In merger procedures, it is a fundamental requirement for parties to provide accurate and complete information to the European Commission as it forms the basis of the Commission’s assessment of mergers. Under the EU Merger Regulation (EUMR), the European Commission can impose fines where parties intentionally or negligently provide misleading or incorrect information during the merger review process and in response to requests for information. In March this year, the European Commission issued a Statement of Objections to Kingspan, alleging it provided misleading or incorrect information during the Commission’s EUMR investigation of Kingspan’s planned acquisition of Trimo, despite the transaction being abended earlier in the process. The case highlights that the companies should be careful not only to avoid gun jumping during their acquisition processes (see Here and Here) but also ensure the quality and truthfulness of the information submit to the European Commission.

As a background, Kingspan had notified the Commission of its intentions to acquire Trimo in March 2021. However, by April 2022, the companies abandoned the proposed transaction following concerns raised by the European Commission. Notably, in November 2022, after the transaction was abandoned, the European Commission launched an investigation to determine whether Kingspan had intentionally or negligently supplied false information during the merger investigation.

The Commission’s preliminary view is that Kingspan had either negligently or intentionally provided misleading or incorrect information regarding basic facts about Kingspan’s internal organization. In addition, it is alleged that basic facts aimed at assessing the following have been misleading or incorrect:

  • The scope of the relevant product and geographic market.
  • The existence of barriers to entry and expansion.
  • The importance of innovation.
  • The competitiveness between Kingspan and Trimo and their competitors.

As a reminder, the issuance of a Statement of Objections does not pre-determine the final outcome of the investigation. It is merely a formal step in the investigation process, informing the companies concerned of the objections raised against them. The companies then have the opportunity to respond to the Commission’s objections.

Should the European Commission conclude that Kingspan had intentionally or negligently provided misleading or incorrect information, it could impose a fine of up to 1% of the company’s annual worldwide turnover for each breach. In 2021, the European Commission imposed a fine of 7.5 million euro on Sigma-Aldrich for providing misleading information on a remedy package during the Commission’s investigation of Merck’s acquisition of Sigma-Aldrich (despite the acquisition being approved beforehand). In 2019, the Commission decided to impose fines totaling €52m on General Electric for providing incorrect information to the Commission during its 2017 merger investigation into General Electric’s acquisition of LM Wind. In 2017, the European Commission fined Facebook 110 million euro for providing incorrect or misleading information during the Commission’s 2014 investigation of Facebook’s acquisition of WhatsApp (despite the fact that the breach had no impact on the outcome of its investigation).

In addition to fines, the European Commission may also ultimately revoke one of its decisions where “the decision is based on incorrect information for which one of the undertakings is responsible”.

The Kingspan case highlights that even the withdrawal of a merger notification does not halt an investigation where the European Commission suspects that misleading or incorrect information has been submitted. While the potential maximum fine is lower than one for gun jumping (1% vs 10% of global turnover) and in practice the fines are well below the statutory maximum, it is an important requirement to comply with during the merger review process.

The European Commission can issue requests for information (RFI) not only to the parties of the case but also third parties, including competitors, suppliers and customers. The Commission has discretion to issue either a simple RFI or RFI by decision. When it comes to simple RFIs, these are not mandatory and recipients are under no obligation to provide the requested information. However, if recipients choose to respond, they cannot provide incorrect or misleading information. The same is true in respect of RFIs by decision. These are mandatory and recipients are under the obligation to provide all the requested information accurately and truthfully. The failure to reply to a formal decision within the specified time limit could also result in a fine.

The ongoing case serves as yet another example of the European Commission’s strict stance on procedural violations in the area of merger control, whether it involves providing misleading or inaccurate information, or prematurely implementing transactions. To date, the European Commission has not revoked a merger decision due to procedural infringements, but the risk persists if decisions are based on false information. Both parties involved in the transaction, as well as third parties responding to RFI, must ensure the accuracy of their responses and ensure that no information is deliberately withheld.

After a lengthy period of consultation, the European Commission has adopted a new Notice (‘Notice’) on the definition of the relevant market for purposes of EU competition law.  The Notice comes on the heels of a significant period of updating competition laws, including (i) a number of new block exemption regulations setting safe harbors (e.g. for vertical agreements, R&D, specialization agreements); (ii) new guidelines on vertical agreements; (iii) new guidelines on horizontal agreements, which have a chapter dedicated to sustainability arrangements; (iv) the Digital Markets Act; (v) the Digital Services Act; and (vi) the Foreign Subsidies Regulation.

