Adopted alongside the new Horizontal Block Exemption Regulations on research and development (R&D) and specialisation agreements, the guidelines (2023) replace the previous guidelines (from 2011) and provide essential guidance to businesses on how to assess the application of the competition rules to agreements with actual or potential competitors. Updated to reflect the latest decisional practice and market developments since 2011, the new guidelines provide guidance in the following key areas, including:
- Information exchange
- Joint purchasing agreements
- Bidding consortia
- Agreements between parent companies and their joint ventures (“JVs”)
The guidelines will formally apply once published in the Official Journal of the EU.
This is the first of a series of briefings that will examine key elements of the guidelines. We will consider those aspects of the guidelines that deal with sustainability agreements and R&D agreements in separate briefings.
Navigating the rules on information exchange can be particularly challenging for businesses. The guidelines confirm the principles that apply to established areas of risk, such as indirect / ‘hub and spoke’ information exchanges involving a third party (eg, benchmarking) and unilateral disclosures of commercially sensitive information by just one business. Significantly, the guidelines have been updated to provide guidance on the “new” ways in which businesses can share data and information in digital environments. For example:
- Use of algorithms: The guidelines clarify that the use of an algorithm to execute a pricing rule is likely to be caught by Article 101, even if the parties do not explicitly agree to align their future prices. The use of publicly available data to feed algorithmic software is lawful, but the aggregation of commercially sensitive information into a pricing tool offered by a single IT company to which various competitors have access could amount to horizontal collusion. The treatment of pricing algorithms is based on the following two principles:
- If pricing practices are illegal when implemented offline, there is a high probability that they will also be illegal when implemented online.
- Firms involved in illegal pricing practices cannot avoid liability on the ground that their prices were determined by algorithms.
- Data sharing agreements and data pools: While acknowledging that data sharing may be essential to innovate, and pooling data may help companies fulfil their sustainability obligations under EU or national law, for example, the guidelines emphasise that a participant should only have access to its own information and the final, aggregated information of other participants. Ways of minimising the competition law risk around data sharing include:
- Limiting the exchange to what is necessary for the intended purpose
- Using clean teams to receive and process the information
- Appointing an independent trustee to manage a data pool
Joint purchasing agreements
The guidelines clarify the distinction between a genuine joint purchasing arrangement and buyer cartels. The guidelines state that joint negotiation and conclusion of an agreement relating to purchasing conditions in a genuine purchasing agreement is not prohibited, but the effects on competition need to be assessed on a case-by-case basis.
Conversely, buyer cartels (where purchasers negotiate independently with the supplier but coordinate their competitive behaviour (eg, by fixing or coordinating purchase prices), are considered to have as their ‘object’ the restriction of competition (ie, by their nature, they cause serious harm to competition).
The guidelines also state that agreements between competing businesses to fix employees’ wages can also be viewed as a buyer cartel.
In a new section for the chapter on commercialisation agreements, the guidelines provide specific guidance on bidding consortia – where two or more parties cooperate to submit a joint bid in a public or private procurement competition. The guidelines distinguish bidding consortia from bid-rigging (which is one of the most serious restrictions on competition), but highlights the importance of being able to demonstrate (preferably from the express terms of a written agreement) that the consortium clearly serves a pro-competitive purpose:
- A bidding consortium will not restrict competition if it allows the parties to participate in projects which they would not be able to undertake individually (eg, where the parties’ products are complementary (not competing) or if the project is too large/complex for one party).
- However, a joint bid may lead to a restriction of competition (eg, where a project can be split into packages and parties can bid on some but not all packages) and would need to be assessed for individual exemption.
Agreements between parent companies and their joint ventures
An addition to the introductory chapter of the guidelines clarifies the circumstances in which agreements between parent companies and their joint ventures are likely to be captured by Article 101, for example:
- The European Commission will “in general” not apply Article 101 to agreements between parent companies and their joint venture to the extent that they concern conduct which occurs in the market where the joint venture is active and in periods during which the parent companies exercise decisive influence over the joint venture.
- However, Article 101 will generally apply to:
- Agreements between parent companies to create a joint venture or modify the scope of their joint venture
- Agreements between parent companies and their joint venture concerning products or geographies in which the joint venture is not active
- Agreements between parent companies not involving their joint venture, even if it concerns products or geographies in which the joint venture is active
What is the significance of the guidelines for businesses?
The guidelines provide welcome clarity on how the competition rules apply to a wide range of business practices, including those in the digital economy. The guidelines provide helpful practical examples which will assist businesses when assessing whether a proposed agreement may fall foul of the rules. That being said, the guidelines are just that - they provide guidance - and are not binding. It will therefore be important for businesses to consider carefully whether any proposed agreement involving their competitors may be captured by the competition rules, based on all the facts of the case in hand.
It is also important to remember that the guidelines don't necessarily reflect the approach of member state courts or national competition authorities, so businesses operating across jurisdictions need to be aware of possible areas of divergence.
In particular, as a consequence of Brexit, the EU competition rules do not apply in the UK and the UK has its own, standalone competition regime. In this respect, the UK’s Competition and Markets Authority (CMA) has issued for consultation its own guidance on horizontal agreements, the final version of which is expected to be published imminently.
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