New European rules on agreements between competitors

The New Research & Development and Specialisation Block Exemption Regulations and Horizontal Co-Operation Agreements Guidelines

Background

European competition rules governing agreements between competitors are set to change in the New Year.

The European Commission has adopted two new block exemption regulations relating to Research and Development and Specialisation (the "Regulations"), and also adopted new Horizontal Cooperation Agreements Guidelines (the "Guidelines") which will replace the existing exemptions and guidelines from 1 January 2011.

There will be a transitional period from 1 January 2011 until the end of 2012 for pre-existing agreements, which satisfied the previous exemptions, but which do not satisfy the conditions for exemption under the Regulations.

Summary of key changes

The most notable changes introduced by the Regulations and Guidelines are as follows:

• Extension of scope of the R&D exemption and prohibited restrictions;
• Clarification of application of the Specialisation exemption; and  
• Guidance relating to information exchange and standardisation.

R&D Exemption

The R&D exemption has been extended to cover "paid for research", which is where one party finances the research of another. The effect of this is that paid for research will be block exempted so long as the market shares of all parties does not exceed 25% and whether or not the contract products or contract technologies can be jointly exploited.

In addition, the new Regulation states that parties can agree to compensate each other for giving access to the results for the purposes of exploitation or research, but only where that compensation is not at such a level as to effectively impede access.

In relation to restrictions, the exemption now clarifies that while limiting output or sales will be considered to be hardcore, the following are not restricted:

• Practices constituting specialisation in the context of exploitation; and
• Restrictions on the parties' freedom to manufacture, sell, assign or license competing products, technologies or processes for the period in which the parties have agreed to jointly exploit the results.

Furthermore, a requirement to exclusively license the results of the R&D to another party is not a territorial or customer hardcore restriction.

The new exemption has also "down graded" a couple of previously hardcore restrictions, and as a result, the inclusion of the following in an R&D agreement will render them, rather than the entire agreement, outside the scope of the exemption: 

• A prohibition on challenging the IP required for the R&D after its completion, or a prohibition on challenging IP which protects the results after the expiry of the R&D agreement; and
• A prohibition on granting licences to third parties to manufacture the products or apply the technology unless one of the parties can exploit the results of the joint R&D in the EU.

It will be necessary to assess the effect of any of the above on the market to consider whether they will be pro-competitive and therefore not caught by Article 101(1).

Specialisation Exemption

The new Specialisation exemption is fundamentally the same as the old one and the main change is a simple clarification that the exemption will apply to unilateral specialisation agreements, where one party agrees to fully or partly cease production.

Horizontal Guidelines

The Guidelines now contain an additional section providing guidance on information exchange between companies, which sets out details of competition concerns arising from the direct or indirect exchange of information between competitors.

The Commission has confirmed that exchanges of individualised future pricing or quantity information are prohibited under Article 101(1). However, there is an acceptance that some exchanges may be pro-competitive and the Guidelines set out criteria to be taken into account when assessing such a situation. These relate to the characteristics of both the market and the information that is exchanged (for example, its age, whether it is aggregated, the frequency of exchange and whether the information is public).

In addition to the above, the section on standardisation agreements has been revised and it now provides guidance on ensuring that access to any standards is given on fair, reasonable and non-discriminatory terms (FRAND). There is further guidance on assessing the competitive effect on the market of any standardisation agreement that may fall outside the exemption.

If you have any questions in relation to the above, or concerns that any agreements or discussions with competitors may infringe competition law, please do not hesitate to contact us.

Lawyers Louisa Penny, Robert Vidal