It is worth recalling that the purpose of the Notice is to provide guidance (including transparency) to business on the approach the Commission will take in analyzing the boundaries of competition between companies and the level of market power being exercised in a market (or the level of change in market power which occurs or might occur).  The new Notice acknowledges that the world has changed considerably since the previous market definition notice which dates from 1997, with the advent of digital markets, more complex supply chains and the multiple challenges of digital and green transitions (for example, carbon zero, environmental sustainability factors).  The Commission acknowledges that product characteristics, price and intended use are not the only competitive parameters.   Other factors may play a role, such as security and privacy protection, durability, possible integration with other products, range of possible uses, as well as possible behavioral biases from choosing the default option on offer.  The Commission wants to reflect these developments as well as developments in jurisprudence, its own practices and ensure consistency with other competition authorities.  The Notice seeks to increase the transparency and therefore the predictability of the Commission’s thinking, through publication of the methodology it will follow and the evidence and criteria it will seek to rely on in the application of the competition rules.  This should help businesses anticipate the sorts of information which the Commission considers to be relevant for purposes of market definition.

The Commission uses market definition as a tool for analyzing (i) proposed mergers and full function JVs under the merger regulation; (ii) antitrust enforcement relating to bi-lateral or multi-lateral conduct under Article 101 TFEU; (iii) antitrust enforcement relating to unilateral conduct by companies which may be dominant under Article 102 TFEU; and (iv) enforcement of equivalent provisions under the Agreement on the European Economic Area.  Customers take a number of factors into account, which the Commission looks at.  These include price, innovation, various aspects of quality (including factors of sustainability, security, reliability of supply). 

What the Commission is interested in are the factors which operate as ‘effective and immediate’ disciplinary forces or restraints on suppliers of a given product and for this it looks primarily at demand substitution, then at supply substitution.  These two help to identify the products and suppliers in the relevant market.  For purposes of the market definition exercise, it does not look at potential market entry (i.e. from outside the market).  Rather this is considered subsequently as part of the competitive assessment.

In addition to clarifying and expanding on existing and well-understood market definition principles, the Notice provides practical examples and there is also discussion in the Notice on a number of new topics.  These include:

  • Product differentiation: this could occur at product or geographic levels and could result in a finding of separate markets or of a single broad market where there is no clear distinction;
  • Customer groups: they could be differentiated (including by customer location) if there are different conditions of supply.  Three conditions are required to be present: identifiable groups, an absence of arbitrage and non-transitory discrimination between them;
  • R&D: where R&D and innovation efforts are in the mix, the Notice indicates that the Commission will consider whether the R&D identifies pipeline products which can be visible for ‘expected transitions in the structure of  a market’, in which case it could form part of the present or a future product market.  For innovation efforts, the Commission will assess what the objectives of the R&D are and whether it is too early a stage of innovation and whether the boundaries of competition can be identified and who the rivals are: ‘is there sufficient probability that new types of products are about to emerge’?
  • Digital markets: the Notice outlines the Commission’s approach to multi-sided platforms where competition may not be on price and after-markets.  For multi-sided platforms, the analysis seeks to determine whether there is one market for all products or separate and distinct markets for products on each side.  The Commission will look to see what substitution possibilities exist.  Where products have zero (or even negative) monetary value, what are the relevant non-price elements (including quality and sustainability factors) and are there alternatives to the SSNIP test (which would not be applicable in such circumstances).  For after-markets, the Notice indicates that the Commission will examine whether there are system markets, multiple markets or dual markets.

The update to the Notice on the definition of the relevant market is welcome and long overdue.  At the same time, businesses should not forget that the relevant market analysis involves both legal and economic arguments, with interpretation of the relevant concepts in a fact-specific context.  Also, markets are constantly developing and evolving and regard will need to be had to guidance from the European Courts.  One point which the Commission has made clear is that the Notice only offers guidance to business: it is not a regulation binding on the Commission and nor is it bound by past decisions.  Parties will certainly rely on the Notice to support their submissions, but the Commission will need to justify its position if it intends to depart from the methodology outlined in the Notice.

