Competition rules relating to horizontal cooperation agreements - Communication pursuant to Article 5 of Council Regulation (EEC) No 2821/71 of 20 December 1971 on the application of Article 81(3) of the Treaty to categories of agreements, decisions and concerted practices modified by Regulation (EEC) No 2743/72 (Text with EEA relevance)
Date: 2000-04-27
Institutions: Council of the European Union
Subjects: European treaties, competition law, cooperation agreement (EU), exchange of information

27.4.2000

EN

Official Journal of the European Communities

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Competition rules relating to horizontal cooperation agreements

Communication pursuant to Article 5 of Council Regulation (EEC) No 2821/71 of 20 December
1971 on the application of Article 81(3) of the Treaty to categories of agreements, decisions and
concerted practices modified by Regulation (EEC) No 2743/72

(2000/C 118/03)

(Text with EEA relevance)

The Commission invites all interested parties to send their comments on the following texts:

(cid:151) draft Commission Regulation (EC) on the application of Article 81(3) of the EC Treaty to categories of

research and development agreements,

(cid:151) draft Commission Regulation (EC) on the application of Article 81(3) of the EC Treaty to categories of

specialisation agreements,

(cid:151) draft Guidelines on the Applicability of Article 81 to horizontal cooperation.

These comments should be sent to the Commission not later than one month after the date of the
publication in the Official Journal of
the European Communities. They should not contain any business
secrets or other confidential information. Comments should be sent to the following address:

European Commission
Competition Directorate-General
Directorate for Competition Policy, Coordination, International Affairs and Relations with other Institutions
Rue de la Loi/Wetstraat 200
B-1049 Brussels

Internet address:
COMP-HORIZONTALS@cec.eu.int

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Official Journal of the European Communities

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Commission Regulation on the application of Article 81(3) of the EC Treaty to categories of
research and development agreements

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EEC) No 2821/71 of 20
December 1971 on the application of Article 85(3) of
the
Treaty to categories of agreements, decisions and concerted
practices (1), as last amended by the Act of Accession of
Austria, Finland and Sweden, and in particular Article 1(b)
thereof,

Having published a draft of this Regulation (2),

Having consulted the Advisory Committee on Restrictive
Practices and Dominant Positions,

Whereas:

including the stage of

(3) Agreements on the joint execution of research work or
the joint development of the results of the research, up to
but not
industrial application,
generally do not fall within the scope of Article 81(1)
of the Treaty. In certain circumstances, however, such as
where the parties agree not to carry out other research
and development in the same field, thereby forgoing the
opportunity of gaining competitive advantages over the
other parties, such agreements may fall within Article
81(1) and should therefore not be excluded from this
Regulation.

(4) Pursuant

2821/71,

(EEC) No

to Regulation

the
Commission has in particular adopted Regulation (EEC)
No 418/85 of 19 December 1984 on the application of
Article 81(3) of the Treaty to categories of research and
development agreements (5), as last amended by Regu-
lation (EC) No 2236/97 (6). This Regulation will expire
on 31 December 2000.

(1) Regulation (EEC) No 2821/71 empowers the Commission
the Treaty by regulation to
to apply Article 81(3) of
certain
and
agreements,
categories
concerted practices falling within the scope of Article
81(1) which have as their object the research and devel-
opment of products or processes up to the stage of
industrial application, and exploitation of
the results,
including provisions regarding intellectual property rights.

decisions

of

of

effective

competition

(5) A new regulation must meet the two requirements of
ensuring
and
protection
providing adequate legal security for undertakings. The
pursuit of these objectives should take account of the
need as far as possible to simplify administrative super-
vision and the legislative framework. Below a certain level
of market power it can for the application of Article
81(3),
in general, be presumed that the positive effects
of research and development agreements will outweigh
any negative effects on competition.

(2) Article 163(2) of the Treaty calls upon the Community to
including small and medium
encourage undertakings,
in their research and technological
sized undertakings,
development activities of high quality, and to support
their efforts to cooperate with one another. Pursuant to
Council Decision 65/1999/EC of 22 December 1998
concerning the rules for the participation of undertakings,
research centres and universities and for the dissemination
of research results for the implementation of the fifth
framework programme of
the European Community
(1998 to 2002) (3) and Commission Regulation (EC) No
996/1999 of 11 May 1999 on the implementation of
Council Decision 1999/65/EC concerning the rules for
the participation of undertakings, research centres and
universities and for the dissemination of research results
for
framework
programme of the European Community (1998-2002) (4),
indirect research and technological development
(RTD)
actions supported under the fifth framework programme
of the European Community are required to be carried
out cooperatively.

implementation

fifth

the

the

of

(1) OJ L 285, 29.12.1971, p. 46.
(2) OJ C 118, 27.4.2000, p. 3.
(3) OJ L 26, 1.2.1999, p. 26.
(4) OJ L 122, 12.5.1999, p. 9.

(6) Regulation (EEC) No 2821/71 requires the exempting
regulation of the Commission (a) to define the categories
of agreements, decisions and concerted practices to which
it applies, (b) to specify the restrictions or clauses which
may, or may not, appear in the agreements, decisions and
concerted practices, and (c) to specify the clauses which
must be contained in the agreements, decisions and
concerted practices or the other conditions which must
be satisfied.

(7) It is appropriate to move away from the approach of
listing exempted clauses and to place greater emphasis
on defining the categories of agreements which are
exempted up to a certain level of market power and on
specifying the restrictions or clauses which are not to be
contained in such agreements. This is consistent with an
economics based approach which assesses the impact of
agreements on the relevant market.

(5) OJ L 53, 22.2.1985, p. 5.
(6) OJ L 306, 11.11.1997, p. 12.

