• The main updates to the Horizontal Guidelines relate to technological advances; and the impact of competition law on initiatives promoting sustainability. These changes align with the EU’s climate change and digital agendas.
• The updated rules emphasize innovation competition, a topic typically highlighted in merger control, and now gaining increased prominence in the context of competitor cooperation. The term refers to competition among companies in devising new products and services, and the new rules emphasize that this form of competition can also fall within the remit of Article 101.
• Market developments and decisional practice since 2011 are reflected in the new guidance and regulations. The new instruments also seek to increase clarity for businesses (and their advisors). For instance, they provide advice on how to distinguish between “genuine purchasing” or “bidding cooperations” on the one hand, and on the other anti-competitive “buyer cartels” and “bid-rigging” arrangements.

The European Commission has published new guidance and related regulations concerning cooperation among competitors, under Article 101 of the Treaty on the Functioning of the European Union (TFEU). These replace instruments in place since 2011.

The key instrument is the so-called Horizontal Guidelines, providing guidance for many types of cooperation. There are also specific safe harbors for two types of cooperation: Research and Development, and Specialization, contained in so-called Horizontal Block Exemption Regulations.

The new block exemptions will take effect on July 1. The Horizontal Guidelines will be formally applicable upon their publication in the Official Journal of the EU, although are de facto already authoritative.

Purpose of the Horizontal Guidelines

The Horizontal Guidelines seek to enable businesses (and their advisers) to self-assess the legality of their arrangements, without the need to consult the European Commission. The guidelines address arrangements among competitors in areas such as (i) production, purchasing, commercialization, and standardization agreements, (ii) information exchanges, (iii) standard terms, and (iv) sustainability. The guidelines cast light on the types of cooperation which do – and do not – restrict competition. For those which are restrictive, the guidelines indicate the sort of countervailing benefits (i.e. efficiencies) which can be considered to outweigh the restrictions arising, so that the agreements can be considered to comply with Article 101.

The guidelines also provide supplementary guidance in relation to the horizontal block exemptions, as regards arrangements falling outside the formal safe harbors. The European Commission also reaffirms its readiness to offer more informal guidance to businesses about planned collaboration projects, drawing from the updated Informal Guidance Notice adopted last October.

Key Revisions to the Horizontal Guidelines

The most notable changes are these:

1. New technologies and algorithms. The Horizontal Guidelines address emerging technologies and their assessment under Article 101, including pricing algorithms used to monitor price deviations, “shared optimization algorithms,” and arrangements on platform sales. The guidelines clarify that a company using an algorithm to set its prices or strategy maintains “direction or control” over that algorithm and is therefore responsible for practices executed through it, as it would be for the conduct of its personnel. The chapter on information exchange now also includes guidance on “data-sharing arrangements” (including “data pools”) and indirect information exchanges via “online platforms” or facilitated by algorithms.
2. Innovation competition. The guidelines (as also the block exemptions) focus on the protection of innovation competition. In particular, the three instruments make it explicit that companies which do not compete in existing product or technology markets can nonetheless be considered as competitors in their innovation efforts. One outcome is that, if an EU national competition authority finds that an agreement would substantially restrict innovation competition, the authority can in certain circumstances withdraw the benefit of the block exemptions.
3. Sustainability agreements. A new chapter emphasizes that EU competition law does not hinder competitors from collaboratively and genuinely pursuing sustainability objectives, which are broadly defined to encompass not only environmental but also social goals. This new chapter primarily offers guidance on:
   • Sustainability agreements that do not in principle restrict competition, such as industry commitments to adhere to binding and precise international agreements, even if a signature state has not fully implemented them.
   • Sustainability agreements that are unlikely to be anti-competitive: examples include agreements ensuring living wages, when certain conditions are met.
   • The assessment of efficiencies generated by sustainability arrangements, including consumer benefits that may extend to collective societal benefits, provided that the beneficiaries of such benefits substantially overlap with the consumers that purchase the products or services covered by the agreement.¹
   • Assessment of sustainability standardization agreements, including an informal safe harbor for agreements that meet six cumulative criteria, including transparency, possibility to opt-out or apply higher standards, and limited impact on competition and/or price/quality of products.²
     Further information on the evolution of EU competition policy in relation to sustainability may be found at Dechert’s ESG Antitrust webpage.
4. Additional practical guidance on information exchange. The chapter on information exchange now suggests practical measures that businesses can take to avoid infringements by limiting the scope of the exchange, using “clean teams” or “independent trustees” and public distancing. The revised guidelines also highlight that anti-competitive information exchanges may occur in the context of regulatory initiatives, and supply further guidance on “unilateral public announcements” which may in some cases form part of a strategy/form of communication among competitors to signal future commercial intentions (“price signaling”).
5. Mobile telecommunications infrastructure sharing agreements. An entirely new section has been included on infrastructure sharing in the mobile telecoms sector. The new guidance reflects enforcement practice in the mobile telecoms sector and the prior guidance on production agreements. Agreements to share such infrastructure, including spectrum sharing, are generally not considered “object” restrictions under Article 101 but, according to the guidance, may have an anti-competitive “effect” and therefore always require individual assessment to assess their legality. The new section lists what are considered to be pertinent factors for evaluating the anti-competitive effects of the main categories of agreements: passive, active, and spectrum sharing agreements.
6. Purchasing agreements vs. buyer cartels. The guidelines have been revised to reflect recent decisional practice. Notably they clarify the distinction between “purchasing agreements” and “buyer cartels”. Buyer cartels seek to limit competition and not only coordinate competitive behavior in the purchasing market but also the individual negotiations among buyers and suppliers, without proper disclosure to vendors; and/or they facilitate unauthorized information exchanges among individual buyers. Agreements to fix employees’ wages can also be viewed as a buyer cartel. On the other hand, joint negotiation of purchasing conditions by buyers in genuine purchasing agreements is not prohibited – but the effects on competition should be assessed case-by-case.
7. Commercialization agreements: bidding consortia vs. bid rigging. Bidding consortia are now addressed and defined. The guidelines clarify that bidding consortia, unlike bid rigging agreements that are viewed as illegal, enable companies to participate in projects which they could not have bid for individually, and are generally permitted. Additionally, the guidelines note that bidding consortia typically occur among non-competitors, in contrast to bid rigging agreements.
8. Standardization agreements (other than sustainability arrangements). This chapter has been revised to address several limitations. Without market power, a standardization agreement will not be deemed anti-competitive. The guidelines allow for increased flexibility concerning the general principle that standard-setting processes should be open to all interested parties. They also offer more criteria for evaluating whether license fees are FRAND (fair, reasonable and non-discriminatory). The updated chapter also clarifies that disclosing a maximum cumulative royalty rate by parties to a standardization agreement is not anti-competitive. The chapter does however not address other ongoing debates about standard essential patent licensing, such as the level of licensing in the supply chain.

