EN Official Journal of the European Union C 362/3

GUIDELINES ON THE APPLICABILITY OF ARTICLE 53 OF THE EEA AGREEMENT TO HORIZONTAL COOPERATION AGREEMENTS

(2013/C 362/03)

A. This Notice is issued pursuant to the rules of the Agreement on the European Economic Area (EEA Agreement) and the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (Surveillance and Court Agreement).

B. The European Commission has issued a notice entitled ‘Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements’ (1). That non-binding act sets out the principles which the European Commission follows for the assessment of horizontal co-operation agreements under Article 101 of the Treaty on the Functioning of the European Union (TFEU).

C. The EFTA Surveillance Authority considers the European Commission guidelines to be EEA relevant. In order to maintain equal conditions of competition and to ensure uniform application of the EEA competition rules throughout the European Economic Area, the EFTA Surveillance Authority has adopted the present Notice under the powers conferred upon it by Article 5(2)(b) of the Surveillance and Court Agreement. It intends to follow the principles and rules laid down in this Notice when applying the relevant EEA rules in a particular case.

TABLE OF CONTENTS

1. Introduction 6

1.1. Purpose and scope 6

1.2. Basic principles for the assessment under Article 53 8

1.2.1. Article 53(1) 8

1.2.2. Article 53(3) 11

1.3. Structure of these guidelines 11

2. General Principles on the competitive assessment of information exchange 11

2.1. Definition and scope 11

2.2. Assessment under Article 53(1) 13

2.2.1. Main competition concerns 13

2.2.2. Restriction of competition by object 14

2.2.3. Restrictive effects on competition 14

2.3. Assessment under Article 53(3) 17

2.3.1. Efficiency gains 17

2.3.2. Indispensability 18

2.3.3. Pass-on to consumers 19

2.3.4. No elimination of competition 19

2.4. Examples 19

3. Research and Development Agreements 21

3.1. Definition 21

3.2. Relevant markets 21

3.3. Assessment under Article 53(1) 23

3.3.1. Main competition concerns 23

3.3.2. Restrictions of competition by object 23

3.3.3. Restrictive effects on competition 23

3.4. Assessment under Article 53(3) 25

3.4.1. Efficiency gains 25

3.4.2. Indispensability 25

3.4.3. Pass-on to consumers 25

3.4.4. No elimination of competition 25

3.4.5. Time of the assessment 25

3.5. Examples 26

4. Production Agreements 28

4.1. Definition and scope 28

4.2. Relevant markets 29

4.3. Assessment under Article 53(1) 29

4.3.1. Main competition concerns 29

4.3.2. Restrictions of competition by object 29

4.3.3. Restrictive effects on competition 29

4.4. Assessment under Article 53(3) 32

4.4.1. Efficiency gains 32

4.4.2. Indispensability 32

4.4.3. Pass-on to consumers 32

4.4.4. No elimination of competition 32

4.5. Examples 32

5. Purchasing agreements 35

5.1. Definition 35

5.2. Relevant markets 35

5.3. Assessment under Article 53(1) 36

5.3.1. Main competition concerns 36

5.3.2. Restrictions of competition by object 36

5.3.3. Restrictive effects on competition 36

5.4. Assessment under Article 53(3) 37

5.4.1. Efficiency gains 37

5.4.2. Indispensability 37

5.4.3. Pass-on to consumers 37

5.4.4. No elimination of competition 38

5.5. Examples 38

6. Agreements on Commercialisation 39

6.1. Definition 39

6.2. Relevant markets 39

6.3. Assessment under Article 53(1) 39

6.3.1. Main competition concerns 39

6.3.2. Restrictions of competition by object 40

6.3.3. Restrictive effects on competition 40

6.4. Assessment under Article 53(3) 41

6.4.1. Efficiency gains 41

6.4.2. Indispensability 41

6.4.3. Pass-on to consumers 41

6.4.4. No elimination of competition 41

6.5. Examples 42

7. Standardisation Agreements 44

7.1. Definition 44

7.2. Relevant markets 44

7.3. Assessment under Article 53(1) 44

7.3.1. Main competition concerns 44

7.3.2. Restrictions of competition by object 46

7.3.3. Restrictive effects on competition 46

7.4. Assessment under Article 53(3) 50

7.4.1. Efficiency gains 50

7.4.2. Indispensability 50

7.4.3. Pass-on to consumers 50

7.4.4. No elimination of competition 50

7.5. Examples 50

1. INTRODUCTION

1.1. Purpose and scope

1. These guidelines set out the principles for the assessment under Article 53 of the EEA Agreement (2) (‘Article 53’) of agreements between undertakings, decisions by associations of undertakings and concerted practices (collectively referred to as ‘agreements’) pertaining to horizontal co-operation. Co-operation is of a ‘horizontal nature’ if an agreement is entered into between actual or potential competitors. In addition, these guidelines also cover horizontal co-operation agreements between non-competitors, for example, between two companies active in the same product markets but in different geographic markets without being potential competitors.

2. Horizontal co-operation agreements can lead to substantial economic benefits, in particular if they combine complementary activities, skills or assets. Horizontal co-operation can be a means to share risk, save costs, increase investments, pool know-how, enhance product quality and variety, and launch innovation faster.

3. On the other hand, horizontal co-operation agreements may lead to competition problems. This is the case, for example, if the parties agree to fix prices or output or to share markets, or if the co-operation enables the parties to maintain, gain or increase market power and thereby is likely to give rise to negative market effects with respect to prices, output, product quality, product variety or innovation.

4. The EFTA Surveillance Authority, while recognising the benefits that can be generated by horizontal co-operation agreements, has to ensure that effective competition is maintained. Article 53 provides the legal framework for a balanced assessment taking into account both adverse effects on competition and pro-competitive effects.

5. The purpose of these guidelines is to provide an analytical framework for the most common types of horizontal co-operation agreements; they deal with research and development agreements, production agreements including subcontracting and specialisation agreements, purchasing agreements, commercialisation agreements, standardisation agreements including standard contracts, and information exchange. This framework is primarily based on legal and economic criteria that help to analyse a horizontal co-operation agreement and the context in which it occurs. Economic criteria such as the market power of the parties and other factors relating to the market structure form a key element of the assessment of the market impact likely to be caused by a horizontal co-operation agreement and, therefore, for the assessment under Article 53.

6. These guidelines apply to the most common types of horizontal co-operation agreements irrespective of the level of integration they entail, with the exception of operations constituting a concentration within the meaning of Article 3 of the Act referred to in point 1 of Annex XIV of the EEA Agreement (Council Regulation (EC) No 139/2004 of 20 January 2004 (3)) on the control of concentrations between undertakings (the ‘Merger Regulation’), as would be the case, for example, with joint ventures performing on a lasting basis all the functions of an autonomous economic entity (‘full-function joint ventures’) (4).

7. Given the potentially large number of types and combinations of horizontal co-operation and market circumstances in which they operate, it is difficult to provide specific answers for every possible scenario. These guidelines will nevertheless assist businesses in assessing the compatibility of an individual co-operation agreement with Article 53. The criteria set out in the guidelines do not, however, constitute a ‘checklist’ which can be applied mechanically. Each case must be assessed on the basis of its own facts, which may require a flexible application of these guidelines.

8. The criteria set out in these guidelines apply to horizontal co-operation agreements concerning both goods and services (collectively referred to as ‘products’). These guidelines complement the Act referred to in point 8 of Annex XIV of the EEA Agreement (Commission Regulation (EU) No 1217 of 14 December 2010 (5)) on the application of Article 53(3) of the EEA Agreement to certain categories of research and development agreements (‘the R&D Block Exemption’) and the Act referred to in point 6 of Annex XIV of the EEA Agreement (Commission Regulation (EU) No 1218 of 14 December 2010 (6)) on the application of Article 53(3) of the EEA Agreement to certain categories of specialisation agreements (‘the Specialisation Block Exemption’).

9. Although these guidelines contain certain references to cartels, they are not intended to give any guidance as to what does or does not constitute a cartel as defined by the decisional practice of the Commission and the EFTA Surveillance Authority and the case law of the Court of Justice of the European Union and the EFTA Court.

10. The term ‘competitors’ as used in these guidelines includes both actual and potential competitors. Two companies are treated as actual competitors if they are active on the same relevant market. A company is treated as a potential competitor of another company if, in the absence of the agreement, in the case of a small but permanent increase in relative prices, it is likely that the former, within a short period of time (7), would undertake the necessary additional investments or other necessary switching costs to enter the relevant market on which the latter is active. This assessment has to be based on realistic grounds; the mere theoretical possibility to enter a market is not sufficient (see EFTA Surveillance Authority Notice on the definition of the relevant market for the purpose of competition law within the European Economic Area (EEA)) (8) (‘the Market Definition Notice’).

