GUIDELINES ON HORIZONTAL COOPERATION AGREEMENTS  
 
 
 
2 
    1 1. INTRODUCTION  
1.1. Purpose and Scope  
1. The purpose of these Guidelines is to establish the principles that shall be taken into 
consideration in the assessment, within the framework of article 4 and 5 of the Act no 
4054 on the Protection of Competition1, of agreements between undertakings, decisions 
of associations of undertakings and concerted practices2 with the nature  of a horizontal 
cooperation.  
2. If the agreement in question is between existing or potential competitors, the cooperation 
has a "horizontal" nature. In addition, these Guidelines also cover horizontal cooperation 
agreements3 between non -competing undertakin gs, for instance those between two 
undertakings which operate in the same product market but in different geographical 
markets and which are not potential competitors for each other.  
3. Horizontal cooperation agreements may lead to significant economic benefi ts, especially 
when they combine complementary operations, skills or assets. Horizontal cooperation 
may be used as a tool to share risks, save costs, increase investments, pool know -how, 
improve the quality and range of products, and increase the rate of i nnovation.  
4. On the other hand, horizontal cooperation agreements may also lead to various 
competitive problems. An agreement by the parties to maintain prices or amounts of 
production, distribution or supply, or the cooperation leading to the parties' acqui ring, 
protecting or increasing market power and thereby to negative effects in the market in 
terms of prices, production amounts, product quality, product variety or innovation may 
be give as examples to such a situation.  
5. While benefits that may arise from  horizontal cooperation agreements need to be 
acknowledged, effective competition must be maintained as well. Articles 4 and 5 provide 
the necessary legal framework for a balanced assessment which takes into account the 
anti-competitive effects together wi th the pro -competitive effects.  
6. The purpose of these Guidelines is to supply an analytical framework based on legal and 
economic criteria for production agreements, purchase agreements, commercialization 
agreements, standardization agreements and informati on exchange, including common 
research and development (R&D) agreements as well as horizontal contract manufacturing 
and specialization agreements. Economic criteria such as the market power of the parties 
and other factors related to the market structure constitute the key elements for the 
                                                 
1 Any reference to "article 4" and "article 5" in the Guidelines should be understood as articles 4 and 5 of the Act 
no 4054 on the Protection of Compet ition, unless otherwise specified.  
2 Concerted practice refers to all types of practical cooperation or coordination between undertakings which, 
without having reached the stage where a proper agreement has been concluded, aims to eliminate risks created 
by competition and substitute the independent conduct of the undertakings themselves.  
3 In the Guidelines, the concept of "agreement" is used to cover decisions of associations of undertakings and 
concerted practices, as well.     2 assessment of the effects an horizontal cooperation agreement may cause in the market 
under the framework of articles 4 and 5.  
7. These Guidelines aim to provide guidance to undertakings concerning the assessment of 
horizon tal cooperation agreements under articles 4 and 5. However, since horizontal 
cooperation may take different shapes depending on the conditions of the markets in which 
it exists, it is difficult to provide explanations specific to each potential case. There fore, 
the criteria specified in these Guidelines should not be seen as a "checklist" to be 
implemented mechanically. Each concrete case must be assessed depending on its own 
characteristics, within the context of the general principles defined in the Guide lines.  
8. The criteria established in these Guidelines shall be applied to horizontal cooperation 
agreements related to goods and services4. In assessing an agreement under articles 4 and 
5 of the Act no 4054, it is first necessary to determine whether compet ition is restricted or 
not; if competition restrictions exist, the second step involves conducting an exemption 
assessment. As known, Competition Board (the Board) has published block exemption 
communiqués concerning certain sectors and types of agreements . Block Exemption 
Communiqué on Research and Development Agreements, no 2003/2 (R&D 
Communiqué) and Block Exemption Communiqué on Specialization Agreements, no 
2013/3 (Specialization Communiqué) provide the conditions for exemption of certain 
types of agre ements falling under the scope of the Guidelines herein from the application 
the provisions of Article 4 of the Act no 4054. However, the clarifications given in these 
Guidelines concerning the types of agreements in question do not aim to explain the 
aforementioned Communiqués, but are meant to complement those Communiqués to the 
extent they are relevant. This is because the explanations in these Guidelines shall provide 
guidance when assessing whether an R&D or specialization agreement restricts 
competiti on and when conducting exemption assessments for agreements which are not 
covered by the relevant block exemption Communiqués.  
9. "Competitors," as used in the Guidelines, cover both actual and potential competitors. Two 
undertakings operating in the same rel evant market are considered actual competitors. If,  
in the absence of a cooperation agreement, in case of a small but permanent increase in 
prices, an undertaking is able to undertake the necessary additional investments or other 
necessary switching costs in a short period of time in order to enter the relevant market in 
which the other undertaking is operating, then this undertaking is considered a potential 
competitor for the other undertaking. However, this assessment must be made based on 
realistic grou nds. The existence of a simple theoretical possibility of entry into the market 
is not sufficient.  
10. For the purposes of these Guidelines, those companies which are included under the same 
economic entity in accordance with the definition of undertaking give n in article 3 of the 
Act no 4054 are not considered to be competitors. Article 4 is only applied to agreements 
between independent undertakings. If a company holds a decisive influence on another 
company, these two companies form a single economic entity and therefore are considered 
to be a part of the same undertaking. This is also true for sister companies, i.e. those 
companies over which a parent company exerts a decisive influence.  Consequently, these 
                                                 
4 Goods and services shall be referred to as "products" together.     3 companies are not considered competitors, even if t hey operate in the same relevant 
product and geographic markets.  
11. Agreements concluded between undertakings which are active at different levels of the 
production or distribution chain, that is to say, vertical agreements, do not fall under the 
scope of the se Guidelines, in principle. However, to the extent that vertical agreements, 
such as distribution agreements, are concluded between competitors, the effects of the 
agreements on the market can be similar to horizontal agreements. Therefore, vertical 
agree ments between competitors fall under these Guidelines. On the other hand, such 
agreements may also require assessment under the Block Exemption Communiqué on 
Vertical Agreements, no 2002/2 (Communiqué no 2002/2) and the Guidelines on Vertical 
Agreements as  well as under the Guidelines on Certain Subcontracting Agreements 
Between Non -Competitors.  
12. Horizontal cooperation agreements may combine different stages of cooperation, such as 
R&D and the production and/or commercialization of its results. In general, s uch 
agreements also fall under the scope of these Guidelines. In the assessment of such a 
cooperation, as a general rule, it would be appropriate to take all chapters of the Guidelines 
pertaining to different characteristics of the cooperation into conside ration. On the other 
hand, if the relevant chapters of the Guidelines contain different assessments for different 
stages of cooperation, then what is set out in the chapter pertaining to that part of a 
cooperation which can be considered its center of grav ity shall be valid for the entire 
cooperation.  
13. In determining the center of gravity for the cooperation, the starting point of the 
cooperation and the degree of integration of the different functions which are combined 
are particularly relevant. For instan ce, the center of gravity for an agreement which 
includes both R&D and cooperation in production shall be the R&D activities under the 
normal conditions. This is because in such a situation cooperation in production would 
only be possible if R&D cooperatio n is successful. This means that the results of R&D 
cooperation are decisive for realizing subsequent cooperation in production. The 
assessment of the center of gravity of the agreement shall be different where the parties 
will enter into cooperation in pr oduction in any event; for instance if the agreement 
provides for full integration in production regardless of R&D cooperation and only partial 
integration in R&D activities. In that case, the center of gravity for the cooperation will 
be the joint product ion activities.  
14. The assessment of horizontal cooperation agreements within the framework of article 4 
and 5 of the Act no 4054 in accordance with the relevant communiqués and the Guidelines 
herein do not prevent the application of article 6 and 7 of the Ac t. 
15. Transactions aimed at the establishment of a joint venture which will permanently perform 
all functions of an independent economic entity are addressed under article 7 and the 
Communiqué Concerning the Mergers and Acquisitions Calling for the Authorizat ion of 
the Competition Board, no 2010/4  On the other hand, the establishment of a joint venture 
by the undertakings which has, as its object or effect, the restriction of competition, and    4 which will permanently perform all functions of an independent econo mic entity is 
addressed under articles 4 and 5 of the Act.  
1.2. Basic principles of the assessment conducted under articles 4 and 5 of the Act  
16. The assessment under articles 4 and 5 of the act is comprised of two steps. The first step, 
is the assessment of whether, under article 4,  the agreement between the parties has an 
anti-competitive object or actual or potential anti -competitive effects on competition. In 
case the agreement is found to be restrictive of competition under article 4, the second step 
beco mes relevant. In this step, an exemption assessment is conducted under article 5, in 
light of the competitive benefits and anti -competitive effects that may arise as a result of 
the agreement.  
1.2.1.  Article 4 of the Act  
17. According to article 4 of the Act, agreements and concerted practices between 
undertakings, and decisions and practices of associations of undertakings which have as 
their object or effect or likely effect the prevention, distortion or restriction of competition 
directly or indirectly in a particular market for goods or services are illegal and prohibited. 
Within this framework, the assessment under article 4 will examine whether the agreement 
has restriction of competition by object and/or restrictive effects on competition.  
  Restriction o f competition by object  
18. Since an agreement which restricts competition by object, by its nature, constitutes a 
violation under article 4, it is not necessary to analyze the actual or potential effects of the 
relevant agreement on the market. When assessing  whether an agreement restricts 
competition by object, the contents of the agreement, the objectives it is trying to attain, 
and the economic and legal framework in which it exists must be taken into consideration. 
Although it is not a necessary factor in determining whether an agreement restricts 
competition by object, the intention of the parties may also be taken into consideration in 
the assessment.  
Restrictive effects on competition  
19. If a horizontal cooperation agreement does not restrict competition by  object, it must be 
examined whether it has restrictive effects on competition. In this examination, account 
must be taken of both actual and potential effects. For restrictive effects on competition to 
exist, the agreement must have, or be likely to have,  an appreciable adverse impact on at 
least one of the parameters of competition in the market, such as price, output, product 
quality, product variety or innovation. Agreements can have such effects by reducing 
competition between the parties to the agreem ent or between any one of them and third 
parties. This would depend on various factors such as the nature and content of the 
agreement, the degree at which the parties, either on their own or jointly, can acquire a 
certain level of market power, and to wha t extent the agreement allows the creation,    5 maintenance and strengthening of market power or the abuse of market power by the 
parties.  
20. The assessment of whether a horizontal cooperation agreement has restrictive effects on 
competition within the meaning of  article 4 must be made by comparing the economic and 
legal context in the situation where the agreement exists and where it does not (by taking 
into account the results the agreement would lead to if it is not yet implemented). Hence, 
in order to prove ac tual or potential restrictive effects on competition, it is necessary to 
examine actual and potential competition between the parties, as well as between the 
parties and third parties, in the situation where the agreement is implemented and in the 
situatio n where it is not. Since potential efficiency gains caused by the agreement are 
examined only under article 5, they will not be taken into account at this stage.  
21. Horizontal cooperation agreements concluded in relation to those activities which a single 
undertaking would be unable to carry out due to various reasons, such as restricted 
technical capabilities, will not, in general, lead to restrictive effects on competition wit hin 
the framework of article 4. However, this requires that it is established under  objective 
criteria that the relevant activity cannot be conducted independently, and that the 
agreement is not more restrictive than necessary for the conduct of the relevant activities.  
22. Horizontal cooperation agreements can restrict competition if they i nclude exclusivity, or 
if they include financial or real obligations which would significantly reduce the ability of 
the parties to take independent decisions. Thus, prices in the relevant market may increase 
in the relevant market as a result of the elimi nation of competitive pressure in the relevant 
market and the exploitation of this situation both by the parties to the agreement and the 
competitors. When analyzing the effects of the agreement on competition, the size of the 
market shares of the parties to the agreement, whether the parties are close competitors5, 
whether consumers have the opportunity to switch suppliers, whether the competitors 
would be able to increase supply in response to an increase in prices, and whether one of 
the parties to the a greement is an important competitive force in the market are among the 
factors that require attention.  
23. Horizontal cooperation agreements can lead to coordination between the parties in the area 
of cooperation or in other areas through disclosure of competi tion-sensitive (strategic) 
information. Horizontal cooperation agreements can also lead to coordination between the 
parties in relation to competitive parameters such as prices and output by ensuring 
commonality for the costs of the parties. Where the part ies hold market power, the 
characteristics of the market is conducive to coordination, the area of cooperation 
constitutes a significant portion of the variable costs of the parties in the market, and the 
parties have significantly merged their operations in the area of cooperation, the 
commonality of costs achieved by the horizontal cooperation agreement allows the parties 
to more easily coordinate their prices and production. An example for this could be the 
                                                 
5 In a relevant market with differentiated products, some products would be closer substitutes than others. 
The higher the rate of substitution between the products of two undertakings, the closer competitors 
those undertakings are. In addition, undertakings in certain markets where it is relatively easier and 
less costly for undertakings to reposition their products or to expand their product range can also be 
considered close competitors.      6 case where the parties jointly manufacture or p urchase an important intermediate product 
or jointly manufacture or distribute a large portion of a final product.  
24. In addition, some horizontal cooperation agreements such as production and 
standardization agreements may result in market foreclosure for co mpetitors as well.  
Market power and other market characteristics  
25. Market power is the ability to profitably maintain prices above competitive levels for a 
certain period of time or to profitably maintain certain elements such as output, product 
quality and variety or innovation below competitive levels for a certain period of time.  
26. Variable costs are considered an important indication in terms of determining whether 
prices are above the competitive level.  However, since especially in markets with high 
fixed costs undertakings must price above their variable costs in order to ensure a return 
on their investment, pricing above fixed costs by undertakings is not in itself a sign that 
they hold market power.  
27. The creation, maintenance and strengthening of market p ower can result from the superior 
skill, foresight or innovation of the undertaking, or it can result from joint conduct by the 
parties to the agreement or by one of the parties and third parties. For instance, the 
agreement may lead to the foreclosure of the market to competitors by raising competitors’ 
costs and removing their capacity to compete effectively with the parties to the agreement.  
28. At this point, the important issue is the degree of the market power. The degree of market 
power required for an agreement to lead to restrictive effects on competition under article 
4 is less than the degree of market power required for a finding of a dominant position 
under articles 6 and 7.  
29. The starting point for the analysis of market power is the position of the  parties in the 
markets affected by the cooperation. To carry out this analysis, the relevant market or 
markets must be defined as explained in the Guidelines on the Definition of Relevant 
Market.  
30. If the combined market share of the parties is very low, th e horizontal cooperation 
agreement is unlikely to give rise to restrictive effects on competition within the meaning 
of article 4 and, under the normal circumstances, no further analysis will be required. The 
assessment concerning the size of the combined market share of the parties can vary 
depending on the type of the agreement in question.  
31. In light of the variety of horizontal cooperation agreements and the fact that they may 
cause different effects in different market conditions, it is not possible to i dentify a general 
market share threshold above which sufficient market power for causing restrictive effects 
on competition can be assumed.     7 32. In market share analysis, in addition to market shares, other factors such as the stability of 
market shares over ti me, entry barriers, and the countervailing power of buyers or 
suppliers must also be taken into consideration, depending on the market position of the 
parties and the concentration in the market.  
33. Normally, in the competitive analysis, current market shares  are used. However, this 
analysis may also take into account likely future developments in light of various 
indicators such as exits, new entries or expansion of the market volume, as well as historic 
data on the market in case market shares have been vola tile. Changes in historic market 
shares may provide useful information about the competitive process and the future 
positions of competitors by indicating whether undertakings have been gaining or losing 
market shares. In any event, the assessment of marke t shares will take into account market 
conditions, such as whether the market dynamic and whether the market structure is 
variable due to innovation or growth.  
34. When entering a market is sufficiently easy, a horizontal cooperation agreement will 
normally no t be expected to give rise to restrictive effects on competition. To that end, 
new entries into the market must be shown to be likely, reasonably timely and sufficient. 
The existence or termination possibility of another horizontal cooperation agreement ma y 
influence market entry analysis.  
1.2.2.  Article 5 of the Act  
35. For an agreement which is found to be restricting competition under article 4 of the Act, 
the burden of proof for showing that the agreement fulfills the conditions laid out in article 
5 of the  Act rests with the undertakings. Therefore, the arguments and evidence presented 
by the undertakings must convince the Board concerning the pro -competitive effects of 
the agreement.  
36. Grant of an exemption to an agreement under article 5 depends on the exis tence of all of 
the following conditions:  
a) Ensuring new developments and improvements, or economic or technical 
development in the production or distribution of goods and in the provision of 
services (Efficiency Gains),  
b) Benefiting the consumer from the abov e-mentioned (Passing on to Consumers),  
c) Not eliminating competition in a significant part of the relevant market (Non -
Elimination of Competition),  
d) Not limiting competition more than what is compulsory for achieving the goals set 
out in sub -paragraphs (a) an d (b) (Indispensability).  
37. R&D Communiqué and Specialization Communiqué exempts some horizontal 
cooperation agreements in those areas from the application of article 4 provisions. The 
aforementioned block exemption communiqués are based on the premise that the 
combination of complementary skills or assets by these agreements can lead to significant 
gains in efficiency. This may also be the valid for other types of horizontal cooperation    8 agreements.  The analysis of the efficiencies of an agreement under artic le 5 is, to a large 
extent, a question of identifying the complementary skills and assets that each of the 
parties brings within the scope of the agreement and evaluating whether the resulting 
efficiencies can fulfill the conditions listed in article 5.  
38. In horizontal cooperation agreements, complementary characteristics may arise in various 
ways. Research and development agreement may bring together different capabilities that 
allow the parties to produce better products more cheaply and shorten the time fo r those 
products to reach the market. Production agreements may allow the parties to achieve 
economies of scale or scope that they could not achieve individually.  
39. Horizontal cooperation agreements that do not involve the combination of complementary 
skills  or assets are less likely to lead to efficiency gains that benefit consumers. Such 
agreements may reduce certain duplicate costs, for instance by eliminating a portion of 
fixed costs. However, savings in fixed costs are generally not passed on to the cons umers 
as compared to savings in, for instanc e, variable or marginal costs.      9 2. COMPETITIVE ASSESSMENT OF EXCHANGE OF INFORMATION  
2.1. Definition and scope  
40. Information exchange between undertakings may take place in various different ways. 
Information may be exchanged among undertakings directly, or indirectly via associations 
of undertakings such as professional associations, market research institutions and similar 
third parties or via the supply or distribution network of undertakings.  
41. Information exchan ge may be the main subject of an agreement, or it may be a part of 
another horizontal agreement. For instance, parties to a production agreement may share 
some information on costs as part of the agreements.  Such information exchanges are 
assessed in the l ight of the horizontal cooperation agreement as a whole.  
42. Information exchange may generate various efficiency gains. For instance, information 
exchange may eliminate problems of information asymmetries between parties. Moreover, 
it may allow undertakings t o benchmark themselves against their competitors, thereby 
improving their efficiency. In addition, sharing of information may also help undertakings 
to reduce their inventories, ensure quicker delivery of perishable products to consumers, 
or lower their co sts caused by unstable demand. This may result in direct benefits for the 
consumers whose search costs are reduced and choices are increased.  
43. However, the exchange of information may also lead to restrictions of competition, in 
particular in situations whe re it enables undertakings to be aware of market strategies of 
their competitors. The effect of information exchange on competition depends on elements 
related to the structure of the market, such as the degree of concentration, transparency 
and stability of the market and the similarity of the undertakings in it (symmetry), as well 
as on the nature of the information exchanged, since it can render the relevant market more 
favorable to coordination between competitors.  
44. Moreover, information exchange among c ompetitors is considered a cartel and fined as 
such if it shows the nature of an agreement with the object of fixing prices or quantities. 
Also exchanges of information which facilitate the operation of a cartel by enabling parties 
to monitor whether the p articipants comply with the agreed terms are also considered as 
part of the cartel.  
45. Under the normal circumstances, undertakings prudently adapting themselves in 
accordance with the existing or anticipated conduct of their competitors is not considered 
a violation. However, any direct or indirect communication between competitors, the 
object or effect of which is to create conditions of competition differing from the normal 
conditions of the market are considered as violations and prohibited. For instance, an 
undertakings disclosing to its competitor the policy which it is implementing or is planning 
to implement may be evaluated under this framework. Therefore, if information exchange 
reduces uncertainty in the market through the exchange of competition -sensitive 
information and facilitates anti -competitive cooperation, then it may constitute a violation 
under article 4.     10 46. There is no difference between an undertaking unilaterally disclosing its competition -
sensitive information via various means such as e -mail, phone calls, meetings, etc. to its 
competitors who then explicitly or implicitly accept these information and many 
undertakings sharing information among themselves concerning their goals and plans. For 
example, mere attendance at a meeting where an und ertaking discloses its pricing policy 
to its competitors may be caught by article 4 of the Act, even in the absence of an explicit 
agreement to raise prices. When an undertaking is sent competition -sensitive information 
by a competitor, the relevant undert aking will be presumed to have accepted the 
information and adapted its market conduct accordingly, unless it responds with a clear 
statement that it does not wish to receive such information.  