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(8) For the application of Article 81(3) by regulation, it is not
necessary to define those agreements which are capable of
falling within Article 81(1). In the individual assessment
of agreements under Article 81(1), account has to be
factors, and in particular the market
taken of several
structure on the relevant market.

(9) The benefit of the block exemption should be limited to
those agreements for which it can be assumed with
sufficient certainty that
they satisfy the conditions of
Article 81(3).

they may agree to use the results of research and devel-
opment solely for the purpose of further research.

(15) The exemption granted under this Regulation must be
limited to research and development agreements which
do not afford the undertakings the possibility of elim-
inating competition in respect of a substantial part of
the products or services in question. It is necessary to
exclude from the block exemption agreements between
competitors whose combined share of
for
products or
services capable of being improved or
replaced by the results of the research and development
exceeds a certain level at
is
entered into.

the time the agreement

the market

(10) Cooperation in research and development and in the
exploitation of the results generally promotes technical
and economic progress by increasing the dissemination
of know-how between the parties and avoiding dupli-
cation of research and development work, by stimulating
new advances through the exchange of complementary
know-how, and by rationalising the manufacture of the
products or application of the processes arising out of the
research and development.

(16)

In order
to guarantee the maintenance of effective
competition during joint exploitation of the results, it is
necessary to provide that the block exemption will cease
to apply if the parties’ combined shares of the market for
the products arising out of the joint research and devel-
opment become too great. It should be provided that the
the
exemption will continue to apply,
the
parties’ market shares,
commencement of
so as to await
stabilisation of their market shares, particularly after the
introduction of an entirely new product, and to guarantee
a minimum period of return on the investments involved.

irrespective of
for a certain period after

joint exploitation,

In principle

certain severe

(17) This Regulation should not exempt restrictions which are
not indispensable to attain the positive effects mentioned
above.
anti-competitive
restraints such as limitations on the freedom of parties
to carry out research and development in a field uncon-
nected to the agreement, the fixing of prices, limitations
on output or sales, allocation of markets or customers,
and limitations on effecting passive sales for the contract
products in territories reserved for other parties should be
excluded from the benefit of the block exemption estab-
lished by this Regulation irrespective of the market share
of the undertakings concerned.

(18) The market share limitation, the non-exemption of certain
agreements, and the conditions provided for in this Regu-
lation normally ensure that the agreements to which the
block exemption applies do not enable the participating
undertakings to eliminate competition in respect of a
substantial part of the products or services in question.

(19)

In particular cases in which the agreements falling under
this Regulation nevertheless have effects incompatible
with Article 81(3) of the Treaty, the Commission may
withdraw the benefit of the block exemption.

(11) The joint exploitation of results can be considered as the
natural consequence of joint research and development. It
can take different forms such as manufacture, the exploi-
tation of
intellectual property rights that substantially
contribute to technical or economic progress, or the
marketing of new products.

(12) Consumers can generally be expected to benefit from the
increased volume and effectiveness of research and devel-
opment through the introduction of new or improved
products or services or the reduction of prices brought
about by new or improved processes.

(13)

In order to attain the benefits and objectives described
above it is appropriate to extend the benefit of this Regu-
lation also to ancillary agreements which do not
constitute the primary object of, but are directly related
to and necessary for the implementation of research and
development agreements.

the

joint

exploitation should

(14) To justify the restrictions of competition which are
exempted,
to
products or processes for which the use of the results
of
is decisive, and all
parties should have access to the results of the work.
However, where academic bodies or research institutes
participate in research and development and are not
the results,
interested in the industrial exploitation of

the research and development

relate

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27.4.2000

(20) Agreements

are

between

undertakings which

not
competing manufacturers of products capable of being
improved or replaced by the results of the research and
development will only eliminate effective competition in
research and development in exceptional circumstances. It
is therefore appropriate to enable such agreements to
benefit from the block exemption irrespective of market
share and to address such exceptional cases by way of
withdrawal of the benefit of this Regulation.

(21) As research and development agreements are often of a
long-term nature,
cooperation
especially where
extends to the exploitation of the results, it is appropriate
to fix the period of validity of the Regulation at 10 years.

the

(22) This Regulation is without prejudice to the application of

Article 82 of the Treaty.

(23) In accordance with the principle of primacy of
Community law, no measure taken pursuant to national
the uniform
laws on competition should prejudice
application throughout
the
Community competition rules or the full effect of any
those rules,
measures adopted in implementation of
including this Regulation,

the common market of

HAS ADOPTED THIS REGULATION:

agreements) contain restrictions of competition falling within
the scope of Article 81(1).

The exemption provided for in paragraph 1 shall also
2.
apply to provisions contained in research and development
agreements which do not constitute the primary object of,
but are directly related to and necessary for their implemen-
tation, such as an obligation not to carry out independently or
together with third parties research and development in the
field to which the
closely
agreement
connected field during the execution of the agreement.

relates or

in a

This does, however, not apply to provisions which have the
same object or effect as
the restrictions of competition
enumerated in Article 5(1).

Article 2

Conditions for exemption

The exemption provided for in Article 1 shall apply

1.
subject to the conditions set out in paragraphs 2 to 5.

2.
All the parties have access to the results of the work.
However, research institutes or academic bodies may agree to
confine their use of the results for the purposes of further
research.

Article 1

Scope

3. Where the agreement provides only for joint research and
development, each party must be free to exploit the results of
research and development and any pre-existing
the joint
know-how necessary therefor independently.