The Antitrust Division of the Department of Justice  and the Federal Trade Commission recently issued a revised model second request clarifying that companies under investigation have an obligation to preserve communications on messaging platforms including those on so-called ephemeral applications.  These applications, such as Slack, Microsoft Teams, Signal, and Google Chat, can be configured to delete messages automatically, posing a problem when a litigation hold is implemented.  A federal judge sanctioned Google in March of 2023 for telling the court that it was preserving messages on Google Chat while not turning off the setting that allowed for 24-hour default deletion.  In their statement, the agencies noted that many companies have not properly been retaining documents from these ephemeral messaging systems in response to preservation requirements in second requests, voluntary access letters, and compulsory legal process such as grand jury subpoenas. 

This failure to preserve is unacceptable to the agencies.  Although they believe that the requirement to preserve ephemeral messages was obvious before, the revised language “makes crystal clear that both ephemeral and non-ephemeral communications through messaging applications are documents” that must be preserved.  The relevant language in the revised second request model now states that “‘Messaging Application’ includes platforms, whether for ephemeral or non-ephemeral messaging, for email, chats, instant messages, text messages, and other methods of group and individual communication (e.g., Microsoft Teams, Slack).”   Also, the model second request states that employee-owned electronic devices used to store or transmit documents responsive to the request are considered to be “in control of the company”.

Companies should review the use of any messaging applications capable of automatically deleting messages to determine what the default settings are and if users have overridden them to delete messages.  In the event of a government investigation and a need to issue a litigation hold notice, the notice should explicitly state that all employees subject to the hold must turn off all auto-deletion functions on all messaging applications on all electronic devices on which they conduct company business. The agencies have signaled this is a priority issue for them and that they may bring obstruction of justice charges or seek civil sanctions if companies fail to preserve ephemeral messages. 

The Federal Trade Commission (“FTC”) has announced updated size-of-transaction thresholds for premerger notification (Hart-Scott-Rodino or “HSR”) filings, as well as updates to the HSR filing fees and transaction value categories.  Separately, the FTC has also updated the de minimis thresholds for interlocking officer and director prohibitions under Section 8 of the Clayton Act.

The HSR filing thresholds, which are revised annually based on the change in gross national product, trigger a premerger notification filing requirement with both the FTC and the Department of Justice’s (“DOJ”) Antitrust Division.  For proposed mergers and acquisitions, the 2024 threshold will increase from $111.4 million to $119.5 million.

Continue Reading The FTC Updates Size of Transaction Thresholds and Filing Fees for Premerger Notification Filings for 2024

On December 18, 2023, the DOJ and FTC jointly released the final 2023 Merger Guidelines that describe how the agencies will evaluate proposed merger and acquisition transactions.  Despite significant editing, and calls from industry to moderate the guidelines, the agencies essentially doubled down on their vision, which we have previously described, promising a more aggressive review of future transactions while providing limited concrete guidance for merging companies.

Changes From Draft Guidelines

We summarize some of the changes made between the draft guidelines and the final version.  None of these, though, are major revisions.  Beyond what is highlighted here, most of the revisions are wordsmithing and the addition of more contemporary case citations, perhaps in response to criticism that the case law cited was all very old.

  • Multimarket Contact Theory.  The agencies have inserted into Guideline 3 an additional example of a situation that may give rise to an anticompetitive alignment of incentives that can be a secondary factor to support a finding of coordinated effects.  Guideline 3 now states that if a merger results in a situation in which the merged firm competes with another firm in multiple markets (“multi-market contact”), firms might have an incentive to compete less aggressively in some markets in anticipation of reciprocity by rivals in other markets.
  • Weakened Threshold for Foreclosure in Vertical Mergers.  Draft Guidelines 5 and 6 have been combined into new Guideline 5, which focuses on vertical merger issues. The agencies removed the bright-line presumption of illegality where one merging party has a 50% share of a “related market” into which the merging counterparty sells or buys.  Instead, the text states that the presumption may be found if the merged firm is approaching or has monopoly power over the related product, and the related products is competitively sensitive.  And the 50% share figure resurfaces in footnote 30, albeit with slightly weaker language stating that the agencies “will generally infer” a violation if the 50% threshold is crossed.
Continue Reading DOJ and FTC Finalize Merger Guidelines

The Federal Trade Commission (FTC) recently submitted comments to the US Copyright Office as part of the Office’s notice of inquiry examining copyright issues related to artificial intelligence.