47. In general, if an undertaking makes a unilateral disclosure con cerning its competition -
sensitive information in a genuinely public manner, for example through a newspaper, this 
does not constitute a violation. However, the characteristics of the underlying the case at 
hand will be decisive in terms of the assessment t o be conducted under article 4. For 
example, competitors following such a disclosure with similar disclosures concerning 
their competition -sensitive information may indicate cooperation.  
2.2. Assessment under Article 4 of the Act  
2.2.1.  Main competitive co ncerns  
48. Once the existence of an agreement is established, main competitive concerns pertaining 
to information exchange will need to be addressed.  
Collusive outcome  
49. The exchange of competition -sensitive information can result in restrictive effects on 
compe tition by artificially increasing transparency in the market, thereby facilitating 
coordination of competitive behavior between undertakings. This can occur through 
different channels.  
50. First of all, information exchange may lead to undertakings arriving at  common and 
collusive expectations concerning the uncertainties in the market.  Thus, undertakings can 
then reach a common understanding in order to coordinate their competitive behavior, 
without an explicit agreement. Information exchange in this way may l ead to collusive 
outcome in the market. Exchange of information about the plans of the undertakings 
concerning future conduct is the most convenient means of such an understanding.  
51. Secondly, through the use of a monitoring mechanism, information exchange c an render 
the market transparent and allow collusive outcome in the market or improve the 
sustainability of such conduct (internal stability) by making it easier for undertakings to 
identify any practice of their competitors that is in violation of the ant i-competitive 
agreement between them and to retaliate against such practices. Such a monitoring 
mechanism may be created by the exchange of current or historical data.     11 52. Thirdly, information exchange can lead to the exclusion of competitors who are not parti es 
to the agreement (external stability) by improving the sustainability of collusive outcomes. 
When the market becomes sufficiently transparent due to exchanges of information, 
undertakings parties to the agreement can be informed on when and how potentia l 
competitors will enter the marke t, target the new entrants, and , as addressed in the next 
section, foreclose the market to potential competitors. Such a monitoring mechanism may 
be created by the exchange of current or historical data.  
Foreclosure of the  market to competitors  
53. Apart from facilitating collusion, exchange of information can also lead to foreclosure of 
the market to competitors.  
54. An exchange of information between only a portion of the undertakings in the market can 
lead to foreclosure in the relevant market. This can occur when those undertakings not 
taking part in the exchange of information is placed at a significant disadvantage as 
compared to the undertakings affiliated with the exchange of information. In order for 
such market foreclosure  to occur, the information concerned must be significantly 
strategic with respect to competition and must cover a significant part of the relevant 
market.  
55. Information exchange may also lead to foreclosure of the market to competitors for 
undertakings operating in related markets. For instance, vertically integrated undertakings 
which gain a certain amount of market power in the upstream market through an 
information exchange may raise the price of a key component for a downstream market, 
thereby increa sing the costs of their rivals downstream and causing foreclosure of that 
market to competitors.  
2.2.2.  Restriction of competition by object  
56. Any information exchange with the objective of restricting competition in the market will 
be considered as a restri ction of competition, regardless of its effect. In assessing whether 
an information exchange constitutes a restriction of competition by object, the legal and 
economic context in which the information exchange took place will be taken into 
consideration To  this end, it will be evaluated whether the information exchange would 
lead to a restriction of competition by nature.  
57. An exchange information concerning future plans is more likely to lead to restriction of 
competition by object as compared to the exchang e of current data. Within this context, 
the exchange of competition -sensitive information among rivals such as future prices, 
outputs or sale amounts are normally considered cartels, since they generally aim to fix 
prices or quantities. Such exchanges of i nformation are very unlikely to meet the 
exemption conditions listed in article 5.  
2.2.3.  Restrictive effects on competition     12 58. The potential effects of information exchange on competition must be analyzed on a case -
by-case basis. This assessment is done by c omparing the existing and likely effects of the 
information exchange with the competitive conditions that would prevail in the absence 
of that information exchange.  For an information exchange to have restrictive effects on 
competition within the meaning o f article 4, it must be of a nature to have an adverse 
impact on at least one of the parameters of competition such as price, output, product 
quality, product variety or innovation. When assessing the restrictive effects of 
information exchange on competit ion, the characteristics of the relevant market and the 
nature of the information exchange is taken into consideration.  
59. Certain markets, due to their characteristics, may facilitate achieving coordination among 
undertakings or sustaining an existing coordi nation. Exchanges of information in such 
markets will lead to more restrictive effects compared to markets which do not have such 
characteristics. However, through various effects, including increasing transparency in the 
market, reducing market complexity  and differences between undertakings (asymmetry) 
and stabilizing the market, the exchange of information can make coordination possible 
even in markets where cooperation was difficult before the change. For this reason, when 
assessing the restrictive effe cts of information exchange on competition, it is important to 
consider the characteristics of the market before the exchange of information and how 
these characteristics were changed by the information exchange. In addition, it is 
necessary to assess fact ors including the purpose of the information exchange system, 
conditions of access to the system and conditions of participation in the system. It is also 
necessary to examine the frequency of the information exchanges, the type of information 
exchanged (p ublic or confidential, aggregated or detailed, historical or current 
information), and the importance of the information for the fixing of prices, volumes or 
conditions of service. Following are some of the factors that must be taken into 
consideration whe n assessing the restrictive effects of information exchange.  
Market characteristics  
60. It is easier for undertakings to achieve a collusive outcome in markets which are 
sufficiently transparent, concentrated, stable, symmetric and non -complex. Information 
exchange can facilitate a collusive outcome by increasing transparency in the market, 
reducing market complexity and asymmetry, and by stabilizing the market.  
Market transparency  
61. Collusive outcomes are more likely in transparent markets. Transparency can enable 
undertakings to conclude and maintain anti -competitive agreements. Information 
exchange can reduce uncertainties about competitively sensitive factors such as prices, 
volume , demand and costs by increasing transparency. The lower the level of transparency 
in the market before the information exchange, the higher the anti -competitive effect of 
the information exchange will be. An information exchange that contributes little to  
rendering the market transparent is less likely to restrict competition than an information 
exchange that significantly increases transparency in the market. Therefore, the level of 
transparency in the market both before and after the information exchange , and how the    13 information exchange changes that level, are the determining factors for the likelihood 
that an information exchange will have restrictive effects on competition. The level of 
transparency before the information exchange depends on the number  undertakings in the 
market and the degree of openness of the buying and selling transactions. The key element 
when evaluating the change in the level of transparency in the market is to identify to what 
extent the undertakings can use the available inform ation to determine the actions of their 
competitors.  
Degree of concentration of the market  
62. Collusive outcomes are more likely in tight oligopolies, since it is easier for fewer 
undertakings to agree on the terms of coordination and to monitor deviations fr om the 
agreement. Therefore, exchanges of information in tight oligopolies are more likely to 
cause restrictive effects on competition than in other oligopolies.  However, even in 
markets with numerous undertakings, information exchanges may facilitate coor dination 
and monitoring of deviations among more undertakings by increasing transparency, or 
rendering the market more suitable for coordination.  
Complexity of the market  
63. It is harder for undertakings to achieve a collusive outcome in a complex market stru cture. 
However, information exchange may simplify such market structures to some extent. In a 
complex market structure, more information exchange is needed to come to an agreement 
on the terms of coordination and to monitor deviations. For example, achievi ng a collusive 
outcome concerning a price for a homogeneous product would be easier than it would be 
in a market with many differentiated products. Nonetheless, undertakings may exchange 
information and introduce rules to simplify pricing in order to circu mvent the difficulties 
involved in achieving a collusive outcome on the prices of many differentiated products.  
Stability of the market  
64. Collusive outcomes are more likely in markets where the demand and supply conditions 
are relatively less volatile, in ot her words where they are stable. In an unstable 
environment, it may be difficult for an undertaking to know whether the reduction in its 
sales is due to an overall reduction in demand or due to a competitor offering relatively 
lower prices, and therefore i t is difficult to sustain a collusive outcome. In this context, 
volatile demand, internal growth by some undertakings in the market, or frequent entry  
into the market, may indicate that the market is not sufficiently stable to ensure 
coordination. On the o ther hand, information exchange can increase stability in the market, 
and thereby may enable a collusive outcome. Moreover, in markets where innovation is 
decisive, coordination may be more difficult since significant innovations may allow 
undertakings to gain a major advantage over their competitors. For a collusive outcome to 
be sustainable, the reactions of third parties such as current and potential competitors not 
participating in the agreement and customers should not be at a level to jeopardize the    14 results expected from the collusive outcome. In this context, the existence of barriers to 
entry would make a collusive outcome more feasible and sustainable.  
Similarity of firms (symmetry)  
65. A collusive outcome is more likely in symmetric market structures. When undertakings 
are similar in terms of their costs, demand, market shares, product range, capacities etc., 
the possibility of coordination among undertakings increases because their competitive 
incentives would be similar as well. However, information e xchange may allow collusive 
outcomes to occur even in markets with differentiated undertakings. Information exchange 
could help undertakings to develop tools to determine their differences and to eliminate 
those differences, thereby to facilitate coordinat ion among themselves.  
Other characteristics  
66. The stability of collusive outcomes also depends on the current value of the profits the 
undertakings expect in the future, on the duration of the interaction between the 
undertakings, and on the efficiency of the retaliation mechanism for deviation from the 
agreement. Within this framework, the sustainability of the collusive outcome would 
diminish if undertakings consider current profits they may gain as a result of a price war 
more valuable than future profit s they may bring as a result of a collusive outcome, or if 
the interaction between the undertakings is short -term, or if there are no efficient means 
of retaliation.  
Characteristics of the information exchange  
Competition sensitive (strategic) information  
67. It is more likely for an exchange between competitors of strategic data that reduces 
uncertainty in the market to be caught by article 4 than exchanges of other types of 
information. Sharing of strategic data can give rise to restrictive effects on competi tion by 
reducing competitive incentives of the parties. Information related to prices, quantities, 
customers, costs, turnovers, sales, purchases, capacities, product characteristics, 
marketing plans, risks, investments, technologies, R&D programs and simil ar information 
are considered competition sensitive. Generally, information related to prices and 
quantities is the most strategic. These are followed by information about costs and 
demand. However, if undertakings compete with regard to R&D, for instance,  then it may 
be the technology data that is the most strategic for competition. Also, the strategic 
importance of data also depends on factors such as the frequency of the information 
exchange and its market coverage as well as whether the data is aggregat ed and its age.  
Market coverage     15 68. When assessing the restrictive effects of information exchange on competition, the market 
coverage of the undertakings exchanging information are taken into account. This is 
because the competitors that are not participating  in the information exchange can 
constrain any anti -competitive behavior of the undertakings exchanging information. For 
example, undertakings not participating in the information exchange can threaten the 
sustainability of the anti -competitive agreement b y pricing below the price level set via 
coordination. The assessment concerning the market coverage degree of the information 
exchange depends on the specific facts of each case and the type of information exchange 
in question.  
Aggregated/individualized da ta 
69. Exchanges of data that is aggregated in such a way as to make the identification of 
individual data of a particular undertaking sufficiently difficult are much less likely to lead 
to restrictive effects on competition than exchanges of individualized da ta. Collection and 
aggregated publication of data including data on sales, on capacities or on costs of inputs 
and components by a professional association or market research company may benefit 
suppliers and customers since it would shed light on the econ omic situation of the sector. 
Such data collection and publication allows undertakings in the market to make choices 
based on information and efficiently adapt their strategy to the market conditions. 
Generally, the exchange of aggregated data is unlikely to give rise to restrictive effects on 
competition, unless it takes place in a concentrated oligopoly. Conversely, the exchange 
of individualized data makes it easier for undertakings to come to a common 
understanding concerning the market on the one hand,  and allows the parties to develop 
suitable punishment strategies by enabling them to target undertakings deviating from the 
agreement or new entrants. Nevertheless, the possibility cannot be excluded that even the 
exchange of aggregated data may lead to a nti-competitive effects in certain markets. For 
instance, if the exchange of aggregated data among the members of a tight and stable 
oligopoly indicates that prices in the market are below a certain level, the undertakings 
may conclude that one of the part ies to the agreement has deviated from the collusive 
outcome and decide to retaliate. In other words, in order to keep the anti -competitive 
agreement stable, undertakings do not need to know who deviated from the agreement, it 
is enough to know that "someo ne" did.  
Age of data  
70. The exchange of historic data is more unlikely to lead to a restriction of competition than 
the exchange of current or future data. This is due to the fact that exchanging historic data 
is unlikely to be an indicator for the future beh avior of competitors or lead to a common 
understanding concerning the market. On the other hand, the older the data, the less 
probable it would be to detect deviations and retaliate. Whether data is historic depends 
on the characteristics of the relevant m arket and, in particular, on  the frequency of price 
re-negotiations in the market. For example, data is considered historic if it is significantly 
older than the average length of contracts in the market. There is no predetermined 
threshold for how old the  data must be not to pose a risk of distorting competition. This 
threshold depends various characteristics such as the nature of the data, whether it is 
aggregated, the frequency of the information exchange, and its stability and transparency.     16 Frequency of  the information exchange  
71. Frequent exchanges of information make it easier for undertakings to come to a better 
common understanding in the market and monitor deviations from the agreement, thereby 
increasing the risks of a collusive outcome. In unstable m arkets, more frequent exchanges 
of information is necessary to ensure a collusive outcome than in stable markets. In 
markets with long -term contracts (which means more infrequent price re -
negotiations),even less frequent exchanges of information may be suf ficient to achieve a 
collusive outcome. However, the frequency at which data needs to be exchanged to result 
in a collusive outcome depends on the nature of the data, its age and whether it is 
aggregated.  
Public/non -public information  
72. In general, exchanges  of genuinely public information are not expected to constitute an 
infringement under article 4. Genuinely public information is information that is equally 
accessible to all competitors and customers in terms of costs of access. For information to 
be genu inely public, the cost for accessing it should not be higher for customers and 
undertakings not participating in the information exchange than for those who are parties 
to the exchange. Consequently, since, under the normal circumstances, competitors would  
not choose to exchange data that they can easily collect from the market, the exchange of 
genuinely public data is not frequently observed it practice. In contrast, if the cost of 
collecting the data exchanged among the competitors is deterring other unde rtakings and 
customers from collecting it, the data cannot be considered to be genuinely public. A 
possibility to gather the information from the market, for instance from the customers, 
does not mean that such information constitutes market data readily a ccessible to 
competitors.  
73. Even if data is publicly available, (for example, information published by regulators), if 
the additional exchange of this information among competitors reduces uncertainty in the 
market, this may give rise to a collusive outcome.  
Public/non -public exchange of information  
74. A genuinely public information exchange may decrease the likelihood of a distortion of 
competition in the market, to the extent that cooperative effects of the exchange of 
information can be constrained by other u ndertakings, potential competitors and 
customers. However, genuinely public exchanges of information would not mean that the 
possibility of a collusive outcome in the market is completely eliminated.  
2.3. Assessment under Article 5 of the Act  
2.3.1.  Effici ency gains     17 75. Information exchange may lead to efficiency gains. For instance, information about 
competitors’ costs can enable undertakings to become increase their efficiency by 
benchmarking their performance against the best practices in the market.  
76. Moreove r, in certain situations, due to the information they acquire as a result of 
information exchange, undertakings can allocate production towards high -demand 
markets or low cost undertakings. The likelihood of achieving those types of efficiencies 
depends on  market characteristics such as whether undertakings compete on prices or on 
quantities, as well as on the uncertainties of the market. Within this framework, some 
forms of information exchange may ensure substantial cost savings by reducing 
inventories or  limiting the distribution of perishable products in areas with low demand.  
77. In markets where undertakings have asymmetric information about consumers, the 
exchange of such information can also give rise to efficiencies. For instance, keeping a 
record on the traffic accidents or credits defaults of customers and sharing these records 
would ensure that consumers face prices which are in accordance with their risk levels and 
thereby constitute an incentive for them to reduce their risk exposure. This makes i t easier 
to detect those consumers at lower risk levels who can benefit from lower prices. In this 
context, switching to other suppliers becomes easier for those consumers who cannot 
switch providers since information is relationship -specific, as a result of which consumer 
lock-in is reduced and competition is encouraged. Examples of such efficiencies are found 
in the banking and insurance sectors, where there are frequent exchanges of information 
about consumer risks and their defaults.  
78. Exchanging historic  and current data related to market shares may provide benefits to both 
undertakings and consumers if it allows undertakings to present these data as an indication 
of quality of their products. As a matter of fact, in case there is imperfect information 
about product quality, consumers resort to indirect means to gain information, by making 
use of the prices, market shares and similar characteristics of the products (for example, 
using best -selling lists when buying books).  
79. Information exchange that is genu inely public helps consumers to reduce their search costs 
and to make more informed choices. Consumers mostly benefit from public exchanges of 
current data when making their purchasing decisions. Similarly, public information 
exchange about current input p rices can lower search costs for undertakings, thereby 
benefiting consumers through lower final prices. Exchanges of information concerning 
prices to be implemented in the future are less likely to generate benefits for consumers, 
since undertakings would adapt the prices in question before consumers can actually make 
purchase.  Consumers generally cannot rely on undertakings’ future intentions when 
making their consumption plans. However, undertakings may face some pressure to 
implement the prices they announced when undertakings have repeated interactions with 
consumers, and when consumers have advance knowledge concerning the prices to be 
implemented, or can place advance orders. In that situation, genuinely public exchange of 
information concerning th e future behavior of the undertakings may improve customers’ 
plans for expenditure.     18 80. Exchanging future data is less likely to generate efficiency gains than exchanging current 
and historical data. However, in exceptional circumstances announcing future data  can 
also give rise to efficiencies. For example, if undertakings were to know in advance who 
would be the winner of an R&D race, they could avoid duplicating costs and wasting 
resources.  
2.3.2.  Pass -on to consumers  
81. Efficiency gains attained by information  exchange must be passed on to consumers in a 
way that outweighs the restrictive effects on competition caused by an information 
exchange. The lower the market power of the parties involved in the information 
exchange, the more likely it is that the effici ency gains would be passed on to consumers 
in a way that outweighs the restrictive effects on competition.  
2.3.3.  Non-elimination of competition  
82. If, as a result of the exchange of information, competition is eliminated in respect of a 
substantial part of t he relevant market, then the agreement cannot benefit from exemption 
under article 5.  
2.3.4.  Indispensability  
83. In order to fulfil the condition of indispensability, the parties must prove that the exchange 
of information carries the lowest  risk of restricti ng competition for achieving the 
efficiency gains and passing them on to the consumers in terms of certain characteristics 
including subject matter, aggregation, age, openness to public, frequency, and coverage. 
Moreover, the exchange should not involve in formation beyond those required for the 
fulfillment of the above conditions. For instance, for the purpose of benchmarking, an 
exchange of data individualized for each undertaking would not be necessary. This is 
because efficiency gains that could be attai ned from benchmarking can also be generated 
through the creation of a form of industry ranking, by anonymizing and aggregating the 
data. Within that context, generally the exchange of individualized data will not be 
considered indispensable. Finally, it is  generally unlikely that the sharing of individualized 
data on future plans, particularly concerning pricing and quantity, is indispensable for 
attaining efficiency gains and passing them on to consumers.  
84. Similarly, information exchanges that form part of horizontal cooperation agreements are 
more likely to be assessed under article 5 if they do not go beyond what is indispensable 
for the implementation of the economic purpose of the agreement. For example, 
technology sharing necessary in an R&D agreement o r the exchange of cost data necessary 
in production agreements can be considered indispensable. 2.4. Examples  
Example 1     19 85. Sufficient efficiency gains for consumers with the exchange of information regarding 
current prices  
Undertakings in a market that is con centrated, stable and non -complex where pricing has 
become transparent via information exchange have decided to announce information on 
current prices on a publicly accessible website. In this example, what is being announced 
are not intended future prices , but current prices over which consumers can purchase 
current and future services under the conditions specified in the information being 
exchanged. In addition to the prices, the information announced on the website include a 
wide range of other informat ion on the product.  