11. Companies that form part of the same ‘undertaking’ within the meaning of Article 53(1) are not considered to be competitors for the purposes of these guidelines. Article 53 only applies to agreements between independent undertakings. When a company exercises decisive influence over another company they form a single economic entity and, therefore, are part of the same undertaking (9). The same is true for sister companies, that is to say, companies over which decisive influence is exercised by the same parent company. They are consequently not considered to be competitors even if they are both active on the same relevant product and geographic markets.

12. Agreements that are entered into between undertakings operating at a different level of the production or distribution chain, that is to say, vertical agreements, are in principle dealt with in the Act referred to in point 2 of Annex XIV of the EEA Agreement (Commission Regulation (EU) No 330/2010 of 20 April 2010 (10)) on the application of Article 53(3) of the EEA Agreement to categories of vertical agreements and concerted practices (‘the Block Exemption on Vertical Restraints’) and the Guidelines on Vertical Restraints (11). However, to the extent that vertical agreements, for example, distribution agreements, are concluded between competitors, the effects of the agreement on the market and the possible competition problems can be similar to horizontal agreements. Therefore, vertical agreements between competitors fall under these guidelines (12). Should there be a need also to assess such agreements under the Block Exemption on Vertical Restraints and the Guidelines on Vertical Restraints, this will be specifically stated in the relevant Chapter of these guidelines. In the absence of such a reference, only these guidelines will be applicable to vertical agreements between competitors.

13. Horizontal co-operation agreements may combine different stages of co-operation, for example research and development (‘R&D’) and the production and/or commercialisation of its results. Such agreements are generally also covered by these guidelines. When using these guidelines for the analysis of such integrated co-operation, as a general rule, all the Chapters pertaining to the different parts of the co-operation will be relevant. However, where the relevant Chapters of these guidelines contain graduated messages, for example with regard to safe harbours or whether certain conduct will normally be considered a restriction of competition by object or by effect, what is set out in the Chapter pertaining to that part of integrated co-operation which can be considered its ‘centre of gravity’ prevails for the entire co-operation (13).

14. Two factors are in particular relevant for the determination of the centre of gravity of integrated co-operation: firstly, the starting point of the co-operation, and, secondly, the degree of integration of the different functions which are combined. For example, the centre of gravity of a horizontal co-operation agreement involving both joint R&D and joint production of the results would normally be the joint R&D, as the joint production will only take place if the joint R&D is successful. This implies that the results of the joint R&D are decisive for the subsequent joint production. The assessment of the centre of gravity would change if the parties would have engaged in the joint production in any event, that is to say, irrespective of the joint R&D, or if the agreement provided for full integration in the area of production and only partial integration of some R&D activities. In this case, the centre of gravity of the co-operation would be the joint production.

15. Article 53 only applies to those horizontal co-operation agreements which may affect trade between Contracting Parties. The principles on the applicability of Article 53 set out in these guidelines are therefore based on the assumption that a horizontal co-operation agreement is capable of affecting trade between Contracting Parties to an appreciable extent.

16. The assessment under Article 53 as described in these guidelines is without prejudice to the possible parallel application of Article 54 of the EEA Agreement to horizontal co-operation agreements (14).

17. These guidelines are without prejudice to the interpretation the Court of Justice of the European Union or the EFTA Court may give to the application of Article 53 of the EEA Agreement to horizontal co-operation agreements.

18. These guidelines replace the EFTA Surveillance Authority guidelines on the applicability of Article 53 of the EEA Agreement to horizontal co-operation agreements (15) which were published by the EFTA Surveillance Authority in 2002, and do not apply to the extent that sector specific rules apply (16) — as is the case for certain agreements with regard to transport (17) and insurance (18).

19. The EFTA Surveillance Authority guidelines on the application of Article 53(3) of the EEA Agreement (19) (the ‘General Guidelines’) contain general guidance on the interpretation of Article 53. Consequently, these guidelines have to be read in conjunction with the General Guidelines.

1.2. Basic principles for the assessment under Article 53

20. The assessment under Article 53 consists of two steps. The first step, under Article 53(1), is to assess whether an agreement between undertakings, which is capable of affecting trade between Contracting Parties, has an anti-competitive object or actual or potential (20) restrictive effects on competition. The second step, under Article 53(3), which only becomes relevant when an agreement is found to be restrictive of competition within the meaning of Article 53(1), is to determine the pro-competitive benefits produced by that agreement and to assess whether those pro-competitive effects outweigh the restrictive effects on competition (21). The balancing of restrictive and pro-competitive effects is conducted exclusively within the framework laid down by Article 53(3) (22). If the pro-competitive effects do not outweigh a restriction of competition, Article 53(2) stipulates that the agreement shall be automatically void.

21. The analysis of horizontal co-operation agreements has certain common elements with the analysis of horizontal mergers pertaining to the potential restrictive effects, in particular as regards joint ventures. There is often only a fine line between full-function joint ventures that fall under the Merger Regulation and non-full-function joint ventures that are assessed under Article 53. Hence, their effects can be quite similar.

22. In certain cases, companies are encouraged by public authorities to enter into horizontal co-operation agreements in order to attain a public policy objective by way of self-regulation. However, companies remain subject to Article 53 if a national law merely encourages or makes it easier for them to engage in autonomous anti-competitive conduct (23). In other words, the fact that public authorities encourage a horizontal co-operation agreement does not mean that it is permissible under Article 53 (24). It is only if anti-competitive conduct is required of companies by national legislation, or if the latter creates a legal framework which precludes all scope for competitive activity on their part, that Article 53 does not apply (25). In such a situation, the restriction of competition is not attributable, as Article 53 implicitly requires, to the autonomous conduct of the companies and they are shielded from all the consequences of an infringement of that Article (26). Each case must be assessed on its own facts according to the general principles set out in these guidelines.

1.2.1. Article 53(1)

23. Article 53(1) prohibits agreements the object or effect of which is to restrict (27) competition.

(i) Restrictions of competition by object

24. Restrictions of competition by object are those that by their very nature have the potential to restrict competition within the meaning of Article 53(1) (28). It is not necessary to examine the actual or potential effects of an agreement on the market once its anti-competitive object has been established (29).

25. According to the settled case law of the Court of Justice of the European Union, in order to assess whether an agreement has an anti-competitive object, regard must be had to the content of the agreement, the objectives it seeks to attain, and the economic and legal context of which it forms part. In addition, although the parties’ intention is not a necessary factor in determining whether an agreement has an anti-competitive object, the EFTA Surveillance Authority may nevertheless take this aspect into account in its analysis (30). Further guidance with regard to the notion of restrictions of competition by object can be obtained in the General Guidelines.

(ii) Restrictive effects on competition

26. If a horizontal co-operation agreement does not restrict competition by object, it must be examined whether it has appreciable restrictive effects on competition. Account must be taken of both actual and potential effects. In other words, the agreement must at least be likely to have anti-competitive effects.

27. For an agreement to have restrictive effects on competition within the meaning of Article 53(1) it must have, or be likely to have, an appreciable adverse impact on at least one of the parameters of competition on the market, such as price, output, product quality, product variety or innovation. Agreements can have such effects by appreciably reducing competition between the parties to the agreement or between any one of them and third parties. This means that the agreement must reduce the parties’ decision-making independence (31), either due to obligations contained in the agreement which regulate the market conduct of at least one of the parties or by influencing the market conduct of at least one of the parties by causing a change in its incentives.

28. Restrictive effects on competition within the relevant market are likely to occur where it can be expected with a reasonable degree of probability that, due to the agreement, the parties would be able profitably to raise prices or reduce output, product quality, product variety or innovation. This will depend on several factors such as the nature and content of the agreement, the extent to which the parties individually or jointly have or obtain some degree of market power, and the extent to which the agreement contributes to the creation, maintenance or strengthening of that market power or allows the parties to exploit such market power.

29. The assessment of whether a horizontal co-operation agreement has restrictive effects on competition within the meaning of Article 53(1) must be made in comparison to the actual legal and economic context in which competition would occur in the absence of the agreement with all of its alleged restrictions (that is to say, in the absence of the agreement as it stands (if already implemented) or as envisaged (if not yet implemented) at the time of assessment). Hence, in order to prove actual or potential restrictive effects on competition, it is necessary to take into account competition between the parties and competition from third parties, in particular actual or potential competition that would have existed in the absence of the agreement. This comparison does not take into account any potential efficiency gains generated by the agreement as these will only be assessed under Article 53(3).

30. Consequently, horizontal co-operation agreements between competitors who, on the basis of objective factors, would not be able independently to carry out the project or activity covered by the co-operation, for instance, due to the limited technical capabilities of the parties, will normally not give rise to restrictive effects on competition within the meaning of Article 53(1) unless the parties could have carried out the project with less stringent restrictions (32).

31. General guidance with regard to the notion of restrictions of competition by effect can be obtained in the General Guidelines. These guidelines provide additional guidance specific to the competition assessment of horizontal co-operation agreements.