1.
Pursuant to Article 81(3) of the Treaty and subject to the
provisions of this Regulation, it is hereby declared that Article
81(1) of the Treaty shall not apply to agreements entered into
between two or more undertakings which relate to the
conditions under which those undertakings pursue:

(a)

joint research and development of products or processes
and joint exploitation of the results of that research and
development;

(b) joint exploitation of

the results of research and devel-
opment of products or processes
jointly carried out
pursuant to a prior agreement between the same under-
takings; or

(c) joint research and development of products or processes

excluding joint exploitation of the results.

This exemption shall apply to the extent that such agreements
development
(hereinafter

research

referred

and

to

as

Any joint exploitation must relate to results which are
4.
protected by intellectual property rights which substantially
contribute to technical or economic progress and the results
must be decisive for the manufacture of the contract products
or the application of the contract processes.

5.
Undertakings charged with manufacture by way of
specialisation in production must be required to fulfil orders
for supplies from all the parties, except where the agreement
also provides for joint distribution.

Article 3

Market share limit and duration

1. Where the participating undertakings are not competing
manufacturers of products capable of being improved or
replaced by the contract products,
the exemption provided
for in Article 1 shall apply for the duration of the research
and development and, where the results are jointly exploited,
for five years from the time the contract products are first put
on the market within the common market.

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the

2. Where two or more of the participating undertakings are
capable of being
competing manufacturers of products
the
improved or
replaced
exemption provided for
the
the time the
period referred to in paragraph 1 only if at
agreement is entered into, the participating undertakings do
not have a combined market share which exceeds 25 % of
the relevant market
the products capable of being
for
improved or replaced by the contract products.

by
contract products,
in Article 1 shall apply for

3.

3.
After the end of the period referred to in paragraph 1,
the exemption shall continue to apply as long as the partici-
pating undertakings do not have a combined market share
which exceeds 25 % of the relevant market for the contract
products.

Article 4

Definitions

(cid:151) one or more of the parties to the agreement or one
or more of their connected undertakings referred to
in (a) to (d) and one or more third parties;

analysis,

(cid:145)research and development(cid:146) of products or processes means
the acquisition of know-how and the carrying out of theor-
experimentation,
etical
including experimental production,
testing of
products or processes, the establishment of the necessary
facilities and the obtaining of intellectual property rights
for the results;

systematic

study or

technical

4. a (cid:145)product(cid:146) means goods and/or a service, including both
intermediary goods and/or services and final goods and/or
services;

For the purposes of this Regulation the following terms shall
have the following meaning:

5. a (cid:145)contract process(cid:146) means a technology or process arising

out of the research and development;

1.

(cid:145)participating undertakings(cid:146) are:

(a) undertakings party to the agreement;

(b) their respective connected undertakings;

2.

(cid:145)connected undertakings(cid:146) are:

(a) undertakings

in which a party to the agreement,

directly or indirectly:

(cid:151) has the power to exercise more than half the voting

rights, or

(cid:151) has the power to appoint more than half

the
the supervisory board, board of
legally representing the

members of
management or bodies
undertaking, or

(cid:151) has the right to manage the undertaking’s affairs;

(b) undertakings which directly or indirectly have, over a
party to the agreement, the rights or powers listed in
(a);

(c) undertakings in which an undertaking referred to in (b)
has, directly or indirectly, the rights or powers listed in
(a);

(d) undertakings

in which a party to the agreement
the undertakings
together with one or more of
referred to in (a), (b) or (c), or in which two or more
of the latter undertakings,
jointly have the rights or
powers listed in (a);

6. a (cid:145)contract product(cid:146) means a product arising out of the
research and development or manufactured or provided
applying the contract processes;

7.

(cid:145)exploitation of the results(cid:146) means the manufacture, selling,
distribution or promotion of the contract products or the
application of the contract processes or the assignment or
licensing of intellectual property rights or the communi-
cation of know-how required for such manufacture or
application;

8.

(cid:145)intellectual property rights(cid:146)
rights, copyright and neighbouring rights;

includes industrial property

9.

(cid:145)know-how(cid:146) means a package of non-patented practical
information, resulting from experience and testing, which
is secret, substantial and identified: in this context, (cid:145)secret(cid:146)
means that the know-how is not generally known or easily
accessible; (cid:145)substantial(cid:146) means that the know-how includes
information which is indispensable for the manufacture of
the contract products or the application of the contract
processes;
(cid:145)identified(cid:146) means that the know-how must be
described in a sufficiently comprehensive manner so as to
make it possible to verify that it fulfils the criteria of
secrecy and substantiality;

10. research and development, or exploitation of the results,
are carried out (cid:145)jointly(cid:146) where the work involved is:

(e) undertakings in which the rights or the powers listed

in (a) are jointly held by:

(cid:151) carried out by a joint team, organisation or under-

taking,

(cid:151) parties

respective
agreement or
connected undertakings referred to in (a) to (d), or

to the

their

(cid:151) jointly entrusted to a third party, or

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(cid:151) allocated between the parties by way of specialisation

(j)

in research, development, or exploitation;

11.

(cid:145)competing manufacturers(cid:146) are undertakings that are actual
or potential producers of products capable of being
improved or replaced by the contract products.

the requirement to make it difficult for users or resellers to
obtain the contract products from other resellers within the
common market, and in particular to exercise intellectual
property rights or take measures so as to prevent users or
resellers from obtaining, or from putting on the market
within the common market, products which have been
lawfully put on the market within the
European
Community by another party or with its consent.

Article 5

Agreements not covered by the exemption

2.

