What’s in the new Horizontal BERs and Guidelines?

On 1 June 2023, the European Commission (“Commission”) adopted the new Specialisation Block Exemption Regulation (“BER”), the new Research and Development (“R&D”) BER and the new Horizontal Guidelines. The revision of these instruments is designed to adapt them to economic and societal developments of the last ten years, such as the growth of the digital economy and the pursuit of sustainability goals, and to provide stakeholders with more legal certainty.

Background

The current applicable Horizontal Block Exemption Regulations (“HBER”) provide an exemption from anticompetitive agreement prohibitions for R&D and specialisation agreements meeting certain conditions. Together with the associated Horizontal Guidelines, these instruments are set to expire on 30 June 2023. As of 2019, the Commission embarked upon a process of assessment and consultation which culminated in the adoption, on 1 June 2023, of the new R&D and Specialisation BERs, accompanied by revised Horizontal Guidelines.

The new HBERs came into force on 1 July 2023, but a transitional regime applies until 30 June 2025 for agreements in force on 30 June 2023. The Horizontal Guidelines will enter into force following publication in the Official Journal of the EU.

Overview of key changes

R&D BER

In comparison to the current version, the revised R&D BER further facilitates R&D cooperation between companies.

The new R&D BER contains some new definitions or amendments which clarify the Regulation. New alternatives are also proposed regarding the methods for determining whether the market share thresholds are met. For instance, the new BER proposes, for the assessment of the market share thresholds, that if the preceding calendar year is not representative of the parties’ position in the relevant market(s) the market share shall be calculated as an average of the parties’ market shares for the three preceding calendar years.(see Article 7.3 R&D BER).

Specialisation BER

In order to provide stakeholders with additional legal certainty, the new Specialisation BER notably expands the definition of “unilateral specialisation agreement” to cover more than two parties (see Regulation (EU) 2023/1067, Article 1(1)(a)). In addition, Section 3.3 of the Horizontal Guidelines helps further clarify which agreements are covered by the Specialisation BER by giving specific examples.

As with the R&D Agreements, Article 4(b) of the Specialisation BER now provides more flexibility in the calculation of market shares by allowing it to be based on an average of the three preceding calendar years if data for the preceding calendar year is not representative (for example, in markets with lumpy or irregular demand) (see also Horizontal Guidelines, para. 205).

Horizontal Guidelines: general changes

A first notable positive development is the Commission confirmation, in paragraph 12 of the Horizontal Guidelines that, in general, it will not apply Article 101 TFEU to agreements or concerted practices between parent companies and their joint venture to the extent that they concern conduct that occurs in relevant market(s) where the joint venture is active and in periods during which the parent companies exercise decisive influence over the joint venture. It is important to note that this position does not extend to agreements between parent companies that alter the scope of the joint venture.

This has huge effects in practice. Parent companies can now freely exchange competitively sensitive information with the joint venture (relating to the activities of the joint venture) without the need for e.g. information barriers.

Information exchange: algorithms and unilateral disclosure of information

The Commission acknowledges the benefits of information exchange but recognises the risks of collusion and anti-competitive behaviour. The new Guidelines offer guidance on assessing such exchanges within a horizontal context. In particular, the Chapter on Information Exchange has been updated to reflect CJEU case law and incorporate recent developments.

First, the Horizontal Guidelines elaborate upon the much-discussed question of when the use of algorithms can lead to a collusive outcome. On the one hand, the Commission considers that algorithms can generate efficiencies, reducing costs and barriers to entry. On the other hand, they can also become a device to facilitate collusion (collusion by code). Collusion by code on essential parameters of competition is typically a cartel and therefore a restriction of competition by object, irrespective of the market conditions (see Horizontal Guidelines, para. 379).

