Paul Lugard, Feb 18, 2011
Following a consultation process of more than two years, the European Commission has now adopted its Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements (the “Horizontal Guidelines”). The new Horizontal Guidelines include a significantly revised chapter on standardization agreements, Chapter 7, an entirely new chapter on information exchanges, as well as numerous other modifications to and refinements of the previous guidelines.
The Horizontal Guidelines provide the EC Commission’s new analytical framework for the assessment of most common types of horizontal agreements, including: research and development agreements; joint production agreements; commercialization agreements and standardization agreements that fall outside the two block exemption regulations for specific types of horizontal agreements; the Specialisation block exemption regulation on unilateral and reciprocal specialization agreements and joint production agreements;and the Research and Development block exemption regulation on joint research and exploitation of the results of joint research and development.
As part of its review, the Commission has considerably revised these rules. Overall, the scope of both block exemption regulations has been amended significantly and, while on balance the new rules provide a more liberal, coherent, and user-friendly framework for companies to structure their agreements without losing the benefit of the exemption under Article 101(3) TFEU, the Commission has also taken the opportunity to tighten the rules in a number of important respects. In particular, it has extended the list of hardcore restrictions of the R&D rules and has limited the scope of the Specialisation block exemption regulation in the event the specialization or joint production agreement is entered into between vertically integrated companies and the agreement concerns intermediate products which at least one party uses captively for the production of downstream products. In that case, the new rules provide that the exemption only applies if, in addition to not exceeding a combined market share threshold of 20 percent for the intermediate product, the parties’ combined market share on the market for the downstream product does not exceed 20 percent. This new rule is introduced to prevent input foreclosure that would disadvantage downstream competitors.
Significantly, the final legislative texts incorporate many improvements on the drafts that the Commission had published for public consultation in May 2010. In their comments in the September 2010(1) CPI Antitrust Chronicle issue on the drafts of the two block exemption regulations and the Horizontal Guidelines, a number of authors identified several significant concerns. In this new issue the same authors evaluate the final text of the horizontal review package, revisit the concerns that they had identified on the basis of the draft texts, and express a much more favorable view. The Commission must be commended for having been willing to engage in extensive consultations with stakeholders and for having been receptive to many suggestions for improvements. The contribution of Donncadh Woods to this issue of the CPI Antitrust Chronicle provides some valuable insights into the main issues that the Commission has been confronted with during the consultation process. CPI is especially appreciative of his contribution.