EU horizontal cooperation rules and guidelines adopted after delay

The Commission said the rules, adopted on 1 June, would provide for a “safe harbour” for certain agreements by block exempting them from EU competition law. The new HBERs will enter into force on 1 July, subject to transitional arrangements for pre-existing agreements. Revised ‘horizontal guidelines’ will also be published in the Official Journal of the EU. Previously, the Commission decided to delay adoption of the revised rules and guidelines – which were meant to be finalised in 2022 and apply from 1 January 2023 – by six months. 

The revised rules expand the scope of the Specialisation Block Exemption Regulation to cover more types of production agreements concluded by more than two parties, and introduce a more flexible approach for calculating market shares when applying the block exemption.

The updated horizontal guidelines and HBERs are welcome as they help to clarify the European Commission’s views in relation to some highly complicated and dynamic areas of competition law.  For example, the concept of potential competition, information exchange, and the ability to cooperate with competitors in order to improve sustainability without infringing the law, are all hot topics.  Companies in the life sciences sector will find the R&D block exemption regulation particularly useful.

The R&D Block Exemption Regulation has also been revised, with changes aimed at increasing clarity and flexibility on calculating market shares for the purpose of applying the updated rules.  The revised rules also have a stronger focus on protecting innovation competition, particularly in cases where it may not be possible to calculate market shares – in this context the Commission and national competition authorities may be able to withdraw the benefit of the exemption in individual problematic cases.

The new R&D block exemption regulation tries to simplify certain aspects of the rules. For example, the always difficult task of calculating market shares in R&D initiatives has been made easier by allowing research expenditure to be taken into account. This is particularly helpful for very innovative markets. Also, the handling of the grace period, i.e. the period during which an agreement is still exempted, even though the market share thresholds have been exceeded, has been made easier and more practical. On the other hand, the analysis of some other issues remains somewhat complicated, for example when it comes to paid-for research agreements between potential competitors.

Changes to the two HBERs are accompanied by revised horizontal guidelines explaining how the Commission expects the new HBERs to apply in practice, as well as setting out the Commission’s views on assessing a wide range of other types of horizontal cooperation agreements. 

A brand-new chapter in the horizonal guidelines, on sustainability agreements, clarifies that EU antitrust rules are not intended to prevent cooperation agreements between competitors that pursue a genuine sustainability objective. The new guidelines clarify how sustainability agreements can be exempted from potentially infringing competition law, by describing the types of efficiencies or benefits that can be taken into account and how these should be assessed to offset any potential restriction of competition. The new guidance contains a broad definition of sustainability objectives, based on the UN Sustainable Development Goals. 

The new chapter on sustainability agreements also contains hypothetical examples illustrating the application of Article 101 TFEU and reminds companies wishing to enter into a sustainability agreement that they can request informal guidance from the Commission to ensure their compliance with EU competition rules.

In addition, the revised horizontal guidelines include an updated introductory chapter on the latest EU case law concerning concepts like concerted practices, potential competition, restrictions by object and by effect, and ancillary restraints. A new section on mobile telecommunications infrastructure sharing agreements in the chapter on production agreements, sets out a list of minimum conditions that companies must comply with to reduce the risk of infringing competition rules.

The new guidelines also explain the distinction between joint purchasing and buyer cartels and include a new section on bidding consortia and guidance on the distinction with bid-rigging. Revised guidance on information exchange reflects the latest EU case law and enforcement experience, while the chapter on standardisation agreements explains the requirement of open participation in the standard-setting process.

It is helpful that there is more guidance now for example in relation to bidding consortia and data sharing arrangements. But, while the guidelines are a helpful document, it is important to remember that they neither bind the national competition authorities nor the courts of the member states.

Both HBERs provide for a two-year transitional period for pre-existing agreements that comply with old EU rules. The two HBERs will expire in 12 years’ time, on 30 June 2035.

As a consequence of Brexit, the UK has its own set of corresponding competition rules and guidelines which are largely but not fully aligned with the new EU rules. For example, under the proposed new UK horizontal agreements guidance – which corresponds with the new EU horizontal guidelines - the definition of “sustainability” is narrower than the EU approach. The UK focus is confined to sustainability agreements aimed at environmental protection, not broader societal objectives such as human rights or improving working conditions.

The UK’s Horizontal Block Exemption Orders (HBEOs) on R&D agreements and specialisation agreements came into force on 1 January 2023 and will expire on 31 December 2035, six months after the EU HBERs will cease to apply.  The Competition and Markets Authority (CMA) is expected to imminently publish its finalised horizontal agreements guidance, having already completed two separate consultations - covering wider horizontal agreements and environmental sustainability agreements specifically.

Co-written by Tadeusz Gielas of Pinsent Masons.