Paragraph 1 does not apply to:

1.
The exemption provided for in Article 1 shall not apply
to agreements which, directly or indirectly, in isolation or in
the
combination with other
parties, have as their object:

the control of

factors under

to carry out

(a) the restriction of the freedom of the participating under-
inde-
takings
pendently or in cooperation with third parties in a field
unconnected with that to which the research and devel-
opment relates or, after its completion,
in the field to
which it relates or in a connected field;

research and development

the validity of

(b) the prohibition to challenge after completion of

the
research and development
intellectual
property rights which the parties hold in the common
market and which are relevant to the research and devel-
opment or, after the expiry of the agreement, the validity of
intellectual property rights which the parties hold in the
common market and which protect
the
research and development;

the results of

(c) the limitation of output or sales;

(d) the fixing of prices;

(e) the restriction of

the participating
the customers that
undertakings may serve, after the end of five years from
the time the contract products are first put on the market
within the common market;

(f)

the prohibition to make passive sales for the contract
products in territories reserved for other parties;

(g) the prohibition to put the contract products on the market
or to pursue an active sales policy for them in territories
within the common market that are reserved for other
five years from the time the
parties after the end of
contract products are first put on the market within the
common market;

(h) the requirement not to grant licences to third parties to
manufacture
to apply the
contract processes where the exploitation by the parties
themselves of the results of the joint research and devel-
opment is not provided for or does not take place;

contract products or

the

(i)

the requirement to refuse to meet demand from users or
resellers in their respective territories who would market
the contract products
territories within the
in other
common market; or

(a) the setting of production targets where the exploitation of
the results includes the joint production of the contract
products;

(b) the setting of sales targets and the fixing of prices charged
the
to immediate customers where the exploitation of
results
the contract
products.

the joint distribution of

includes

Article 6

Calculation of market shares

the purposes of applying the market share threshold

For
provided for in Article 3 the following rules shall apply:

(a) the market share shall be calculated on the basis of the
if market sales value data are not
market sales value;
available,
reliable market
information, including market sales volumes, may be used
to establish the market share of the undertaking concerned;

estimates based on other

(b) the market share shall be calculated on the basis of data

relating to the preceding calendar year;

(c) for the purpose of the calculation of market shares, the
market share held by the undertakings referred to in
Article 4(2)(e) shall be apportioned equally to each under-
taking having the rights or the powers listed in Article
4(2)(a);

(d) if the market share referred to in Article 3(3) is initially not
more than 25 % but subsequently rises above this level
without exceeding 30 %, the exemption provided for in
Article 1 shall continue to apply for a period of
two
consecutive calendar years following the year in which
the 25 % threshold was first exceeded;

(e) if the market share referred to in Article 3(3) is initially not
more than 25 % but subsequently rises above 30 %, the
exemption provided for in Article 1 shall continue to
apply for one calendar year following the year in which
the level of 30 % was first exceeded;

(f)

the benefit of letters (d) and (e) may not be combined so as
to exceed a period of two calendar years.

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Article 7

Withdrawal

(e) the existence of the agreement would eliminate effective
competition in research and development on a particular
market.

The Commission may withdraw the benefit of this Regulation,
pursuant to Article 7 of Regulation (EEC) No 2821/71, where,
either on its own initiative or at the request of a Member State
or of a natural or legal person claiming a legitimate interest, it
finds in a particular case that an agreement exempted by this
Regulation nevertheless has certain effects which are incom-
patible with the conditions laid down in Article 81(3) of the
Treaty, and in particular where:

(a) the existence of the agreement substantially restricts the
scope for third parties to carry out research and devel-
opment
the limited
in the relevant
research capacity available elsewhere;

field because of

Article 8

Decisions and concerted practices

This Regulation shall apply mutatis mutandis to decisions of
associations of undertakings and concerted practices.

Article 9

Transition period

The prohibition laid down in Article 81(1) of the EC Treaty
shall not apply during the period from 1 January 2001 to 31
December 2001 in respect of agreements already in force on
31 December 2000 which do not satisfy the conditions for
exemption provided for in this Regulation but which satisfy
the conditions
in Regulation
for exemption provided for
(EEC) No 418/85.

(b) because of the particular structure of supply, the existence
of the agreement substantially restricts the access of third
parties to the market for the contract products;

Article 10

Duration of Regulation

(c) without any objectively valid reason, the parties do not
exploit the results of the joint research and development;

(d) the contract products are not subject in the whole or a
substantial part of
to effective
competition from identical products or products considered
by users as equivalent in view of their characteristics, price
and intended use;

the common market

This Regulation shall enter into force on 1 January 2001. It
shall apply until 31 December 2010.

This Regulation shall be binding in its entirety and directly
applicable in all Member States.

Done at Brussels, . . .

For the Commission

. . .

Member of the Commission

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Draft Commission Regulation on the application of Article 81(3) of the EC Treaty to categories of
specialisation agreements

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EEC) No 2821/71 of 20
December 1971 on the application of Article 85(3) of
the
Treaty to categories of agreements, decisions and concerted
practices (1), as last amended by the Act of Accession of
Austria, Finland and Sweden, and in particular Article 1(c)
thereof,

Having published a draft of this Regulation (2),

Having consulted the Advisory Committee on Restrictive
Practices and Dominant Positions,

Whereas

(1) Regulation (EEC) No 2821/71 empowers the Commission
the Treaty by regulation to
to apply Article 81(3) of
certain
and
agreements,
categories
concerted practices falling within the scope of Article
81(1) which have as their object specialisation, including
agreements necessary for achieving it.

decisions

of

(2) Pursuant

2821/71,

(EEC) No

to Regulation

the
Commission has in particular adopted Regulation (EEC)
No 417/85 of 19 December 1984 on the application of
Article 81(3) of the Treaty to categories of specialisation
agreements (3), as last amended by Regulation (EC) No
2236/97 (4).
31
December 2000.