Assessment:  This information exchange does not constitute a restriction of competition by 
object. The undertakings are exchanging current prices over which they are effectively 
making sales in the present, rather than the future prices they intent to implement. 
Therefore, this exchange of information is less likely to constitute an efficient mechanism 
for coordination than the exchange of intended future prices. Nevertheless, given the 
market structure and strategic nature of the data, t his information exchange may constitute 
an efficient mechanism for monitoring deviations from an anti -competitive agreement, 
thereby facilitating any coordination that is likely to occur in such a market structure. 
Therefore, this information exchange coul d give rise to restrictive effects on competition 
within the meaning of article 4. However, it is possible that efficiency gains stemming 
from the information exchange would be passed on to consumers to an extent that 
outweighs the restrictive effects on c ompetition in terms of both their likelihood and 
magnitude. In this example the information exchange is public and consumers can make 
purchases at the announced prices and conditions. Therefore this information exchange is 
likely to directly benefit consum ers by reducing search costs and improving choice, and 
thereby also stimulating price competition. Hence, the information exchange in question 
is likely to meet the exemption conditions of article 5.  
Example 2  
86. Deduction of current prices from information e xchange  
The luxury hotels in a city have homogeneous cost structures constituting a separate 
relevant market from other hotels and they operate in a non -complex, stable and tight 
oligopoly. The hotels in question exchange individual information about curre nt 
occupancy rates and revenues. In this case, the parties can deduce the current prices of 
each other as a result of the exchange of information.  
Assessment:  Since the hotels exchange present data and not intended future data, this 
exchange of information  would not constitute a restriction of competition by object, unless 
it is used as means of secretly exchanging information on future plans. However, this 
information exchange would give rise to restrictive effects on competition within the 
meaning of arti cle 4, because knowing the competitors’ current prices would facilitate 
coordination of undertakings’ competitive behavior. Such an exchange of information 
would be most likely used to monitor deviations from the anti -competitive agreement. The    20 information  exchange increases transparency in the market, since the hotels normally offer 
various discounts through negotiations or early or group reservations over the list prices 
they publish. Therefore, the exchange of information between the hotels is competitiv ely 
sensitive and have strategic significance. This exchange is likely to lead to the restriction 
of competition in the market because the parties involved are involved in a long -term and 
constant interaction in a non -complex, stable and tight oligopoly. M oreover, the cost 
structures of the hotels are largely homogeneous. Finally, since consumers have little 
buyer power and barriers to entry are high, consumers or new entrants will not be able to 
constrain the anti -competitive behavior of incumbents. It see ms unlikely in this case that 
the parties would be able to demonstrate that any efficiency gains would be generated by 
the information exchange to an extent that would outweigh the restrictive effects on 
competition which would then be passed on to the con sumers; therefore neither is it likely 
that the exemption conditions listed in article 5 would be met.  
Example 3  
87. Exchange of individual/aggregated data  
In a stable, non -complex, concentrated market with high barriers to entry, three large 
undertakings with  an aggregate market share of 80% engage in direct, frequent and non -
public exchanges of information concerning a significant portion of their costs. 
Undertakings claim that they exchange information in order to benchmark their 
performance against their ri vals in order to become more efficient.  
Assessment: Since this information exchange does not in principle constitute a restriction 
of competition by object, its effects on the market need to be assessed. Because of the 
market structure, the fact that the i nformation exchanged relates to a large portion of the 
undertakings' variable costs, the fact that the data is presented in an individualized form 
and covers a significant part of the relevant market, this information exchange is likely to 
facilitate a col lusive outcome and thereby give rise to restrictive effects on competition 
within the meaning of article 4. It is not possible to claim that exemption conditions are 
fulfilled because the claimed efficiency gains stemming from the information exchange 
can be achieved in a manner that is less restrictive for competition by way of a third party 
collecting, anonymizing and aggregating the data in some form of industry ranking. 
Finally, in this example, since the parties form a non -complex, stable and very tigh t 
oligopoly, even the exchange of aggregated data could lead to a collusive outcome. 
However, it would be very unlikely for the exchange of aggregated information to restrict 
competition if it happened in a non -transparent, fragmented, unstable, and comple x 
market.  
Example 4  
88. Genuinely public information     21 The four undertakings owning all the petrol stations in a large city exchange information 
on the current gasoline prices over the telephone. These undertakings claim that this 
information exchange does not h ave restrictive effects on competition because the 
information is public as it is announced on large display panels at every petrol station.  
Assessment: The pricing data exchanged over the telephone is not genuinely public, as in 
order to obtain that same data in another would require incurring substantial time and 
transport costs. One would have to travel large distances to collect the prices displayed on 
the boards of petrol stations spread all over the city. Since the costs for such a survey 
would be hig h, the information concerned could not be obtained by any means other than 
the information exchange, in practice. Moreover, this systematic exchange covering the 
entire relevant market, which is a non -complex, stable and tight oligopoly, is likely to lead 
to competing undertakings becoming certain of their rival's pricing policies, thereby 
restricting competition. As a result, this information exchange is likely to give rise to 
restrictive effects on competition within the meaning of Article 4.  
Example 5  
89. Efficiency gains  
There are five undertakings producing fresh bottled orange juice in the relevant market. 
Demand for this product is very unstable and shows variations depending on location and 
time. The fruit juice in question has to be sold and consumed wi thin one day from the date 
of production. The producers agree to establish an independent market research company 
that will collect information about unsold juice in each point of sale on a daily basis and 
publish the data it will aggregate on the basis of  each point of sale on its website the 
following week. The published statistics allow producers and retailers to forecast demand 
and to better position the product. Before the information exchange was put in place, the 
retailers had reported large quantiti es of wasted juice and had reduced the quantity of juice 
purchased from the producers; that is to say, the market was not working efficiently. 
Consequently, in some periods and areas there were frequent instances of unmet demand. 
The information exchange s ystem, which allows better forecasting of oversupply and 
undersupply, has significantly reduced the instances of unmet consumer demand and 
increased the quantity sold in the market.  
Assessment:  Even though this example involves the exchange of current and strategic data 
in a quite concentrated market, it is not very likely that this exchange would have 
restrictive effects on competition in such an unstable market. Even if the exchange creates 
some risk of giving rise to restrictive effects on competition, t he efficiency gains stemming 
from increasing supply to places with high demand and decreasing supply in places with 
low demand is likely to offset potential restrictive effects. Since the information is 
exchanged in a public and aggregated form, it poses a  lower risk of causing restrictive 
effects on competition than if it were non -public and individualized. Consequently, the 
information exchange does not go beyond what is necessary to correct the market failure. 
Therefore, it is likely that this informatio n exchange meets the criteria of article 5.     22      23 3. RESEARCH AND DEVELOPMENT AGREEMENTS  
3.1. Definition and Scope  
90. Block Exemption Communiqué on Research and Development Agreements, no:2003/2 
sets the conditions for the block exemption of R&D agreements concluded between 
undertakings from the application of the provisions of article 4 of the Act. As stated in 
paragraph 8 of the Guidelines herein, this chapter titled "Research and Development 
Agreements" is complementary in nature to the R&D Communiqué.  
91. R&D agreements be concluded in different forms and scopes, ranging from outsourcing 
R&D activities to third parties to the joint improvement of existing technologies and 
cooperation concerning the research, development and marketing of completely new 
product s. R&D agreements may be in the form of signing a cooperation agreement or 
establishing an undertaking under joint control. This chapter of the Guidelines applies to 
all forms of R&D agreements, including agreements concerning the production or 
commerciali zation of the R&D results.  
3.2. Relevant markets  
92. When assessing the effects of an R&D agreement, the key point in defining the relevant 
market is to identify those products, technologies or R&D efforts that will comprise the 
main competitive pressure on th e parties. Innovation may result in a product or technology 
which competes with an existing product or technology in market, as is the case with R&D 
efforts directed towards slight improvements or variations . Here, possible effects are 
realized in the mark et for existing products. On the other hand, innovation may also result 
in an entirely new product which creates its own new product market, as is the case in the 
example of the discovery of a new vaccine for a previously incurable disease. However, 
many c ases concern situations in between those two extremes In other words, innovation 
efforts may result in new products or technologies which, over time, replace existing ones, 
such as in the example of CDs replacing cassettes. An analysis of such situations m ay 
require the examination of both existing markets and the impact of the agreement on 
innovation.  
Existing product markets  
93. Where the cooperation concerns R&D for the improvement of existing products, those 
existing products and their close substitutes for m the relevant market concerned by the 
cooperation.  
94. If the R& D efforts aim at significantly changing existing products or at new products to 
replace existing ones, it may be concluded that the old and the potentially new products 
do not belong to the same relevant market, since it may be impossible to fully substitu te 
these with other products already in the market or substitute them in the short -term. 
Nevertheless, the market for existing products may be taken into consideration, if the    24 pooling of R&D efforts is likely to result in coordination between the suppliers  of those 
existing products, for instance because of the exchange of competitively sensitive 
information.  
95. If the R&D concerns an important component of a final product, not only the market for 
that component, but also the market for the final product may b e taken into consideration 
in the assessment. For instance, if car manufacturers cooperate in R&D related to a new 
type of engine, the car market may be affected by that cooperation. The market for final 
products, however, is only relevant for the assessme nt if the component at which the R&D 
is aimed is technically or economically a key element of those final products and if the 
parties to the R&D agreement have market power with respect to the final products.  
Existing technology markets  
96. R&D cooperation may  concern not only products but also technology. When intellectual 
property rights are marketed separately from the products to which they relate, the relevant 
technology market has to be defined as well. Technology markets consist of the 
intellectual prope rty rights that are licensed and other technologies which may be used as 
close substitutes thereof.  
97. The definition of technology markets follows a similar method to the definition of product 
markets. Starting from the technology which is marketed by the pa rties, those other 
technologies to which consumers could switch in response to a small but non -transitory 
increase in relative prices need to be identified. Following that identification, market 
shares in the technology markets can be calculated based on t he licensing incomes of 
undertakings.  
98. The parties’ position in the market in relation to the existing technology may be considered 
a suitable assessment criterion where the R&D cooperation concerns a significant 
improvement to an existing technology or a n ew technology that can replace the existing 
technology. The parties’ market shares can, however, only be taken as a starting point for 
this analysis. In technology markets, potential competition is of particular import. If 
undertakings which do not current ly license their technology are potential entrants on the 
relevant technology market, these undertakings could constrain the ability of the parties 
to the R&D agreement to profitably raise the price for their technology. In such a situation, 
the calculatio n of the market shares may also be based on the sales in the downstream 
product markets which include products incorporating the licensed technology.  
Competition in innovation (R&D efforts)  
99. R&D cooperation may affect not only competition in existing market s, but also 
competition in innovation and new product markets. Such may be the case where R&D 
cooperation replaces existing products or concerns the development of new products or 
technologies intended for a new use. In these situations, the effects on com petition in 
innovation are important. However in some cases, it may not be sufficient to analyze actual 
or potential competition in existing product or technology markets in the assessment of    25 these effects. In this respect, two scenarios can be distinguish ed, depending on the nature 
of the innovation process in an industry  
100. In the first scenario, examples for which may be observed in the pharmaceutical industry, 
it is possible to identify competing R&D efforts at an early stage in the innovation process. 
Com peting R&D efforts are comprised of R&D efforts directed towards a certain new 
product or technology, and the substitutes for those efforts developed in a similar timing.  
 In this case, it can be analyzed whether there will be a sufficient number of compet ing 
R&D efforts following the agreement. The starting point of the analysis is the R&D efforts 
of the parties, after which it is necessary to identify significant competing R&D efforts. In 
order to decide whether competing efforts are significant, various aspects must be taken 
into account, including the nature, scope and size of the other R&D efforts, their access to 
financial and human resources, know -how and patents, or some other assets, as well as 
their timing and their capability to exploit possible r esults.  
101. Besides the direct effect on the innovation itself, the cooperation may also affect the 
market for a new product. Since such a market does not yet exist, it will often be difficult 
to analyze the effects on the market directly. Consequently, the an alysis of such markets 
will generally be incorporated in the analysis of competition in innovation. On the other 
hand, in a competitive analysis, it may be necessary to directly consider the effects of those 
aspects of the agreement which go beyond the R&D  activities on the market for a new 
product. For instance, an R&D agreement that also includes joint production and 
commercialization in the new product market may be assessed differently than an 
agreement aimed at pure R&D efforts.  
102. The second scenario con cerns the situation where innovative efforts in an industry are not 
sufficiently clear to allow the identification of R&D efforts. In this case, the impact of a 
given R&D cooperation on innovation shall not be assessed, except for exceptional 
circumstances . The assessment to be conducted shall be limited to existing product and/or 
technology markets which are related to theR&D cooperation in question, except for 
exceptional circumstances.  
Calculation of market shares  
103. Both for the purposes of the R&D Communi qué and of these Guidelines, the distinction 
between existing markets and competition in innovation needs to be distinguished in the 
calculation of market shares. At the beginning of an R&D cooperation, the existing market 
which includes products capable o f being improved, substituted or replaced by the 
products under development shall be taken as the reference point. Where the R&D 
agreement only aims at improving or refining existing products, that market will include 
products directly concerned by the R&D  effort. Thus, market shares can be calculated on 
the basis of the sales value of the existing products. If the R&D cooperation aims at 
developing a new product to replace existing products, it is again possible to calculate 
market shares on the basis of t he sales value of the existing products.     26 104. For technology markets, it is possible to calculate each technology's share in the market 
which includes the competing licensed technologies by calculating its share in the total 
licensing income generated by intell ectual property rights. However, this may often be a 
difficult method to implement due to various reasons including the lack of clear 
information on licensing costs, the use of cross -licensing, etc. An alternative approach is 
to calculate market shares in the technology market on the basis of sales of products or 
services incorporating the licensed technology in downstream markets. Under that 
approach, all sales in the relevant product market are taken into account, irrespective of 
whether the product incor porates a licensed technology. To be issued an exemption under 
the R&D Communiqué, the market share must not exceed the relevant thresholds, 
regardless of the calculation method used.  
105. If R&D efforts are aimed at developing an entirely new product, then mar ket shares cannot 
be calculated on the basis of sales. In that case, it is only possible to analyze the effects of 
the agreement on competition in innovation.  
3.3. Assessment under Article 4 of the Act  
3.3.1.  Main competitive concerns  
106. R&D cooperation can r estrict competition in various ways. First, it may reduce or slow 
down innovation, leading to fewer or lower quality products coming to the market. 
Secondly, R&D cooperation may lead to increasing prices by significantly reducing 
competition between the un dertakings which are not parties to the agreement in product 
or technology markets, or by making coordination of competitive conduct in those markets 
possible. Also, R&D cooperation may lead to market foreclosure for competitors. 
However, a market foreclos ure effect may only arise if at least one of the parties holds, if 
not dominant position, significant market power concerning a key technology and derives 
exclusive benefits from the results of the R&D efforts of the parties.  
3.3.2.  Restriction of competit ion by object  
107. If R&D efforts do not truly concern joint R&D efforts but instead serve as a tool for cartel 
activities such as price or quantity fixing or market allocation, they are considered to be 
agreements which restrict competition by object. However,  for example, an R&D 
agreement which specifies the joint exploitation of possible future results may not be 
restrictive of competition.  
3.3.3.  Restrictive effects on competition  
108. Most R&D agreements do not fall under article 4. This can be said for many R&D  
agreements which are related to cooperation at early stages and which would only allow 
exploitation of possible results in the very long term.  Moreover, normally, R&D 
agreement would not give rise to restrictive effects on competition where, on the basis of 
objective factors, the parties are not able to carry out the R&D independently, for instance 
due to the limited technical capabilities of the parties. This situation can apply, for    27 example, to undertakings bringing together complementary skills, technol ogies and other 
resources they have.  
109. R&D cooperation between non -competing undertakings would not generally give rise to 
restrictive effects on competition. However, if there is exclusive exploitation of the results 
obtained from the cooperation and if one  of the parties to the agreement holds significant 
market power related to a key technology, then R&D cooperation between non -competing 
undertakings may result in market foreclosure.  
110. When assessing an R&D agreement, the competitive relationship between the  parties has 
to be analyzed in the context of affected existing markets and/or innovation. The issue of 
potential competition between the parties, on the other hand, has to be assessed on a 
realistic basis. For instance, parties cannot be defined as potent ial competitors simply 
because they cooperate to carry out the R&D activities. The decisive point here is whether 
each party independently has the necessary know -how and other resources.  
111. Having third -party undertakings to carry out those R&D activities whi ch were previously 
conducted in -house (outsourcing) is a specific form of R&D cooperation.  In such a 
cooperation, the R&D activity is often carried out by companies, research institutes or 
academic institutions which are specialized on the subject but whic h do not play an active 
role in the exploitation of the results of the R&D effort. In general, such agreements 
include exclusive supply provisions concerning the transfer of know -how and/or the 
results of the R&D activities. Such provisions in the agreemen ts in question are not 
expected to lead to restrictive effects on competition due to the complementary nature of 
the parties to the cooperation.  
112. An R&D cooperation which does not include the joint exploitation of possible results by 
means of licensing, pro duction and/or marketing rarely gives rise to restrictive effects on 
competition. Those pure R&D agreements can only cause a competition problem if 
competition with respect to innovation is appreciably reduced, leaving only a limited 
number of significant competing R&D efforts.  
113. R&D agreements are only likely to give rise to restrictive effects on competition where 
the parties to the cooperation have market power in the existing markets and/or 
competition with respect to innovation is appreciably reduced.  
114. There is no absolute threshold denoting the point where an R&D agreement can give rise 
to restrictive effects on competition under article 4 by creating or maintaining market 
power. However, R&D agreements between competitors can benefit from block 
exemption  under the R&D Communiqué, provided that the combined market share of the 
parties does not exceed the market share thresholds specified in the abovementioned 
Communiqué and the other conditions are fulfilled.  
115. Agreements falling outside the R&D Communiqué b ecause the combined market share of 
the parties exceeds the relevant thresholds may not necessarily give rise to restrictive 
effects on competition. However, the stronger the combined position of the parties in    28 existing markets and/or the more competition in innovation is restricted, the more likely 
it is that the R&D agreement can cause restrictive effects on competition.  
116. If the R&D activity is directed at the improvement or refinement of existing products or 
technologies, possible effects are observed in the relevant markets for those existing 
products or technologies as a rule. Restrictive effects on competition concerning product 
prices, output, quality, variety or innovation in existing markets can, however, only 
emerge if the parties together have a st rong position, entry into the market is difficult and 
other innovation activities are few in number. Furthermore, if the R&D only concerns a 
relatively minor input for the production of the final product, only a very limited effect 
would be observed on com petition in relation to those final products.  
117. A distinction has to be made between pure R&D agreements and agreements providing 
for a more comprehensive cooperation involving the exploitation of results of the different 
stages of the R&D activity, such as licensing, production or marketing. As mentioned 
above, pure R&D agreements will rarely give rise to restrictive effects on competition. In 
particular, the likelihood of encountering restrictive effects on competition is low for R&D 
activities directed tow ards a limited improvement of existing products or technologies. If, 
in such a scenario, the joint exploitation of the R&D cooperation results is limited to 
licensing to third parties, restrictive effects on competition such as foreclosure of markets 
to co mpetitors are unlikely. If, however, joint production and/or marketing of the slightly 
improved products or technologies are included, the effects on competition of the 
cooperation have to be examined more closely. The likelihood of facing restrictive effe cts 
on competition in the form of increased prices or reduced output in existing markets would 
increase if strong competitors are involved in such a cooperation as well.  
118. If the R&D activity is directed at an entirely new product or technology which creates  a 
new market, any effect on the price and output in existing markets are rather unlikely. In 
this case, the analysis has to focus on possible restrictions of innovation including, for 
instance, the quality and variety of possible future products or techno logies, or the speed 
of innovation. Such restrictive effects can arise in case the cooperation is between two or 
more of a small number of undertakings which are independently engaged in the 
development of a new product and which are close to launch to pro duct in the market. 
Such effects are, in general, the direct result of the agreement between the parties. 
Innovation may also be restricted by a pure R&D agreement. However, an R&D 
cooperation concerning entirely new products is unlikely to give rise to re strictive effects 
on competition, unless there are only a very limited number of competing R&D efforts. 
This principle is largely valid even when joint exploitation of the results of the R&D 
activity, including joint marketing, is involved. In those situat ions, the joint exploitation 
of R&D results may only give rise to restrictive effects on competition where there is 
market foreclosure due to key technologies. However, those problems would not arise if 
the parties allow third parties to compete effectivel y by granting licenses.  
