11 August 2023

The New EU Regime For Horizontal Agreements: Overview Of The Main Changes

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In this month's topical edition of Competitive Edge, we look at the European Commission's new legal framework and guidance for horizontal cooperation agreements and discuss the main changes...
European Union Antitrust/Competition Law
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In this month's topical edition of Competitive Edge, we look at the European Commission's new legal framework and guidance for horizontal cooperation agreements and discuss the main changes in relation to competition law consideration of horizontal cooperation agreements from a European perspective with a comparative look at relevant non-EU jurisdictions.

Horizontal agreements are cooperation agreements between competitors aimed at cooperating in certain areas, such as research and development (“R&D”), production, purchasing, commercialisation, standardisation, or exchange of information.

Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits agreements between companies that have the object or actual/potential effect of restricting competition in the internal market. However, under certain conditions, horizontal cooperation agreements can be pro-competitive and lead to substantial economic benefits. Horizontal cooperation agreements can be a means to share risk, save costs, increase investments, pool know-how, enhance product quality and variety and speed up innovation. Competitive restrictions that are indispensable for such pro-competitive effects of horizontal agreements may be exempt from the prohibition under Article 101(3) TFEU as long as the agreements benefit consumers and allow for sufficient residual competition in the market.

Following a review of the current European competition rules governing horizontal agreements, on 1 June 2023 the European Commission (“Commission”) adopted and published the revised Research and Development Block Exemption Regulation (“R&D BER”) and Specialisation Block Exemption Regulation (“Specialisation BER”), together referred to as the Horizontal Block Exemption Regulations (“HBERs”), accompanied by the revised Horizontal Guidelines (“Guidelines”). The HBER and Guidelines provide clear and up-to-date guidance to assist businesses in self-assessing their compatibility of any horizontal cooperation agreements with EU competition law.

The revised HBERs apply from 1 July 2023, and the Guidelines will enter into force once published in the Official Journal of the European Union. The HBERs provide for a transitional period (until 30 June 2025) for those agreements already in force on 30 June 2023 that, while not fulfilling the exemption criteria set out in the new horizontal regulations and Guidelines, nevertheless satisfy the exemption conditions set out in the previous HBER framework.

By way of a generic application of Article 101(3) TFEU, the two HBERs exempt R&D and specialisation agreements, which respect the conditions specified in the HBERs, from the application of Article 101(1) TFEU. The Guidelines provide guidance on how to apply the HBERs and how to assess other types of cooperation agreements (such as information exchange, R&D agreements, production agreements, joint purchasing agreements, commercialisation agreements, standardisation agreements and standard terms). The Guidelines also include a new chapter on the assessment of sustainability agreements.

In this edition of the Competitive edge newsletter, we address the main chapters of the Guidelines discussing the changes and highlights of the new regime:

In addition to these focus points of the new EU regime, we asked our colleagues outside the EU (the UK, Australia, China and Singapore) what is happening in the horizontals space outside of the EU.

2. Overview of key amendments

Below is an overview of the key amendments made to both the HBERs and the Guidelines.

  • Main changes to the revised R&D BER:
    • There is increased clarity and flexibility in relation to the calculation of market shares for the purpose of applying the R&D BER , including guidance in the Guidelines on how to apply the R&D BER.
    • There is more focus given to the protection of innovation competition.
    • Competent antitrust authorities (Commission and NCAs) can withdraw the benefits of the exemption in individual problematic cases.

Unchanged provisions: no amendments have been made in the market share thresholds (i.e. 25%), the conditions for exemptions, nor to the lists of hardcore and excluded restrictions.

  • Main changes in the revised Specialisation BER:
    • The scope of the Specialisation BER has been extended to cover more types of production agreements concluded by more than two parties.
    • There is now a more flexible approach for the calculation of market shares for the purposes of applying the block exemption .
    • Competent antitrust authorities (Commission and NCAs) can withdraw the benefits of the exemption in individual problematic cases
    • There is specific guidance on the application of the Specialisation BER in the Guidelines, which cover both horizontal joint production agreements and sub-contracting ones.

Unchanged provisions: no amendments have been made to the market share thresholds (which are kept at 20%) nor to the list of hardcore restrictions, which has remained unaltered.