This Regulation will

expire

on

of

effective

competition

(3) A new regulation must meet the two requirements of
and
ensuring
protection
providing adequate legal security for undertakings. The
pursuit of these objectives should take account of the
need as far as possible to simplify administrative super-
vision and the legislative framework. Below a certain level
of market power it can, in general, be presumed that the
positive effects of specialisation agreements will outweigh
any negative effects on competition.

may, or may not, appear in the agreements, decisions and
concerted practices, and (c) to specify the clauses which
must be contained in the agreements, decisions and
concerted practices or the other conditions which must
be satisfied.

(5) It is appropriate to move away from the approach of
listing exempted clauses and to place greater emphasis
on defining the categories of agreements which are
exempted up to a certain level of market power and on
specifying the restrictions or clauses which are not to be
contained in such agreements. This is consistent with an
economics based approach which assesses the impact of
agreements on the relevant market.

(6) For the application of Article 81(3) by regulation, it is not
necessary to define those agreements which are capable of
falling within Article 81(1). In the individual assessment
of agreements under Article 81(1), account has to be
taken of several
factors, and in particular the market
structure on the relevant market.

(7) The benefit of the block exemption should be limited to
those agreements for which it can be assumed with
sufficient certainty that
they satisfy the conditions of
Article 81(3).

the undertakings

(8) Agreements on specialisation in production generally
contribute to improving the production or distribution
of goods, because
concerned can
concentrate on the manufacture of certain products and
thus operate more efficiently and supply the products
more
cheaply. Agreements on specialisation in the
provision of services can also be said to generally give
rise to similar
is likely that, given
effective competition, consumers will receive a fair share
of the resulting benefit.

improvements.

It

(4) Regulation (EEC) No 2821/71 requires the exempting
regulation of the Commission (a) to define the categories
of agreements, decisions and concerted practices to which
it applies, (b) to specify the restrictions or clauses which

(1) OJ L 285, 29.12.1971, p. 46.
(2) OJ C 118, 27.4.2000, p. 3.
(3) OJ L 53, 22.2.1985, p. 1.
(4) OJ L 306, 11.11.1997, p. 12

(9) Such advantages can arise equally from agreements
whereby one participant gives up the manufacture of
certain products or provision of certain services
in
favour of another participant ((cid:145)unilateral specialisation(cid:146)),
from agreements whereby each participant gives up the
manufacture of certain products or provision of certain
((cid:145)reciprocal
services
specialisation(cid:146))
the
participants undertake to jointly manufacture certain
products or provide certain services ((cid:145)joint production(cid:146)).

in favour of another participant

from agreements whereby

and

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(10) As

unilateral

agreements

specialisation

between
non-competitors may benefit from the block exemption
provided
No
2790/1999 (5), it is appropriate to limit the coverage of
unilateral specialisation in this Regulation to agreements
between competitors.

Commission

Regulation

(EC)

by

(11)

It is appropriate to include all agreements entered into
between undertakings relating to the conditions under
which they specialise in the production of goods and/or
services. The block exemption should also apply to
ancillary
the
primary object of, but are directly related to and
necessary
specialisation
agreements
and to certain related purchasing and
marketing agreements.

agreements which do not

implementation of

constitute

the

for

(12) To ensure

that

specialisation will
the benefits of
materialise without one party leaving the market down-
stream of production, unilateral and reciprocal special-
isation agreements should only be covered by this Regu-
lation where they provide for supply and purchase obli-
gations. These obligations can be, but do not have to be
of an exclusive nature.

(13)

It can be presumed that, where the participating under-
takings’ share of
the relevant market does not exceed
20 %, specialisation agreements of the category defined
in this Regulation will, as a general rule, give rise to
economic benefits in the form of economies of scale or
scope or better production technologies, while allowing
consumers a fair share of the resulting benefits.

In principle

(14) This Regulation should not exempt restrictions which are
not indispensable to attain the positive effects mentioned
anti-competitive
above.
restraints relating to the fixing of prices,
limitation of
output or sales, and allocation of markets or customers
should be excluded from the benefit of
the block
exemption established by this Regulation irrespective of
the market share of the undertakings concerned.

certain severe

(15) The market share limitation, the non-exemption of certain
agreements and the conditions provided for in this Regu-
lation normally ensure that the agreements to which the
block exemption applies do not enable the participating
undertakings to eliminate competition in respect of a
substantial part of the products or services in question.

(17)

to facilitate the conclusion of specialisation
In order
agreements, which can have a bearing on the structure
of the participating undertakings, it is appropriate to fix
the period of validity of the Regulation at 10 years.

(18) This Regulation is without prejudice to the application of

Article 82 of the Treaty.

(19)

In accordance with the principle of primacy of
Community law, no measure taken pursuant to national
the uniform
laws on competition should prejudice
the
application throughout
Community competition rules or the full effect of any
measures adopted in implementation of
those rules,
including this Regulation,

the common market of

HAS ADOPTED THIS REGULATION:

Article 1

Scope

1.
Pursuant to Article 81(3) of the Treaty and subject to the
provisions of this Regulation, it is hereby declared that Article
81(1) of the Treaty shall not apply to the following agreements
entered into between two or more undertakings and which
relate to the conditions under which those undertakings
specialise in the production of products:

(a) unilateral specialisation agreements, by virtue of which one
party agrees to cease production of certain products or to
refrain from producing these products and to purchase
them from a competitor, while the competitor agrees to
produce and supply these products; or

(b) reciprocal specialisation agreements, by virtue of which two
or more parties on a reciprocal basis accept to cease or
refrain from producing certain but different products and to
purchase these products from the other parties, who accept
to supply them; or

(c) joint production agreements, by virtue of which two or
more parties agree to produce certain products jointly.

This exemption shall apply to the extent that such agreements
(hereinafter referred to as specialisation agreements) contain
restrictions of competition falling within the scope of Article
81(1) of the Treaty.