Nature and content of the agreement

32. The nature and content of an agreement relates to factors such as the area and objective of the co-operation, the competitive relationship between the parties and the extent to which they combine their activities. Those factors determine which kinds of possible competition concerns can arise from a horizontal co-operation agreement.

33. Horizontal co-operation agreements may limit competition in several ways. The agreement may: — be exclusive in the sense that it limits the possibility of the parties to compete against each other or third parties as independent economic operators or as parties to other, competing agreements; — require the parties to contribute such assets that their decision-making independence is appreciably reduced; or — affect the parties’ financial interests in such a way that their decision-making independence is appreciably reduced. Both financial interests in the agreement and also financial interests in other parties to the agreement are relevant for the assessment.

34. The potential effect of such agreements may be the loss of competition between the parties to the agreement. Competitors can also benefit from the reduction of competitive pressure that results from the agreement and may therefore find it profitable to increase their prices. The reduction in those competitive constraints may lead to price increases in the relevant market. Factors such as whether the parties to the agreement have high market shares, whether they are close competitors, whether customers have limited possibilities of switching suppliers, whether competitors are unlikely to increase supply if prices increase, and whether one of the parties to the agreement is an important competitive force, are all relevant for the competitive assessment of the agreement.

35. A horizontal co-operation agreement may also: — lead to the disclosure of strategic information thereby increasing the likelihood of coordination among the parties within or outside the field of the co-operation; — achieve significant commonality of costs (that is to say, the proportion of variable costs which the parties have in common), so the parties may more easily coordinate market prices and output.

36. Significant commonality of costs achieved by a horizontal co-operation agreement can only allow the parties to coordinate market prices and output more easily where the parties have market power, the market characteristics are conducive to such coordination, the area of co-operation accounts for a high proportion of the parties’ variable costs in a given market, and the parties combine their activities in the area of co-operation to a significant extent. This could, for instance, be the case where the parties jointly manufacture or purchase an important intermediate product or jointly manufacture or distribute a high proportion of their total output of a final product.

37. A horizontal agreement may therefore decrease the parties’ decision-making independence and, as a result, increase the likelihood that they will coordinate their behaviour in order to reach a collusive outcome. It may also make coordination easier, more stable or more effective for parties who were already coordinating before, either by making the coordination more robust or by permitting them to achieve even higher prices.

38. Some horizontal co-operation agreements, for example production and standardisation agreements, may also give rise to anti-competitive foreclosure concerns.

Market power and other market characteristics

39. Market power is the ability profitably to maintain prices above competitive levels for a period of time or profitably to maintain output in terms of product quantities, product quality and variety or innovation below competitive levels for a period of time.

40. In markets with fixed costs undertakings must price above their variable costs of production in order to ensure a competitive return on their investment. The fact that undertakings price above their variable costs is therefore not in itself a sign that competition in the market is not functioning well and that undertakings have market power that allows them to price above the competitive level. It is when competitive constraints are insufficient to maintain prices, output, product quality, product variety and innovation at competitive levels that undertakings have market power in the context of Article 53(1).

41. The creation, maintenance or strengthening of market power can result from superior skill, foresight or innovation. It can also result from reduced competition between the parties to the agreement or between any one of those parties and third parties, for example, because the agreement leads to anti-competitive foreclosure of competitors by raising competitors’ costs and limiting their capacity to compete effectively with the contracting parties.

42. Market power is a question of degree. The degree of market power required for the finding of an infringement under Article 53(1) in the case of agreements that are restrictive of competition by effect is less than the degree of market power required for a finding of dominance under Article 54, where a substantial degree of market power is required.

43. The starting point for the analysis of market power is the position of the parties on the markets affected by the co-operation. To carry out this analysis the relevant market(s) have to be defined by using the methodology in the EFTA Surveillance Authority’s Market Definition Notice. Where specific types of markets, such as purchasing or technology markets, are concerned these guidelines will provide additional guidance.

44. If the parties have a low combined market share, a horizontal co-operation agreement is unlikely to give rise to restrictive effects on competition within the meaning of Article 53(1) and, normally, no further analysis will be required. What is considered to be a ‘low combined market share’ depends on the type of agreement in question and can be inferred from the ‘safe harbour’ thresholds set out in various Chapters of these guidelines and, more generally, from the EFTA Surveillance Authority Notice on agreements of minor importance which do not appreciably restrict competition under Article 53(1) of the EEA Agreement (de minimis) (33) (the ‘de minimis Notice’). If one of just two parties has only an insignificant market share and if it does not possess important resources, even a high combined market share normally cannot be seen as indicating a likely restrictive effect on competition in the market (34). Given the variety of horizontal co-operation agreements and the different effects they may cause in different market situations, it is not possible to give a general market share threshold above which sufficient market power for causing restrictive effects on competition can be assumed.

45. Depending on the market position of the parties and the concentration in the market, other factors such as the stability of market shares over time, entry barriers and the likelihood of market entry, and the countervailing power of buyers/suppliers also have to be considered.

46. Normally, the EFTA Surveillance Authority uses current market shares in its competitive analysis (35). However, reasonably certain future developments may also be taken into account, for instance in the light of exit, entry or expansion in the relevant market. Historic data may be used if market shares have been volatile, for instance when the market is characterised by large, lumpy orders. Changes in historic market shares may provide useful information about the competitive process and the likely future importance of the various competitors, for instance, by indicating whether undertakings have been gaining or losing market share. In any event, the EFTA Surveillance Authority interprets market shares in the light of likely market conditions, for instance, if the market is highly dynamic in character or if the market structure is unstable due to innovation or growth.

47. When entering a market is sufficiently easy, a horizontal co-operation agreement will normally not be expected to give rise to restrictive effects on competition. For entry to be considered a sufficient competitive constraint on the parties to a horizontal co-operation agreement, it must be shown to be likely, timely and sufficient to deter or defeat any potential restrictive effects of the agreement. The analysis of entry may be affected by the presence of horizontal co-operation agreements. The likely or possible termination of a horizontal co-operation agreement may influence the likelihood of entry.

1.2.2. Article 53(3)

48. The assessment of restrictions of competition by object or effect under Article 53(1) is only one side of the analysis. The other side, which is reflected in Article 53(3), is the assessment of the pro-competitive effects of restrictive agreements. The general approach when applying Article 53(3) is presented in the General Guidelines. Where in an individual case a restriction of competition within the meaning of Article 53(1) has been proven, Article 53(3) can be invoked as a defence. According to Article 2 of Chapter II of Protocol 4 to the Surveillance and Court Agreement (36) on the implementation of the rules on competition laid down in Articles 53 and 54 of the EEA Agreement, the burden of proof under Article 53(3) rests on the undertaking(s) invoking the benefit of this provision. Therefore, the factual arguments and the evidence provided by the undertaking(s) must enable the EFTA Surveillance Authority to arrive at the conclusion that the agreement in question is sufficiently likely to give rise to pro-competitive effects or that it is not (37).

49. The application of the exception rule in Article 53(3) is subject to four cumulative conditions, two positive and two negative: — the agreement must contribute to improving the production or distribution of products or contribute to promoting technical or economic progress, that is to say, lead to efficiency gains; — the restrictions must be indispensable to the attainment of those objectives, that is to say, the efficiency gains; — consumers must receive a fair share of the resulting benefits, that is to say, the efficiency gains, including qualitative efficiency gains, attained by the indispensable restrictions must be sufficiently passed on to consumers so that they are at least compensated for the restrictive effects of the agreement; hence, efficiencies only accruing to the parties to the agreement will not suffice; for the purposes of these guidelines, the concept of ‘consumers’ encompasses the customers, potential and/or actual, of the parties to the agreement (38); and — the agreement must not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question.

50. In the area of horizontal co-operation agreements there are block exemptions based on Article 53(3) for research and development (39) and specialisation (including joint production) (40) agreements. Those Block Exemptions are based on the premise that the combination of complementary skills or assets can be the source of substantial efficiencies in research and development and specialisation agreements. This may also be the case for other types of horizontal co-operation agreements. The analysis of the efficiencies of an individual agreement under Article 53(3) is therefore to a large extent a question of identifying the complementary skills and assets that each of the parties brings to the agreement and evaluating whether the resulting efficiencies are such that the conditions of Article 53(3) are fulfilled.

51. Complementarities may arise from horizontal co-operation agreements in various ways. A research and development agreement may bring together different research capabilities that allow the parties to produce better products more cheaply and shorten the time for those products to reach the market. A production agreement may allow the parties to achieve economies of scale or scope that they could not achieve individually.

52. Horizontal co-operation 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 duplication of certain costs, for instance because certain fixed costs can be eliminated. However, fixed cost savings are, in general, less likely to result in benefits to consumers than savings in, for instance, variable or marginal costs.

