On March 1, 2022, the European Commission published its revised draft block exemption regulations on research and development agreements (“R&D BER”) and specialization agreements (“Specialization BER”), collectively referred to as the Horizontal Block Exemption Regulations (“HBER”) . At the same time, it published revised draft guidelines for horizontal cooperation agreements (“horizontal guidelines”). The stated objective of the revision is to facilitate business cooperation on economically desirable terms and to contribute to the digital and green transition. the Current HBERs expire on December 31, 2022; it is therefore expected that the final revised HBERs and horizontal guidelines will be adopted before the end of this year.
Horizontal cooperation agreements, ie agreements between competitors operating at the same level of trade, can be pro-competitive. The HBERs define the conditions under which such cooperation agreements in the areas of R&D and production are presumed to comply with EU competition law, in particular on the basis of market share thresholds (25% market share combined market share for R&D agreements; 20% for specialization agreements). In other words, they create a “safe harbor” for certain categories of agreements. The accompanying horizontal guidelines provide guidance to companies for a “self-assessment” of the compatibility with competition law of various forms of cooperation outside the safe harbor of HBERs.
The draft new rules follow a review and assessment process launched in September 2019. In May 2021, the Commission published a staff working document presenting the results of the assessment of the horizontal guidelines and the current horizontal guidelines (see also summary of findings). The evaluation found that the HBERs and the horizontal guidelines achieve their overall objectives by facilitating economically desirable cooperation, providing legal certainty for businesses and simplifying administrative control by enforcement authorities. However, the evaluation identified a number of areas where the current texts are considered insufficiently clear, too strict or otherwise difficult to interpret.
The draft revised texts now proposed by the Commission aim to solve these problems by modernising, streamlining and clarifying the rules.
About the HBERHere are the most important changes:
- Modifications common to REC R&D and Specialization: The revised texts propose to simplify the grace period that applies if market shares exceed the “safe harbor” threshold, to add new definitions and to clarify existing ones, to calculate market shares on the basis the previous calendar year or the average of the previous three. years depending on the market (the current rules only use the previous calendar year as the basis for the calculation), and slightly modifying the definition of “potential competitors” to remove the reference to a small but permanent price increase.
- Changes to REC R&D: The revised text exempts (1) R&D agreements concerning entirely new products, technologies and processes and (2) R&D efforts directed towards a specific but not yet specific objective in terms of product or technology only when there are at least three competing R&D efforts in addition to and comparable to those of the parties to the R&D agreement.
- Specialization REC Changes: The specialization REC covers cooperation agreements in the field of production, including unilateral specialization agreements, reciprocal specialization agreements and co-production agreements. The revision slightly expands the scope of the specialization BCR to explicitly include unilateral specialization agreements concluded by more than two parties (the current text only refers to agreements between two parties).
About the Horizontal guidelinesthe most important changes can be summarized as follows:
- General: The draft amended guidelines contain additional guidance on determining the “centre of gravity” of horizontal cooperation agreements involving different types of cooperation (e.g. both joint R&D and joint production of results, or at the same time both joint production and joint marketing of products).
- R&D agreements and production agreements: The draft guidelines now include new sections explaining the application of both HBERs, to help companies better understand how HBERs work and the concepts and definitions they are based on. In addition, the chapter on production agreements now includes specific guidance on mobile infrastructure sharing agreements.
- Joint purchasing agreements: The new guidelines clarify that the joint purchasing chapter applies to all types of sectors, and not only to joint purchasing per se but also to joint negotiations (including by holders of a standard essential patent license (SEP)). The updated chapter also clarifies the distinction between joint purchasing agreements and buyer cartels, and addresses retail alliances.
- Marketing agreements: The chapter on commercialization agreements now contains a specific section on bidding consortia, which notably provides guidance on the evaluation of consortium agreements between the parties that could participate individually in the tenders.
- Exchange of information: The chapter on exchanges of information between competitors now provides additional guidance on the different types of information exchanges, including the different types of data sharing, as well as exchanges in the context of acquisitions. It clarifies various concepts relevant to self-assessment, such as “commercially sensitive information”, “genuinely public information”, “historical information”, etc., and it provides additional guidance on unilateral disclosure and exchanges of information indirect (including spoken scripts). New sections provide guidance on measures to control/limit how data is used, including a discussion of clean teams and data pools.
- Standardization agreements: The existing chapter is divided into two chapters – one on standardization agreements and the other on general conditions. The chapter on standardization agreements proposes to introduce more flexibility in the analysis of the effects by allowing, in certain circumstances, a more limited participation in the development of a standard, and a requirement of more specific disclosure by the participants. of their intellectual property rights (IPRs) which could be essential for the implementation of the standard being developed (considering that “general disclosures” without identifying specific IPR claims/applications should be the exception rather than Rule). The chapter also contains a statement that standard development agreements providing for ex ante disclosure of a maximum aggregate royalty rate by all IPR holders will not, in principle, restrict competition.
- New chapter on sustainability agreements: In line with the objectives of the European Green Deal, the draft guidelines contain a new chapter on the assessment of horizontal agreements that pursue sustainability objectives, which pays particular attention to standard-setting agreements in terms of sustainability (this should be the most frequent form of cooperation in the pursuit of sustainability objectives). To some extent, this is a reversal of the Commission’s decision not to carry over the ‘environmental standards’ chapter from the 2001 guidelines to the 2010 guidelines. such agreements fall outside the general prohibition of agreements restricting competition contained in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), and in which cases the agreements covered by this prohibition may nevertheless benefit an exemption under Article 101(3) TFEU:
- Sustainability agreements do not fall under Article 101 provided they do not affect competitive parameters such as price, quantity, quality, choice or innovation. If so, whether an agreement genuinely pursues a sustainability objective may be taken into account in determining whether the restriction in question is a restriction “by object” (i.e. presumed illegal) or ” by effect”. The Commission notes in this context that an agreement between competitors on how to translate the increased costs resulting from the adoption of a sustainability standard into higher selling prices to customers, or an agreement between the parties to a sustainability standard aimed at putting pressure on third parties to refrain from marketing non-compliant products, restricts competition by object. The chapter also defines criteria for the sustainability impact-based assessment of standardization agreements, describing a “soft safe harbor” for agreements that meet certain conditions.
- With regard to the assessment under Article 101(3), the draft guidelines indicate that sustainability benefits may be taken into account as efficiency gains which may outweigh the effects restrictions of an agreement, emphasizing however that such efficiencies must be justified and cannot be assumed, and should be objective and verifiable. It should also be noted that the Commission argues that the sustainability benefits that flow from the agreements must be linked to the consumers of the product covered by these agreements (“in-market” efficiencies), although it accepts that the concept of ” consumers” encompasses all direct and indirect users of the products concerned. Sustainability benefits which are not consumer-related in the relevant market, or which would not be significant enough to outweigh the harm caused in the relevant market, cannot justify an exemption. The chapter contains detailed guidance on how to assess whether sustainability benefits are essential to achieving stated sustainability goals and whether they are sufficiently linked to market consumers. The chapter concludes by affirming (or recalling) that the involvement of public authorities in sustainable development agreements is not in itself a reason to consider these agreements as compatible with the rules of competition. The intervention of the public authority does not therefore exonerate the parties from any liability, unless they have been compelled or required by a public authority to enter into the agreement, or unless an authority increased the restrictive effect of the agreement.
The Commission invited stakeholders to comment on the draft revised texts by 26 April 2022.