119. Many R&D agreements will lie somewhere in between the two situations described in the 
previous two paragraphs. Therefore, these agreements may have effects both on 
innovation and on existing markets. Consequently, both the existing market and the effect 
on innovation may have to be taken into consideration for the assessment conducted in 
relation to the combined positions of the parties, concentration ratios, number of players    29 or innovators in the market and entry conditions. In some  cases there can be restrictive 
effects on competition in the form of increased prices or reduced output, product quality, 
product variety or innovation in relation to existing markets, and in the form of a slowing 
down in development in relation to innova tion. For instance, a cooperation by the 
significant competitors in an existing technology market directed at developing a new 
technology which can replace existing products in the future may slow down the 
development of the new technology if the parties h ave market power in the existing market 
and a strong position with respect to R&D. A similar effect can occur if one of the major 
players in an existing market cooperates with a much smaller actual or potential 
competitor that is just about to emerge with a new product or technology which may 
endanger the position of the incumbent undertaking.  
120. Agreements may also fall outside the scope of the R&D Communiqué irrespective of the 
parties’ market power. This applies for instance to agreements which unduly restr ict 
access of one of the parties to the results of the R&D cooperation.  
3.4. Assessment under Article 5 of the Act  
3.4.1.  Efficiency gains  
121. Many R&D agreements, with or without joint exploitation of possible results, bring about 
efficiency gains by combinin g complementary skills and assets, thus ensuring more rapid 
development and marketing of new or improved products and technologies. R&D 
agreements may also ensure further innovation by allowing wider dissemination of 
knowledge. R&D agreements may also give  rise to cost reductions.  
3.4.2.  Pass -on to consumers  
122. Efficiency gains attained must be passed on to consumers in a way that compensates for 
the restrictive effects of the R&D agreement on competition. For example, positive effects 
caused by the introducti on of new or improved products in the market must outweigh price 
increases or other restrictive effects on competition. In general, it is more likely for R&D 
agreements combining complementary skills and assets to bring about efficiency gains 
that benefit consumers. On the other hand, those R&D agreements where the skills and 
assets of the parties are very similar may result in the elimination of part or all of the R&D 
efforts of one or more of the parties. Such an agreement would remove fixed costs for the  
parties, but would most probably fail to lead to benefits which would be passed on to 
consumers. Moreover, the higher the market power of the parties the less likely they are 
to pass on the efficiency gains to consumers in a way that would outweigh the re strictive 
effects on competition.  
3.4.3.  Non-elimination of competition  
123. If competition is eliminated in a significant part of the relevant product or technology 
markets, the agreement may not benefit from exemption under article 5.     30 3.4.4.  Indispensability  
124. An R&D agreement which includes restrictions that go beyond what is necessary to 
achieve the efficiency gains would not meet the conditions listed in article 5 of the Act no 
4054. In particular, it is unlikely for agreements to fulfil the conditions listed  in article 5 
of the Act no 4054 if they include the restrictions listed in article 6 of the R&D 
Communiqué and thus do not fall under the relevant block exemption. In this situation, in 
order to benefit from the exemption, it will be necessary for the par ties of the R&D 
agreement to show that such restrictions are indispensable to the cooperation.  
3.4.5.  Assessment under article 5 of the Act with respect to time  
125. The assessment of a restrictive agreement under article 5 is made within the framework of 
the conditions prevailing at the time the agreement was signed. The assessment is sensitive 
to material changes in these conditions, and the exemption granted to the agreements 
applies as long as the four conditions listed in article 5 are fulfilled. Within thi s framework, 
in an assessment under article 5, it is necessary to take into account the initial sunk costs 
incurred by any of the parties as well as the time and restraints required for making and 
recouping an efficiency enhancing investment. If the invent ion resulting from the 
investment grants exclusivity to the parties under intellectual property rights, it is 
generally unlikely for the recoupment period for such an investment to exceed the 
exclusivity period determined.  
3.5. Examples  
Example 1  
126. Impact of  R&D cooperation in innovation/new product markets  
Undertaking A which is a small research company that does not have its own marketing 
division has discovered and patented a pharmaceutical substance based on new technology 
that will revolutionize the trea tment of a certain disease. Undertaking A enters into an 
R&D agreement with undertaking B, which is a large pharmaceutical producer 
manufacturing the products that have so far been used for treating the disease in question. 
Undertaking B lacks any similar expertise and R&D program and would not be able to 
build such expertise within a relevant timeframe. For the existing products, undertaking B 
has a market share of around 75%; but the its patents will expire over the next five years. 
There exist two other competing R&D efforts comprised of undertakings using the same 
new technology and at approximately the same stage of development. Undertaking B will 
provide considerable funding and know -how for product development, as well as future 
access to the market f or the products. Undertaking B is granted a license for the exclusive 
production and distribution of the resulting product for the duration of the patent. Th 
product is expected to be brought to market within five to seven years.     31 Assessment:  The product wi ll most probably belong to a new relevant market. The parties 
bring complementary resources and skills to the cooperation, and the probability of the 
product coming to market increases substantially as a result of the cooperation. Although 
undertaking B is  likely to hold significant market power in the existing market, that market 
power will start to decrease shortly. The agreement will not lead to a loss in R&D on the 
part of undertaking B, since undertaking B lacks any expertise in the area of R&D and the  
existence of rival R&D efforts are of a nature to eliminate any incentive to reduce R&D 
efforts. Undertaking B would need rights to exploit the results of the R&D efforts during 
the patent period in order to be able to make the necessary investments Under taking A, on 
the other hand, has no marketing resources of its own. Consequently, the relevant 
agreement is unlikely to give rise to restrictive effects on competition within the meaning 
of article 4. Even if such effects were to arise, it is likely that c onditions specified in article 
5 would be met.  
Example 2  
127. Impact of R&D cooperation on dynamic product and technology markets and the 
environment  
Two engineering companies that produce vehicle components agree to set up a joint 
venture with an aim to combin e their R&D efforts to improve the production and 
performance of an existing component. The production of the relevant component would 
also have a positive effect on the environment; vehicles would consume less fuel and 
therefore emit less CO 2. The underta kings will pool their existing technology licensing 
activities, but will continue to manufacture and sell the components separately. The two 
undertakings have a domestic market shares of 15% and 20% in the "original equipment 
manufacturer" (OEM) market. Th ere are two other major competitors in this area in 
addition to the in -house research programs by large -scale vehicle manufacturers. In the 
world -wide market for the licensing of technology for the products in question, the parties 
have 20% and 25% market shares on the basis of turnover, and there are two rival major 
technologies. The life cycle for the component is typically two to three years. For the past 
five years, one of the major undertakings has introduced a new version or upgrade for the 
component each year.  
Assessment: Since neither undertaking’s R&D effort is aimed at a completely new 
product, the markets to consider are those for the existing components and for the licensing 
of the relevant technology. The combined market share of the parties in both the OEM 
market (35%) and, in the technology market (45%) are quite high. However, the parties 
will continue to manufacture and sell the components separately. In addition, there are 
several competing technologies, which are regularly improved. Moreove r, the vehicle 
manufacturers who do not currently license their technology are also potential entrants for 
the technology market, and thus constrain the ability of the parties to profitably raise 
prices. Within this context, even if the joint venture has r estrictive effects on competition 
within the meaning of article 4, it could fulfil the criteria of exemption listed in article 5. 
For the assessment under article 5, it would be necessary to take into account that lower 
fuel consumption would be to the ben efit of the consumers.      32 4. PRODUCTION AGREEMENTS  
4.1. Definition and Scope  
128. Block Exemption Communiqué on Specialization Agreements, no 2013/3 specifies the 
conditions for granting block exemption to specialization agreements between 
undertakings from the application of the provisions of article 4 of the Act. As also 
mentioned in paragraph 8 of these Guidelines, this chapter titled "Production Agreements" 
is complementary in nature to the Specialization Communiqué.  
129. Production agreements may come in various forms and they are meant to ensure that 
production may be carried out by one or more undertakings. Undertakings can engage in 
joint production by way of a joint venture company under their shared control operating 
one or more production facilities, or via looser forms of cooperation such as 
subcontracting agreements where one party (the contractor) entrusts to another party 
(subcontractor) the production of a good.  
130. There are different types of subcontracting agreements. Horizontal subcontracting 
agreements are concluded between undertakings operating in the same product market 
irrespective of whether they are actual or potential competitors, while vertical 
subcontracting agreements are concluded between undertakings operating at different 
levels of the marke t. 
131. Horizontal subcontracting agreements comprise unilateral and reciprocal specialization 
agreements as well as subcontracting agreements with a view to expanding production. 
"Unilateral specialization agreements" are agreements between two parties which o perate 
in the same product market or markets, wherein one party agrees to fully or partly cease 
production of certain products or to purchase them from the other party, and the other 
party agrees to produce and supply the products in question. "Reciprocal specialization 
agreements" are agreements between two or more parties which operate in the same 
products market or markets, wherein they agree, on a reciprocal basis, to fully or partly 
cease producing certain but different products or to purchase those pr oducts from the other 
parties, and the other parties agree to produce and supply the products in question. 
"Subcontracting agreements with a view to expanding production" are those agreements 
where the contractor entrusts the subcontractor with the product ion of a good, while the 
contractor does not cease or limit its own production of the relevant good.  
132. The principles in these Guidelines are valid for all forms of joint production agreements 
and horizontal subcontracting agreements. Subject to certain cond itions, joint production 
agreements as well as unilateral and reciprocal specialization agreements may benefit 
from block exemption under the Specialization Communiqué.  
133. Vertical subcontracting agreements are not covered by these Guidelines; instead they fa ll 
within the scope of the Guidelines on Certain Subcontracting Agreements Between Non -
Competitors and may benefit from block exemption under the Block Exemption 
Communiqué on Vertical Agreements, no 2002/2, subject to certain conditions.     33 4.2. Relevant mar kets 
134. In order to assess the competitive relationship between the cooperating parties, it is 
necessary first to define the relevant market or markets directly concerned by the 
cooperation in production, that is to say, the markets to which the products manu factured 
under the production agreement belong.  
135. A production agreement can also have spill -over effects in neighboring markets directly 
concerned by the cooperation (spill -over markets), for instance upstream or downstream 
to the agreement. The spill -over markets will be taken into consideration in the assessment 
to be conducted as well, if the markets are interdependent and the parties are in a strong 
position in the spill -over markets.  
4.3. Assessment under Article 4 of the Act  
4.3.1.  Main competitive concerns  
136. Production agreements, and in particular production joint ventures, may cause restriction 
of competition by leading the parties to align output volumes, product quality, product 
price and other competitively important parameters. This may happen e ven if the parties 
market the products independently.  
137. Production agreements may lead to higher prices or reduced output, product quality, 
product variety or innovation, that is to say, to a collusive outcome, as a result of the 
parties' coordinating their competitive behavior as suppliers. This can happen, depending 
on market power of the parties and whether the market is conducive to coordination, in 
particular if the production agreement makes the variable costs of the parties similar to a 
degree which en ables a collusive outcome, or if it involves an exchange of competitively 
sensitive information.  
138. Production agreements may furthermore lead to the foreclosure of related markets to other 
undertakings. For instance, by gaining enough market power, parties e ngaging in joint 
production activities in the upstream market may be able to raise the price of a key 
component for a downstream market, and thus they could use the joint production activity 
to raise the costs of their competitors downstream and, ultimatel y, force these competitors 
off the market. This, as a result, could have adverse effects on the consumers by allowing 
the parties to increase their market power downstream and to sustain prices above the 
competitive level, or through other ways. Such compe tition concerns could materialize 
irrespective of whether the parties to the agreement are competitors in the market in which 
the cooperation takes place. However, in order to talk about this kind of market 
foreclosure, at least one of the parties must hav e a strong position in the market where the 
risk of foreclosure of the market to the competitors is identified.  
4.3.2.  Restriction of competition by object     34 139. Generally, agreements which involve price -fixing, limiting output or allocating markets 
or customers  restrict competition by object. However, in the context of production 
agreements, this does not apply under the following circumstances:  
 Where the parties agree on the elements directly concerned by the production 
agreement (for example, the capacity and production volume of a joint venture 
or the amount of products to be outsourced to third parties), provided that the 
other parameters of competition are not eliminated,  
 Where a production agreement that provides for the joint distribution of the 
products m anufactured as a result of the cooperation also jointly determines the 
sales prices for the products manufactured, provided that this is absolutely 
necessary for the parties to come to an agreement concerning joint production.  
140. In these two cases an assessm ent is required as to whether the agreement gives rise to 
restrictive effects on competition within the meaning of article 4. In both scenarios, the 
provisions of the agreement concerning output or prices will not be assessed separately, 
but in light of th e overall effects of the entire production agreement on the market.  4.3.3. 
Restrictive effects on competition  
141. The likely effects on competition of a production agreement and whether it would fall 
under article 4 depends on the characteristics of the market  in which the agreement takes 
place, as well as on other variables such as the products covered by the cooperation and 
the nature and scope of the cooperation.  
142. When assessing the likelihood of a production agreement causing restrictive effects on 
competiti on, a comparison must be made between the situation where the agreement exists 
together with all of its effects thought to restrict competition and the situation where such 
an agreement does not exist.  
143. If a new market is created as a result production agre ements, the agreement is no likely to 
give rise to restrictive effects on competition. For instance, if a new product or service is 
launched which would, on the basis of objective criteria, have been impossible for the 
parties to produce individually due t o technical impracticalities, the likelihood of 
restricting competition would be low.  
144. In those sectors where production is the main economic activity, even a pure production 
agreement can limit competition by eliminating key dimensions of competition.  
145. A production agreement can lead to a collusive outcome in the market or to the foreclosure 
of the market to competitors, if it increases the undertakings’ market power or their 
commonality of costs, or if it involves the exchange of competitively sensitive 
information. The parties of the agreement can only profitably maintain prices above the 
competitive level, or profitably maintain output, product quality or variety below the 
competitive level if they have market power.  
146. In cases where an undertaking with mark et power in a certain market cooperates with a 
potential competitor in the position of a supplier of the same product in a neighboring    35 geographic or product market, the agreement would potentially increase the market power 
of the incumbent undertaking. Thi s can lead to restrictive effects on competition if actual 
competition in the incumbent's market is already weak and the threat of entry forms 
significant competitive pressure.  
147. Production agreements which also involve commercialization functions, such as j oint 
distribution or marketing, carry a higher risk of restricting competition than pure joint 
production agreements. In cases of joint commercialization, cooperation happens closer 
to the consumer and usually involves practices that carry the highest risk s for competition 
such as the joint setting of sales prices and amounts. However, joint distribution 
agreements for products which have been jointly produced are generally less likely to 
restrict competition than those agreements which involve pure joint d istribution 
agreements. Also, a joint distribution agreement that is necessary for the joint production 
agreement to take place is less likely to restrict competition than a joint distribution 
agreement that is not necessary for joint production.  
Market power  
148. A production agreement is unlikely to restrict competition if the parties thereof do not hold 
market power. The analysis of market power takes into account various factors including 
the concentration ratio and the number of players in the market,  potential entry 
opportunities into the market, variability of market shares and, in particular, the market 
shares of the parties.  
149. Undertakings with a market share below a certain level are less likely to have market 
power. In any event, unilateral or reciprocal specialization agreements as well as joint 
production agreements that include certain commercialization activities such as joint 
distribution are covered by the Specialization Communiqué, provided that the combined 
market share of the parties in  the relevant market or markets do not exceed 25% and that 
the other conditions listed in the Specialization Communiqué are fulfilled. Moreover, 
similarly, as regards horizontal subcontracting agreements with a view to expanding 
production, in most cases i t is hard to talk about market power if the combined market 
share of the parties to the agreement does not exceed 20%.  
150. However, if the combined market share of the parties exceeds 25%, the restrictive effects 
on competition would have to be analyzed, since  the agreement would not be covered by 
the Specialization Communiqué. A market share that exceeds the above -mentioned 
threshold for the Specialization Communiqué or subcontracting agreements may not 
necessarily imply a highly concentrated market. In a mark et with moderate concentration, 
the combined market share of the parties may be 25% or slightly more than that. Generally, 
a production agreement is more likely to lead to restrictive effects on competition in a 
concentrated market than in a market which i s not concentrated. Similarly, conclusion of 
a production agreement in a concentrated market may increase the risk of a collusive 
outcome in comparison to a market that is not concentrated, even if the parties only have 
a moderate combined market share.     36 151. Even if the market shares of the parties to the agreement and the market concentration are 
high, the risk of restriction of competition posed by an agreement concluded in a market 
in which new entries occur and market positions change frequently would be low . 
152. In the analysis of whether the parties to a production agreement have market power, the 
number and intensity of relationships between the competitors (for example, other 
cooperation agreements) in the market are taken into account as well.  
153. For the compet itive assessment of the agreement, factors such as whether the parties to 
the agreement have high market shares, whether they are close competitors, whether the 
customers have limited possibilities of switching suppliers, whether competitors would be 
capab le of increasing supply if prices increase, and whether one of the parties to the 
agreement exerts significant competitive pressure in the market are all taken into 
consideration.  
Collusive outcome  
154. The likelihood of a collusive outcome depends on the parti es’ market power as well as the 
characteristics of the relevant market. A collusive outcome can result in particular if the 
production agreement cases commonality of costs or an exchange of information.  
Commonality of costs  
155. A production agreement between p arties with market power can cause restrictive effects 
on competition if it increases the commonality of the variable costs for the product in such 
a way as to enable the parties to collude.  
156. If, prior to the agreement, the variable costs of the parties is mostly similar as in 
homogenous products, then increasing the commonality of production costs as well would 
increase the likelihood of a collusive outcome. On the other hand, if the commonality in 
the costs of the parties sees a significant increase as a r esult of the agreement, the risk of 
a collusive outcome for the agreement will be high, even if the level of commonality of 
costs before the agreement was low.  
157. Commonality of costs increases the risk of a collusive outcome only if production costs 
constitu te a large proportion of the variable costs concerned. This is, for instance, not the 
case where the cooperation concerns products which require incurring high costs for 
commercialization, since production costs would constitute a small portion of the vari able 
costs. An example would be new or heterogeneous products requiring high marketing or 
transport costs.  
158. Another situation where commonality of costs can lead to a collusive outcome could be 
where the parties form a joint venture concerning an intermedia te product which accounts 
for a large proportion of the variable costs of the final product with respect to which the    37 parties compete in the downstream market. The parties could use the production 
agreement to increase the price of the important common inp ut for their products in the 
downstream market. This would weaken competition downstream and would most likely 
lead to higher prices for the final product. The profit generated would be shifted from 
downstream to upstream to be shared between the parties t hrough the joint venture.  
159. Similarly, commonality of costs also increases the risk of restriction of competition with 
respect to a horizontal subcontracting agreement where the input contractor purchases 
from the subcontractor accounts for a large proportio n of the variable costs of the final 
product in relation to which the parties compete.  
Information exchange  
160. Negative effects arising from exchange of information will not be assessed separately but 
in the light of the overall effects of the agreement. A pr oduction agreement can give rise 
to restrictive effects on competition if it involves an exchange of competitively sensitive 
information that can lead to a collusive outcome or to the foreclosure of the market to 
competitors. The likelihood of an exchange of information performed in the context of a 
production agreement to lead to restrictive effects on competition should be assessed 
according to the principles explained in the chapter of these Guidelines concerning 
information exchange.  
161. If the information exchange does not exceed the sharing of data necessary for the joint 
production of the goods subject to the production agreement, then even if the information 
exchange had restrictive effects on competition within the meaning of article 4, the 
agreement wo uld be more likely to meet the exemption criteria of Article 5. In this case 
the efficiency gains stemming from joint production are likely to outweigh the restrictive 
effects on competition stemming from the coordination of the parties’ conduct. 
Conversel y, where an information exchange that goes beyond what is necessary for joint 
production is concerned, such as the exchange of data on prices and sales, then it is less 
likely for the agreement to fulfil the conditions of article 5.  