53. Further guidance regarding the EFTA Surveillance Authority’s application of the criteria in Article 53(3) can be obtained in the General Guidelines.

1.3. Structure of these guidelines

54. Chapter 2 will first set out some general principles for the assessment of the exchange of information, which are applicable to all types of horizontal co-operation agreements entailing the exchange of information. The subsequent Chapters of these guidelines will each address one specific type of horizontal co-operation agreement. Each Chapter will apply the analytical framework described in Section 1.2, as well as the general principles on the exchange of information, to the specific type of co-operation in question.

2. GENERAL PRINCIPLES ON THE COMPETITIVE ASSESSMENT OF INFORMATION EXCHANGE

2.1. Definition and scope

55. The purpose of this Chapter is to guide the competitive assessment of information exchange. Information exchange can take various forms. Firstly, data can be directly shared between competitors. Secondly, data can be shared indirectly through a common agency (for example, a trade association) or a third party such as a market research organisation or through the companies’ suppliers or retailers.

56. Information exchange takes place in different contexts. There are agreements, decisions by associations of undertakings, or concerted practices under which information is exchanged, where the main economic function lies in the exchange of information itself. Moreover, information exchange can be part of another type of horizontal co-operation agreement (for example, the parties to a production agreement share certain information on costs). The assessment of the latter type of information exchanges should be carried out in the context of the assessment of the horizontal co-operation agreement itself.

57. Information exchange is a common feature of many competitive markets and may generate various types of efficiency gains. It may solve problems of information asymmetries (41), thereby making markets more efficient. Moreover, companies may improve their internal efficiency through benchmarking against each other’s best practices. Sharing of information may also help companies to save costs by reducing their inventories, enabling quicker delivery of perishable products to consumers, or dealing with unstable demand etc. Furthermore, information exchanges may directly benefit consumers by reducing their search costs and improving choice.

58. However, the exchange of market information may also lead to restrictions of competition, in particular in situations where it is liable to enable undertakings to be aware of market strategies of their competitors (42). The competitive outcome of information exchange depends on the characteristics of the market in which it takes place (such as concentration, transparency, stability, symmetry, complexity etc.) as well as on the type of information that is exchanged, which may modify the relevant market environment towards one liable to coordination.

59. Moreover, communication of information among competitors may constitute an agreement, a concerted practice, or a decision by an association of undertakings with the object of fixing, in particular, prices or quantities. Those types of information exchanges will normally be considered and fined as cartels. Information exchange may also facilitate the implementation of a cartel by enabling companies to monitor whether the participants comply with the agreed terms. Those types of exchanges of information will be assessed as part of the cartel.

Concerted practice

60. Information exchange can only be addressed under Article 53 if it establishes or is part of an agreement, a concerted practice or a decision by an association of undertakings. The existence of an agreement, a concerted practice or decision by an association of undertakings does not prejudge whether the agreement, concerted practice or decision by an association of undertakings gives rise to a restriction of competition within the meaning of Article 53(1). In line with the case law of the EFTA Court and the Court of Justice of the European Union, the concept of a concerted practice refers to a form of coordination between undertakings by which, without it having reached the stage where an agreement properly so-called has been concluded, practical co-operation between them is knowingly substituted for the risks of competition (43). The criteria of coordination and co-operation necessary for determining the existence of a concerted practice, far from requiring an actual plan to have been worked out, are to be understood in the light of the concept inherent in the provisions of the EEA Agreement on competition, according to which each company must determine independently the policy which it intends to adopt in the internal market and the conditions which it intends to offer to its customers (44).

61. This does not deprive companies of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors. It does, however, preclude any direct or indirect contact between competitors, the object or effect of which is to create conditions of competition which do not correspond to the normal competitive conditions of the market in question, regard being had to the nature of the products or services offered, the size and number of the undertakings, and the volume of the said market (45). This precludes any direct or indirect contact between competitors, the object or effect of which is to influence conduct on the market of an actual or potential competitor, or to disclose to such competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market, thereby facilitating a collusive outcome on the market (46). Hence, information exchange can constitute a concerted practice if it reduces strategic uncertainty (47) in the market thereby facilitating collusion, that is to say, if the data exchanged is strategic. Consequently, sharing of strategic data between competitors amounts to concertation, because it reduces the independence of competitors’ conduct on the market and diminishes their incentives to compete.

62. A situation where only one undertaking discloses strategic information to its competitor(s) who accept(s) it can also constitute a concerted practice (48). Such disclosure could occur, for example, through contacts via mail, e-mails, phone calls, meetings etc. It is then irrelevant whether only one undertaking unilaterally informs its competitors of its intended market behaviour, or whether all participating undertakings inform each other of the respective deliberations and intentions. When one undertaking alone reveals to its competitors strategic information concerning its future commercial policy, that reduces strategic uncertainty as to the future operation of the market for all the competitors involved and increases the risk of limiting competition and of collusive behaviour (49). For example, mere attendance at a meeting (50) where a company discloses its pricing plans to its competitors is likely to be caught by Article 53, even in the absence of an explicit agreement to raise prices (51). When a company receives strategic data from a competitor (be it in a meeting, by mail or electronically), it 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 data (52).

63. Where a company makes a unilateral announcement that is also genuinely public, for example through a newspaper, this generally does not constitute a concerted practice within the meaning of Article 53(1) (53). However, depending on the facts underlying the case at hand, the possibility of finding a concerted practice cannot be excluded, for example in a situation where such an announcement is followed by public announcements by other competitors, not least because strategic responses of competitors to each other’s public announcements (which, to take one example, might involve readjustments of their own earlier announcements to announcements made by competitors) could prove to be a strategy for reaching a common understanding about the terms of coordination.

2.2. Assessment under Article 53(1)

2.2.1. Main competition concerns (54)

64. Once it has been established that there is an agreement, concerted practice or decision by an association of undertakings, it is necessary to consider the main competition concerns pertaining to information exchanges.

Collusive outcome

65. By artificially increasing transparency in the market, the exchange of strategic information can facilitate coordination (that is to say, alignment) of companies’ competitive behaviour and result in restrictive effects on competition. This can occur through different channels.

66. One way is that through information exchange companies may reach a common understanding on the terms of coordination, which can lead to a collusive outcome on the market. Information exchange can create mutually consistent expectations regarding the uncertainties present in the market. On that basis companies can then reach a common understanding on the terms of coordination of their competitive behaviour, even without an explicit agreement on coordination. Exchange of information about intentions concerning future conduct is the most likely means to enable companies to reach such a common understanding.

67. Another channel through which information exchange can lead to restrictive effects on competition is by increasing the internal stability of a collusive outcome on the market. In particular, it can do so by enabling the companies involved to monitor deviations. Namely, information exchange can make the market sufficiently transparent to allow the colluding companies to monitor to a sufficient degree whether other companies are deviating from the collusive outcome, and thus to know when to retaliate. Both exchanges of present and past data can constitute such a monitoring mechanism. This can either enable companies to achieve a collusive outcome on markets where they would otherwise not have been able to do so, or it can increase the stability of a collusive outcome already present on the market (see Example 3, paragraph 107).

68. A third channel through which information exchange can lead to restrictive effects on competition is by increasing the external stability of a collusive outcome on the market. Information exchanges that make the market sufficiently transparent can allow colluding companies to monitor where and when other companies are attempting to enter the market, thus allowing the colluding companies to target the new entrant. This may also tie into the anti-competitive foreclosure concerns discussed in paragraphs 69 to 71. Both exchanges of present and past data can constitute such a monitoring mechanism.

Anti-competitive foreclosure

69. Apart from facilitating collusion, an exchange of information can also lead to anti-competitive foreclosure (55).

70. An exclusive exchange of information can lead to anti-competitive foreclosure on the same market where the exchange takes place. This can occur when the exchange of commercially sensitive information places unaffiliated competitors at a significant competitive disadvantage as compared to the companies affiliated within the exchange system. This type of foreclosure is only possible if the information concerned is very strategic for competition and covers a significant part of the relevant market.

71. It cannot be excluded that information exchange may also lead to anti-competitive foreclosure of third parties in a related market. For instance, by gaining enough market power through an information exchange, parties exchanging information in an upstream market, for instance vertically integrated companies, may be able to raise the price of a key component for a market downstream. Thereby, they could raise the costs of their rivals downstream, which could result in anti-competitive foreclosure in the downstream market.

2.2.2. Restriction of competition by object

72. Any information exchange with the objective of restricting competition on the market will be considered as a restriction of competition by object. In assessing whether an information exchange constitutes a restriction of competition by object, the EFTA Surveillance Authority will pay particular attention to the legal and economic context in which the information exchange takes place (56). To this end, the EFTA Surveillance Authority will take into account whether the information exchange, by its very nature, may possibly lead to a restriction of competition (57).

