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.
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.