 2023

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