73. Exchanging information on companies’ individualised intentions concerning future conduct regarding prices or quantities (58) is particularly likely to lead to a collusive outcome. Informing each other about such intentions may allow competitors to arrive at a common higher price level without incurring the risk of losing market share or triggering a price war during the period of adjustment to new prices (see Example 1, paragraph 105). Moreover, it is less likely that information exchanges concerning future intentions are made for pro-competitive reasons than exchanges of actual data.

74. Information exchanges between competitors of individualised data regarding intended future prices or quantities should therefore be considered a restriction of competition by object (59) (60). In addition, private exchanges between competitors of their individualised intentions regarding future prices or quantities would normally be considered and fined as cartels because they generally have the object of fixing prices or quantities. Information exchanges that constitute cartels not only infringe Article 53(1), but, in addition, are very unlikely to fulfil the conditions of Article 53(3).

2.2.3. Restrictive effects on competition

75. The likely effects of an information exchange on competition must be analysed on a case-by-case basis as the results of the assessment depend on a combination of various case specific factors. The assessment of restrictive effects on competition compares the likely effects of the information exchange with the competitive situation that would prevail in the absence of that specific information exchange (61). For an information exchange to have restrictive effects on competition within the meaning of Article 53(1), it must be likely to have an appreciable adverse impact on one (or several) of the parameters of competition such as price, output, product quality, product variety or innovation. Whether or not an exchange of information will have restrictive effects on competition depends on both the economic conditions on the relevant markets and the characteristics of information exchanged.

76. Certain market conditions may make coordination easier to achieve, sustain internally, or sustain externally (62). Exchanges of information in such markets may have more restrictive effects compared to markets with different conditions. However, even where market conditions are such that coordination may be difficult to sustain before the exchange, the exchange of information may change the market conditions in such a way that coordination becomes possible after the exchange — for example by increasing transparency in the market, reducing market complexity, buffering instability or compensating for asymmetry. For this reason it is important to assess the restrictive effects of the information exchange in the context of both the initial market conditions, and how the information exchange changes those conditions. This will include an assessment of the specific characteristics of the system concerned, including its purpose, conditions of access to the system and conditions of participation in the system. It will also be necessary to examine the frequency of the information exchanges, the type of information exchanged (for example, whether it is public or confidential, aggregated or detailed, and historical or current), and the importance of the information for the fixing of prices, volumes or conditions of service (63). The following factors are relevant for this assessment.

(i) Market characteristics

77. Companies are more likely to achieve a collusive outcome in markets which are sufficiently transparent, concentrated, non-complex, stable and symmetric. In those types of markets companies can reach a common understanding on the terms of coordination and successfully monitor and punish deviations. However, information exchange can also enable companies to achieve a collusive outcome in other market situations where they would not be able to do so in the absence of the information exchange. Information exchange can thereby facilitate a collusive outcome by increasing transparency in the market, reducing market complexity, buffering instability or compensating for asymmetry. In this context, the competitive outcome of an information exchange depends not only on the initial characteristics of the market in which it takes place (such as concentration, transparency, stability, complexity etc.), but also on how the type of information exchanged may change those characteristics (64).

78. Collusive outcomes are more likely in transparent markets. Transparency can facilitate collusion by enabling companies to reach a common understanding on the terms of coordination and/or by increasing internal and external stability of collusion. Information exchange can increase transparency and hence limit uncertainties about the strategic variables of competition (for example, prices, output, demand, costs etc.). The lower the pre-existing level of transparency in the market, the more value an information exchange may have in achieving a collusive outcome. An information exchange that contributes little to the transparency in a market is less likely to have restrictive effects on competition than an information exchange that significantly increases transparency. Therefore, it is the combination of both the pre-existing level of transparency and how the information exchange changes that level that will determine how likely it is that the information exchange will have restrictive effects on competition. The pre-existing degree of transparency depends, inter alia, on the number of market participants and the nature of transactions, which can range from public transactions to confidential bilateral negotiations between buyers and sellers. When evaluating the change in the level of transparency in the market, the key element is to identify to what extent the available information can be used by companies to determine the actions of their competitors.

79. Tight oligopolies can facilitate a collusive outcome on the market as it is easier for fewer companies to reach a common understanding on the terms of coordination and to monitor deviations. A collusive outcome is also more likely to be sustainable with fewer companies. With more companies coordinating, the gains from deviating are greater because a larger market share can be gained through undercutting. At the same time, gains from the collusive outcome are smaller because, when there are more companies, the share of the rents from the collusive outcome declines. Exchanges of information in tight oligopolies are more likely to cause restrictive effects on competition than in less tight oligopolies, and are not likely to cause such restrictive effects on competition in very fragmented markets. However, by increasing transparency, or modifying the market environment in another way towards one more liable to coordination, information exchanges may facilitate coordination and monitoring among more companies than would be possible in its absence.

80. Companies may find it difficult to achieve a collusive outcome in a complex market environment. However, to some extent, the use of information exchange may simplify such environments. In a complex market environment more information exchange is normally needed to reach a common understanding on the terms of coordination and to monitor deviations. For example, it is easier to achieve a collusive outcome on a price for a single, homogeneous product, than on numerous prices in a market with many differentiated products. It is nonetheless possible that to circumvent the difficulties involved in achieving a collusive outcome on a large number of prices, companies may exchange information to establish simple pricing rules (for example, pricing points).

81. Collusive outcomes are more likely where the demand and supply conditions are relatively stable (65). In an unstable environment it may be difficult for a company to know whether its lost sales are due to an overall low level of demand or due to a competitor offering particularly low prices, and therefore it is difficult to sustain a collusive outcome. In this context, volatile demand, substantial internal growth by some companies in the market, or frequent entry by new companies, may indicate that the current situation is not sufficiently stable for coordination to be likely (66). Information exchange in certain situations can serve the purpose of increasing stability in the market, and thereby may enable a collusive outcome in the market. Moreover, in markets where innovation is important, coordination may be more difficult since particularly significant innovations may allow one company to gain a major advantage over its rivals. For a collusive outcome to be sustainable, the reactions of outsiders, such as current and future competitors not participating in the coordination, as well as customers, should not be capable of jeopardising the results expected from the collusive outcome. In this context, the existence of barriers to entry makes it more likely that a collusive outcome on the market is feasible and sustainable.

82. A collusive outcome is more likely in symmetric market structures. When companies are homogenous in terms of their costs, demand, market shares, product range, capacities etc., they are more likely to reach a common understanding on the terms of coordination because their incentives are more aligned. However, information exchange may in some situations also allow a collusive outcome to occur in more heterogeneous market structures. Information exchange could make companies aware of their differences and help them to design means to accommodate for their heterogeneity in the context of coordination.

83. The stability of a collusive outcome also depends on the companies’ discounting of future profits. The more companies value the current profits that they could gain from undercutting versus all the future ones that they could gain by the collusive outcome, the less likely it is that they will be able to achieve a collusive outcome.

84. By the same token, a collusive outcome is more likely among companies that will continue to operate in the same market for a long time, as in such a scenario they will be more committed to coordinate. If a company knows that it will interact with the others for a long time, it will have a greater incentive to achieve the collusive outcome because the stream of future profits from the collusive outcome will be worth more than the short term profit it could have if it deviated, that is to say, before the other companies detect the deviation and retaliate.

85. Overall, for a collusive outcome to be sustainable, the threat of a sufficiently credible and prompt retaliation must be likely. Collusive outcomes are not sustainable in markets in which the consequences of deviation are not sufficiently severe to convince coordinating companies that it is in their best interest to adhere to the terms of the collusive outcome. For example, in markets characterised by infrequent, lumpy orders, it may be difficult to establish a sufficiently severe deterrence mechanism, since the gain from deviating at the right time may be large, certain and immediate, whereas the losses from being punished small and uncertain, and only materialise after some time. The credibility of the deterrence mechanism also depends on whether the other coordinating companies have an incentive to retaliate, determined by their short-term losses from triggering a price war versus their potential long-term gain if they induce a return to a collusive outcome. For example, companies’ ability to retaliate may be reinforced if they are also interrelated by vertical commercial relationships which they can use as a threat of punishment for deviations.

(ii) Characteristics of the information exchange

Strategic information

86. The exchange between competitors of strategic data, that is to say, data that reduces strategic uncertainty in the market, is more likely to be caught by Article 53 than exchanges of other types of information. Sharing of strategic data can give rise to restrictive effects on competition because it reduces the parties’ decision-making independence by decreasing their incentives to compete. Strategic information can be related to prices (for example, actual prices, discounts, increases, reductions or rebates), customer lists, production costs, quantities, turnover, sales, capacities, quality, marketing plans, risks, investments, technologies and R&D programmes and their results. Generally, information related to prices and quantities is the most strategic information, followed by information about costs and demand. However, if companies compete with regard to R&D, technological data may be the most strategic for competition. The strategic usefulness of data also depends on its aggregation and age, as well as the market context and frequency of the exchange.

