On 1 March 2022, the European Commission (the “Commission”) published draft revisions to EU antitrust rules governing cooperation between competitors (the “proposed revisions”) and launched a public consultation on those proposed revisions. The proposed revisions comprise, inter alia, updated rules applicable to R&D and specialization agreements, as well as new or expanded guidance on how competitors may collaborate in relation to sustainability initiatives, joint purchasing, bidding consortia, standardization, mobile infrastructure sharing and other types of agreements, without falling foul of EU antitrust rules. Companies have now an opportunity to weigh in on the proposed revisions before the Commission finalizes the new rules.
1. Which rules is the Commission consulting on?
Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) prohibits, in particular, agreements between competitors operating at the same level in the market (“horizontal agreements”) that are anticompetitive. While, as a general matter, it is advisable for companies to exercise caution in relation to any type of conduct involving competitors, horizontal agreements are not necessarily anticompetitive under Article 101 TFEU. As acknowledged by the Commission, cooperation between competitors may be pro-competitive, for example because it may lead to substantial economic and sustainability benefits.
The proposed revisions and the related consultation process concern two sets of documents which clarify the conditions under which companies may cooperate with their competitors without infringing Article 101 TFEU, namely the horizontal block exemption regulations (the “HBERs”) and the Guidelines on horizontal cooperation agreements (the “Horizontal Guidelines”):
- The HBERs set out the conditions under which R&D and specialization agreements between competitors benefit from a safe harbor, i.e. the conditions under which they are exempted from the application of Article 101 TFEU. The revised HBERs, once finalized, will replace the current HBERs that expire on 31 December 2022.
- The Horizontal Guidelines provide guidance on how to interpret and apply the HBERs. In addition, they provide guidance on how companies should self-assess their compliance with Article 101 TFEU in relation to R&D and specialization agreements which are not automatically exempted, as well as a wide range of other horizontal agreements such as purchasing and commercialization agreements and exchanges of information.
2. Why should companies follow this review process?
Infringements of Article 101 TFEU may carry serious consequences including, in particular, substantial fines, damages actions, reputational harm, as well as disruption of resources and business arising from lengthy investigations by EU antitrust agencies. For companies that are already involved in horizontal agreements, companies that consider entering into such agreements, and companies in general, it is therefore essential to stay on top of the applicable EU antitrust rules. A number of the proposed revisions offer greater clarity or flexibility and, as such, may make it easier for competitors to collaborate without infringing Article 101 TFEU. The new rules are due to enter into force on 1 January 2023, and companies will have to take them into account in self-assessing their compliance with Article 101 TFEU.
The proposed revisions are relevant, on the one hand, to companies which, given the specifics of their activities and the sectors they are active in, are likely to be confronted with specific types of horizontal agreements. This may, for instance, be the case for companies involved in R&D collaboration, e.g. in the pharmaceutical and high-tech sectors, telecommunications companies that contemplate entering into mobile infrastructure sharing agreements, or companies routinely involved in tenders which wish to take part in bidding consortia.
More generally however, the proposed revisions address issues that are potentially relevant to any company, irrespective of its sector of activity. For example, the question under which conditions competitors may enter into a sustainability agreement is not confined to a specific sector, and that question could become more prominent in the future. Similarly, exchanges of information, in particular of data, between competitors could potentially occur in any sector.
3. How can companies weigh in on the proposed revisions?
Any interested parties may submit their comments on the proposed revisions by 26 April 2022. Contributions may be submitted through the Commission’s dedicated webpage at https://ec.europa.eu/competition-policy/public-consultations/2022-hbers_en.
Following the end of the consultation process, the Commission is expected to adopt the final version of the HBERs and of the Horizontal Guidelines in Q4 2022. As noted above, the new rules are due to enter into force on 1 January 2023.
4. The proposed revisions: key highlights
The revised drafts of the HBERs and of the Horizontal Guidelines span in total over 170 pages and cover a wide range of different agreements and issues, not all of which will be discussed as part of this update. Set out below are some high-level highlights of the proposed revisions.
Under the proposed revised rules, the R&D block exemption regulation will be widened by relaxing the conditions regarding the requirement to provide full access to the results of the R&D and access to pre-existing know-how in the context of R&D projects. However, the Commission also proposes to no longer make the exemption available where less than three competing and comparable R&D efforts would remain in the market in addition to those of the parties to the R&D agreement. We believe that this new approach will prove to be impractical and may significantly reduce the usefulness of the block exemption for firms wishing to enter into R&D projects. In contrast, the proposed changes to the Specialization block exemption regulation are likely to facilitate cooperation between companies in the production of goods and services.
With regard to the Horizontal Guidelines, the Commission suggests clarifying how to distinguish between legitimate joint purchasing agreements and buyer cartels, something that has increasingly become difficult in the past few years. The proposed rules merit close reading by companies involved in joint buying arrangements, either as sellers or buyers. The Commission also proposes to provide additional guidance with regard to the conditions under which information exchange between competitors may be objectionable. While the Commission appears to acknowledge that such information exchange may often be efficiency-enhancing, we are concerned that the proposed assessment may be difficult to apply – as current pricing information may qualify as “commercially sensitive information” – and may result in an overbroad category of by-object violations.
In relation to standardization agreements, the proposed new rules provide some additional guidance, but are remarkably silent with respect to “Special Interest Groups” (SIGs) and the role of standard development organizations in determining where in the supply chain licensing should or should not take place. These issues are of particular importance in a number of high-tech sectors.Finally, the future rules will provide new guidance with respect to horizontal collaboration designed to foster sustainability goals. We expect that the final rules will provide some support to companies wishing to enter into joint ventures or other types of cooperation which may result in benefits to the environment. However, companies interested in this area should keep a close eye on the final text of the Horizontal Guidelines, in particular if their proposed cooperation is expected to generate “out-of-market” efficiencies, or collective benefits, rather than efficiencies that will benefit customers in the markets where the products will be sold.
5. In conclusion
Collaboration between actual or potential competitors often gives rise to very significant efficiencies, but – not surprisingly – also raises antitrust risks. The proposed revisions to the current EU rules will result in a number of important changes to the treatment of horizontal agreements and may necessitate a critical reappraisal of existing agreements with competitors. While many of the modifications will provide for additional flexibility, a number of key changes may also negatively affect ongoing competitor collaborations.
Comments on the proposed revisions should be submitted by 26 April 2022.
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