4.4. Assessment under A rticle 5 of the Act  
4.4.1.  Efficiency gains  
162. Production agreements can provide efficiency gains such as cost savings or improvement 
in production technologies. By producing together, undertakings can save costs by 
avoiding cost duplication. If, as a result of the cooperation, marginal costs decrease in line 
with the increase in the output, that is to say, if economies of  scale are utilized, then the 
production costs of the undertakings would also decline. Joint production can also help 
undertakings to improv e product quality if they put together their complementary skills 
and know -how elements. Cooperation can also enable an increase in product variety, 
which the undertakings could not have financed or achieved otherwise. If joint production 
allows an increas e in product variety, it can also provide cost savings by means of 
economies of scope.     38 4.4.2.  Pass -on to consumers  
163. Efficiency gains attained need to be passed on to consumers in the form of lower prices, 
better product quality or product variety to an extent that outweighs the restrictive effects 
on competition. Efficiency gains that only benefit the parties or cost savings caused by 
output reduction or market allocation are not sufficient to meet the conditions listed in 
article 5. Savings attained in fixed costs as a result of a production agreement is less likely 
to be passed -on to the consumers than savings attained in variable costs. Moreover, the 
higher the market power of the parties the less likely they are to pass on the efficiency 
gains to cons umers in a way that would outweigh the restrictive effects on competition.  
4.4.3.  Non-elimination of competition  
164. If competition is eliminated in respect of a substantial part of the relevant market, then the 
agreement cannot benefit from exemption under ar ticle 5. The assessment to be conducted 
within this framework must analyze the relevant market to which the products subject to 
the cooperation belong as well as any possible spill -over markets.  
4.4.4.  Indispensability  
165. A production agreement which includes  restrictions that go beyond what is necessary to 
achieve the efficiency gains would not meet the conditions listed in article 5. For instance, 
restrictions imposed in a production agreement on the parties’ competitive conduct with 
regard to products outsi de the scope of the cooperation will normally not be considered to 
be indispensable. Similarly, where the production agreement does not involve joint 
commercialization, joint price setting will not be considered to be indispensable for the 
agreement.  
4.5. Examples  
Example 1  
166. Commonality of costs and collusive outcome  
Undertakings A and B, two suppliers of a product K, agree to replace their existing 
production plants by building a modern and more efficient production plant with a higher 
capacity than the tot al capacity of their old plants, which will be run by a joint venture to 
be established. no such investments are planned by competitors, which are using their 
facilities at full capacity. Undertakings A and B have market shares of 20% and 25% 
respectively.  The products of the two undertakings are the closest substitutes for each other 
in this concentrated market. The market is rather transparent and stagnant, there is no new 
entry into the market and the current market shares have been stable over time. Pro duction 
costs constitute a major part of the variable costs for undertakings A and B with respect to 
product K. Since product K is homogenous and established, its commercialization costs 
are low and transportation costs do not constitute a key element in t erms of competition.     39 Assessment: If undertakings A and B share all or most of their variable costs, this 
production agreement could lead to a direct limitation of competition between the parties. 
This may lead the parties to limit the output of the joint v enture compared to what they 
would have produced independently. In the light of the capacity constraints of the 
competitors, this reduction in output could lead to higher prices.  
Even if undertakings A and B were not sharing most of their variable costs, b ut only a 
significant part thereof, the agreement could lead to a collusive outcome, thereby 
indirectly eliminating competition between the two parties.  This likelihood depends not 
only on the commonality of costs, but also on certain characteristics of th e relevant market 
such as transparency, stability and level of concentration.  
In either of the two situations mentioned above, it is likely, in the market configuration of 
this example, that the production joint venture created by undertakings A and B woul d 
give rise to restrictive effects on competition within the meaning of article 4 in the market 
to which product K belongs.  
It is possible for the joint venture to benefit consumers by offering more output at lower 
prices through the replacement of two sma ller old production plants with a larger, modern 
and more efficient facility. However, in order for the production agreement to meet the 
conditions of article 5, the parties must prove that the efficiency gains would be passed on 
to consumers to such an ex tent as to outweigh the restrictive effects on competition.  
Example 2  
167. Links between competitors and collusive outcome  
Undertakings A and B which are the suppliers for product K, form a production joint 
venture with respect to product K. Undertakings A and B each have a 15% market share 
in the market for K. Also in the market are undertaking C with a market share of 30%, D 
with a market share of 25%, and E with a market share of 15%. Undertakings B and D 
already have a facility for joint production.  
Assessme nt: There are very few undertakings in the market with similar sizes. A 
cooperation between undertakings A and B would also link undertaking D with 
undertakings A and B, thereby creating an additional link in the market and leading to a 
de facto increase i n market concentration. This cooperation is likely to increase the risk of 
a collusive outcome in the market, giving rise to restrictive effects on competition within 
the meaning of article 4. The agreement would only benefit from the exemption of article 
5 in the presence of significant efficiency gains which are passed on to consumers to such 
an extent that they would outweigh the restrictive effects on competition.  
Example 3  
168. Foreclosure of a downstream market     40 Undertakings A and B set up a joint venture f or the production of the intermediate product 
K. The production costs of K account for 70% of the variable costs of the final product L 
with respect to which undertakings A and B compete downstream. Undertakings A and B 
each have a market share of 20% on t he product market for L, where there is limited entry 
and the market shares have been stable. Undertakings A and B can cover the entirety of 
their own demand for K and each have a market share of 40% on the market for K. There 
are high barriers to entry on  the market for K and existing producers are operating near 
full capacity. On the market for L, there are two other significant competitors, each with 
a market share of 15% as well as several smaller competitors. The production agreement 
in question genera tes economies of scale.  
Assessment: By virtue of the production joint venture, undertakings A and B would be 
able to largely control the supply for K, which is an essential input for their competitors 
in the market for L. This situation could give undertakings A and B the ability to raise 
their competitors' costs by artificially increasing the price or reducing the output of K, and 
thus lead to the foreclosure of the L market to competitors. Due to the possibility of 
downstream market foreclosure, t his agreement is likely to give rise to restrictive effects 
on competition within the meaning of article 4. The economies of scale generated by the 
production joint venture agreement are unlikely to outweigh the restrictive effects on 
competition, and ther efore this agreement would most likely not meet the conditions of 
article 5.  
Example 4  
169. Market allocation via specialization agreements  
Undertakings A and B both manufacture products K and L. Undertaking A’s market share 
of K is 30% and of L 10%. B’s market  share is 10% for K and 30% for L. To obtain 
economies of scale, the undertakings conclude a specialization agreement according to 
which undertaking A will only produce product K, and undertaking B only product L. 
Undertakings do not engage in cross -supply ; thus, undertaking A only sells product K and 
undertaking B sells only product L. The parties claim that by specializing in this way they 
will save costs due to the economies of scale and that focusing on only one product will 
improve their production tec hnologies, which will increase the quality of their products.  
Assessment: With regard to its effects on competition in the market, this specialization 
agreement is similar to a hardcore cartel for market allocation. Therefore, this agreement 
restricts comp etition by object. Because the claimed efficiencies such as economies of 
scale and improving production technology are directly linked to the allocation of the 
market, these would not outweigh the restrictive effects on competition, and conditions 
listed a rticle 5 would not be fulfilled. On the other hand, if undertakings A and B believe 
that it would be more efficient to focus on only one product, they can take the unilateral 
decision to only produce K or L without a simultaneous decision by the other unde rtaking 
to focus on the production of the remaining product at the same time.     41 The analysis would be different if undertakings A and B continue to produce products K 
and L, and concluded an agreement to supply each other with the product they specialize 
on. In such a case, especially where production costs do not constitute a major share of the 
variable costs of the products, undertakings A and B could still continue competing on 
price in both markets. Hence, the specialization agreement would not be able to  restrict 
competition if K and L were largely heterogeneous products, with a high proportion of 
marketing and distribution costs within total costs (for example, 65 -70%). In such a 
scenario, the risks of a collusive outcome would not be high and the condit ions of article 
5 can be fulfilled, provided that the efficiency gains can be passed on to consumers to such 
an extent that they would outweigh the restrictive effects on competition of the agreement.  
Example 5  
170. Information exchange in a production agreemen t 
Undertakings A and B with high market power decide to produce together to become more 
efficient. Within the context of this agreement, the undertakings secretly exchange 
information about their future prices. The agreement does not cover joint distributi on. 
Assessment:  This information exchange is likely to restrict competition by object within 
the meaning of article 4, since it strengthens the likelihood of collusive outcome.  The 
agreement would be unlikely to meet the conditions of article 5, because th e sharing of 
information by the parties concerning their future prices is not indispensable for ensuring 
joint production and cost savings.  
     42 5. JOINT PURCHASING AGREEMENTS  
5.1. Definition and scope  
171. Joint purchasing can be carried out by a company jointly controlled by more than one 
undertaking, by a company in which many other undertakings hold non -controlling stakes, 
by a contractual arrangement or by looser forms of cooperation. Joint purchasing 
arrangements aim at the creation of buying power, thereby u sually ensuring lower prices 
or better quality products or  services for consumers. However, buying power may, under 
certain circumstances, also give rise to competition problems.  
172. Joint purchasing agreements may involve both horizontal and vertical arrangem ents. In 
these cases a two -stage analysis is necessary. First, the horizontal agreements between the 
undertakings engaging in joint purchasing have to be assessed according to the principles 
described in these Guidelines. If that assessment leads to the co nclusion that the joint 
purchasing arrangement does not give rise to competition concerns, a further assessment 
will be necessary to examine the relevant vertical arrangements. The latter assessment will 
follow the rules of the Block Exemption Communiqué o n Vertical Agreements, no 2002/2 
and the relevant Guidelines.  
173. Joint purchasing agreements are generally observed in the form of associations of 
undertakings formed by a group of retailers for the joint purchasing of products. 
Horizontal agreements conclude d between the members of the association or decisions 
adopted by the association first have to be assessed as a horizontal cooperation agreement 
according to these Guidelines. If no competition problems are found as a result of that 
assessment, it becomes relevant to assess the vertical agreements concluded between the 
association and a member thereof and between the association and suppliers. Those 
agreements are covered by block exemption under the Communiqué no 2002/2, subject to 
certain conditions. Thos e vertical agreements which fall under article 4 of the Act but 
which are not covered by block exemption under the Communiqué no 2002/2 mentioned 
above are subject to exemption assessment under article 5 of the Act.  
5.2. Relevant markets  
174. There are two markets which may be affected by joint purchasing agreements. The first of 
these is the markets with which the joint purchasing arrangement is directly concerned, 
that is to say, the relevant  purchasing markets. The second are the selling markets, which 
are the downstream markets where the parties to the agreement are active as sellers.  
175. The definition of relevant purchasing markets is based generally on the concept of 
substitutability. The only difference between the definition of purchasing markets from 
the definition of selling markets is that substitutability has to be defined from the 
viewpoint of supply instead of demand. In other words, the supplier alternatives have 
decisive effect on identifying the competitive constraints on purchasers. Those altern atives 
could be analyzed, for instance by examining the suppliers’ reaction to a small but non -
transitory decrease in prices. Once the market is defined, the market share can be    43 calculated as the percentage of the purchases by the parties out of the total sales of the 
purchased product or products in the relevant market.  
176. If the parties are, in addition, competitors on one or more selling markets, those markets 
must also be considered within the scope of the relevant market for the purposes of the 
assessment . The selling markets have to be defined within the framework of the 
methodology described in the Guidelines on the Definition of Relevant Market.  
5.3. Assessment under Article 4 of the Act  
5.3.1.  Main competitive concerns  
177. Joint purchasing arrangements may  lead to restrictive effects on competition in the 
purchasing and/or downstream selling markets, such as increase in product prices, 
reduction in output, product quality and variety or innovation, market allocation, or 
foreclosure of the market to other po ssible purchasers.  
178. If downstream competitors purchase a significant part of their products together, the 
incentive for price competition on the selling markets may be considerably reduced. Even 
though this does not necessarily amount to dominant position, if the parties hold 
significant market power in the selling markets, it is likely that the lower purchase prices 
achieved by the joint purchasing arrangement would not be passed on to consumers.  
179. In case the parties have a significant degree of market power  on the purchasing market 
(buying power), there is a risk that they may force suppliers to reduce the variety or quality 
of products they produce. This situation may bring about certain restrictive effects, such 
as reduction in quality, lessening of innova tion efforts, or ultimately sub -optimal amount 
of supply.  
180. Buying power of the parties to the joint purchasing arrangement could be used to foreclose 
competing purchasers by limiting their access to efficient suppliers. This is more likely 
where there are a  limited number of suppliers and there are barriers to entry on the supply 
side of the upstream market.  
181. In general, however, joint purchasing arrangements are less likely to give rise to 
competition concerns if the parties do not have market power in the s elling markets.  
5.3.2.  Restriction of competition by object  
182. Joint purchasing arrangements restrict competition by object if they do not truly concern 
joint purchasing, but serve as a tool to form a disguised cartel, that is to say, to engage in 
activities such as price fixing, output limitation or market allocation which are otherwise 
prohibited.     44 183. Agreements which involve the fixing of purchase prices can restricting competition by 
object in accordance with article 4.  However, where the parties to the arrang ement 
concerning the joint purchasing agreement settle on the purchasing prices the arrangement 
would pay to suppliers for the products subject to the supply contract, an assessment is 
required as to whether the agreement is likely to give rise to restrict ive effects on 
competition within the meaning of article 4. In both scenarios the agreement on purchase 
prices will not be assessed on its own, but in light of the overall effects of the purchasing 
agreement on the market.  
5.3.3.  Restrictive effects on com petition  
184. The actual and potential competitive effects of joint purchasing arrangements which do 
not restrict competition by object must be analyzed in light of their own legal and 
economic context. The analysis of the restrictive effects on competition gen erated by a 
joint purchasing agreement must cover the negative effects on both the purchasing and the 
selling markets.  
Market power  
185. There is no absolute threshold which demonstrates that one of the parties to a joint 
purchasing arrangement holds market pow er and thus the agreement is likely to give rise 
to restrictive effects on competition in accordance with article 4. However, in most cases, 
it is unlikely that market power exists if the combined market share of the parties to the 
joint purchasing arrange ment  does not exceed 15% in the purchasing markets and 15% in 
the selling markets. Besides, if the combined market shares of the parties do not exceed 
15% on both the purchasing and the selling markets, it is likely that the conditions of 
article 5 are ful filled.  
186. A market share above that threshold in one market or both does not automatically indicate 
that the joint purchasing arrangement would give rise to restrictive effects on competition. 
In such a case, it is necessary to assess the joint purchasing ar rangement in terms of its 
effects on the market, by taking into consideration factors such as market concentration 
and possible countervailing power of strong suppliers.  
187. Buying power may, under certain circumstances, cause restrictive effects on competitio n. 
Anti-competitive buying power is likely to arise if purchases made by a joint purchasing 
arrangement accounts for a sufficiently large proportion of the purchasing market so that 
access to the market may be foreclosed to competing purchasers. A high deg ree of buying 
power may indirectly affect the output, quality and variety of products in the selling 
market.  
188. When analyzing whether the parties to a joint purchasing arrangement have buying power, 
the number and intensity of links (for example, other purch asing agreements) between the 
competitors in the market are important.     45 189. However, in case of cooperation by competing purchasers who are not active on the same 
relevant selling market (for example, retailers which are active in different geographic 
markets a nd cannot be regarded as potential competitors), the joint purchasing 
arrangement is unlikely to have restrictive effects on competition, provided that the parties 
does not have a position in the purchasing markets which may harm the competitive 
position o f other players in their respective selling markets.  
Collusive outcome  
190. Joint purchasing arrangements which make it easier for the parties to coordinate their 
behavior in the selling market may lead to a collusive outcome. This can be the case 
particularly where joint purchasing creates a high degree of commonality of costs for the 
parties, provided the parties have market power and the market characteristics are 
conducive to coordination.  
191. The relevant cooperation is more likely to lead to restrictive effects on competition if the 
parties to the joint purchasing arrangement have a significant proportion of their variable 
costs in the relevant downstream market in common. For instance, if retailers active in the 
same market jointly purchase a significant  amount of the products they offer for resale or 
if undertakings which compete with each other in the market related to the final product 
jointly purchase a high proportion of their input together, the aforementioned types of 
cooperation would be highly li kely to lead to restrictive effects on competition.  
192. A joint purchasing arrangement may require the exchange of commercially important 
information such as purchase prices and volumes. The exchange of such information may 
facilitate coordination with regard to sales prices and output, thus leading to a collusive 
outcome in the selling markets. However, spill -over effects from the exchange of 
competitively sensitive information can be minimized where, in a joint purchasing 
arrangement, data is collected withou t being passed on to the parties thereto.  
193. Any negative effects arising from the exchange of information will not be assessed 
separately, but in light of the overall effects of the agreement. Whether the exchange of 
information within the framework of a joi nt purchasing arrangement is likely to lead to 
restrictive effects on competition should be assessed according to the general principles 
included in the chapter on exchange of information. If the information exchange does not 
go beyond the sharing of data necessary for the joint purchasing arrangement, then there 
is a high likelihood that the agreement would meet the conditions specified in article 5.  
5.4. Assessment under Article 5 of the Act  
5.4.1.  Efficiency gains  
194. Joint purchasing arrangements can give r ise to significant efficiency gains. In particular, 
economies of scale may be realized by ensuring savings in cost items by various means 
such as lower purchase prices or reducing transaction, transportation and storage costs.    46 Moreover, joint purchasing ar rangements may give rise to qualitative efficiency gains by 
leading suppliers to innovate and introduce new or improved products in the markets.  
5.4.2.  Pass -on to consumers  
195. Efficiency gains attained, such as cost efficiencies or qualitative efficiencies in  the form 
of introduction of new or improved products in the market, must be passed on to 
consumers to an extent that outweighs the restrictive effects of competition caused by the 
joint purchasing arrangement. Cost savings need to be passed on to consumer s, that is to 
say, the parties’ customers, for example by lowering prices in the selling markets. In case 
the purchasers together have market power in the selling markets, lower purchasing prices 
resulting from the mere exercise of buying power are not lik ely to be passed on to 
consumers. In this case, the conditions of article 5 would not be met. Moreover, the higher 
the market power of the parties in the selling markets, the less likely they are to pass on 
the efficiency gains to consumers in a way that w ould outweigh the restrictive effects on 
competition created by the joint purchasing agreement.  
5.4.3.  Non-elimination of competition  
196. If, as a result of the joint purchasing agreement, competition is eliminated in respect of a 
substantial part of the relev ant market, then the agreement cannot benefit from exemption 
under article 5.  This assessment has to cover both purchasing and selling markets.  
5.4.4.  Indispensability  
197. A joint purchasing agreement which includes restrictions that go beyond what is necessar y 
to achieve the efficiency gains would not meet the conditions listed in article 5. 
Obligations to procure the products exclusively through joint purchasing may, in certain 
cases, be indispensable to achieve the volume necessary for the realization of eco nomies 
of scale. However, such an obligation needs to be assessed in the context of each individual 
case.  
5.5. Examples  
Example 1  
198. Joint purchasing by small undertakings  
150 small retailers conclude an agreement to form a joint purchasing organization. The 
undertakings are obliged to purchase a minimum volume through the organization, 
corresponding to roughly 50% of each retailer’s total costs. The retailers can purchase 
more than the minimum volume through the organization, and they may also purchase 
outside the framework of the agreement. The undertakings have a total market share of 
23% in both the purchasing and the selling markets. Undertaking A and undertaking B are 
the two large competitors of these retailers. The share of undertaking A in the purchasing    47 and selling markets is 25% and that of undertaking B is 35%. There are no barriers which 
would prevent the remaining smaller competitors from also forming a purchasin g group. 
These 150 retailers achieve substantial cost savings by virtue of purchasing jointly through 
the purchasing organization.  
Assessment: The retailers have a moderate market position in the purchasing and the 
selling markets. Furthermore, the coopera tion brings about some economies of scale. Even 
though the retailers achieve a high degree of commonality of costs, the retailers are 
unlikely to have market power in the selling market due to the market presence of 
undertakings A and B, which are both ind ividually larger than the joint purchasing 
organization. Consequently, the retailers are unlikely to coordinate their behavior and 
cause a collusive outcome. Therefore, the formation of the joint purchasing organization 
is unlikely to give rise to restrict ive effects on competition within the meaning of article 
4. Even if such effects were to arise, it is likely that conditions specified in article 5 would 
be met.  
Example 2  
199. Commonality of costs and market power in the selling market  
Two supermarket chains c onclude an agreement to jointly purchase products which 
account for roughly 80% of their variable costs. In the relevant purchasing markets for the 
different product categories, the total market shares of the parties are between 25% and 
40%. Their combined  market share in the relevant selling market is 60%. There are four 
other large retailers in the market, each with a market share of 10%. Market entry by new 
retailers is unlikely.  