Market coverage

87. For an information exchange to be likely to have restrictive effects on competition, the companies involved in the exchange have to cover a sufficiently large part of the relevant market. Otherwise, the competitors that are not participating in the information exchange could constrain any anti-competitive behaviour of the companies involved. For example, by pricing below the coordinated price level companies unaffiliated to the information exchange system could threaten the external stability of a collusive outcome.

88. What constitutes ‘a sufficiently large part of the market’ cannot be defined in the abstract and will depend on the specific facts of each case and the type of information exchange in question. Where, however, an information exchange takes place in the context of another type of horizontal co-operation agreement and does not go beyond what is necessary for its implementation, market coverage below the market share thresholds set out in the relevant Chapter of these guidelines, the relevant block exemption (67) or the De Minimis Notice pertaining to the type of agreement in question will usually not be large enough for the information exchange to give rise to restrictive effects on competition.

Aggregated/individualised data

89. Exchanges of genuinely aggregated data, that is to say, where the recognition of individualised company level information is sufficiently difficult, are much less likely to lead to restrictive effects on competition than exchanges of company level data. Collection and publication of aggregated market data (such as sales data, data on capacities or data on costs of inputs and components) by a trade organisation or market intelligence firm may benefit suppliers and customers alike by allowing them to get a clearer picture of the economic situation of a sector. Such data collection and publication may allow market participants to make better-informed individual choices in order to adapt efficiently their strategy to the market conditions. More generally, unless it takes place in a tight oligopoly, the exchange of aggregated data is unlikely to give rise to restrictive effects on competition. Conversely, the exchange of individualised data facilitates a common understanding on the market and punishment strategies by allowing the coordinating companies to single out a deviator or entrant. Nevertheless, the possibility cannot be excluded that even the exchange of aggregated data may facilitate a collusive outcome in markets with specific characteristics. Namely, members of a very tight and stable oligopoly exchanging aggregated data who detect a market price below a certain level could automatically assume that someone has deviated from the collusive outcome and take market-wide retaliatory steps. In other words, in order to keep collusion stable, companies may not always need to know who deviated; it may be enough to learn that ‘someone’ deviated.

Age of data

90. The exchange of historic data is unlikely to lead to a collusive outcome as it is unlikely to be indicative of the competitors’ future conduct or to provide a common understanding on the market (68). Moreover, exchanging historic data is unlikely to facilitate monitoring of deviations because the older the data, the less useful it would be for timely detection of deviations and thus as a credible threat of prompt retaliation (69). There is no predetermined threshold for when data becomes historic, that is to say, old enough not to pose risks to competition. Whether data is genuinely historic depends on the specific characteristics of the relevant market and in particular the frequency of price re-negotiations in the industry. For example, data can be considered as historic if it is several times older than the average length of contracts in the industry if the latter are indicative of price re-negotiations. The threshold for when data becomes historic also depends on the data’s nature, aggregation, frequency of the exchange, and the characteristics of the relevant market (for example, its stability and transparency).

Frequency of the information exchange

91. Frequent exchanges of information that facilitate both a better common understanding of the market and monitoring of deviations increase the risks of a collusive outcome. In more unstable markets, more frequent exchanges of information may be necessary to facilitate a collusive outcome than in stable markets. In markets with long-term contracts (which are indicative of infrequent price re-negotiations) less frequent exchange of information would normally be sufficient to achieve a collusive outcome. By contrast, infrequent exchanges would not tend to be sufficient to achieve a collusive outcome in markets with short-term contracts indicative of frequent price re-negotiations (70). However, the frequency at which data needs to be exchanged to facilitate a collusive outcome also depends on the nature, age and aggregation of data (71).

Public/non-public information

92. In general, exchanges of genuinely public information are unlikely to constitute an infringement of Article 53 (72). Genuinely public information is information that is generally equally accessible (in terms of costs of access) to all competitors and customers. For information to be genuinely public, obtaining it should not be more costly for customers and companies unaffiliated to the exchange system than for the companies exchanging the information. For this reason, competitors would normally not choose to exchange data that they can collect from the market at equal ease, and hence in practice exchanges of genuinely public data are unlikely. In contrast, even if the data exchanged between competitors is what is often referred to as being ‘in the public domain’, it is not genuinely public if the costs involved in collecting the data deter other companies and customers from doing so (73). The possibility to gather the information in the market, for example to collect it from customers, does not necessarily mean that such information constitutes market data readily accessible to competitors (74).

93. Even if there is public availability of data (for example, information published by regulators), the existence of an additional information exchange by competitors may give rise to restrictive effects on competition if it further reduces strategic uncertainty in the market. In that case, it is the incremental information that could be critical to tip the market balance towards a collusive outcome.

Public/non-public exchange of information

94. An information exchange is genuinely public if it makes the exchanged data equally accessible (in terms of costs of access) to all competitors and customers (75). The fact that information is exchanged in public may decrease the likelihood of a collusive outcome on the market to the extent that non-coordinating companies, potential competitors, as well as costumers may be able to constrain potential restrictive effects on competition (76). However, the possibility cannot be entirely excluded that even genuinely public exchanges of information may facilitate a collusive outcome in the market.

2.3. Assessment under Article 53(3)

2.3.1. Efficiency gains (77)

95. Information exchange may lead to efficiency gains. Information about competitors’ costs can enable companies to become more efficient if they benchmark their performance against the best practices in the industry and design internal incentive schemes accordingly.

96. Moreover, in certain situations information exchange can help companies allocate production towards high-demand markets (for example, demand information) or low cost companies (for example, cost information). The likelihood of those types of efficiencies depends on market characteristics such as whether companies compete on prices or quantities and the nature of uncertainties on the market. Some forms of information exchanges in this context may allow substantial cost savings where, for example, they reduce unnecessary inventories or enable quicker delivery of perishable products to areas with high demand and their reduction in areas with low demand (see Example 6, paragraph 110).

97. Exchange of consumer data between companies in markets with asymmetric information about consumers can also give rise to efficiencies. For instance, keeping track of the past behaviour of customers in terms of accidents or credit default provides an incentive for consumers to limit their risk exposure. It also makes it possible to detect which consumers carry a lower risk and should benefit from lower prices. In this context, information exchange can also reduce consumer lock-in, thereby inducing stronger competition. This is because information is generally specific to a relationship and consumers would otherwise lose the benefit from that information when switching to another company. Examples of such efficiencies are found in the banking and insurance sectors, which are characterised by frequent exchanges of information about consumer defaults and risk characteristics.

98. Exchanging past and present data related to market shares may in some situations provide benefits to both companies and consumers by allowing companies to announce it as a signal of quality of their products to consumers. In situations of imperfect information about product quality, consumers often use indirect means to gain information on the relative qualities of products such as price and market shares (for example, consumers use best-selling lists in order to choose their next book).

99. Information exchange that is genuinely public can also benefit consumers by helping them to make a more informed choice (and reducing their search costs). Consumers are most likely to benefit in this way from public exchanges of current data, which are the most relevant for their purchasing decisions. Similarly, public information exchange about current input prices can lower search costs for companies, which would normally benefit consumers through lower final prices. Those types of direct consumer benefits are less likely to be generated by exchanges of future pricing intentions because companies which announce their pricing intentions are likely to revise them before consumers actually purchase based on that information. Consumers generally cannot rely on companies’ future intentions when making their consumption plans. However, to some extent, companies may be disciplined not to change announced future prices before implementation when, for example, they have repeated interactions with consumers and consumers rely on knowing prices in advance or, for example, when consumers can make advance orders. In those situations, exchanging information related to the future may improve customers’ planning of expenditure.

100. Exchanging present and past data is more likely to generate efficiency gains than exchanging information about future intentions. However, in specific circumstances announcing future intentions could also give rise to efficiency gains. For example, companies knowing early the winner of an R&D race could avoid duplicating costly efforts and wasting resources that cannot be recovered (78).

2.3.2. Indispensability

101. Restrictions that go beyond what is necessary to achieve the efficiency gains generated by an information exchange do not fulfil the conditions of Article 53(3). In order to fulfil the condition of indispensability, the parties will need to prove that the data’s subject matter, aggregation, age, confidentiality and frequency, as well as coverage, of the exchange are of the kind that carries the lowest risks indispensable for creating the claimed efficiency gains. Moreover, the exchange should not involve information beyond the variables that are relevant for the attainment of the efficiency gains. For instance, for the purpose of benchmarking, an exchange of individualised data would generally not be indispensable because information aggregated in, for example, some form of industry ranking could also generate the claimed efficiency gains while carrying a lower risk of leading to a collusive outcome (see Example 4, paragraph 108). Finally, it is generally unlikely that the sharing of individualised data on future intentions is indispensable, especially if it is related to prices and quantities.

