Competition / Antitrust Regulation
Competition law: Cooperation or Collusion? Time for the EU Commission to Revisit the Horizontal Block Exemption Regulations
Competition law: Cooperation or Collusion? Time for the EU Commission to Revisit the Horizontal Block Exemption Regulations
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On 6 November 2019, the EU Commission launched a public consultation on the two so-called Horizontal Block Exemption Regulations. This consultation will run until 12 February 2020, so any feedback needs to be submitted to the Commission by midnight of the 12th February 2020.
What is covered
Article 101(1) – Horizontal agreements
In essence, this consultation targets any form of co-operation agreements concluded between actual or potential competitors, so-called ‘horizontal co-operation agreements’ which are, in principle, prohibited under Art. 101(1) of the Treaty on the functioning of the European Union (“the Treaty”), as they are considered as agreements between undertakings that restrict competition.
These include research and development (R&D) agreements, production agreements, purchasing agreements, commercialisation agreements, standardisation agreements and information exchange.
We are not speaking about agreements that are entered in between companies at a different level of the production or distribution chain, so-called vertical agreements as these are, in principle, dealt with in the Block Exemption Regulation on vertical restraints and the Guidelines on vertical restraints.
However, to the extent that vertical agreements are concluded between competitors, they must be assessed according to the principles applicable to horizontal agreements. And therefore, would also fall within the scope of this consultation.
Article 101(3) – Exempt horizontal agreements
Although these cooperation agreements are in principle considered anti-competitive and therefore prohibited, they may be exempted under Art. 101(3) of the Treaty if they fulfill the following four cumulative conditions:
- the restrictive agreement must lead to economic benefits, such as improvements in the production or distribution of products or the promotion of technical or economic progress, i.e. efficiency gains;
- the restrictions must be indispensable to the attainment of the efficiency gains;
- consumers must receive a fair share of the resulting efficiency gains attained by indispensable restrictions; and
- the agreement must offer the parties no possible elimination of competition in relation to a substantial part of the products in question.
Where all these four criteria are met, the efficiency gains generated by an agreement can be considered to offset the restrictions of competition generated by it.
EU Commission – Regulations and Guidelines
In addition to the Treaty articles cited above, these types of horizontal cooperation agreements and/or practices have been further dealt with in two Commission Regulations, together referred to as the “Horizontal Block Exemption Regulations” namely:
- Commission Regulation (EU) No 1217/2010 for research and development agreements, (“R&D BER”), and
- Commission Regulation (EU) No 1218/2010 for specialisation agreements, (“Specialisation BER”).
The purpose of the Horizontal Block Exemption Regulations is to make it easier for undertakings to cooperate in ways that are economically desirable and without adversely affecting competition law or policy.
In addition, the Commission issued Guidelines on the applicability of Article 101 of the TFEU to horizontal co-operation agreements or “Horizontal Guidelines.” These are particularly useful in determining what kind of cooperation is considered beneficial and therefore exempt and what is regarded as suspicious.
So, by way of example, the Guidelines consider a horizontal agreement to be economically beneficial where it is a means of sharing risk, making cost savings, increasing investments, pooling know-how, enhancing product quality and variety and launching innovation faster. On the other hand, horizontal co-operation can lead to competition problems where it causes negative market effects with respect to prices, output, innovation or the variety and quality of products.
Quo vadis
The question which this consultation and evaluation aims to answer is whether, based on an evaluation of the functioning of the Horizontal Block Exemption Regulations to date, the Commission should (a) let them lapse, (b) prolong their duration or (c) revise them, together with the Horizontal Guidelines.
This public consultation, which is part of the general evaluation of the Horizontal Block Exemption Regulations, aims to collect evidence and views from stakeholders. Interested parties are urged to contribute with feedback which will enable the Commission to take well informed decisions in an area which is becoming increasingly important in the current economic climate and landscape. The questionnaire can be accessed here:
For further information about how GVZH Advocates can help you complete the questionnaire and/or submit feedback which you consider important for your business, kindly contact us on competition@gvzh.mt.