The agency’s comments largely focused on two areas: potential threats to competition from AI, and copyright.

Competition: The FTC cautioned that “the rapid development and deployment of AI also poses potential risks to competition” for several reasons:

  • “The rising importance of AI to the economy may further lock in the market dominance of large incumbent technology firms. These powerful, vertically integrated incumbents control many of the inputs necessary for the effective development and deployment of AI tools, including cloud-based or local computing power and access to large stores of training data. These dominant technology companies may have the incentive to use their control over these inputs to unlawfully entrench their market positions in AI and related markets, including digital content markets.”
  • “AI tools can be used to facilitate collusive behavior that unfairly inflates prices, precisely target price discrimination, or otherwise manipulate outputs.”
  • “Many large technology firms possess vast financial resources that enable them to indemnify the users of their generative AI tools or obtain exclusive licenses to copyrighted (or otherwise proprietary) training data, potentially further entrenching the market power of these dominant firms.”
Continue Reading The Federal Trade Commission Weighs In on AI and Copyright

A recent Seventh Circuit opinion by Judge Easterbrook held that no-poach agreements, absent valid ancillary restraints, can be per se illegal. Per se violations of the antitrust laws are inherently illegal—meaning no defenses or justifications are available. They have traditionally included conduct like horizontal price fixing, bid rigging, and market allocation. 

This is the first appellate opinion to reach the conclusion that no-poach agreements can be per se violations. As the Department of Justice Antitrust Division (DOJ) has spent the past seven years arguing that no-poach agreements are criminal violations of the antitrust laws, the opinion could empower the DOJ to bring more no-poach cases, given that it must establish an antitrust violation is a per se violation for criminal cases. This opinion also fires a warning shot at companies that use no-poach clauses in franchise agreements. Under the principles described in the opinion, many no-poach clauses in that type of agreement may be per se illegal.

Continue Reading Seventh Circuit: No-Poach Agreements May Be Per Se Illegal

On July 4, 2023, the highest EU court issued a landmark judgment in Case C-252/21, where the German court referred several questions for a preliminary ruling related to (i) the interplay between data protection concerns and competition law breaches; and (ii) interpretation of the EU General Data Protection Regulation (GDPR). This judgment has far-reaching implications for online operators whose business model is based on personalized content and advertisement.

We highlight some of the main takeaways from the judgment below, namely:

  1. Relevance of data protection determinations in competition laws cases.
  2. Large interpretation of the notion of sensitive data and restrictive application of the “manifestly made public by the data subject” derogation within the meaning of Article 9 GDPR.
  3. High threshold regarding the legal basis available under Article 6 GDPR for personalized content and advertisement.
  4. Charging a fee for processing activities not necessary for the provision of the services may be an alternative to consent.
  5. Dominant market position does not affect per se the validity of consent.

1. Relevance of data protection determinations in competition law cases

The Court of Justice of European Union (CJEU) confirmed that national competition authorities (which usually do not have a monitoring or enforcement role under the GDPR) can review whether a data processing operation complies with the GDPR as part of the examination of an abuse of a dominant position by that undertaking. However, the national competition authorities should engage in sincere cooperation with the data protection authorities responsible for enforcing compliance with the GDPR.

Where there is a decision from a data protection authority or a court on the conduct or similar conduct under the GDPR, the national competition authority cannot depart from that decision. It can, however, reach its own conclusions from the point of view of the application of competition law. Where there is no decision or the scope of that decision is unclear, and the data protection authority refuses to cooperate (for example, it does not respond within a reasonable time to the request to cooperate) or does not object the investigation by the national competition authority, the national competition authority can conduct its own assessment.

The judgment of the CJEU highlights the possibility that companies could face enforcement actions for the same conduct under two regimes, both of which could result in substantial fines. Further, while the judgment focuses on the abuse of dominance, similar interplay could arise between the GDPR considerations and other aspects of EU competition rules. We have already seen this in merger cases.

2. Large interpretation of the notion of sensitive data and restrictive application of the “manifestly made public by the data subject” derogation within the meaning of Article 9 GDPR

The CJEU clarified that the processing by an operator consisting in the collection – by means of integrated interfaces, cookies or similar storage technologies – of data from visits of websites or apps relating to sensitive data and of the information entered by the users, the linking of all those data with the operator’s user accounts and the use of those data by the operator must be regarded as processing of sensitive data if sensitive data can be revealed. Further, where the processing entails the collection en bloc of both non-sensitive data and sensitive data without it being possible to separate the data items from each other at the time of collection, such processing activity must be regarded as processing of sensitive data if the data set contains only one sensitive data item. Such processing activities are in principle prohibited unless one of the derogations provided under Article 9(1) GDPR applies.

