On 1 June 2023, the European Commission (EC) announced that it has adopted two revised Horizontal Block Exemption Regulations on Research & Development (R&D) and Specialisation Agreements (HBERs), together with revised Horizontal Guidelines.
The EC's aim with the revised HBERs and Horizontal Guidelines is to provide businesses with clearer and up-to-date guidance to help them assess the compatibility of their horizontal cooperation agreements with EU competition rules. The HBERs set out certain conditions for agreements relating to R&D and specialisation. If an agreement meets those conditions, the EC considers that the benefits to consumers outweigh the potential harms to competition. Such agreements are therefore automatically exempt from the prohibition on anti-competitive agreements in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). The existing rules will expire on 30 June 2023, and the HBERs will come into force on 1 July 2023.
The main changes introduced by the revised rules are:
- Expanded scope of the Specialisation Block Exemption Regulation to cover production agreements between more than two parties and a more flexible approach to the calculation of market shares for the purposes of applying the exemption.
- Increased clarity and flexibility in the approach for the calculation of market shares for the purpose of applying the R&D Block Exemption, together with guidance on how to apply the new approach. The EC has explained that the revised rules are intended to increase focus on protecting innovation competition (i.e., where businesses may encourage competition through innovation in other or new markets), especially in cases where it is not possible to calculate market shares.
- Ability of the EC and national competition authorities to withdraw the benefit of either exemption in individual cases where they consider the agreement is nonetheless incompatible with Article 101. This may occur, for example, where an R&D agreement substantially restricts the scope for third parties to carry out R&D in related fields due to limited available research capacity.
- A new safe harbour for certain sustainability standardisation agreements.
The Horizontal Guidelines provide updated detailed guidance on the application of the HBERs to help businesses assess whether their horizontal cooperation agreements may benefit from the exemption. They are also intended to make it easier for businesses to cooperate in ways that are economically desirable, for example, in relation to supporting "green" and digital transitions.
Key changes to the Horizontal Guidelines include:
- Updates on key concepts such as concerted practices, restrictions by object and effect, and potential competition to reflect developments in case law as well as new guidance on the application of Article 101 to joint venture agreements.
- The chapter on information exchange has been updated to reflect case law and enforcement developments. The revised chapter provides guidance on the concept of "commercially sensitive information", the exchange of different types of information in both physical form and digital content that may be shared directly or indirectly via an online platform or using an algorithm, anti-competitive signalling through public announcements, and the potential pro-competitive effects of data pools. The Horizontal Guidelines also identify practical measures that businesses can take to reduce the risk of competition law infringements in the context of information exchange, for example, the use of "clean teams".
- There is a new chapter on sustainability agreements which are broadly defined as "agreements between competitors that pursue sustainability objectives". The new chapter provides guidance on sustainability agreements that are unlikely to raise competition concerns (for example, agreements that relate to internal corporate conduct rather than economic activity) and explains how sustainability agreements will be assessed under Article 101(1). A "soft safe harbour" has also been introduced which provides that agreements are unlikely to breach competition rules if six prescribed cumulative conditions are met. The new chapter also reminds businesses that they can request informal guidance from the EC in relation to proposed sustainability agreements to ensure compliance with competition rules.
- A new section within the chapter on Commercialisation Agreements provides guidance on bidding consortia and the distinction with bid rigging.
The Horizontal Guidelines will come into force once they are published in the Official Journal of the EU.
As noted above, the HBERs and Horizontal Guidelines are intended to provide businesses with clearer and up-to-date guidance on the application of the exemptions to make it easier for businesses to assess compliance and to ensure that cooperation with competitors does not raise competition concerns. The safe harbour for sustainability agreements also provides businesses with opportunities to work together to pursue environmental, political, and/or social goals for the benefit of consumers.
The EU HBERs retained by the UK post-Brexit have expired and were replaced in January 2023 by UK block exemptions for R&D and specialisation agreements. The UK's Competition and Markets Authority (CMA) recently concluded consultation on its draft Guidance on Horizontal Agreements which will replace the application of the EU guidelines to cooperation agreements in the UK. While there are many similarities in the respective approaches, there are some notable differences which could lead to divergent outcomes between the UK and EU. For example, the UK's draft Guidance includes a new (and divergent) category of information which is not confidential, but which may nevertheless not be considered "genuinely public" depending on the relationship of the parties sharing the information and whether it is viewed as "reliable" by the receiving party. Further, even if information is undoubtedly in the public domain, the draft Guidance explains this will not be considered "genuinely public" information if the costs involved in collecting it would deter such collection.
Businesses operating in these jurisdictions will need to refer to the relevant guidance, when published by the CMA, to ensure compliance with the respective rules.