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EU Revises Rules On Horizontal Cooperation Agreements

Doyle, Barlow & Mazard PLLC

The European Union recently published new revised rules regarding the assessment of horizontal cooperation agreements (i.e. agreements concluded between competitors). These new modifications primarily concern issues of standardization, information exchange, and research and development (“R&D”). Now, businesses operating in the EU may better assess their compliance with EU antitrust law to avoid penalties and litigation. The new regulations come in two parts: (1) a set of “Horizontal Guidelines” and (2) pair of Block Exemption Regulations (“BERs”).
EU Commission Vice President Joaquin Almunia commented: “One of the overarching goals of the new rules is to contribute to the Commission's Europe 2020 strategy, in particular by promoting innovation and competitiveness. The new Guidelines and Block Exemption Regulations will give companies the necessary freedom to cooperate in a globalized market place, while at the same time minimizing the risk of agreements that are harmful to industry or consumers.”

The new “Horizontal Guidelines” set up a basic framework for analyzing common types of horizontal cooperation agreements, including those in the areas of R&D, production, purchasing, commercialization, standardization, standard terms, and information exchange. Included in the Guidelines is a revised chapter on standardization agreements. The chapter promotes an open and transparent standard-setting system in order to increase the transparency of licensing costs for intellectual property rights (“IPRs”). Access will be given on “fair, reasonable, and non-discriminatory” (“FRAND”) terms to interested businesses and individuals. In addition, it features detailed criteria on what constitutes a so-called “safe-harbour” agreement so that companies may assess the extent to which their agreements line up with EU competition law. The Guidelines also feature a new chapter on information exchange, which explains how to assess the compatibility of information exchanges with EU competition law. This chapter allows competitors, for example, to increase prices without incurring the risk of losing market shares or triggering a price war during the adjustment period to new prices. The chapter also includes real-life examples of typical information exchange scenarios.

The new R&D BER provides more clarity and legal certainty and expands the scope of the original R&D BER. The new rules not only cover joint R&D between companies, but also “paid-for research” agreements in which one company carries out the R&D while the other one finances it. The new Specialization BER explains that its exemptions apply to all specialization agreements, even those in which parties only partly cease production (e.g. closing down a plant). The BER also stipulates that the exemption is conditional upon a 20% market share threshold downstream, where the products concerned by a joint or specialization production agreement are intermediary or downstream products.

The “Horizontal Guidelines” will come into full force once they have been published in the Official Journal of the EU. The two new BERs came into force on January, 1, 2011, with a transitional period of two years for agreements that received exemptions under the previous regulations but did not meet the criteria of the new regulations.

Camelia C. Mazard

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