102. Similarly, information exchanges that form part of horizontal co-operation agreements are also more likely to fulfil the conditions of Article 53(3) if they do not go beyond what is indispensable for the implementation of the economic purpose of the agreement (for example, sharing technology necessary for an R&D agreement or cost data in the context of a production agreement).

2.3.3. Pass-on to consumers

103. Efficiency gains attained by indispensable restrictions must be passed on to consumers to an extent 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 efficiency gains will be passed on to consumers to an extent that outweighs the restrictive effects on competition.

2.3.4. No elimination of competition

104. The criteria in Article 53(3) cannot be met if the companies involved in the information exchange are afforded the possibility of eliminating competition in respect of a substantial part of the products concerned.

2.4. Examples

105. Exchange of intended future prices as a restriction of competition by object Example 1 Situation: A trade association of coach companies in country X disseminates individualised information on intended future prices only to the member coach companies. The information contains several elements, such as the intended fare and the route to which the fare applies, the possible restrictions to this fare, such as which consumers can buy it, if advanced payment or minimum stay is required, the period during which tickets can be sold for the given fare (first and last ticket date), and the time during which the ticket with the given fare can be used for travel (first and last travel dates). Analysis: This information exchange, which is triggered by a decision by an association of undertakings, concerns pricing intentions of competitors. This information exchange is a very efficient tool for reaching a collusive outcome and therefore restricts competition by object. This is because the companies are free to change their own intended prices as announced within the association at any time if they learn that their competitors intend to charge higher prices. This allows the companies to reach a common higher price level without incurring the cost of losing market share. For example, coach Company A can announce today a price increase on the route from city 1 to city 2 for travel as of the following month. Since this information is accessible to all other coach companies, Company A can then wait and see the reaction of its competitors to this price announcement. If a competitor on the same route, say, Company B, matched the price increase, then Company A’s announcement would be left unchanged and later would likely become effective. However, if Company B did not match the price increase, then Company A could still revise its fare. The adjustment would continue until the companies converged to an increased anti-competitive price level. This information exchange is unlikely to fulfil the conditions of Article 53(3). The information exchange is only confined to competitors, that is to say, customers of the coach companies do not directly benefit from it.

106. Exchange of current prices with sufficient efficiency gains for consumers Example 2 Situation: A national tourist office together with the coach companies in small country X agree to disseminate information on current prices of coach tickets through a freely accessible website (in contrast to Example 1, paragraph 105, consumers can already purchase tickets at the prices and conditions which are exchanged, thus they are not intended future prices but present prices of current and future services). The information contains several elements, such as the fare and the route to which the fare is applied, the possible restrictions to this fare, such as which consumers can buy it, if advanced payment or minimum stay is required, and the time during which the ticket with the given fare can be used for travel (first and last travel dates). Coach travel in country X is not in the same relevant market as train and air travel. It is presumed that the relevant market is concentrated, stable and relatively non-complex, and pricing becomes transparent with the information exchange. Analysis: This information exchange does not constitute a restriction of competition by object. The companies are exchanging current prices rather than intended future prices because they are effectively already selling tickets at these prices (unlike in Example 1, paragraph 105). Therefore, this exchange of information is less likely to constitute an efficient mechanism for reaching a focal point for coordination. Nevertheless, given the market structure and strategic nature of the data, this information exchange is likely to constitute an efficient mechanism for monitoring deviations from a collusive outcome, which would be likely to occur in this type of market setting. Therefore, this information exchange could give rise to restrictive effects on competition within the meaning of Article 53(1). However, to the extent that some restrictive effects on competition could result from the possibility to monitor deviations, it is likely that the efficiency gains stemming from the information exchange would be passed on to consumers to an extent that outweighs the restrictive effects on competition in both their likelihood and magnitude. Unlike in Example 1, paragraph 105, the information exchange is public and consumers can actually purchase tickets at the prices and conditions that are exchanged. Therefore, this information exchange is likely to benefit consumers directly by reducing their search costs and improving choice, and thereby also stimulating price competition. Hence, the conditions of Article 53(3) are likely to be met.

107. Current prices deduced from the information exchanged Example 3 Situation: The luxury hotels in the capital of country A operate in a tight, non-complex and stable oligopoly, with largely homogenous cost structures, which constitute a separate relevant market from other hotels. They directly exchange individual information about current occupancy rates and revenues. In this case, from the information exchanged the parties can directly deduce their actual current prices. Analysis: Unless it is a disguised means of exchanging information on future intentions, this exchange of information would not constitute a restriction of competition by object because the hotels exchange present data and not information on intended future prices or quantities. However, the information exchange would give rise to restrictive effects on competition within the meaning of Article 53(1) because knowing competitors’ actual current prices would be likely to facilitate coordination (that is to say, alignment) of companies’ competitive behaviour. It would be most likely used to monitor deviations from the collusive outcome. The information exchange increases transparency in the market as even though the hotels normally publish their list prices, they also offer various discounts to the list price resulting from negotiations or for early or group bookings, etc. Therefore, the incremental information that is non-publicly exchanged between the hotels is commercially sensitive, that is to say, strategically useful. This exchange is likely to facilitate a collusive outcome on the market because the parties involved constitute a tight, non-complex and stable oligopoly involved in a long-term competitive relationship (repeated interactions). Moreover, the cost structures of the hotels are largely homogeneous. Finally, neither consumers nor market entry can constrain the incumbents’ anti-competitive behaviour as consumers have little buyer power and barriers to entry are high. It is unlikely that in this case the parties would be able to demonstrate any efficiency gains stemming from the information exchange that would be passed on to consumers to an extent that would outweigh the restrictive effects on competition. Therefore, it is unlikely that the conditions of Article 53(3) can be met.

108. Benchmarking benefits — criteria in Article 53(3) not fulfilled Example 4 Situation: Three large companies with a combined market share of 80 % in a stable, non-complex, concentrated market with high barriers to entry, non-publicly and frequently exchange information directly between themselves about a substantial fraction of their individual costs. The companies claim that they do this to benchmark their performance against their competitors and thereby intend to become more efficient. Analysis: This information exchange does not in principle constitute a restriction of competition by object. Consequently, its effects on the market need to be assessed. Because of the market structure, the fact that the information exchanged relates to a large proportion of the companies’ variable costs, the individualised form of presentation of the data, and its large coverage of the relevant market, the information exchange is likely to facilitate a collusive outcome and thereby gives rise to restrictive effects on competition within the meaning of Article 53(1). It is unlikely that the criteria in Article 53(3) are fulfilled because there are less restrictive means to achieve the claimed efficiency gains, for example by way of a third party collecting, anonymising and aggregating the data in some form of industry ranking. Finally, in this case, since the parties form a very tight, non-complex and stable oligopoly, even the exchange of aggregated data could facilitate a collusive outcome in the market. However, this would be very unlikely if this exchange of information happened in a non-transparent, fragmented, unstable, and complex market.

109. Genuinely public information Example 5 Situation: The four companies owning all the petrol stations in a large country A exchange current gasoline prices over the telephone. They claim that this information exchange cannot have restrictive effects on competition because the information is public as it is displayed on large display panels at every petrol station. Analysis: The pricing data exchanged over the telephone is not genuinely public, as in order to obtain the same information in a different way it would be necessary to incur substantial time and transport costs. One would have to travel frequently large distances to collect the prices displayed on the boards of petrol stations spread all over the country. The costs for this are potentially high, so that the information could in practice not be obtained but for the information exchange. Moreover, the exchange is systematic and covers the entire relevant market, which is a tight, non-complex, stable oligopoly. Therefore it is likely to create a climate of mutual certainty as to the competitors’ pricing policy and thereby it is likely to facilitate a collusive outcome. Consequently, this information exchange is likely to give rise to restrictive effects on competition within the meaning of Article 53(1).

110. Improved meeting of demand as an efficiency gain Example 6 Situation: There are five producers of fresh bottled carrot juice in the relevant market. Demand for this product is very unstable and varies from location to location at different points in time. The juice has to be sold and consumed within one day of the date of production. The producers agree to establish an independent market research company that collects, on a daily basis, current information about unsold juice in each point of sale, which it publishes on its website the following week in a form that is aggregated per point of sale. The published statistics allow producers and retailers to forecast demand and to position the product better. Before the information exchange was put in place, the retailers had reported large quantities of wasted juice and therefore 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 system, 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. Analysis: Even though the market is quite concentrated and the data exchanged is recent and strategic, it is not very likely that this exchange would facilitate a collusive outcome because a collusive outcome would be unlikely to occur in such an unstable market. Even if the exchange creates some risk of giving rise to restrictive effects on competition, the 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. The information is exchanged in a public and aggregated form, which carries lower anti-competitive risks than if it were non-public and individualised. The information exchange does not therefore go beyond what is necessary to correct the market failure. Therefore, it is likely that this information exchange meets the criteria in Article 53(3).