Assessment:  This purchasing agreement is likely to lead to a collusive outc ome by 
allowing the parties to coordinate their behavior in the selling market. The parties have 
market power in the selling market and the purchasing agreement gives rise to a significant 
commonality of costs. Moreover, market entry by new retailers is un likely. The incentives 
for the parties to coordinate their behavior would be reinforced if their cost structures were 
already similar prior to the conclusion of the agreement. Moreover, the parties' having 
similar profit margins would further increase the risk of a collusive outcome. This 
agreement also poses the risk of increased selling prices in the downstream market as a 
result of reduced quantity caused by a reduction of demand by the parties. Hence, the 
purchasing agreement is likely to give rise to r estrictive effects on competition within the 
meaning of article 4.  Even though the agreement is quite likely to give rise to efficiency 
gains in the form of cost savings, due to the significant market power held by the parties 
in the selling market, these gains are unlikely to be passed on to consumers to an extent 
that would outweigh the restrictive effects on competition. Therefore, the purchasing 
agreement is unlikely to fulfil the conditions listed in article 5.  
Example 3     48 200. Parties operating in different geographic markets  
Six large retailers, each of which are based in a different region, form a purchasing group 
to buy durum wheat products of different brands. The parties are allowed to purchase other 
similar branded products outside the cooperation. More over, five of them also offer similar 
products in the market under private labels. The combined market share of the members 
of the purchasing group is approximately 25% of the relevant national purchasing market. 
In the purchasing market there are three ot her players of similar size. Each of the parties 
to the purchasing group has a market share between 20% and 30% in the regional selling 
markets in which they operate. None of the members is active in a region where another 
member of the group is operating.  The parties are not potential entrants to each other’s 
markets.  
Assessment: The purchasing group will be able to compete with the other existing major 
players in the purchasing market. The selling markets are much smaller (in terms of 
turnover and geograp hic scope) than the nation -wide purchasing market and some of the 
members of the group may have market power in those markets. Even though the 
combined market share of the members of the purchasing group in the purchasing market 
is not very low, the partie s are unlikely to coordinate their conduct in the selling markets 
since the members are not actual or potential competitors in the downstream markets. 
Consequently, the agreement is unlikely to give rise to restrictive effects on competition 
within the mea ning of article 4. Even if such effects were to arise, it is likely that conditions 
specified in article 5 would be met.  
Example 4  
201. Information exchange  
Three competing manufacturers A, B and C, entrust an independent joint purchasing 
organization with the purchase of product L, which is an intermediary product used by all 
of the three undertakings in the production of the final product K. L is not a significant 
cost factor for the production of K. The joint purchasing organization is not in competition 
with the parties in the selling market for K. All information necessary for the purchases, 
such as quality specifications, quantities, delivery dates and maximum purchase prices, is 
only disclosed to the joint purchasing organization, not to the other parties.  The joint 
purchasing organization agrees on the purchasing prices with the suppliers. A, B and C 
have a combined market share of 30% in each of the purchasing and selling markets. These 
manufacturers have six competitors in the purchasing and selling mark ets, two of which 
have a market share of 20%.  
Assessment: Since there is no direct information exchange between the parties, the transfer 
of the information necessary for the purchases to the joint purchasing organization is 
unlikely to lead to a collusive  outcome. Consequently, the exchange of information is 
unlikely to give rise to restrictive effects on competition within the meaning of article 4. 
Even if such effects were to arise, it is likely that conditions specified in article 5 would 
be met.      49 6. COMMERCIALIZATION AGREEMENTS  
6.1. Definition and scope  
202. Commercialization agreements involve cooperation between competitors related to the 
selling, distribution or promotion of substitute products. This type of agreement can take 
widely varying forms, depend ing on the commercialization functions covered by the 
cooperation. These agreements may lead to a joint determination of all commercial aspects 
related to the sale of the product, including the price, and they may also take a more limited 
form which only c oncern a specific commercialization function, such as distribution, after -
sales service, or advertising.  
203. An important category within commercialization agreements is distribution agreements. 
The Block Exemption Communiqué on Vertical Agreements, no 2002/2 and the related 
Guidelines generally cover distribution agreements, unless the parties to the agreement are 
comprised of actual or potential competitors. Even if the parties are competitors, such 
agreements would be assessed under the Communiqué no 2002/2 in case the supplier is 
both a manufacturer and a distributor of the goods covered by the agreement, while the 
buyer is simply a distributor and not a manufacturer of the competing goods.  
204. If competitors agree to distribute their substitute products on a re ciprocal basis (in 
particular if they do so on different geographic markets), it is possible that the agreements 
have as their object or effect the partitioning of markets between the parties or that they 
lead to a collusive outcome. The same can be true f or non -reciprocal agreements between 
competitors. Hence, agreements between competitors that are not covered by the 
Communiqué no 2002/2 must be assessed according to the principles set out in this 
chapter.  
205. A distinction must be drawn between agreements wh ich only concern joint 
commercialization and agreements in which commercialization is related to another type 
of cooperation in the upstream market, such as joint production or joint purchasing. When 
analyzing commercialization agreements combining differe nt stages of cooperation, it is 
necessary to determine the center of  gravity of the cooperation (see paragraph 12, 
paragraph 13).  
6.2 Relevant markets  
206. In order to assess the competitive relationship between the parties, the relevant product 
and geographic markets directly concerned by the cooperation need to be defined. Since a 
commercialization agreement in one market may also affect the competitive behavior of 
the undertakings in a neighboring market with close ties to the relevant market, any such 
neighb oring market must also be defined. The neighboring market in question may be 
horizontally or vertically related to the market where the cooperation takes place.  
6.3. Assessment under Article 4 of the Act     50 6.3.1.  Main competitive concerns  
207. Commercialization a greements can lead to restrictions of competition in several ways. 
First of all, commercialization agreements may lead to price fixing. Secondly, in 
commercialization agreements, the parties may restrict supply by determining the 
production volume to be pu t on the market. Thirdly, commercialization agreements may 
become a means for dividing the markets or allocating customers, for example in cases 
where the parties’ production facilities are located in different geographic markets or when 
the agreements are  reciprocal. Finally, such agreements may also result in a collusive 
outcome by leading to an exchange of competitively sensitive information related to 
subjects falling within or outside the scope of the cooperation or by leading to a 
commonality of costs . 
6.3.2.  Restriction of competition by object  
208. Price fixing is one of the major competition problems arising from commercialization 
agreements between competitors. Agreements limited to joint selling generally aim to 
coordinate the pricing policy of competitors. Such agreements can not only eliminate price 
competition between the parties in terms of substitute products, but they can also restrict 
the total volume of products to be offered by the parties within the framework of a system 
for allocating orders. Such agreements are therefore highly likely to restrict competition 
by object.  
209. The agreement would be likely to restrict competition by object, even if the agreement is 
non-exclusive (that is to say, even if the parties are free to sell individuall y outside the 
agreement), as long as it is possible to conclude that it will lead to an overall coordination 
of prices.  
210. Another important competition problem related to distribution arrangements between 
parties which are active in different geographic mark ets is that these agreements can be 
used as an instrument of market allocation. If the parties have concluded a reciprocal 
distribution agreement to distribute each other’s products in order to eliminate actual or 
potential competition between them by allo cating markets or customers, the agreement is 
likely to restrict competition by object. If the agreement is not reciprocal, the risk of market 
allocation is smaller. However, it is necessary to assess whether the non -reciprocal 
agreement would lead to a mu tual understanding where the parties avoid entering each 
other's markets.  
6.3.3.  Restrictive effects on competition  
211. Under normal circumstances, a commercialization agreement is not likely to give rise to 
competitive problems if it is objectively deemed to be necessary in order to allow one of 
the parties to the agreement to enter a market it could not have entered indiv idually (or 
with a fewer number of parties than are effectively taking part in the cooperation), for 
example, because of the costs involved. A specific application of this principle would be 
consortia which allow the undertakings involved to participate in  projects that they would    51 not be able to undertake individually.  As the parties to the consortium are not potential 
competitors for the implementation of the project, no restriction of competition is expected 
under these circumstances.  
212. Similarly, all recip rocal distribution agreements do not necessarily have restriction of 
competition as their object. Nevertheless, depending on the facts of the case at hand, some 
reciprocal distribution agreements may have restrictive effects on competition. The key 
issue i n assessing such an agreement is whether the agreement in question is objectively 
necessary for the parties to enter each other’s markets. If it is, the agreement is not 
expected to create competition problems of a horizontal nature. However, if the agreem ent 
reduces the incentives for one of the parties to enter the other parties’ market, then the 
agreement is likely to give rise to restrictive effects on competition. This assessment also 
applies to non -reciprocal agreements, where the risk of restrictive effects on competition 
is less pronounced.  
213. In addition, a distribution agreement may also lead to restrictive effects on competition if 
it includes vertical restraints such as restriction of passive sales and resale price 
maintenance.  
Market power  
214. Commerci alization agreements between competitors can have restrictive effects on 
competition if the parties have a certain degree of market power. If the combined market 
share of the parties to the agreement does not exceed 15%, it is not likely that market 
power exists in most cases. Besides, if the combined market shares of the parties do not 
exceed 15%, it is likely that the conditions of article 5 of the Act are fulfilled.  
215. The fact that the parties have a combined market share above this ratio does not necessar ily 
mean that the commercialization agreement would lead to restrictive effects on 
competition. In this case, the likely impact of the joint commercialization agreement on 
the market must be assessed.  
Collusive outcome  
216. A joint commercialization agreement t hat does not involve price fixing is also likely to 
give rise to restrictive effects on competition if it increases the parties’ commonality of 
variable costs to an extent that is likely to lead to a collusive outcome. This is likely to be 
the case for joi nt commercialization agreements where the variable costs of the parties 
were already significantly similar prior to the agreement. This is because increasing the 
commonality of commercialization costs as a result of the agreement can raise the 
likelihood o f collusive outcome. On the other hand, where the costs become significantly 
common as a result of the agreement, the risk of a collusive outcome may be high even if 
the initial level of commonality of costs is low.     52 217. The likelihood of collusive outcome depe nds on the parties’ market power and the 
characteristics of the relevant market. Commonality of costs can only increase the risk of 
a collusive outcome if the parties have market power and if the commercialization costs 
constitute a large portion of the va riable costs related to the products in question. This is, 
for example, not the case for homogeneous products for which the highest cost factor is 
production. However, commonality of commercialization costs increases the risk of a 
collusive outcome if the commercialization agreement covers products with high 
distribution and marketing costs. Consequently, where those items constitute a significant 
cost factor, joint advertising or joint promotion agreements can also give rise to restrictive 
effects on compe tition.  
218. Joint commercialization agreements generally involve the exchange of competitively 
sensitive information, such as marketing strategy and pricing. In most commercialization 
agreements, some degree of information exchange is required in order to impl ement the 
agreement. It is necessary to determine whether the information exchange concerned can 
give rise to a collusive outcome with regard to the parties’ activities falling within and 
outside the scope of the cooperation. Any negative effects arising f rom the exchange of 
information will not be assessed separately, but in light of the overall effects of the 
agreement.  
219. For example, where the parties to a joint advertising agreement exchange pricing 
information, a collusive outcome may emerge concerning t he sale of these jointly 
advertised products. In any event, the exchange of such information in the context of a 
joint advertising agreement goes beyond what would be necessary to implement the 
agreement in question. The likely effects on competition of in formation exchange in the 
context of commercialization agreements depends on the characteristics of the market and 
the data shared, and should be assessed in light of the principles included in the chapter 
concerning information exchange.  
6.4. Assessment u nder Article 5 of the Act  
6.4.1.  Efficiency gains  
220. Commercialization agreements can give rise to significant efficiency gains. The 
efficiencies to be taken into account when assessing whether a commercialization 
agreement fulfils the criteria of article 5 d epend on the nature of the activity and of the 
parties to the cooperation. Price fixing is not acceptable, unless it is absolutely 
indispensable for generating substantial efficiencies. Joint distribution can generate 
significant efficiencies, especially f or smaller producers, stemming from economies of 
scale or scope.  
221. In addition, the efficiency gains must not merely be savings resulting from the elimination 
of the costs incurred due to the existence of competition; they must also result from the 
integrati on of economic activities. For instance, a reduction of transport cost which is only 
a result of customer allocation without any integration of the logistical system cannot be 
regarded as an efficiency gain within the meaning of article 5.     53 222. Efficiency gains  must be demonstrated by the parties to the agreement. In this respect, it 
is important for the parties to make significant contributions to capital, technology, or 
other assets within the framework of the cooperation. Cost savings through a reduction in 
the number of resources and facilities used for the same job will also be deemed as 
acceptable gains. On the other hand, a joint commercialization agreement which lacks any 
investments and is no more than a sales department is likely to be a disguised carte l and 
is unlikely to fulfil the conditions of article 5.  
6.4.2.  Pass -on to consumers  
223. Efficiency gains attained must be passed on to consumers in a way that compensates for 
the restrictive effects of the commercialization agreement on competition. This can happen 
in the form of lower prices or better product quality or variety. However, the higher the 
market power of the parties, the less likely they are to pass on the efficiency gains to 
consumers in a way that would outweigh the restrictive effects on comp etition created by 
the agreement. Where the combined market share of the parties is below 15%, it is highly 
likely that any efficiency gains generated by the agreement will be sufficiently passed on 
to consumers.  
6.4.3.  Non-elimination of competition  
224. If, as a result of the commercialization agreement, competition is eliminated in respect of 
a substantial part of the relevant market, then the agreement cannot benefit from 
exemption under article 5. This analysis must also be conducted in relation to the rel evant 
market to which the products subject to the cooperation belong, as well as in relation to 
the possible spill -over markets.  
6.4.4.  Indispensability  
225. A commercialization agreement which includes restrictions that go beyond what is 
necessary to achieve t he efficiency gains would not meet the conditions listed in article 5. 
The question of indispensability is especially important for those agreements involving 
price fixing or market allocation, which can be considered indispensable only un der 
exceptional c ircumstances.  
6.5. Examples  
Example 1  
226. Joint commercialization necessary to enter a market  
Four undertakings providing laundry services in a large city, each with a 3 % market share 
in the laundry market for that city, agree to create a joint marketing arm for selling laundry 
services to institutional customers such as hotels, hospitals and offices, whilst keeping 
their freedom to compete for individual clients. In view of the new segment of demand,    54 i.e. the institutional customers, these undertakings establ ish a common brand name, a 
common price and common standard terms including a maximum period of 24 hours 
before deliveries and schedules for delivery; they also set up a common call center where 
institutional clients can request express services. Within th is framework, they hire a 
receptionist for the call center and several drivers. Further, they invest in vans for 
dispatching, and in brand promotion to increase their recognition. The agreement does not 
fully reduce the infrastructure costs of the parties since they are keeping their own 
premises and still compete with each other for individual clients; however, it increases 
their economies of scale, allowing them to offer a more comprehensive service to other 
clients for a longer period of time and in a wi der geographic area. In order to ensure the 
realization of the project, it is necessary for all four of the undertakings to sign the 
agreement. The market is very fragmented, with no individual undertaking having more 
than 20% market share.  
Assessment: Alt hough the combined market share of the parties is low, the fact that the 
agreement involves price fixing means a violation of article 4 may be at issue. However, 
the parties would not have been able to enter the market for providing laundry services to 
institutional customers, either individually or in cooperation with a fewer number of 
parties than the four currently taking part in the agreement. As such, in this particular case, 
the agreement may not create competition concerns despite the price -fixing re striction it 
includes, since it can be considered as indispensable for the promotion of the common 
brand and the success of the project. Even if such effects were to arise, it is likely that 
conditions specified in article 5 would be met.  
On the other hand , in a situation where four undertakings enter into the agreement when 
just three would have been sufficient for the realization of the project, the fact that the 
agreement involves price fixing and could have been carried out by fewer than four parties 
means that article 4 was violated. Therefore, the agreement needs to be assessed under 
article 5. The agreement gives rise to efficiency gains as the parties are now able to offer 
improved services for a new category of customers on a larger scale, which the y would 
not have been able provide individually. In light of the fact that the combined market share 
of the parties is low, it is likely that efficiency gains will be sufficiently passed on to 
consumers. It is further necessary to consider whether the rest rictions imposed by the 
agreement are indispensable to achieve the efficiencies and whether the agreement 
eliminates competition. Given that the aim of the agreement is to provide new and more 
comprehensive services to an additional category of customers, under a single brand with 
common standards, the price fixing can be considered as indispensable for the promotion 
of the common brand and, consequently, for the success of the efficiencies resulting from 
the project. Additionally, due to the fragmented mar ket structure, the agreement is not 
likely to eliminate competition. The fact that there are four parties to the agreement allows 
for increased capacity and contributes to simultaneously fulfilling the demand of several 
institutional customers in complianc e with the standard terms such as meeting maximum 
delivery time. As such, the efficiency gains are likely to outweigh the restrictive effects 
on competition arising from the reduction of competition between the parties and the 
agreement is likely to fulfil  the conditions of Article 5.  
Example 2     55 227. Joint internet platform  
A number of small florist firms join an electronic web -based platform for the promotion, 
sale and delivery of flower arrangements. There are a number of competing web -based 
platforms. By means  of a monthly fee, member businesses share the operating costs of the 
platform and make joint investments in brand promotion. Through the webpage, where a 
wide range of different types flower arrangements are offered for sale, customers can order 
and pay f or the type of flower arrangements they want to be delivered. The order is then 
forwarded to the firm closest to the address of delivery. The firm individually bears the 
costs of preparing the flower arrangement and delivering it to the client. The firm is  paid 
90% of the final price, which is set by the web -based platform and applies to all 
participating firms, whilst 10% of the final price is used for funding the operating costs of 
the web -based platform and also for common promotion costs. Apart from the  payment of 
the monthly fee, there are no further restrictions for firms to join the platform. Moreover, 
florist firms with their own websites are also able to sell flower arrangements on the 
internet under their own brand and thus the firms are still able  to compete among 
themselves outside the cooperation. Customers purchasing over the web -based platform 
are guaranteed same day delivery of the flower arrangements and they can also choose a 
delivery time convenient to them.  
Assessment: Although the agreeme nt is of a limited nature, as it only covers the joint 
selling of a particular type of product through a specific marketing channel (the web -based 
platform), it is likely to constitute a violation under article 4 since it involves price -fixing. 
The agreeme nt therefore needs to be assessed under article 5. The agreement gives rise to 
efficiency gains by offering benefits to consumers such as greater choice, higher quality 
service and the reduction of search costs. These efficiencies are likely to outweigh th e 
restrictive effects on competition brought about by the agreement. Florist firms taking part 
in the cooperation are still able to continue their individual operations and compete one 
with another, through both their shops and websites. Therefore, price -fixing could be 
considered as indispensable for the promotion of the product and the efficiency gains, 
since when buying through the web -based platform consumers do not know which store 
they are buying the flower arrangement from and do not wish to deal wit h a multitude of 
different prices. In the absence of other restrictions, the agreement fulfils the conditions 
of article 5. Moreover, competition in the market will not be eliminated, as other 
competing web -based platforms exist and the parties continue to  compete with each other 
through their shops or over the internet.  
Example 3  
228. Sales joint venture  
Undertakings A and B, located in two different regions, produce bicycle tires. The 
undertakings have a combined market share of 15% in the nation -wide market for bicycle 
tires. The undertakings decide to set up a non full -function joint venture for sales i n order 
to market the tires jointly and agree to sell all their production through the joint venture. 
The production and transport infrastructure remains within each party. The parties claim 
to have attained considerable efficiency gains from the agreement . It is claimed that such    56 gains basically stem from being able to fulfil the demands of their existing and potential 
customers due to increased economies of scale and from being able to compete better with 
rival tires. The joint venture negotiates the pric es and allocates orders to the closest tire 
manufacturer, with a view to keep transport costs which arise during delivery to the 
customer at an optimum level.  
Assessment: Even though the combined market share of the parties is low, the agreement 
restricts competition by object since it involves customer allocation and the setting of 
prices by the joint venture. The claimed efficiencies deriving from the agreement do not 
result from the integration of economic activities or from common investment. The joint 
venture would have a very limited function since it would only serve as an interface for 
allocating orders between the production facilities. Therefore, the conditions of article 5 
would not be fulfilled since it is unlikely that any efficiency gains would  be passed on to 
consumers  to such an extent that they would outweigh the restrictive effects on 
competition brought about by the agreement.      57 7. STANDARDIZATION AGREEMENTS  
7.1. Definition and scope  
Standardization agreements  
229. The primary objective of standa rdization agreements is to establish the technical 
requirements or quality standards for the alignment of current or future products, 
production processes, services or methods. Standardization agreements can cover various 
issues, such as standardization of  different grades or sizes of a particular product, or 
standardization of technical specifications in product or services markets where 
compatibility and interoperability with other products or services is essential. The terms 
required for access to a part icular quality standard or for approval by a regulatory body 
can also be regarded as a standard. Agreements setting out standards on the environmental 
performance of products or production processes are also covered by this chapter.  