Regarding specifically the derogation of special categories of personal data manifestly made public by the data subject provided under Article 9 (1) (e) GDPR, the Court further ruled that this derogation may only apply to the processing above described if the user has explicitly made the choice – through individual settings – to make publicly accessible to an unlimited number of persons his interactions with these websites or apps.

3. High threshold regarding the legal basis available under Article 6 GDPR for personalized content and advertisement

  • Performance of a Contract

The CJEU ruled that this legal basis can only be used where the processing is objectively indispensable for a purpose that is integral to the contractual obligations intended for the data subject. In practice, this means that the controller must be able to demonstrate that the processing is essential for the proper performance of the contract and that the contract cannot be achieved if the processing does not occur. The fact that the processing is referenced in the contract or merely useful for its performance is irrelevant. The Court considered that the personalization of content by social media platforms may be useful to users; however, such personalization is not necessary to offer the to users of social media platforms as such services can be provided without personalization.

  • Legitimate Interest

The CJEU recalled that the controller must consider – when conducting its balancing test to assess whether its legitimate interest is not overridden by the data subject’s interests, rights and freedoms – the reasonable expectations of the data subject as well as the scale of the processing at issue and its impact on data subjects. The CJEU acknowledged that personalized advertising may be regarded as a legitimate interest of the controller; however, it concluded the users’ interests, rights and freedoms prevail in the context of the processing at issue. Indeed, the CJEU noted that the processing at issue is particularly extensive since it relates to potentially unlimited data, and users may feel that their private life is being continuously monitored. According to the CJEU, users can, therefore, not reasonably expect that such extensive processing activity for the purpose of personalized advertisement is being conducted without their consent. Consequently, legitimate interest cannot be used as a legal basis for personalised advertisement in the context of the processing at issue.

4. Charging a fee for processing activities not necessary for the provision of the services may be an alternative to consent

The CJEU recalled that under the GDPR, consent is not freely given where the data subject has no genuine or free choice or is unable to refuse or withdraw consent without detriment. In practice, this means that separate consent must be sought for each data processing operations. Users must, thus, be free to refuse to give their consent to particular data processing operations not necessary for the performance of the contract (such as personalized advertisement) without being obliged to refrain entirely from using the service offered by the online operator. According to the CJEU, users not wishing to provide consent to processing operations that are not necessary for the performance of the contract could be charged a fee.

5. Dominant market position does not affect per se the validity of consent

The CJEU noted that the dominant market position of the online operator does not, per se, preclude users from being able to validly consent to the processing of their personal data by that operator. However, since that position is liable to affect the freedom of choice of those users and to create a clear imbalance between them and the online operator, it is an important factor in determining whether the consent was, in fact, validly and, in particular, freely given, which it is for that operator to prove.

Yesterday (July 19, 2023), the DOJ Antitrust Division and the FTC released the long-anticipated proposed Merger Guidelines. As has also been long-anticipated, the proposed Guidelines reflect a much-stiffened enforcement philosophy. Throughout the text, the proposed Guidelines provide citations to Supreme Court cases from the 1960s and 1970s (and some even older) that will send many antitrust lawyers back to the library to re-read opinions that have not been part of mainstream antitrust thinking for decades, as the Agencies and courts have relied far more heavily on economic principles than Brown Shoe factors in assessing the likely competitive impact of a proposed transaction.

A full analysis of what these Guidelines may mean for merger enforcement will require some time – as well as the possible revision of the draft following the 60-day notice and comment period – but here are a few important observations based on a day-one review of the text:

  • Structural Presumption Standards. Guideline 1 rejects the structural presumption thresholds that were loosened in the 2010 Horizontal Merger Guidelines and reverts to the post-merger HHI threshold of 1800 and an HHI increase of 100 as sufficient to rise a rebuttable presumption of an unlawful merger. Guideline 1 also adds a new structural presumption that mergers are unlawful if the merged firm’s market share is greater than 30% and the change in the HHI is greater than 100. This means that an acquisition by a firm with a 28% market share of a firm with only a 2% market share would be presumptively unlawful.

