Late last year, the European Commission published two new revised block exemption regulations, one on research and development (“R&D”) agreements (OJ L 335/36, 14 December 2010), the other on specialisation contracts (OJ L 335/43, 14 December 2010). The overall aim of this package is to make it easier for a company to assess whether its co-operation agreements are lawful while at the same time minimising the risk that collaboration between competitors will result in anti-competitive harm.
Article 101 of the TFEU
Article 101 of the Treaty on the Functioning of the EU (formerly Article 81 of the EC Treaty) generally prohibits agreements between companies, decisions by associations of undertakings and concerted practices that have the object or effect of restricting competition in the EU. However, restrictive agreements may be exempted where their overall effect is to promote competition. The Commission has issued various block exemption regulations, pursuant to Article 101(3), specifying the conditions under which certain types of agreements are exempted from the prohibition of restrictive arrangements laid down in Article 101(1). When an agreement fulfils the conditions set out in a block exemption regulation, the agreement is automatically valid and enforceable.
Background and framework
The rules for assessing whether R&D contracts and specialisation agreements are prohibited by Article 101 were previously contained in two block exemption regulations. These block exemptions provided safe harbours for contracts that fell within their scope. The old block exemptions expired on 31 December 2010 and were replaced by the new block exemptions the following day. Neither of the new block exemptions represents a radical reform of its predecessor.
R&D agreements
The new R&D block exemption regulation follows a similar approach to its predecessor. Most notably the market share threshold has not been changed – the exemption will continue to apply provided the parties’ combined market share does not exceed 25%. The Commission has, however, broadened the scope of the exemption. It now extends to cover “paid-for” research, i.e., where one company finances the R&D. Previously, the exemption only applied where both companies collaborated. The new regulation provides for a greater range of possibilities for joint exploitation such as where one party grants the other an exclusive licence to produce and sell the relevant products. In addition, a number of provisions on the so-called “blacklist” (i.e., the list of restrictions that prevent the application of the exemption) have been refined. For example, restrictions on active sales into exclusive territories or to certain customers are no longer subject to a seven-year time limit.
Specialisation contracts
Specialisation contracts are where a party active on a particular product market decides to refrain from manufacturing certain products and instead purchase same from the other party. These agreements may be unilateral or reciprocal. Like its R&D counterpart, this block exemption retains the same framework as its predecessor. Contracting parties will continue to benefit from an exemption provided their combined market share is no more than 20%. However, where the product purchased is intermediary, this threshold must now be met in respect of the markets for both the intermediary and the downstream products.
In both new block exemptions, the definition of “potential competitors” has been adjusted by the inclusion of a three-year period during which a party must be likely to enter the relevant market in order to be considered a potential rival. R&D and specialisation agreements benefiting from the previous block exemptions will continue to do so for a transitional period of two years, i.e., until 31 December 2012.
Impact of the new rules
The Commission’s two new block exemptions collectively provide a useful guide for a company in assessing the legality of any proposed collaboration with one or more of its competitors. This is particularly welcome for the business sector in light of the severe financial penalties for infringing competition rules.
Contributed by Cormac Little.