  • Introductory chapter of the Guidelines
    • The introductory paragraph of the Guidelines has been amended. It now contains the latest case law on concerted practices, potential competition, restriction by object or by effect, and ancillary restraints.
    • There is new guidance on the application of Article 101 TFEU to agreements between joint ventures and their parent companies in light of the recent case law, according to which joint ventures and their parent companies are considered as a single economic unit for competition law purposes in so far as it is demonstrated that the parent companies exercise decisive influence over the joint venture. As a result, the Commission will generally not apply Article 101 TFEU to agreements between the parent companies and the joint venture to the extent that they relate to the operations of the joint venture and as long as the parents exercise decisive influence. This does not preclude the application of Article 101 TFEU to other agreements between the parent companies as they are considered independent on other markets.
    • There is expanded guidance on how the Guidelines apply to combined cooperation agreements that involve cooperation on more than one type of activity (such as between production and commercialisation). In order to determine which chapter of the Guidelines apply to such combined cooperation agreements the “centre of gravity” of the cooperation needs to be identified. The Guidelines clarify that the “centre of gravity” test takes into account two relevant factors: (i) the starting point of the cooperation; and (ii) the degree of integration of the various combined functions. According to this test, R&D preceeds joint production, which in turn preceeds joint commercialisation and the legal guidance follows the same ranking.
  • Main changes to the other chapters of the Guidelines
    • In the chapter on Production Agreements, the Guidelines include a new section on mobile telecommunications infrastructure sharing agreements reflecting recent enforcement practice as well as general guidance on the likelihood of concerns.
    • There has been an expansion and clarification on purchasing agreements reflecting recent case practice: the distinction between joint purchasing and buyer cartels has been clarified and it is specified that the joint purchasing extends to arrangements whereby buyers negotiate purchase conditions jointly, but each buyer makes its purchases independently.
    • The chapter on commercialisation agreements now includes additional guidance on output limitation-related risks and a new specific section dedicated to bidding consortia, specifying that the latter do not amount to a restriction of competition per se when (i) the participants to the consortia are not able to submit individual offers and (ii) in any event, the joint offer respects the conditions of Article 101 (3).
    • The chapter on information exchange has been amended to reflect the most recent case law, experience in enforcement as well as the technological developments allowing for new methods by means of which information can be exchanged. The most significant aim pursued by the revised Guidelines is to support companies by providing them with (i) self-assessment guidance also considering the new sharing techniques of big-data and the potential pro-competitive effects of information exchange and (ii) practical mitigating measures to avoid infringements of EU antitrust rules.
    • The standardisation agreements chapter of the Guidelines is now separate from the one on standard terms. Key amendments to the standardisation agreements chapter now allow for greater flexibility by providing “soft" safe harbour conditions to regulate the disclosure of IPRs in good faith, open access participation in standard development and the exemption in the event that the disclosure is made by participating IPRs holders of maximum cumulated royalty rate.
    • There is a new chapter in the Guidelines that deals with sustainability agreements clarifying that the EU competition rules do not run against cooperation agreements seeking a sustainability objective. To this end, the Guidelines provides a framework for companies to self-assess the compatibility of their joint sustainability initiatives with the EU antitrust legislation. In particular, the Commission included: (i) a list of sustainability agreements that usually do not breach Article 101 (1) TFEU; (ii) a “soft” safe harbour for sustainability standardisation agreements that meet certain conditions; (iii) a clarification regarding the types of benefits to be considered when assessing the exemption of sustainability agreements; (iv) and the possibility for the companies that want to enter into a sustainability agreement to request informal guidance from the Commission in order to ensure compliance with EU competition rules.


Key Amendments 

  • Additional clarity on application
  • Increased clarity and flexibility on calculation of market shares
  • Authorities can withdraw benefits of exemption in certain problematic cases.
Specialisation BER 
  • Extended scope
  • Amended definition of “unilateral specialisation agreement” to cover more than two parties
  • Increased clarity and flexibility on calculation of market shares

Horizontal Guidelines: main topics covered

Key Amendments 

  • New introduction with clarification of general principles for the assessment horizontal cooperation agreements under Article 101 TFEU
Joint production - Mobile telecoms infrastructure sharing agreements
  • New section in the chapter on joint production reflecting recent enforcement practice and providing relevant guidance for the assessment of mobile network sharing agreements
Purchasing agreements
  • Expansion and clarification in the Guidelines
  • Distinction between joint purchasing and buyer cartels
  • Clarification that joint purchasing extends to arrangements whereby buyers negotiate purchase conditions jointly, but each buyer makes its purchases independently
  • Further explanations on the assessment under Article 101 (3) of pass-on to consumers
Commercialisation agreements
  • Expansion on this chapter in the Guidance
  • New section on bidding consortia
  • Guidance on main risks of output limitation
  • Guidance on the distinction with bid rigging
  • Guidance on specific rules in relation to agricultural products
Information exchange
  • Chapter on information exchange restructured and expanded
  • Reflects most recent case law, experience in enforcement and technological developments
  • Additional guidance on:
    • commercially sensitive information
    • types of information exchange
    • by object restrictions
    • pro-competitive effects of data pools
    • use of algorithms
    • indirect forms of information exchange
    • anti-competitive signalling
    • practical measures to avoid infringements
Standardisation agreements
  • Greater flexibility on open participation in the standard-setting process
  • Clarification on the disclosure by parties of a maximum cumulated royalty rate
Sustainability agreements
  • New chapter in the Guidelines on how to self-assess sustainability agreements
  • Competition rules do not stand in the way of agreements between competitors that pursue a sustainability objective.
  • Broader definition of sustainability objectives
  • “Soft” safe harbour for sustainability standardisation agreements
  • Clarification on benefits that may lead to the exemption of sustainability agreements

Originally published 19 July 2023

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.

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