In its Guidelines, the Commission also elaborates on the concept of unilateral disclosure (see Horizontal Guidelines, paras. 396 et seq.). In particular, it considers that where one undertaking discloses commercially sensitive information to a competitor, which requested it or at the very least accepts it, this can constitute a concerted practice. Unilateral disclosure can occur, for example, via (chat) messages, emails, phone calls, input in a shared algorithmic tool, meetings, etc. It will generally be considered that, unless the recipient publicly distances itself or reports it to the administrative authorities, it accepts the information shared.

The Horizontal Guidelines also discuss measures that are widely used in practice, such as clean teams or firewalls, by stating that such measures can prevent the exchange of competitively sensitive information (see Horizontal Guidelines, para. 407). The Commission also emphasises that participants to a data pool should in principle only have access to their own and the final, aggregated, information of other participants (see Horizontal Guidelines, para. 408).

Unlike what many had hoped, the Guidelines do not elaborate upon the (limits of) information exchanges in the context of an acquisition process. It merely states that “any conduct restricting competition that is not directly related to and necessary for the implementation of the acquisition of control remains subject to Article 101 TFEU” (see Horizontal Guidelines, para. 371).

Sustainability

The Horizontal Guidelines introduce a new Section 9 on the assessment of agreements between competitors that pursue one or more sustainability objectives (see Horizontal Guidelines, paras. 515 et seq.). The move towards a greener competition policy was already announced by the Commission in previous publications and was highly awaited by businesses and legal practitioners (see Commission, Competition Policy Brief 2021-01, “Competition Policy in Support of Europe’s Green Ambition”, September 2021). Decisional practice and case law will help further refine the assessment of sustainability agreements in coming years.

Pursuant to the Horizontal Guidelines:

• A sustainability agreement which does not affect parameters of competition (e.g. price, quantity, quality, choice or innovation) is not capable of raising competition concerns and falls out of the scope of Article 101(1) TFEU. This for example includes agreements which concern the internal corporate conduct of competitors, the creation of a database containing information about suppliers which have (un)sustainable value chains and the organisation of industry-wide awareness campaigns (see Horizontal Guidelines, para. 529).
• A sustainability agreement which affects one or more parameters of competition may need to be assessed against Article 101(1) TFEU. When it corresponds to one of the categories of cooperation agreements already assessed in the Guidelines, the agreement will be assessed in light of the recommendations made in these Guidelines. The Commission sets out specific guidance for “sustainability standardisation agreements” by which competitors may agree to replace or phase out some non-sustainable products or processes. Such agreements are different from standardisation agreements that do not pursue sustainability objectives, and may benefit from a “soft safe harbour” pursuant to which they will fall out of the scope of Article 101(1) if a number of conditions are met (see Horizontal Guidelines, para. 549).
• Even when an agreement restricts competition within the meaning of Article 101(1), a sustainability agreement may still benefit from an individual exemption pursuant to Article 101(3) if it leads to substantiated, objective, concrete and efficiency gains (see Horizontal Guidelines, para. 559). The Guidelines clarify how the four conditions set out by Article 101(3) apply to sustainability agreements (see Horizontal Guidelines, para. 556 to 596). For example, on the pass-on to consumer test, the Commission confirms that positive effects in a related market (which may differ from the market affected by the restriction) can be taken into consideration, as long as the group of consumers affected by the restriction and benefiting from the efficiencies substantially overlap (see Horizontal Guidelines, section 9.4). However, the further away from home the benefits are, the less the benefits will pass-on to the consumers of the relevant market. In the same vein, the Commission acknowledges that there may be a time delay before the benefits of pass-on to consumers materialise. The existence of a time lag does not automatically exclude the application of Article 101(3). However, the greater the time lag, the higher the level of efficiencies must be to adequately compensate for the loss to consumers during the preceding period (see Horizontal Guidelines, para. 591).
• Furthermore, the Commission emphasises its commitment to providing informal guidance on novel or unresolved questions related to individual sustainability agreements through its Informal Guidance Notice (see Horizontal Guidelines, para. 515).

