On 1 June 2023, the European Commission published its new block exemption regulations on research and development (R&D) and specialisation agreements, collectively referred to as the Horizontal Block Exemption Regulations ("HBERs"). Simultaneously, it published its revised Guidelines on horizontal co-operation with competitors ("Guidelines").
Simply put, the HBERs exempt certain R&D and specialisation agreements from the prohibition on anti-competitive agreements under Article 101(1) on the Treaty on the Functioning of the European Union ("TFEU") by providing a 'safe harbor'. Collectively, the revised HBERs and Guidelines provide businesses with clearer and up-to-date guidance to help them self-assess the compatibility of their horizontal cooperation agreements with EU competition rules. The revisions included therein primarily relate to digital advances, and the impact of antitrust law on initiatives which seek to promote sustainability.
The HBERs entered into force on 1 July 2023 and are valid for 12 years. They allow for a two-year transitional period for existing agreements to align with the new legislation. The Guidelines entered into force on 21 July 2023, following their later publication in the Official Journal of the EU.
Irish businesses will need to review and update their existing and planned horizontal cooperation agreements in light of the Guidelines to ensure that their agreements either fall within the Guidelines themselves, or fulfil the exemption conditions under the HBERs. Companies should do so before the above referenced transition period has lapsed.
What are the Key Changes under the revised HBERs?
The HBERs' primary aim is to enhance clarity and user-friendliness for companies seeking to avail of a block exemption.
(i) R&D Agreements
Under the R&D BER, greater clarity (and flexibility) is provided when calculating market share thresholds (a fundamental requirement to a block exemption being applied). In this vein, the grace period (that is, the timeframe during which an R&D agreement continues to benefit from a R&D exemption even where the conditions for its application no longer apply (due to an increase in market share)) has been simplified. The revised grace-period now constitutes a (consecutive) two-year block following the initial year in which the parties' market share exceed the applicable thresholds (ie, a combined market share of 25% or less).
The R&D BER increases the focus on protecting "innovation" competition — that is, where companies may not actively compete on existing product or technology markets but nonetheless push one another to innovate to compete for new markets.
It is envisaged that the changes to the R&D BER will make it easier for small and medium-sized companies to avail of safe harbor under the HBERs, and bespoke R&D BER guidance has been provided in the Guidelines in this respect.
(ii) Specialisation Agreements
The specialisation BER introduces equivalent changes to the grace period and market share calculations as made under the R&D BER. It further broadens the scope of its application by expanding the definition of "unilateral specialisation agreements" to include more than just agreements between two parties.
Under the HBERs, the European Commission and national competition authorities (in the case of Ireland, the Competition and Consumer Protection Commission (the "CCPC")) can withdraw the benefits of the block exemption in individual problematic cases.
What are the Key Changes under the Guidelines?
The Guidelines look to allow businesses self-assess the legality of their co-operation arrangements, without the need to consult the European Commission, or national competition authority. In short, the Guidelines cast light on the types of cooperation which do – and do not – distort competition. Some key changes include the following:
- Information exchange
The Guidelines place significant emphasis on expanded guidance for information exchange. The primary aim pursued by the Guidelines is to assist companies by providing them with (i) a revised assessment structure in order to facilitate self-assessment, and (ii) practical mitigating measures to avoid infringements of EU antitrust rules (such measures extending to the use of clean teams or independent trustees, as well as public distancing measures etc).
Otherwise, additional comprehensive guidance has been provided in respect of the following areas: (i) the types of information exchange that may constitute restrictions of competition 'by object'; (ii) the concept of commercially sensitive information; (iii) indirect forms of information exchange, including 'hub-and-spoke' type arrangements; (iv) potential pro-competitive effects of data pools; and (v) anti-competitive signalling via public announcements.
The Guideline's chapter on information exchange is a cornerstone of the European Commission's guidance and is significant in that it recognises companies now have access to more competitor information than they would have traditionally, taking into account the transformation of the digital age.
- Wage fixing agreements
The Guidelines formally confirm the Commission's approach to wage fixing agreements for the first time. In a revised chapter on purchasing agreements, wage fixing agreements are added to the non-exhaustive list of agreements restricting competition 'by object'.
- Sustainability agreements
One of the most significant developments in the Guidelines is the introduction of a new chapter on sustainability agreements. The aim of this chapter is to show that antitrust rules do not stand in the way of sustainability agreements between competitors pursuing a sustainable, environmental or social objective. This chapter provides that if a sustainability agreement affects the parameters of competition it may be saved by assessing whether the agreement qualifies for what is called a "soft safe harbor."
The Guidelines provide a framework for companies to self-assess the compatibility of their joint sustainability initiatives with the EU competition rules. In this regard, the European Commission has provided a list of sustainability agreements that are unlikely to be anti-competitive and / or fall foul of Article 101 (1) TFEU, while further clarifying the types of benefits to be considered when assessing the exemption of sustainability agreements.
Companies looking to enter into a sustainability agreement are permitted to request informal guidance from the Commission in order to ensure compliance with the relevant legislative framework.
- Standardisation agreements
Chapter 7 of the Guidelines provides guidance on how to assess the compatibility of standardisation agreements with Article 101 TFEU. This chapter deals with specific issues of intellectual property rights, the licensing of standard-essential patents and the involvement of public authorities in standard-setting.
- Joint purchasing agreements
The Guidelines provide additional guidance on when joint purchasing activities may infringe EU antitrust rules. The Guidelines also clarify that analysis on joint purchasing applies not only to actual joint purchases, but to joint negotiations too (including by licensees of a standard-essential patent license). A distinction between joint purchasing arrangements and buyer cartels has also been made. Buyer cartels seek to limit competition and not only coordinate competitive behaviour in the purchasing market but also among individual/supplier negotiations. Conversely, joint negotiation of purchasing conditions by buyers in genuine purchasing agreements is not prohibited. However, as with all such agreements, the effects on competition should be assessed on a case-by-case basis.
- Bid rigging
The Guidelines draw an important distinction between bid rigging and legitimate bidding practices. For example, an agreement will not restrict competition within the meaning of Article 101 TFEU if it allows the parties to participate in projects that they would not be able to undertake individually.
Practical impact for Irish Businesses?
As above, businesses will need to review and update their existing and planned horizontal cooperation agreements with a view to either (i) ensuring compliance with the Guidelines, or (i) satisfying the exemption conditions under the HBERs.
The Guidelines are business friendly by design and aim to simplify the rules on horizontal cooperation, which in turn allow companies to better self-assess whether cooperating with their competitor would fall foul of Article 101 TFEU. The Guidelines include practical examples, together with step-by-step self-assessment charts to assist companies in identifying the potential antitrust risks associated with competitor collaboration.
In addition to ensuring compliance with the Guidelines, it may be worthwhile for businesses to action the following on a regular basis:
- Continued observation of its co-operation agreements, and the market shares attributable to each contracting party.
- Management analysis of planned horizontal co-operation to ensure same is unproblematic in light of (current and prospective) market conditions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
