Commission Moves Closer to Finalizing New Horizontal Guidelines and R&D and Specialization Block Exemptions

Since launching its review programme in September 2019, the Commission has been working to update its Horizontal Guidelines and two sets of block exemptions, R&D and Specialisation, both of which are due to expire on December 31, 2022. The Commission consulted widely (to which we contributed) and has just published proposed drafts of each in a final round of consultations, which will expire on April 26, 2022. Alongside this programme, the Commission is also updating the Verticals Block Exemption and the Market Definition Guidelines, for which further drafts are expected in the coming months. Highlights of the proposed updates are as follows: R&D Block Exemption

• There will be a narrowing of the available exemption to exclude R&D agreements where less than 3 competing R&D efforts will remain as a result of the proposed cooperation.
• Some simplifications (in definitions and in grace periods for increasing market shares) to assist parties.
• Calculation of market shares by reference to the preceding year (or a 3-year average).
• Providing for the power of withdrawal of the benefit of the block exemption.
• Introduction of a new section in the Horizontal Guidelines providing clarification to businesses to better understand how the block exemption works.

Specialisation Block Exemption

• Horizontal subcontracting will be covered.
• The block exemption may cover more than two parties.
• Similar changes to those in the R&D block exemption (on grace periods, market share calculations, power of withdrawal).
• There will be a new section in the Horizontal Guidelines to offer help to businesses to better understand how it works and how the concepts and definitions operate.
• The draft Guidelines will also address network sharing agreements.

Horizontal Guidelines The Guidelines are used by businesses to assist them in navigating the requirement to self-assess the application of the competition rules to their proposed arrangements and relationships with potential rivals. The Guidelines do not have the force of Regulations or Directives but do indicate how the Commission may be expected to interpret the block exemption safe harbour regulations. It is also unlikely that the Commission would take action against a party for infringement of the competition where it had relied in good faith on the Guidelines. The Guidelines provide guidance not only on the interpretation of the R&D and Specialisation block exemptions but also on other types of agreements, including purchasing, commercialization, standardization and exchanges of information – which is often one of the trickiest areas for businesses to grapple with. The Commission has recognized that updating is needed to reflect developments in the last decade in digitization and in driving towards sustainability goals. The draft Guidelines seek to provide additional guidance which reflects recent case law, on determining the centre of gravity in horizontal arrangements, clarify key concepts (like ‘concerted practices’ ‘undertakings’) and application of the competition rules to joint ventures. Some key changes include:

• Joint Purchasing agreements
  • More guidance on by object and on by effect restrictions
  • Guidance on potential upstream harm
  • Guidance on pass-on of benefits to consumers
• Commercialisation agreements
  • Guidance on agricultural products
  • Guidance on output limitation risks
  • Clarification on the markets which may be affected
  • A new section on bidding consortia
• Information exchange
  • More guidance on different types of information exchanges and different types of data sharing
  • Guidance on information sharing in the M&A context and also in relation to EU regulatory initiatives
  • Identification of classes of commercially sensitive information
  • Guidance on by object infringements
  • Guidance on common topics of concern, including: aggregation, ‘publicly available’ information, indirect information sharing (hub and spoke), third party facilitation of exchanges
  • A new section on measures to limit sharing and control of data gathered
• Standardisation agreements
  • Guidance on increased flexibility in the effects analysis
  • More elements for assessing whether a proposed licence fee is FRAND
• Sustainability agreements

A new chapter is proposed on sustainability agreements, with a definition of what they are, when they will be treated as falling outside of the competition rules and guidance on how they will be assessed if they do appear to restrict competition but may benefit from an exemption under Article 101(3). There is a particular focus on agreements that set sustainability standards.  We will shortly issue a Client Alert on this new Chapter.