    Guideline 1 would also mean the death knell for claims by broadcasters of a safe harbor for radio and television broadcast station mergers where the merged firm market share was below 40%. These claims were based on a misreading of a 1997 speech by then AAG Joel Klein, but broadcasters have always argued for it anyway. With Guideline 1’s 30% market share threshold for a structural presumption, this argument is fully and totally dead.
  • Potential Entry Standards. Guideline 4 deals with the acquisition of “actual potential” and “perceived potential” entrants. Under the proposed guideline, it is no longer the case that there had to be a reasonable probability of the potential entrant actually entering the market. Instead, if a market participant could “reasonably consider one of the merging firms to be a potential entrant,” then that could be a basis for blocking the merger, even if that firm could not actually enter the market. There is a lot of room here for market participants opposed to the merger to create havoc, by claiming to have “objective evidence” that they believe one of the merging firms could have entered the market independently but for the proposed acquisition. 

    And with regard to proof of actual potential entry, the Guidelines state that subjective evidence that the company considered organic entry absent the merger can indicate a reasonable probability that the company would have entered – but what if the company considered it and rejected the idea? Why does that suggest that entry would be “reasonably probable” absent the merger? 

    Furthermore, the guidelines state that the “Agencies will usually presume” that such entry by one of the merging parties would have been competitively significant. This is a vastly different treatment of potential entry than the guidelines adopt in Article IV, which seems to reiterate the current standards of timeliness, likelihood, and sufficiency of potential entry in situations in which the parties seek to argue that potential entrants will keep the market competitive in the future. The only thing that’s consistent is that the Guidelines place the burden of persuasion on the merging parties.
  • Labor Markets. As expected, the Guidelines (Guideline 11) focus on labor markets: “The Agencies will consider whether workers face a risk that the merger may substantially lessen competition for labor.” Notable in this section is the adoption of worker “attributes” as market-defining characteristics beyond education/skills. There is also repeated discussion of individual worker issues – “the individual needs of workers may limit geographical and work scope of the jobs that are competitive substitutes;” “workers may seek not only a paycheck but also work that they value in a workplace that matches their preferences.” How can individual workers’ interests and needs, which vary as much as the human experience, be accounted for in a unified market definition? The guidelines don’t say.
  • Entrenchment and Extension. Guideline 7 reaches back to some of the older cases that condemned mergers that may “entrench” or extend a dominant position. Interestingly, the guidelines equate a 30% market share with evidence of a dominant position – a figure well below current monopoly standards and more in line with a European concept of dominance.

    Of note in addition to the somewhat vague notion of entrenchment, is that a merger may be condemned for extending a dominant position into new markets – relying on the 1972 decision in Ford Motor. While the Agencies don’t typically permit firms to claim an out-of-market benefit as helping a company’s deal, the Guideline now state that an out-of-market impact can hurt a deal.

    Also of interest is the acceptance of “potential tying” as a harm, i.e., that the merger might lead the merged firm to leverage its position by tying or bundling, and therefore lessening competition in the related market. While there is some old judicial acceptance of this theory, the idea behind Section 7 is to address mergers in their incipiency, not potential violations of the Sherman Act’s prohibition on tying. The inclusion of potential tying and bundling as reasons to block a deal evidences the breadth of the bases for blocking deals that the proposed Guidelines embrace.
  • Trend Toward Concentration. In a short, but potentially important section, Guideline 8 would condemn mergers that will “further [a] trend toward concentration.” It’s difficult to see why “furthering a trend toward concentration” is tantamount to “may substantially lessen competition or tend to create a monopoly.” Doesn’t a merger itself have to cross the line of illegality – rather than just setting up the possibility that the next deal may cross it?   

    And Guideline 8 lacks clarity. The trend toward concentration can be established, it tells us, “as a steadily increasing HHI exceeds 1,000 and rises toward 1,800.” Over what period of time? With what speed? How steady is “steadily”? And with somewhat circular logic, the guideline tells us that the fact that a merger would increase the pace of the trend toward concentration “may be established by other facts showing the merger would increase the pace of concentration.” 