(16)

In particular cases in which the agreements falling under
this Regulation nevertheless have effects incompatible
with Article 81(3) of the Treaty, the Commission may
withdraw the benefit of the block exemption.

(5) OJ L 336, 29.12.1999, p. 21.

The exemption provided for in paragraph 1 shall also
2.
apply to provisions contained in specialisation agreements,
which do not constitute the primary object of, but are
directly related to and necessary for their implementation,
such as those concerning the assignment or use of intellectual
property rights.

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This does, however, not apply to provisions which have the
same object or effect as
the restrictions of competition
enumerated in Article 4(1).

Article 5

Definitions

Article 2

For the purposes of this Regulation the following terms shall
have the following meaning:

Related purchasing and marketing agreements

1.

(cid:145)participating undertakings(cid:146) are

The exemption provided for in Article 1 shall also apply to
related purchasing or marketing agreements whereby:

(a) the parties accept an exclusive purchase and/or exclusive
supply obligation in the context of Article 1(1)(a), (b) and
(c); or

(b) the parties provide for joint distribution or distribution by a
third party on an exclusive or non-exclusive basis in the
context of Article 1(1)(c), provided that the third party is
not a competitor of the parties in the relevant market.

(a) undertakings party to the agreement;

(b) their respective connected undertakings;

2.

(cid:145)connected undertakings(cid:146) are

(a) undertakings in which a party to the agreement, directly

or indirectly:

(cid:151) has the power to exercise more than half the voting

Article 3

Market share limit

rights, or

(cid:151) has

the power

Articles 1 and 2 shall apply on condition that the participating
undertakings do not have a combined market share which
exceeds 20 % of the relevant market.

Article 4

Agreements not covered by the exemption

1.
The exemption provided for in Article 1 shall not apply
to agreements which, directly or indirectly, in isolation or in
combination with other
the
parties, have as their object:

the control of

factors under

(a) the fixing of prices,

b)

the limitation of output or sales, or

c)

the allocation of markets or customers.

2.

Paragraph 1 does not apply to:

(a) provisions on the agreed amount of products in the context
of Article 1(1)(a) and (b) or the setting of the capacity and
production volume of a production joint venture in the
context of Article 1(1)(c).

the

members of
management or bodies
undertaking, or

to appoint more than half

the
supervisory board, board of
legally representing the

(cid:151) has the right to manage the undertaking’s affairs;

(b) undertakings which directly or indirectly have, over a
party to the agreement, the rights or powers listed in (a);

(c) undertakings in which an undertaking referred to in (b)
has, directly or indirectly, the rights or powers listed in
(a);

(d) undertakings in which a party to the agreement together
with one or more of the undertakings referred to in (a),
(b) or (c), or in which two or more of the latter under-
takings, jointly have the rights or powers listed in (a);

(e) undertakings in which the rights or the powers listed in

(a) are jointly held by:

(cid:151) parties

respective
agreement or
connected undertakings referred to in (a) to (d), or

to the

their

(cid:151) one or more of the parties to the agreement or one
or more of their connected undertakings referred to
in (a) to (d) and one or more third parties;

(b) the fixing of prices that a production joint venture charges
to its immediate customers, provided that the joint venture
also carries out the distribution of these products so that
the price fixing by the joint venture is the effect of inte-
grating the various functions.

3. a (cid:145)product(cid:146) is goods and/or a service, including both inter-
mediary goods and/or services and final goods and/or
services, with the exception of distribution and rental
services;

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4.

(cid:145)production(cid:146) is the manufacture of goods or the provision of
services and includes production by way of subcontracting;

5. the (cid:145)relevant market(cid:146) is the relevant product and geographic
to which the products, which are the subject

market(s)
matter of a specialisation agreement, belong;

6. a (cid:145)competitor(cid:146)

is an undertaking that

is an actual or

potential competitor on the relevant market;

7.

8.

(cid:145)exclusive supply obligation(cid:146) means an obligation not
to
supply a competitor with the product to which the special-
isation agreement relates;

(cid:145)exclusive purchase obligation(cid:146) means an obligation to
purchase
specialisation
agreement relates only from the party which agrees to
supply it.

to which

product

the

the

Article 6

Calculation of market shares

the purposes of applying the market share threshold

For
provided for in Article 3 the following rules shall apply:

(a) the market share shall be calculated on the basis of the
if market sales value data are not
market sales value;
available,
reliable market
information, including market sales volumes, may be used
to establish the market share of the undertaking concerned;

estimates based on other

(b) the market share shall be calculated on the basis of data

relating to the preceding calendar year;

(c) for the purpose of the calculation of market shares, the
market share held by the undertakings referred to in
Article 5(2)(e) shall be apportioned equally to each under-
taking having the rights or the powers listed in Article
5(2)(a);

(d) if the market share referred to in Article 3 is initially not
more than 20 % but subsequently rises above this level
without exceeding 25 %, the exemption provided for in
two
Article 1 shall continue to apply for a period of
consecutive calendar years following the year in which
the 20 % threshold was first exceeded;

(e) if the market share referred to in Article 3 is initially not
more than 20 % but subsequently rises above 25 %, the
exemption provided for in Article 1 shall continue to
apply for one calendar year following the year in which
the level of 25 % was first exceeded;

(f)

the benefit of letters (d) and (e) may not be combined so as
to exceed a period of two calendar years.