Standardisation agreements

Concerning standardisation agreements, the Horizontal Guidelines introduce more flexibility in the effects analysis of such agreements by allowing under specific circumstances, restricted participation in the development of a standard. For example, a standardisation agreement should not be considered to have restrictive effects on competition if the restriction on the participants is limited in time and with a view to progressing quickly, and as long as at major milestones, all competitors have an opportunity to be involved in the further development of the standard (see Horizontal Guidelines, para. 470).

Concerning the treatment of intellectual property rights (“IPR”) in the context of standardisation agreement, the Horizontal Guidelines also provide (see Horizontal Guidelines, paras. 457 to 462):

• specification on the requirement of “good faith disclosure” by participants of relevant IPR that might be essential for the implementation of the standardisation agreement (e.g. only when IPR information is not yet publicly available can IPR owners declare “blanket disclosure”)¹;
• more methods for the assessment of the economic value of IPR to determine whether a proposed license fee is FRAND²;
• confirmation that standards development agreements providing for ex ante disclosure of the most restrictive licensing terms for patents essential to the standard by individual IPR holders or of a maximum aggregate royalty rate by all IPR holders do not, in principle, restrict competition (see Horizontal Guidelines, para. 474).

Mobile Telecommunications Infrastructure Sharing Agreements

The 2023 Horizontal Guidelines introduce a new section on infrastructure sharing agreements in the telecom sector, reflecting recent enforcement practice. This new guidance sets out factors relevant for the assessment of these agreements and includes a list of minimum conditions that companies must comply with to reduce the risk of infringing competition rules (see Section 3.6 of the Horizontal Guidelines).

Purchasing agreements

In the section on purchasing agreements, the Commission notably:

• clarifies existing types of joint purchasing arrangements which may occur in all sectors and may concern not only joint purchases but also joint negotiations of (components of) purchase prices or of other terms and conditions (see Horizontal Guidelines, para. 274);
• clarifies what may constitute illegitimate “buyer cartels”, which are considered restrictions by object. This will be of interest for ongoing and upcoming investigations as buyer cartels are high on the competition enforcement agenda (see Horizontal Guidelines, para. 279);
• clarifies what kind of by effect restrictions a joint purchasing arrangement may lead to (see Horizontal Guidelines para. 285 et seq.); and
• clarifies circumstances under which a joint purchasing arrangement leading to lower supply costs may not actually lead to lower prices for consumers (see Horizontal Guidelines para. 297).

Agreements on commercialisation

The most important changes relating to commercialisation agreements are that the Commission:

• clarifies that specific rules are applicable to the commercialisation of agricultural products (see Horizontal Guidelines para. 321); and
• provides additional guidance on the main risks linked with output limitation in commercialisation agreements (see Horizontal Guidelines para. 331).

In addition, the Commission added a new section on bidding consortia, which refers to situations where two or more parties cooperate to submit a joint bid in a public or private procurement competition. The Guidelines distinguish this type of joint participation in a tender procedure from collusive bid rigging (see Horizontal Guidelines para. 348; for an analysis of different types of joint bidding cooperation, see Horizontal Guidelines para. 357).

In particular, a bidding consortium agreement will not restrict competition within the meaning of Article 101(1) if it allows the parties to participate in projects that they would not realistically be capable to undertake individually. In such a scenario, the Commission considers the parties to the bidding consortium agreement to be neither actual nor potential competitors for the implementation of the project (see Horizontal Guidelines para. 352).

When Article 101(1) is applicable to joint bidding, an individual assessment of the bidding consortium agreement will have to be carried out, taking into account all relevant factors (see Horizontal Guidelines para. 356 and 357). In any event, the agreement may fulfil the conditions of Article 101(3) if the joint bid allows for an offer that is more competitive than what the parties could have submitted on their own and the benefits accruing to the contracting entity and final consumers outweigh the restrictions of competition.

¹ Non-specific disclosures that include a claim to (probable) rights in a certain technology that could be important to the standard.
² Fair, reasonable and non-discriminatory terms.