The European Commission ("EC") has published its final revised Horizontal Cooperation Guidelines and adopted new R&D and Specialisation Block Exemption Regulations (HBERs). The EC's aim is to provide more guidance for competitors wishing to cooperate in areas such as R&D and production, but also in sustainability initiatives.
What are the EU rules on horizontal cooperation?
Article 101(1) TFEU captures any form of co-operation agreement concluded between actual or potential competitors that have the object or effect of restricting competition. The HBERs provide a safe harbour from the application of Article 101 (1) TFEU by block exempting certain types of R&D and specialisation agreements.
To complement the HBERs, the EC has published guidelines on the application of Article 101 TFEU to horizontal cooperation agreements. These provide guidance on how to self-assess, including with additional safe harbours, the compatibility with EU competition law of different types of agreements entered into between companies operating at the same level in the market (e.g. R&D, production, joint purchasing, commercialisation, and standardisation). It also provides guidance on the assessment of information exchanges between competitors.
What is the revised horizontal package?
The revised HBERs and guidelines replace instruments that have been in force since 2011. The revised package follows a long period of evaluation that began in July 2019 (see our previous alert here), and included the publication in March 2022 of draft texts for consultation (see our previous alert here). The EC delayed publication of the texts by six months to allow time to digest the extensive feedback provided to its consultation, in particular on the new rules relating to cooperation pursuing sustainability objectives and on network sharing agreements concluded by mobile network operators.
The revised guidelines have been extended from 72 pages to 167 pages. They seek to make the EU rules clearer and easier to apply, support the green and digital transitions by making certain co-operation easier, and reflect the latest case law and decisional practice.
Key revisions to the horizontal guidelines
Key changes to the draft guidelines following consultation
The EC made a number of changes to the text of the guidelines following the consultation of its draft text. Some of the most extensive amendments related to the sections on sustainability and information exchange are set out below.
Key revisions to the HBERs and changes from the drafts that were circulated for consultation
Timetable
The HBERs enter into force on 1 July 2023 for 12 years. There is a transition period of two years, under which agreements that do not meet the conditions of the new HBERs but which meet the conditions of one of the previous HBER will remain block-exempted.
The guidelines will apply officially at some point in July when they are published in the Official Journal of the EU.
Impact
Much of the EC's reform is helpful with new guidance in important areas such as sustainability, joint purchasing, and bidding consortia.
The new chapter in the guidelines on sustainability provides opportunities for companies to come up with creative cooperation initiatives in the field of sustainability, although the guidelines focus, somewhat uninspiringly, on sustainability standards. The chapter also specifically invites companies to come forward to seek informal guidance on these initiatives. The aim is to deal with the "chicken and egg" problem of more specific guidance requiring more case experience.
The invitation to come forward to seek informal guidance is in line with the approach being adopted by other authorities in Europe (such as the Dutch, Greek, and UK authorities), but does not go as far as some authorities that have confirmed that they will not impose fines or take enforcement action concerning sustainability agreements in certain circumstances.
The guidelines indicate that sustainability considerations will be taken into account in the assessment of efficiencies (including those generated by joint production agreements) under Article 101(3). This opens the door to the possibility of taking into account "out of market efficiencies", i.e. efficiencies not directly and immediately benefitting only those consumers that may suffer from the cooperation's restrictive effects.
The true extent of the opportunities and limitations of the new sustainability framework will need to be tested by the practice, in particular the future publication of any comfort letters in relation to proposed initiatives. Given the narrow scope of assessment under Article 101(3) and the focus on economic efficiencies, it will also be interesting to see to what extent sustainability considerations will in fact play a role in the assessment of efficiencies going forward.
The guidelines also now include comprehensive guidance on information exchange based on case law and practice. There is no safe harbour for information exchange; rather, any exchange with a competitor is subject to an individual assessment. The guidance on what constitutes sensitive information is comprehensive and helpful, confirming the practice that aggregated and historical data is unlikely to be considered sensitive. The guidance on information exchange in the context on M&A on the other hand remains very thin, with the EC confirming that information exchange may be considered directly related and necessary for the implementation of a transaction and that whether this is the case may depend on the stage of the M&A process. Parties engaging in M&A would have benefitted from more detailed guidance in particular in relation to information exchange in the period between signing and closing where parties remain independent but a significant amount of information often needs to be exchanged in order to be prepared for Day 1 as a combined company.