Article 7

Withdrawal

The Commission may withdraw the benefit of this Regulation,
pursuant to Article 7 of Regulation (EEC) No 2821/71, where,
either on its own initiative or at the request of a Member State
or of a natural or legal person claiming a legitimate interest, it
finds in a particular case that an agreement exempted by this
Regulation nevertheless has effects which are incompatible with
the conditions set out in Article 81(3) of the Treaty, and in
particular where:

(a) the agreement is not yielding significant results in terms of
rationalisation or consumers are not receiving a fair share
of the resulting benefit; or

(b) the products which are the subject of the specialisation are
not subject in the common market or a substantial part
thereof
to effective competition from identical products
or products considered by users to be equivalent in view
of their characteristics, price and intended use.

Article 8

Decisions and concerted practices

This Regulation shall apply mutatis mutandis to decisions of
associations of undertakings and concerted practices.

Article 9

Transition period

The prohibition laid down in Article 81(1) of the EC Treaty
shall not apply during the period from 1 January 2001 to 31
December 2001 in respect of agreements already in force on
31 December 2000 which do not satisfy the conditions for
exemption provided for in this Regulation but which satisfy
the conditions
in Regulation
for exemption provided for
(EEC) No 417/85.

Article 10

Duration of Regulation

This Regulation shall enter into force on 1 January 2001. It
shall apply until 31 December 2010.

This Regulation shall be binding in its entirety and directly
applicable in all Member States.

Done at Brussels, . . .

For the Commission

. . .

Member of the Commission

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Draft guidelines on the applicability of Article 81 to horizontal cooperation

1. INTRODUCTION

1.1. PURPOSE

1.
These guidelines set out the principles for the assessment
of horizontal cooperation under Article 81 of the EC Treaty. A
if an agreement or
cooperation is of a (cid:145)horizontal nature(cid:146)
concerted practice
into between companies
operating at the same level(s) in the market. In most instances,
horizontal
to cooperation between
competitors. It covers for example areas such as research and
development (R & D), production, purchasing or commercial-
isation.

cooperation amounts

entered

is

2.
Companies need to respond to increasing competitive
pressure and a changing market place driven by globalisation,
the speed of technological progress and the generally more
dynamic nature of markets. Cooperation can be a means to
share risk, save costs, pool know how and launch innovation
faster.
In particular for small and medium-sized enterprises
cooperation is an important means to adapt to the changing
market place.

Horizontal cooperation may, however, also lead to
3.
competition problems. This is the case if
the parties to a
cooperation agree to fix prices, output or share markets, or
if the cooperation enables the parties to maintain, gain or
increase market power and thereby causes negative market
effects with respect
the
to prices, output,
variety and quality of goods.

innovation or

recognising

The Commission, while

4.
economic
benefits that can be generated by cooperation, has to ensure
that effective competition is maintained. Article 81 provides
the legal
taking into
framework for a balanced assessment
account both anti-competitive effects as well as economic
benefits.

the

Until the adoption of these guidelines two notices and
5.
two block exemption regulations provided guidance for the
assessment of horizontal cooperation under Article 81 (1).

(1) Notice on agreements, decisions and concerted practices in the field
of cooperation between enterprises (OJ C 75, 29.7.1968, p. 3).
Commission Regulation (EEC) No 417/85 of 19 December 1984 on
the application of Article 81(3) of
the Treaty to categories of
specialisation agreements, as amended by Commission Regulation
(EEC) No 151/93.
Commission Regulation (EEC) No 418/85 of 19 December 1984 on
the application of Article 81(3) of
the Treaty to categories of
research and development agreements, as amended by Commission
Regulation (EEC) No 151/93 (OJ L 53, 22.2.1985, p. 5, OJ L 21,
29.1.1993, p. 8).
Notice concerning the assessment of cooperative joint ventures
under Article 81 (OJ C 43, 16.2.1993, p. 2).

The notices covered certain legal forms of agreements such as
the notice on joint ventures or (cid:151) as the 1968 notice on
cooperation agreements (cid:151) dealt with certain types of coop-
eration falling outside Article 81. Regulations (EEC) No 417/85
and (EEC) No 418/85 exempted certain forms of specialisation
and R & D agreements.

Changing markets have generated an increasing variety
6.
and use of horizontal cooperation. More complete and
updated guidance is needed to improve clarity and trans-
parency regarding the applicability of Article 81 in this area.
Within the assessment greater emphasis has to be put on
economic criteria to better reflect recent developments in
enforcement practice and case law of the Community Courts.

7.
The purpose of these guidelines is to provide an analytical
framework for the most common types of horizontal coop-
eration. This framework is primarily based on criteria that
help to analyse the economic context of a cooperation
agreement. 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 cooperation and therefore for the
assessment under Article 81. Given the enormous variety in
types and combinations of horizontal cooperation and market
circumstances in which they operate, it is impossible to provide
for every possible scenario. The present
specific answers
analytical framework based on economic criteria will never-
theless assist businesses in assessing the compatibility of an
individual cooperation agreement with Article 81.

8.
The guidelines do not only replace the abovementioned
notices in the field of horizontal cooperation, but also cover a
the most common types of horizontal
wider
agreements. They
block
form a
exemption regulations on R & D and specialisation.

complement

range of

the

to

1.2. SCOPE OF THE GUIDELINES

cover

These

guidelines

9.
concerted
practices (2) entered into between two or more companies
operating at the same level(s) in the market, e.g. at the same
level of production or distribution. Within this context the
is on cooperation between competitors. The term
focus

agreements

or

(2) Any reference hereafter

to agreements

is meant

to include

concerted practices.

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(cid:145)competitors(cid:146) as used in these guidelines includes both actual (3)
and potential (4) competitors.

to these agreements to assess the vertical restraints included in
such agreements (7).