230. Standardization bodies are assessed under the Act no 4054 if they are considered as 
undertakings or associations of undertakings. However, preparation of technical standards 
as part of the exercise of public mandates or standards related to the provision of 
professional services  such as rules of admission to liberal professions do not fall under the 
scope of these Guidelines.  
Standard terms  
231. In certain sectors, standard terms of sale or purchase elaborated by an association of 
undertakings or directly by the competing undertakings  (standard terms) are used. For 
instance, standard terms play an important role in banking and insurance sectors. Standard 
terms which establish standard conditions of sale or purchase for substitute products 
between competing undertakings and consumers ar e covered by these Guidelines. 
Standard terms related to sale or purchase between competitors, on the other hand, do not 
fall within this framework. When standard terms find wide utilization within a sector, the 
conditions of purchase or sale used in the s ector may be aligned without being tied to an 
agreement.  
232. Standard terms elaborated individually by an undertaking solely for its own use in 
contracts signed with its suppliers or customers are not covered by these Guidelines as 
they are not horizontal agre ements.  
7.2. Relevant markets  
233. Standardization agreements may demonstrate their effects on four possible markets. 
Standard -setting may first have an impact on the product or services market to which the 
standard or standards relates. Second, where the stand ard-setting involves the selection of 
technology and where intellectual property rights (IPR) are marketed separately from the    58 products to which they relate, the relevant technology market may be affected. Third, the 
market for standard -setting may be affe cted if different standard -setting bodies or 
agreements exist. Lastly, if a distinct market for testing and certification exists, this market 
may be affected.  
234. The effects of standard terms are in general felt on the downstream market where the 
undertakings  using the standard terms compete with each other by selling their products 
to their customers.  
7.3. Assessment under Article 4 of the Act  
7.3.1.  Main competitive concerns  
Standardization agreements  
235. Standardization agreements usually produce significant po sitive economic effects through 
various means such as creating new and improved products or markets and promoting the 
improvement supply conditions. Normally, standards benefit economies as a whole by 
increasing competition and lowering production and sale s costs. Standards can maintain 
and enhance quality, provide information, ensure interoperability and compatibility and 
thus increase benefits for consumers.  
236. Standard -setting can, however, in certain circumstances, also give rise to restrictive effects 
on competition by potentially restricting price competition and limiting or controlling 
production, market, innovation or technical development. This can occur through three 
main channels: Reduction in price competition, foreclosure of the market to innovativ e 
technologies, and exclusion of, or discrimination against, certain undertakings by 
prevention of effective access to the standard.  
237. First, if undertakings were to engage in anti -competitive discussions in the context of 
standard -setting, this could reduce  or eliminate price competition in the markets 
concerned, thereby facilitating a collusive outcome in the market.  
238. Second, standards that set detailed technical specifications for a product or service may 
limit technical development and innovation. While a standard is being developed, 
alternative technologies can compete with each other for inclusion in the standard. Once 
one technology has been chosen and the standard has been set, competing technologies 
and undertakings may face a barrier to entry and may potentially be excluded from the 
market. In addition, standards which require the exclusive use of a particular technology 
for a standard or which force the members of the standard -setting organization to 
exclusively use a particular standard, may lead to the same effect. The risk of limiting 
innovation is increased if one or more undertakings are excluded from the standard -setting 
process without an objective reason.  
239. The third channel in which standard -setting results in anti -competitive effects is where 
standardization leads to restrictive effects on competition by preventing certain    59 undertakings from obtaining effective access to the results of the standard -setting process, 
that is to say, to the technical specifications and/or to the intellectual propert y rights6 
essential for the implementation of  the standard. In case an undertaking's access to the 
results of the standard is either completely prevented or is tied to prohibitive or 
discriminatory terms, there is a risk of creating restrictive effects on competition. A system 
where intellectual property rights which are likely to be used in setting the standard are 
disclosed up -front may ensure effective access to the standard, since it would allow the 
participants to identify which technologies are covere d by intellectual property rights. In 
this way, the participants will be able to both factor in the potential effect of the results of 
the standard on the final price, and know if the IPR holder would accept to license if their 
technology is included in th e standard.  
240. Intellectual property law and competition law have similar objectives with respect to 
promoting innovation and enhancing consumer welfare. Intellectual property rights 
promote dynamic competition by encouraging undertakings to invest in new or improved 
products and processes. However, a participant holding IPR essential for the 
implementation of a standard, could, by virtue of these rights, acquire control over the use 
of a standard. Therefore, where the standard constitutes a barrier to entry, the 
aforementioned participant could thereby control the product or service market to which 
the standard relates. This in turn could allow undertakings to behave in anti -competitive 
ways, for example by preventing users' effective access to the standard af ter the adoption 
of the standard either through refusing to license the necessary IPR or through extracting 
excessive royalty fees. However, even if the establishment of a standard can create or 
increase the market power for those undertakings which hold t he intellectual property 
rights essential for that standard, simply holding the IPR essential for a standard does not 
necessarily equate to the direct possession or exercise of market power. The question of 
market power, therefore, can only be assessed on a case by case basis.  
Standard terms  
241. Standard terms can give rise to restrictive effects on competition by limiting product 
choice and innovation. If a large part of an industry adopts the standard terms and chooses 
not to deviate from them, or only deviat es from them in exceptional cases of strong buyer 
power, then customers might have no option other than to accept the standard terms. 
However, the risk of limiting choice and innovation is only likely in cases where the 
standard terms define the scope of t he final product. As regards classical consumer goods, 
                                                 
6 In the context of stand ards involving intellectual property rights, different groups of undertakings with different 
interests in standard -setting can be identified. The first of these groups consists of technology development and 
marketing undertakings which are solely active in  the upstream market. Their only source of income is licensing 
revenues and their goal is to maximize their royalties. The second group consists of downstream -only 
undertakings which manufacture products or provide services developed by other undertakings but which do not 
hold relevant IPR. Royalties represent a cost for these undertakings, and their goal is to avoid these costs. The 
last group consists of vertically integrated undertakings that both develop technology and sell products. They 
have mixed inc entives. On the one hand, they can draw licensing revenue from their IPR; on the other hand, they 
may have to pay royalties to other undertakings holding IPR essential to the standard. Therefore, these 
undertakings may cross -license their own essential IPR  in exchange for the essential IPR held by other 
undertakings.     60 standard terms of sale generally do not limit innovation, quality and variety related to the 
product.  
242. In addition, depending on their content, standard terms might pose the risk of affecting the 
commer cial conditions of the final product. In particular, there is a serious risk that price -
related standard terms would restrict price competition.  
243. Moreover, if the standard terms become industry practice in a general sense, access to 
these standard terms mig ht become vitally important for entry into the market. In such 
cases, refusing access to the standard terms could risk causing foreclosure of the market 
to competitors.  As long as the standard terms remain effectively open for use by anyone 
that demands access to them, the possibility of foreclosure of the market to competitors 
would be low.  
7.3.2.  Restriction of competition by object  
Standardization agreements  
244. Standardization agreements which are used as part of another agreement aimed at 
excluding actua l or potential competitors restrict competition by object. For instance, an 
agreement whereby an association of manufacturers sets a standard and puts pressure on 
third parties not to market products that do not comply with that standard, or whereby the 
producers of an existing product come to an understanding to exclude new technologies 
from an existing standard could be assessed under this category.  
245. Agreements where restrictive licensing terms7 are disclosed prior to the adoption of a 
standard in order to  cover joint price fixing related to downstream products, substitute 
intellectual property rights or technologies will be considered under the scope of 
restriction of competition by object. On the other hand, prior disclosure of restrictive terms 
on a unil ateral basis should not be seen as a direct violation of article 4 of the Act.  
Standard terms  
246. Agreements including standard terms, which are used as part of another agreement aimed 
at excluding actual or potential competitors restrict competition by object . An example 
would be where an association of undertakings refuses to allow a new entrant access to 
standard terms, the use of which is vital for entry to the market.  
247. Any standard terms containing provisions which directly influence prices, such as 
recomme nded prices and discounts, would fall under the scope of restriction of 
competition by object.  
                                                 
7 Maximum licensing price to be implemented may be given as an example.     61 7.3.3.  Restrictive effects on competition  
Standardization agreements  
Agreements normally not restrictive of competition  
248. Standardization agreements which do not r estrict competition by object must be analyzed 
in light of their own legal and economic context with regard to their actual and potential 
effects on competition. In the absence of market power, a standardization agreement is not 
expected to produce restric tive effects on competition. Therefore, restrictive effects on 
competition are unlikely to arise in a situation where there is effective competition 
between a number of voluntary standards.  
249. The following paragraphs describe the situations under which stand ardization agreements 
posing a risk of creating market power could normally fall outside of the scope of article 
4. 
250. Even in case the conditions principles set out in this section are absent, an assessment must 
be carried out to establish whether the agreement falls under article 4 and, if so, whether 
or not the conditions of article 5 are fulfilled. It is recognized that a positive aspect of 
market economy is the existence of different models for standard -setting as well as the 
competition between tho se models. Therefore, standard -setting organizations are entirely 
free to establish rules and procedures completely different from those described in the 
paragraphs, as long as they do not violate competition rules.  
251. Normally, where participation  in standar d-setting is unrestricted  and the procedure for 
adopting the standard in question is transparent , standardization agreements which 
contain no obligation to comply  with the standard and provide access to the standard 
on fair, reasonable and non -discriminato ry (FRAND) terms  are not expected to restrict 
competition under article 4.  
252. In particular, to ensure unrestricted participation , the rules established by the standard -
setting organization must guarantee that all competitors in the market or markets affected  
by the standard can participate in the selection process of the standard. Standard -setting 
organizations must establish non -discriminatory and objective procedures for allocating 
voting rights as well as objective criteria for selecting the technologies t o be included in 
the standard, where relevant.  
253. With respect to transparency , the relevant standard -setting organization must introduce 
methods which allow stakeholders to gather timely and effective information concerning 
upcoming, on -going and finalized s tandardization work, at each stage of the development 
of the standard.     62 254. Furthermore, the rules introduced by the standard -setting organization need to ensure 
effective access  to the standard on fair, reasonable and non -discriminatory terms . 
255. In case of a sta ndard involving intellectual property rights, a clear and balanced IPR 
policy, adapted to the relevant industry  and the needs of the standard -setting 
organization, increases the likelihood that those implementing the standard can have 
effective access to t he standards established.  
256. In order to ensure effective access to the standard, those participants wishing to have the 
IPR they hold included in the standard must provide an irrevocable commitment in writing 
to offer to license the essential rights to all t hird parties under fair, reasonable and non -
discriminatory terms. That commitment to license under fair, reasonable and non -
discriminatory terms should be given prior to the adoption of the standard. Moreover, 
holders of these rights should be able to excl ude specified technology from the scope of 
the standard -setting process and thereby from the commitment to offer licenses, provided 
that this takes place at the first stages of the standard development process. To ensure the 
effectiveness of the aforementi oned commitment, IPR holder participators who provide 
such a commitment must ensure that any undertaking to which they transfers their 
intellectual property rights, including licensing rights, is bound by that same commitment.  
257. As well, participants must disclose, on a good faith basis,  any of their intellectual 
property rights which might be essential for the implementation of the standard under 
development. This disclosure would facilitate efficient access to the standard by enabling 
the industry to make a n informed choice of technology. Such a disclosure obligation could 
also include ongoing disclosure as the standard is developed as well as objective efforts to 
identify IPR related to the potential standard. It is also sufficient if the participant declar es 
that it is likely to hold intellectual property rights over a particular technology, without 
mentioning any specific IPR claims or applications. Since aforementioned risks with 
regard to effective access do not apply to cases of standards which do not r equire 
intellectual property rights, IPR disclosure concerning such standards would not be 
necessary, either.  
FRAND commitments  
258. FRAND commitments are designed to ensure that any essential technology under IPR 
protection incorporated in a standard is access ible to the users of that standard on a fair, 
reasonable and non -discriminatory basis. In particular, these commitments can prevent 
IPR holders from making the implementation of a standard difficult by refusing to license 
or by requesting unfair or unreaso nable (excessive) fees or discriminatory fees after the 
industry has been locked -in to a standard.  
259. In order to ensure that a standardization agreement is not caught by article 4, the relevant 
standard -setting organization does not need to demonstrate that the licensing terms of the 
participants themselves fulfil the FRAND commitments. Participants will have to assess 
for themselves whether the licensing terms and in particular the fees they charge fulfil the 
relevant commitments. Therefore, when deciding to  undertake such commitments for a    63 particular IPR, participants will need to accept the implications of the commitment, 
notably on the freedom to set their fees.  
260. In case of a dispute, the assessment of whether fees charged for access to IPR in the 
standard -setting context are unfair or unreasonable should be based on whether there is 
reasonable relationship between these fees and the economic value of the IPR. In general, 
there are various methods available to make this assessment. In principle, cost -based 
methods are not suitable, because of the difficulty in assessing the costs attributable to the 
development of a particular patent. Instead, it is possible to compare the licensing fees 
charged by the undertaking in question for the relevant patents in a com petitive 
environment before the sector has been locked into the standard (ex ante) with those 
charged after the sector has been locked in (ex post). This method may be applied where 
the comparison can be made in a consistent and reliable manner. Licensing fees charged 
for the same intellectual property rights within the context of similar standards may also 
be used as an indicator for FRAND licensing fees. However, these Guidelines do not 
include an exhaustive list of appropriate methods to assess whether l icensing fees are 
excessive.  
261. Also, an independent expert analysis may be requested, stating that the relevant IPR 
portfolio is objectively important and essential for the standard at issue. In certain cases, 
it may also be possible to refer to ex ante disclosures concerning licensing terms in relation 
to a specific standard -setting process.  
Effects based assessment for standardization agreements  
262. The assessment of standardization agreements must take into account the likely effects of 
the standard on the  markets concerned. The following considerations apply to all 
standardization agreements that depart from the principles set out in paragraphs 251 to 
257. 
263. Whether standardization agreements will give rise to restrictive effects on competition 
may depend on  whether the members of the standard -setting organization are  free to 
develop alternative standards or products  that do not comply with the agreed standard. 
For example, if the standard -setting agreement forces its members to only produce 
products in compl iance with the standard, the risk of the agreement giving rise to negative 
effects on competition is significantly increased, which could, in certain circumstances, 
lead to the agreement to have restriction of competition as its object. On the other hand, 
the likelihood of standards which only cover elements of limited importance for the 
production of the final product to lead to competitive problems is lower when compared 
to those standards which concern more important aspects of the final product.  
264. The ass essment of whether the agreement restricts competition must also analyze the issue 
of access to the standard . Where the result of a standard (that is to say, technical 
specification on how to comply with the standard and the essential IPR for implementing 
the standard) is not accessible, or only accessible on discriminatory terms, to members or 
third parties who are not members of the relevant standard -setting organization, this may    64 lead to discrimination between undertakings or to segmentation or foreclose  of the 
markets. Thus, such an agreement is highly likely to restrict competition. However, in case 
of several competing standards or in case of effective competition between the 
standardized products and non -standardized products, access limitations may n ot produce 
restrictive effects on competition.  
265. If participation in the standard -setting process  is open, that is to say if all competitors 
and/or stakeholders in the market affected by the standard are allowed to take part in 
choosing and elaborating the s tandard, the risk of restriction of competition will decrease. 
The greater the likely impact of the standard on the market, and the wider its potential 
fields of application, the more important it is to allow equal access to the standard -setting 
process. H owever, if it can be demonstrated that, under the current circumstances, there is 
effective competition between several similar standards and standard -setting 
organizations and that it is not necessary for the whole sector to utilize the same standards, 
then it can be said that there are no restrictive effects on competition. At the same time, if 
in the absence of a limitation on the number of participants it would have been impossible 
to adopt the standard, the agreement is not expected to lead to any rest rictive effects on 
competition under article 4.  In certain situations, the potential negative effects of restricted 
participation may be eliminated, or at least lessened, by ensuring that  stakeholders are 
kept informed and consulted  on the work in progress . The more transparent the adoption 
process for the standard, the more likely it is that the adopted standard will take into 
account the interests of all stakeholders.  
266. When assessing the effects of a standard -setting agreement, the market shares of the 
goods or services based on the standard  should be taken into account. However, at the 
early stages, it might not always be possible to estimate with any certainty whether the 
standard will be adopted by a large part of the sector or whether it will only be a standard 
used by a small part of the relevant sector. Since most of the undertakings participating in 
setting the standard would participate in implementing the standard as well, the relevant 
market shares of these undertakings can, in many cases, be used in estimating the likely 
market share of the standard. However, as the effectiveness of standardization agreements 
is often proportional to the share of those involved in setting and/or implementing the 
standard, high market shares held by the parties in t he market or markets affected by the 
standard will not necessarily lead to the conclusion that the standard is likely to restrict 
competition.  
267. Any standard -setting agreement which clearly discriminates  against any of the 
participating or potential members could lead to a restriction of competition. For example, 
if a standard -setting organization explicitly excludes undertakings operating only in the 
upstream markets, this could lead to the exclusion of potentially better technologies.  
268. For standard -setting a greements which adopts methods different than those laid out in 
paragraph 257 concerning the disclosure of intellectual property rights , it would have 
to be assessed on a case by case basis whether the methods which, for example, does not 
require but only encourage IPR disclosure, guarantee effective access to the standard. In 
other words, it needs to be assessed in the specific context whether the IPR disclosure 
method prevents, in practice, an informed choice between technologies and associated 
IPR.    65 269. Final ly, standard -setting agreements providing for ex ante disclosures of restrictive 
licensing terms , are not, in principle, expected to restrict competition within the meaning 
of article 4. Within that framework, it is important that parties involved in the s election of 
a standard be fully informed not only as to the available technical options and the 
intellectual property rights associated with them, but also as to the likely costs of those 
intellectual property rights. Therefore, should the IPR policy of a standard -setting 
organization provide for IPR holders to unilaterally disclose their restrictive licensing 
terms, including the maximum royalty rates they would charge, prior to the adoption of 
the standard, this is normally not expected to lead to a restr iction of competition within 
the meaning of article 48. Such unilateral ex ante disclosures of restrictive licensing terms 
would be one way to enable the standard -setting organization to take an informed decision 
based on both technical and price -related a dvantages and disadvantages of different 
alternative technologies.  
Standard terms  
270. When assessing whether standard terms would lead to restrictive effects on competition, 
existing economic conditions and the situation of the relevant market should be taken into 
consideration.  
271. Such agreements are not likely to give rise to restrictive effects on competition, as long as 
competitors in the relevant market are not restricted  from participating in the 
establishment of standard terms, the established standard term s are non-binding  and are 
effectively accessible  for anyone.  
272. Effectively accessible and non -binding standard terms related to the sale of goods and 
services which have no effect on price generally do not have any restrictive effects on 
competition.  This is  because these terms are unlikely to lead to any negative effects on 
product quality, product variety or innovation. There are, however, two general exceptions 
where a more in -depth assessment would be required.  
273. Firstly, where standard terms related to the  sale of goods or services define the scope of 
the product sold to the customer, thus increasing the risk of limiting product variety, the 
widespread application of these terms could give rise to restrictive effects on competition 
within the meaning of art icle 4. The limitation innovation and product variety due to 
widespread use of the standard terms may, for instance, arise as a result of standard terms 
in insurance contracts where limits are placed on customer choice related to the key 
elements of the co ntract, such as the standard risks covered. Even if their use is not 
compulsory, such standard terms might eliminate the incentives of the competitors to 
compete on product variety.  
274. When assessing whether there is a risk that the standard terms are likely to have restrictive 
effects by way of a limitation of product choice, factors such as existing competition in 
the market and the scope of the standard terms should be taken into account. For example, 
                                                 
8 As outlined in paragraph 245, the use of unilateral ex ante disclosures of restrictive licensing terms to cover joint 
price fixing of either downstream products or of substitute IPR/technologies would constitute a restriction of 
competition by object.     66 in a market with a large number of smaller competitors, the risk of a limitation of product 
choice would be lower than in a market with a few bigger competitors. The market shares 
of the undertakings participating in the establishment of the standard terms might provide 
an indication of the likelihood of adopti on of the standard terms or of the likelihood that 
the standard terms will be used by a large part of the market. However, the assessment 
must analyze not only whether the standard terms elaborated are likely to be used by a 
large part of the  market, but a lso whether these terms cover only part of the product or the 
whole of it. This is because the less extensive the standard terms, the less likely that these 
terms will lead to a limitation of product choice. Moreover, in cases where it would not be 
possibl e to offer a certain product in the market without establishing standard terms, there 
would likely be no restrictive effects on competition within the meaning of article 4. In 
that scenario, product choice is increased rather than decreased by the establis hment of the 
standard terms.  