Key Revision to the Horizontal Block Exemptions

R&D agreements are cooperative arrangements among companies to jointly engage in R&D activities, covering various stages of the R&D process. Specialization agreements are a type of cooperation agreement among competitors pursuant to which each agrees to “specialize” in a given area of activity, with the other(s) withdrawing from that area and focusing elsewhere.

Key revisions are as follows:

1. The block exemptions provide a “safe harbor” for R&D and specialization agreements. One of the conditions is that the parties to the agreement have “limited” market power, i.e. the parties’ combined market shares do not exceed certain thresholds - 20% for specialization agreements and 25% for R&D agreements. The new block exemptions and guidelines clarify how to apply the market share thresholds. The European Commission abandoned an earlier proposal which would have required that at least three additional competing and comparable R&D efforts remain in the market for the block exemption to apply – this change is welcome as it would have led to significant practical issues and legal uncertainty for companies to assess the existence of other (most likely confidential) R&D efforts and their comparability to the parties’ own project.
2. The scope of the Specialization block exemption has been expanded. It now extends to agreements among more than two parties (which was already the case under the R&D block exemption).
3. So-called “excluded restrictions” will not deprive the entire agreement of the benefit of the R&D block exemption. This however only applies if such clauses can be separated from the rest of the agreement; if the agreement cannot be applied without the excluded restrictions, the block exemption will no longer apply
4. Innovation competition is addressed in the revised horizontal block exemptions (see above).

How will the revisions impact enforcement and self-assessment?

The revisions are substantial and aim to offer clearer, more comprehensive guidance, particularly reflecting the digital and green transitions that various European policies support.

Importantly the new guidelines address the pervasive impact of digital technologies across the economy in general, relevant to businesses of all sizes, within and beyond the technology sector (whereas the Digital Markets Act applies only to the largest technology businesses). The guidelines enable self-assessment by businesses in their deployment of technological tools, while giving fair warning of the types of conduct which the European Commission may target, notably algorithmic price fixing.

The guidelines’ sustainability chapter is more extensive than guidance issued by EU national competition authorities so far. It also presents opportunities for companies to propose new collaboration types, such as industry-supported living wage initiatives. Businesses are specifically invited to seek informal guidance from the European Commission regarding novel forms of sustainability collaboration. At the same time it is plain that the European Commission will be alive to greenwashing, where green concerns are no more than a front for unlawful anti-competitive conduct.

¹ For instance, although clothing made of sustainable cotton may reduce the use of fertilisers and water in developing countries, such environmental benefits cannot generally be taken into account as a collective benefit since there is unlikely to be any substantial overlap between the buyers of the clothing in Europe versus the beneficiaries of the environmental benefits overseas.

² The agreement must either (i) involve parties with a combined market share not exceeding 20%; or (ii) not lead to a significant increase in price or reduction in quality of the products covered by the agreement.