Time will tell if these proposed Guidelines are changed after the comment period and the extent to which they receive judicial acceptance. The reason that the enforcement agencies and the courts moved on from the concepts central to many of the 1960s and 1970s merger decisions relied on by these guidelines was the recognition that economic principles and concern for consumer welfare were more reliable and principled bases for sound antitrust enforcement than subjective judgments about possible future conduct or suitably benign market structures. The current Administration justifies increased litigation on the grounds that even losing cases advances antitrust doctrine by defining the edges of permissible conduct. These proposed Guidelines presage more of this approach. 

On 1 July 2023 the revised Research & Development Block Exemption Regulation and Specialization Block Exemption Regulation, alongside the revised Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to cooperation agreements between competitors (Horizontal Guidelines) enter into force. The new rules introduce some significant changes (including in comparison to the earlier drafts published by the European Commission), some of which we set out below.

R&D and Specialisation Block Exemption Regulations

The European Commission has introduced a more flexible approach for the calculation of market shares under both Block Exemption Regulations. The market shares are usually calculated on the basis of market sale value or volumes but where such information is not available, other reliable information could be used. For example, in the R&D cases, expenditure on R&D or R&D capabilities could be used as a basis for market share calculation.

The European Commission has also clarified the rules on the grace period applicable after the market share thresholds are exceeded – 2 consecutive calendar years following the year in which the relevant market share threshold was first exceeded (25% for R&D agreements and 20% for specialization agreements).

The new revised Block Exemption Regulations now expressly contain the general power of the European Commission and national competent authorities to withdraw the benefit of exemption in individual cases.

In respect of R&D agreements, the proposal to exclude from the benefit of the R&D Block Exemption Regulation where there are less than three competing R&D efforts in addition to and comparable with those of the parties to the R&D agreement, has not been included in the final text.

In respect of specialization agreements, the scope has been extended to cover more types of production arrangements concluded by more than two competitors.

The other terms on exemption criteria, including hardcore restrictions are the same or very similar to those that have been in force since 2010.

Horizontal Guidelines

The revised Horizontal Guidelines contain some new chapters and sections, for example, new sections on mobile telecommunications infrastructure agreements and bidding consortia and a  new chapter on sustainability agreements among competitors. We have previously commented on the new chapter on sustainability agreements (see Here).

While the chapter has not significantly changed since the first draft published by the European Commission, we highlight the following three changes.

First, the European Commission has acknowledged that it will provide additional guidance in relation to novel and unresolved questions regarding sustainability agreements through its Informal Guidance Notice on a case-by-case basis.

Second, the safe harbor criteria for sustainability standardisation agreements have been slightly revised and can be summarized as follows:

  • The procedure for developing the sustainability standard must be transparent and all interested competitors can participate in the process leading to the selection of the standard.
  • The sustainability standard must not impose on undertakings that do not wish to participate in the standard, an obligation – either directly or indirectly – to comply with it.
  • Participating undertakings remain free to adopt for themselves a higher sustainability standard than the one agreed with the other parties to the agreement.
  • The parties to the sustainability standard must not exchange commercially sensitive information that is not necessary for the development, adoption or modification of the standard as such.
  • Effective and non-discriminatory access to the outcome of the standardisation procedure is ensured, including effective and non-discriminatory access to the requirements and the conditions for obtaining the agreed label or for the adoption of the standard at a later stage by undertakings that have not participated in the standard development process.
  • And at least one of the following conditions is met:
    • The sustainability standard does not lead to a significant increase in price or to a significant reduction in the choice of products available on the market; and/or
    • The combined market share of the participating undertakings does not exceed 20%.

The cumulative criteria for the safe harbor no longer require to have a mechanism or a monitoring system to be put in place. However, the European Commission notes that having such mechanism or system in place could be an indication that the sustainability standardisation agreement aims to promote the attainment of a sustainability objective.

Third, the European Commission has identified an additional type of agreement that is unlikely to raise competition concerns: namely, agreements that aim solely to ensure compliance with sufficiently precise requirements or prohibitions in legally binding international treaties, agreements or conventions, whether or not they have been implemented in national law and which are not fully implemented or enforced by a member state. In order to benefit from this exclusion, the participating companies, their suppliers and/or their distributors are required to comply with such requirements or prohibitions under those international rules. The European Commission notes such agreements may be an appropriate measure to enable undertakings to implement their sustainability due diligence obligations under national or EU law.

Further analysis of other chapters of the revised Horizontal Guidelines will follow. We will pay particular attention to the chapter on information exchange, which introduces clarification on commercially sensitive information, data pools, unilateral disclosure and indirect information exchanges.