275. Secondly, even if the standard terms are not directly related to the final product, they might 
comprise a decisive part of the relevant commercial transaction due to other reasons. An 
example would be standard terms which becom e de facto standards in online shopping. In 
online shopping, where customer trust is of vital importance within the framework of 
various elements including the use of safe payment systems, proper description of the 
products, clear and transparent pricing r ules and return policy, it is difficult for customers 
to make a clear assessment of all those elements. Therefore, due to customers adopting 
widespread practices, standard terms regarding those elements might become de facto 
standards with which undertakin gs would need to comply to sell their products in the 
market. Even though non -binding, these standard terms would become de facto standards 
with effects very close to a binding standard, and they would need to be analyzed 
accordingly.  
276. If standard terms are  binding, their impact on product quality, product variety and 
innovation must be assessed. This assessment is particularly important if the standard 
terms are binding for the entire market.  
277. Moreover, binding or non -binding, should the standard terms conta in any provisions 
which are likely to have a negative effect on rice competition, such as terms defining 
discounts, these terms would be highly likely to lead to restrictive effects on competition 
within the meaning of article 4.  
7.4. Assessment under Arti cle 5 of the Act  
7.4.1.  Efficiency gains  
Standardization agreements  
278. Standardization agreements generally give rise to significant efficiency gains. For 
example, standards which establish technical interoperability and compatibility often 
encourage performance -based competition between technologies from different 
undertakin gs, thereby preventing dependency on a single supplier. Furthermore, standards    67 may reduce transaction costs for buyers and sellers. For instance quality, safety and 
environment standards related to a product can lead to increased product quality by 
facilit ating consumer choice. Standards, which also play an important role for innovation, 
can reduce the time it takes to bring a new technology to the market and facilitate 
innovation by allowing undertakings to work on common solutions.  
279. To achieve those effici ency gains in the case of standardization agreements, the 
information necessary to apply the standard must be accessible to those wishing to enter 
the market.  
280. The use of marks or logos certifying compliance to a standard and thereby providing 
certainty to customers can enhance the dissemination of a standard. On the other hand, 
agreements for testing and certification go beyond the main objective of defining the 
standard and normally constitute a distinct agreement and market.  
281. The effects of standardization  agreements on innovation must be analyzed on a case -by-
case basis. However, standards creating compatibility on a horizontal level between 
different technology platforms are generally considered to be likely to give rise to 
efficiency gains.  
Standard term s 
282. The use of standard terms can provide economic benefits such as making it easier for 
customers to compare the conditions offered and thus facilitate switching between 
undertakings. Standard terms can also lead to efficiency gains in the form of savings i n 
transaction costs and can, particularly in sectors where the contracts are of a complex legal 
structure, facilitate entry. Moreover, standard terms may also increase legal certainty for 
the contract parties  
283. The higher the number of competitors in the mar ket, the greater the efficiency gains 
created by facilitating the comparison of contract conditions.  
7.4.2.  Pass -on to consumers  
284. Efficiency gains attained must be passed on to consumers in a way that compensates for 
the restrictive effects of the standardi zation agreement or standard terms on competition.  
Standardization agreements  
285. An important part of the analysis of pass -on to consumers relates to which procedures are 
employed in order to ensure that the interests of the users of the standards and of end 
consumers are protected. Where standards facilitate technical interoperability and 
compatibility or competition between new and existing products, services and processes, 
it can be presumed that the standard will benefit consumers.     68 Standard terms  
286. Both the risk of potential restrictive effects on competition and the likelihood of creating 
efficiency gains increase in line with the market shares of the undertakings and with the 
extent to which the standard terms are used. Hence, it is not possible to establis h a general 
market share threshold presuming there would be no risk of restrictive effects on 
competition or efficiency gains would be passed on to consumers to an extent that would 
compensate for the restrictive effects on competition.  
287. However, certain ef ficiency gains generated by standard terms, such as increased 
comparability of the offers on the market, facilitated switching between providers, and 
legal certainty of the clauses set out in the standard terms, are deemed to be beneficial for 
the consumer s. As regards other possible efficiency gains, such as lower transaction costs, 
it is necessary to make an assessment on a case -by-case basis and in the relevant economic 
context whether these gains are likely to be passed on to consumers.  
7.4.3.  Non-elimi nation of competition  
288. Whether a standardization agreement affords the parties the ability to eliminate 
competition depends on the other sources in the market, on the level of competitive 
constraint that these sources impose on the parties, and on the impac t of the agreement on 
those competitive constraints. While market shares are important for that analysis, the 
magnitude of existing sources of competition outside the scope of the agreement cannot 
be assessed exclusively on the basis of market share, excep t in cases where a standard 
becomes a de facto sector standard. This is because if the relevant standard has become a 
de facto sector standard, competition may be eliminated in cases where effective access to 
the standard by third parties are prevented. St andard terms used by a majority of the sector 
might also create a de facto sector standard and thus raise similar competitive concerns. 
However, if the standard or the standard terms only concern a limited part of the product 
or service, competition is not  likely to be eliminated.  
7.4.4.  Indispensability  
289. A standardization agreement or standard terms which include restrictions that go beyond 
what is necessary to achieve the efficiency gains would not meet the exemption conditions 
listed in article 5.  
Standar dization agreements  
290. In the assessment of standardization agreements, the likely effects on the markets 
concerned on one hand, and the scope of restrictions which can possibly go beyond the 
objective of achieving efficiencies on the other hand must be taken  into consideration.     69 291. Participation in standard -setting should normally be open to all competitors in the markets 
affected by the standard, unless this leads to significant inefficiencies or unless recognized 
procedures are foreseen for the collective repre sentation of interests.  
292. As a general rule, standardization agreements should cover no more than what is necessary 
to achieve their identified goals, even when interoperability, compatibility or a certain 
level of quality is concerned. In cases where there is only one technological solution which 
would ensure efficiency gains, those standards should be set on a non -discriminatory basis. 
Technology neutral standards can, in certain circumstances, lead to larger efficiency gains. 
Setting substitute intellectua l property rights as essential elements of a standard while at 
the same time forcing the users of the standard to pay for more IPR than technically 
necessary would go beyond what is necessary to achieve any efficiency gains. In the same 
vein, including sub stitute IPR as essential elements of a standard and then limiting the use 
of that technology exclusively to that particular standard would not be necessary to 
achieve the intended efficiencies and could limit competition between technologies.  
293. In a standard ization agreement, restrictions which make a standard binding and obligatory 
for the sector are in principle not indispensable.  
294. Similarly, standardization agreements that entrust certain organizations with exclusive 
rights to test compliance with the stand ard go beyond the primary objective of standard -
setting and may also restrict competition. However, it can be claimed that the exclusivity 
in question is mandatory for a certain period of time, for example due to the need to recoup 
significant start -up cos ts. In that case, the standardization agreement should include the 
necessary measures to eliminate possible risks to competition resulting from exclusivity. 
These measures may include certification fees at a reasonable level which are 
proportionate to the cost of the standard compliance test.  
Standard terms  
295. It is generally not justified to make standard terms binding and obligatory for the sector or 
for the members of the association of undertakings that established them. However, under 
certain circumstance s, making standard terms binding may be indispensable for the 
attainment of the efficiency gains generated by them.  
7.5. Examples  
Example 1  
296. Setting standards competitors cannot satisfy  
A standard -setting organization sets and publishes safety standards tha t are widely used 
by the relevant industry. Most competitors in the industry participate in the setting of the 
standard. An undertaking which entered the market prior to the adoption of the standard 
has developed a product which is equivalent in terms of p erformance and functional    70 requirements and which is approved by the technical committee of the standard -setting 
organization. However, the technical specifications of the safety standard are, without any 
objective justification, drawn up in such a way as t o not allow for this or other new 
products to comply with the standard.  
Assessment: This standardization agreement is expected to give rise to restrictive effects 
on competition under article 4, and it is unlikely to meet the conditions of article 5. The 
members of the standards development organization have, without any objective 
justification, set a standard which cannot be satisfied by those products manufactured by 
competitors based on other technological solutions, even though they have equivalent 
performance. Hence, this standard, which is based on a discriminatory basis, will reduce 
or prevent innovation and product variety. It is unlikely that the way the standard is drafted 
will lead to greater efficiency gains than a neutral one.  
Example 2  
297. Non-binding and transparent standard covering a large part of the market  
A number of consumer electronics manufacturers with high market shares agree to 
develop a new standard for a product that is more advanced than DVD.  
Assessment: Competitive concerns should not arise, provided that the manufacturers 
remain free to produce other new products which do not conform to the new standard, 
participation in the standard -setting is unrestricted and transparent, and the standardization 
agreement does not otherwise restr ict competition. Even if such effects were to arise, it is 
likely that conditions specified in article 5 would be met. If the parties agreed to only 
manufacture products which conform to the new standard, the agreement would lead to 
restrictive effects on competition within the meaning of article 4 by limiting technical 
development, reducing innovation and preventing the parties from selling different 
products. Also, under such circumstances, conditions listed in article 5 are not likely to be 
fulfilled.  
Example 3  
298. Standards related to the protection of the environment  
Almost all producers of washing machines agree, with the encouragement of a public 
body, to no longer manufacture products which do not comply with certain environmental 
criteria, such as energ y efficiency. Together, the parties hold 90% of the market. The 
products which will be phased out of the market as a result of this decision account for a 
significant proportion of total sales. They will be replaced by more environmentally 
friendly, but al so more expensive products. Furthermore, the agreement indirectly reduces 
the output of third parties such as electric utilities companies and suppliers of components 
incorporated in the products phased out. However, without the agreement, the parties    71 woul d not shift their production and marketing efforts to the more environmentally 
friendly products.  
Assessment: The agreement grants the parties  control of individual production, concerns 
an appreciable proportion of their sales and total production, and at the same time reduces 
the output of third parties. As a result of the agreement, product variety arising from the 
environmental characteristic s of the product will be reduced and prices will probably rise. 
Consequently, the agreement is likely to give rise to restrictive effects on competition 
within the meaning of article 4. The involvement of the public authority in this particular 
case is irr elevant for that assessment. However, newer and more environmentally friendly 
products are more technically advanced, offering qualitative efficiencies in the form of 
more washing machine programs which can be used by consumers. Furthermore, there are 
also efficiencies for the purchasers of the washing machines resulting from lower running 
costs in the form of reduced consumption of water, electricity and detergent. Those cost 
efficiencies are realized in markets which are different from the relevant market  of the 
agreement. Nevertheless, those efficiencies may be taken into account as the markets in 
which the restrictive effects on competition and the efficiency gains arise are related and 
the consumer group affected by the restrictions and the efficiency g ains is substantially 
the same. The efficiency gains outweigh the restrictive effects on competition in the form 
of increased costs. Other alternatives to the agreement are shown to be less certain in 
delivering the same net benefits and less effective in terms of cost reduction. Various 
technical means are economically available for the parties to manufacture washing 
machines which comply with the environmental  characteristics agreed upon, and the 
parties will continue to compete in relation to other produ ct characteristics. Therefore, it 
seems likely that the conditions of article 5 would be fulfilled.  
Example 4  
299. Government encouraged standardization  
In response to the findings of research into the recommended levels of fat in certain 
processed food conduct ed by a public institution, several major undertakings 
manufacturing processed foods agree, as a result of discussions conducted at the industry 
association, to set recommended fat levels for the products. The sales of the parties to the 
agreement represen t 70% of the total sales of the products. This initiative of the parties 
will be supported by a national advertising campaign funded by the institution which 
conducted the research, highlighting the dangers of a high fat content in processed foods.  
Assessm ent: Although the fat levels are presented only as recommendations and therefore 
their implementation is voluntary, due to the wide publicity resulting from the national 
advertising campaign, these levels are likely to be implemented by all manufacturers. 
Therefore, de facto maximum fat levels in the processed foods are likely to be fixed. 
Consumer choice in the product markets concerned could therefore be reduced. However, 
the parties will be able to continue to compete with regard to some other characteri stics of 
the products, such as price, product size, quality, taste, other nutritional ingredients, salt 
content, balance of ingredients, and branding. Moreover, competition regarding the fat 
levels in the products offered in the market may increase if part ies seek to offer lower    72 levels. Consequently, the agreement is unlikely to give rise to restrictive effects on 
competition within the meaning of article 4. Even if such effects were to arise, it is likely 
that conditions specified in article 5 would be met . 
Example 5  
300. Open standardization related to product packaging  
The major undertakings which produce a fast -moving consumer product in a competitive 
market and those which sell that product from abroad (importers) agree with major 
packaging firms to start an d implement a voluntary initiative to standardize the size and 
shape of the packaging of the product sold. There is currently a wide variation in 
packaging sizes and materials for the product. This shows that packaging does not 
represent a high proportion of the total production costs of the product and that switching 
costs for packaging producers are not significant. There is no existing standard for 
packaging. The parties have concluded the agreement voluntarily and in response to 
pressure from the public  authority to meet environmental targets. Together, the 
manufacturers and importers meet 85% of the domestic sales of the product. This 
voluntary agreement will ensure that the product offered for sale will be at the same size 
and will use less packaging m aterial, occupy less shelf space, have lower transport and 
packaging costs, and be more environmentally friendly through reduced packaging waste. 
The relevant agreement will also reduce the recycling costs of manufacturers. The 
standard does not specify wh ich types of packaging materials must be used. The 
specifications of the standard have been agreed between manufacturers and importers in 
an open and transparent manner, since the draft specifications were published on the 
website of the sectoral associati on a reasonable period of time prior to adoption. The final 
specifications adopted are also published on the sectoral association website that is freely 
accessible to any new entrants, even if they are not members of the association.  
Assessment: Although t he agreement is voluntary, the standard is likely to become a de 
facto industry practice because the parties represent a high proportion of the market for 
the product and the public authority is encouraging the retailers to reduce packaging waste. 
Conseque ntly, the agreement could, in theory, create barriers to entry and lead to market 
foreclosure. This would in particular be a risk for importers who may need to repackage 
the product to comply with the de facto national standard, if the package size used in  other 
countries does not meet the de facto standard. However, significant barriers to entry and 
foreclosure are unlikely to occur in practice. This is because the agreement is voluntary. 
Major importers have agreed on the standard in an open and transpare nt manner, switching 
costs are low, and the technical details of the standard are accessible to new entrants, 
importers and all packaging suppliers. In particular, importers will be aware of potential 
changes to packaging at an early stage of the process a nd will have the opportunity to 
present their views before the standard is completed due to the open consultation process 
for the draft standards. Consequently, the agreement is unlikely to give rise to restrictive 
effects on competition within the meaning  of article 4. Even if such effects were to arise, 
it is likely that conditions specified in article 5 would be met. First of all,  the agreement 
will give rise to quantitative efficiencies through lower transport and packaging costs. 
Secondly, due to the p revailing competitive conditions in the market, these costs    73 reductions are likely to be passed on to consumers. Thirdly, the agreement includes only 
the minimum restrictions necessary to comply with the packaging standard and is unlikely 
to result in signi ficant foreclosure effects. Lastly, competition will not be eliminated with 
respect to a substantial part of the products in question.  
Example 6  
301. Closed standardization related to product packaging  
In this example, the situation is the same as in Example 5,  except only the manufacturers 
based within the country representing 65% of the domestic sales of the product agree on 
the standard, no open consultation is conducted on the specifications adopted including 
detailed standards on the packaging material that  must be used, and the specifications of 
the voluntary standard are not published. This resulted in higher switching costs for 
importers as compared to domestic producers.  
Assessment: Although the agreement is voluntary as in Example 5, it is very likely f or the 
standard to become de facto industry practice since retailers are being encouraged by the 
public authority to reduce packaging waste and the domestic manufacturers account for 
65% of the national sales of the product. The fact that importers were no t consulted 
resulted in the adoption of a standard which imposes higher switching costs on importers 
as compared to domestic manufacturers. The agreement may therefore create barriers to 
entry for packaging suppliers, new entrants and importers who, if the  package size used  in 
other countries does not meet the de facto standard, may need to repackage the product to 
meet the standard in and who were not involved in the standard -setting process, and it may 
lead to foreclosure of the market to the competitors.  
Also in this example, unlike in Example 5, the standardization process has not been carried 
out in an open and transparent manner. Since importers, packaging suppliers and new 
entrants have not been given the opportunity to comment on the proposed standar d, it is 
possible that these undertakings were not aware of the standard for a significant period of 
time. This situation may lead to undertakings' being unable to change their production 
methods or switch suppliers quickly and effectively. Moreover, if th e standard is unknown 
or difficult to comply with, importers, packaging suppliers and new entrants may be 
unable to compete with the parties to the agreement, as well. An issue that is of particular 
relevance here is the fact that the standard includes det ailed specifications concerning 
packaging materials, with which importers and new entrants will struggle to comply due 
to the closed nature of the consultation and the standard. The agreement may therefore 
restrict competition within the meaning of article  4. This conclusion is not affected by the 
fact the agreement has been entered into in order to meet environmental targets agreed 
with the public authority.  
It is unlikely that the conditions of article 5 will be fulfilled in this scenario. Although the 
agreement results in similar quantitative efficiencies as listed in Example 5, the closed and 
private nature of the standardization agreement and the non -published detailed standard    74 on the type of packaging material that must be used are unlikely to be indis pensable to 
achieving the efficiencies under the agreement.  
Example 7  
302. Standard terms used for contracts between undertakings  
In this example, construction companies come together to establish non -binding and open 
standard terms and conditions for use by co ntractors when submitting a quotation for 
construction work to a client. A quotation form is included with terms and conditions 
suitable for building or construction work. Together, these documents create the 
construction contract. Contract clauses cover s uch matters as contract formation, general 
obligations of the contractor and the client and non -price related payment conditions, 
insurance, duration, handover and defects, limitation of liability, and termination. These 
standard terms would often be used between undertakings one of which is active in the 
upstream and the other is active in the downstream market.  
Assessment: These standard terms are not likely to have restrictive effects on competition 
within the meaning of article 4. Under the normal circumstances, the aforementioned 
standard terms would not introduce any significant limitations on the customer's  choice of 
the end -product, namely the construction work. Other restrictive effects on competition 
do not seem likely, either. Indeed, several  of the contract clauses above are already 
regulated by law.  
Example 8  
303. Standard terms facilitating the comparison of products by different undertakings  
A national association for the insurance sector lays down non -binding standard policy 
conditions for hou se insurance contracts. The conditions concerned include no provisions 
on insurance premiums, the amount of coverage, or the excesses payable by the insured. 
Standard conditions do not impose comprehensive cover which includes risks to which a 
significant number of policyholders are not simultaneously exposed, and they do not 
require the policyholders to obtain cover from the same insurer for different risks. While 
the majority of insurance companies use these standard policy conditions, not all contracts 
contain the same conditions as they are adapted according to each client's individual needs. 
Therefore there is no de facto standardization in insurance products offered to consumers. 
The standard policy conditions enable consumers and consumer organization s to compare 
the policies offered by different insurers. A consumer association is also involved in the 
process of laying down the standard policy conditions. These conditions are also available 
for use by new entrants, on a non -discriminatory basis.  
Asses sment: Standard policy conditions relate to the structure of the final insurance 
product. Even if the market conditions and other factors shows that standard policy 
conditions used by insurance companies create a risk of limitation in product variety, it i s    75 likely that such possible limitation would be outweighed by efficiencies created by the 
conditions in question, such as facilitation of comparison by consumers of conditions 
offered by insurance companies. This convenience in conducting comparisons enhan ce 
competition by facilitating switching between insurance companies. Furthermore the 
switching of providers and market entry by competitors constitutes an advantage for 
consumers. The fact that a consumer association has participated in the process could,  in 
certain instances, increase the likelihood of those efficiencies which do not automatically 
benefit the consumers being passed on. It is also likely for the standard policy conditions 
to reduce transaction costs and facilitate entry for insurers in dif ferent geographic and/or 
product markets. Moreover, the restrictions do not seem to go beyond what is necessary 
to achieve the identified efficiencies and competition would not be eliminated. 
Consequently, the conditions of article 5 are likely to be fulfi lled.