3. RESEARCH AND DEVELOPMENT AGREEMENTS

3.1. Definition

111. R&D agreements vary in form and scope. They range from outsourcing certain R&D activities to the joint improvement of existing technologies and co-operation concerning the research, development and marketing of completely new products. They may take the form of a co-operation agreement or of a jointly controlled company. This Chapter applies to all forms of R&D agreements, including related agreements concerning the production or commercialisation of the R&D results.

3.2. Relevant markets

112. The key to defining the relevant market when assessing the effects of an R&D agreement is to identify those products, technologies or R&D efforts that will act as the main competitive constraints on the parties. At one end of the spectrum of possible situations, innovation may result in a product (or technology) which competes in an existing product (or technology) market. This is, for example, the case with R&D directed towards slight improvements or variations, such as new models of certain products. Here, possible effects concern the market for existing products. At the other end of the spectrum, innovation may result in an entirely new product which creates its own new product market (for example, a new vaccine for a previously incurable disease). However, many cases concern situations in between those two extremes, that is to say, situations in which innovation efforts may create products (or technology) which, over time, replace existing products (or technology) (for example, CDs which have replaced records). A careful analysis of those situations may have to cover both existing markets and the impact of the agreement on innovation.

Existing product markets

113. Where the co-operation concerns R&D for the improvement of existing products, those existing products and their close substitutes form the relevant market concerned by the co-operation (79).

114. If the R&D efforts aim at a significant change in existing products or even at a new product to replace existing products, substitution with the existing products may be imperfect or long-term. It may be concluded that the old and the potentially emerging new products do not belong to the same relevant market (80). The market for existing products may nevertheless be concerned, if the pooling of R&D efforts is likely to result in the coordination of the parties’ behaviour as suppliers of existing products, for instance because of the exchange of competitively sensitive information relating to the market for existing products.

115. If the R&D concerns an important component of a final product, not only the market for that component may be relevant for the assessment, but also the existing market for the final product. For instance, if car manufacturers co-operate in R&D related to a new type of engine, the car market may be affected by that R&D co-operation. The market for final products, however, is only relevant for the assessment 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

116. R&D co-operation may not only concern 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 property that is licensed and its close substitutes, that is to say, other technologies which customers could use as a substitute.

117. The methodology for defining technology markets follows the same principles as product market definition (81). Starting from the technology which is marketed by the parties, those other technologies to which customers could switch in response to a small but non-transitory increase in relative prices need to be identified. Once those technologies are identified, market shares can be calculated by dividing the licensing income generated by the parties by the total licensing income of all licensors.

118. The parties’ position in the market for existing technology is a relevant assessment criterion where the R&D co-operation concerns a significant improvement to an existing technology or a new technology that is likely to replace the existing technology. The parties’ market shares can, however, only be taken as a starting point for this analysis. In technology markets, particular emphasis must be placed on potential competition. If companies which do not currently license their technology are potential entrants on the technology market they could constrain the ability of the parties to raise the price for their technology profitably. This aspect of the analysis may also be taken into account directly in the calculation of market shares by basing them on the sales of the products incorporating the licensed technology on downstream product markets (see paragraphs 123 to 126).

Competition in innovation (R&D efforts)

119. R&D co-operation may not only affect competition in existing markets, but also competition in innovation and new product markets. This is the case where R&D co-operation concerns the development of new products or technology which either may — if emerging — one day replace existing products or technology or which are being developed for a new intended use and will therefore not replace existing products but create a completely new demand. The effects on competition in innovation are important in these situations, but can in some cases not be sufficiently assessed by analysing actual or potential competition in existing product/technology markets. In this respect, two scenarios can be distinguished, depending on the nature of the innovative process in a given industry.

120. In the first scenario, which is, for instance, present in the pharmaceutical industry, the process of innovation is structured in such a way that it is possible at an early stage to identify competing R&D poles. Competing R&D poles are R&D efforts directed towards a certain new product or technology, and the substitutes for that R&D, that is to say, R&D aimed at developing substitutable products or technology for those developed by the co-operation and having similar timing. In this case, it can be analysed whether after the agreement there will be a sufficient number of remaining R&D poles. The starting point of the analysis is the R&D of the parties. Then credible competing R&D poles have to be identified. In order to assess the credibility of competing poles, the following aspects have to be taken into account: the nature, scope and size of any other R&D efforts, their access to financial and human resources, know-how/patents, or other specialised assets, as well as their timing and their capability to exploit possible results. An R&D pole is not a credible competitor if it cannot be regarded as a close substitute for the parties’ R&D effort from the viewpoint of, for instance, access to resources or timing.

121. Besides the direct effect on the innovation itself, the co-operation may also affect a new product market. It will often be difficult to analyse the effects on such a market directly as by its very nature it does not yet exist. The analysis of such markets will therefore often be implicitly incorporated in the analysis of competition in innovation. However, it may be necessary to consider directly the effects on such a market of aspects of the agreement that go beyond the R&D stage. An R&D agreement that includes joint production and commercialisation on the new product market may, for instance, be assessed differently than a pure R&D agreement.

122. In the second scenario, the innovation efforts in an industry are not clearly structured so as to allow the identification of R&D poles. In this situation, in the absence of exceptional circumstances, the EFTA Surveillance Authority would not try to assess the impact of a given R&D co-operation on innovation, but would limit its assessment to existing product and/or technology markets which are related to the R&D co-operation in question.

Calculation of market shares

123. The calculation of market shares, both for the purposes of the R&D Block Exemption and of these guidelines, has to reflect the distinction between existing markets and competition in innovation. At the beginning of an R&D co-operation the reference point is the existing market for products capable of being improved, substituted or replaced by the products under development. If the R&D agreement only aims at improving or refining existing products, that market includes the products directly concerned by the R&D. Market shares can thus be calculated on the basis of the sales value of the existing products.

124. If the R&D aims at replacing an existing product, the new product will, if successful, become a substitute for the existing products. To assess the competitive position of the parties, it is again possible to calculate market shares on the basis of the sales value of the existing products. Consequently, the R&D Block Exemption bases its exemption of those situations on the market share in the relevant market for the products capable of being improved, substituted or replaced by the contract products (82). To fall under the R&D Block Exemption, that market share may not exceed 25 % (83).

125. For technology markets, one way to proceed is to calculate market shares on the basis of each technology’s share of total licensing income from royalties, representing a technology’s share of the market where competing technologies are licensed. However, this may often be a mere theoretical and not very practical way to proceed because of lack of clear information on royalties, the use of royalty-free cross-licensing, etc. An alternative approach is to calculate market shares on the technology market on the basis of sales of products or services incorporating the licensed technology on downstream product markets. Under that approach, all sales on the relevant product market are taken into account, irrespective of whether the product incorporates a technology that is being licensed (84). Also for that market, the share may not exceed 25 % (irrespective of the calculation method used) for the benefits of the R&D Block Exemption to apply.

126. If the R&D aims at developing a product which will create a completely new demand, market shares based on sales cannot be calculated. Only an analysis of the effects of the agreement on competition in innovation is possible. Consequently, the R&D Block Exemption treats those agreements as agreements between non-competitors and exempts them irrespective of market share for the duration of the joint R&D and for an additional period of seven years after the product is first put on the market (85). However, the benefit of the Block Exemption may be withdrawn if the agreement eliminates effective competition in innovation (86). After the seven year period, market shares based on sales value can be calculated, and the market share threshold of 25 % applies (87).

3.3. Assessment under Article 53(1)

3.3.1. Main competition concerns

127. R&D co-operation can restrict competition in various ways. First, it may reduce or slow down innovation, leading to fewer or worse products coming to the market later than they otherwise would. Secondly, on product or technology markets R&D co-operation may reduce significantly competition between the parties outside the scope of the agreement or it may make anti-competitive coordination on those markets likely, thereby leading to higher prices. A foreclosure problem may only arise in the context of co-operation involving at least one player with a significant degree of market power (which does not necessarily amount to dominance) for a key technology and the exclusive exploitation of the results.

3.3.2. Restrictions of competition by object

128. R&D agreements restrict competition by object if they do not truly concern joint R&D, but serve as a tool to engage in a disguised cartel, that is to say, otherwise prohibited price-fixing, output limitation or market allocation. However, an R&D agreement which includes the joint exploitation of possible future results is not necessarily restrictive of competition.

3.3.3. Restrictive effects on competition

129. Most R&D agreements do not fall under Article 53(1). First, this can be said for many agreements relating to co-operation in R&D at a rather early stage, far removed from the exploitation of possible results.

130. Moreover, R&D co-operation between non-competitors does not generally give rise to restrictive effects on competition (88). The competitive relationship between the parties has to be analysed in the context of affected existing markets and/or innovation. If, on the basis of objective factors, the parties are not able to carry out the necessary R&D independently, for instance, due to the limited technical capabilities of the parties, the R&D agreement will normally not have any restrictive effects on competition. This can apply, for example, to companies bringing together complementary skills, technologies and other resources. The issue of