10.
The present guidelines are however not addressing all
possible horizontal agreements. They are only concerned with
those types of cooperation which potentially generate efficiency
i.e. agreements on R & D, production, purchasing,
gains,
commercialisation,
environmental
agreements. Other types of horizontal agreements between
competitors, for example, on the exchange of information or
on minority shareholdings, are to be addressed separately.

standardisation,

and

that vertical agreements,

Agreements that are entered into between companies
11.
operating at a different level of the production or distribution
chain, i.e. vertical agreements, are in principle excluded from
these guidelines and dealt with in the guidelines (5) and block
exemption regulation (6) on vertical restraints. However, to the
for example distribution
extent
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,
these agreements have to be assessed according to the prin-
ciples described in the present guidelines. This does not exclude
the additional application of the guidelines on vertical restraints

(3) A firm is treated as an actual competitor if it is either active on the
same relevant market or if, in the absence of the agreement, it is
able to switch production to the relevant products and market them
in the short term without incurring significant additional costs or
risks in response to a small and permanent increase in relative
(immediate supply-side substitutability). However, when
prices
supply-side
the need to adjust
substitutability would entail
to make
significantly existing tangible and intangible assets,
additional investments, to take strategic decisions or to incur time
delays, a company will not be treated as a competitor but as a
potential competitor (see below). See Commission notice on the
definition of the relevant market for the purposes of Community
competition law (OJ C 372, 9.12.1997, points 20 to 23).

the agreement,

(4) A firm is treated as a potential competitor if there is evidence that,
absent
this firm would undertake the necessary
additional investments or other changes necessary so that it could
enter the relevant market in response to a small and permanent
increase in relative prices. This assessment has to be based on
the mere theoretical possibility to enter a
realistic grounds,
market is not sufficient (see Commission notice on the definition
of the relevant market for the purposes of Community competition
law (OJ C 372, 9.12.1997, point 24); see also the Commission’s
Thirteenth Report on Competition Policy, No 55;
see Case
Elopak/Metal Box-Odin, OJ 1990 L 209/15).

(5) Guidelines on vertical restraints
(6) Commission Regulation (EC) No 2790/1999 of 22 December 1999
on the application of Article 81(3) of the Treaty to categories of
vertical agreements and concerted practices, OJ L 336, 29.12.1999,
p. 21.

integration of

the degree of

Agreements may combine different

12.
levels of coop-
eration, for example R & D and the production of its results.
these
Unless they fall under the merger control regulation,
agreements are covered by the guidelines. The centre of
gravity of the cooperation determines which section of the
present guidelines applies to the agreement in question.
In
the determination of the centre of gravity, account is taken
in particular of two factors: (i) the starting point of the coop-
eration, and (ii)
the different
functions which are being combined. Cooperation involving
both joint R & D and joint production of the results would
thus normally be covered in the section on (cid:145)Agreements on
Research and Development(cid:146), 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 production. The
R & D agreement can thus be regarded as the starting point
the
the cooperation. This assessment would change if
of
integration in the area of
agreement would foresee a full
integration of some R & D
production and only a partial
the possible anti-competitive effects
activities.
In this case,
the cooperation would largely
and economic benefits of
relate to the joint production, and the agreement would
therefore be examined according to the principles set out in
the
complex
arrangements
that combine a
number of different areas and instruments of cooperation in
varying ways are not covered by the guidelines. The assessment
of each individual area of cooperation within an alliance may
be carried out with the help of the corresponding chapter in
the guidelines. However, complex arrangements must also be
analysed in their totality. Due to the variety of areas an alliance
may combine, it is impossible to give general guidance for such
an overall assessment. Alliances or other forms of cooperation
that primarily declare intentions are impossible to assess under
the competition rules as long as they lack a precise scope.

section on (cid:145)production agreements(cid:146). More

strategic alliances

such as

13.
The criteria set out in the guidelines apply to coop-
eration concerning both products and services (8). However,
the guidelines do not apply to the extent that sector-specific

(7) The delineation between horizontal and vertical agreements will be
further developed in the chapters on joint purchasing (Chapter 4)
and joint commercialisation (Chapter 5).

(8) In the following, the meaning of the term (cid:145)products(cid:146) or (cid:145)goods(cid:146) shall

include services as well.

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insurance (9).
rules apply, as is the case for
Operations that come under the merger control regulation (10)
are also not the subject of the present guidelines.

transport or

1.3. BASIC PRINCIPLES FOR THE ASSESSMENT UNDER ARTICLE 81

1.3.1. Article 81(1)

81(1)

Article

cooperation
16.
agreements which have as their object or effect the prevention,
restriction or distortion of competition (11).

horizontal

applies

to

14.
Article 81 only applies to those horizontal cooperation
agreements which may affect trade between Member States.
These guidelines are not concerned with the analysis of the
capability of a given agreement to affect trade. The following
principles on the applicability of Article 81 are therefore based
is
on the assumption that
affected.
to be
In practice, however,
examined on a case-by-case basis.

trade between Member States

issue needs

this

is without prejudice

The assessment under Article 81 as described in these
15.
to the possible parallel
guidelines
application of Article 82 of the EC Treaty to horizontal coop-
eration agreements. Furthermore, these guidelines are without
prejudice to the interpretation that may be given by the Court
of First Instance and the Court of
Justice of the European
Communities in relation to the application of Article 81 to
horizontal cooperation agreements.

(9) Council Regulation 26/62 (OJ 1962, 30/993) (agriculture);

Council Regulation (EEC) No 1017/68 (OJ, 1968, L 175, p. 1)
(transport by rail road and inland waterway);
Council Regulation (EEC) No 4056/86 (OJ, 1986, L 378, p. 4)
(maritime transport);
Council Regulation (EEC) No 3975/87 (OJ, 1987, L 374, p. 1) (air
transport) as amended by Council Regulation (EEC) No 1284/91
(OJ, 1991, L 122, p. 2) and Council Regulation (EEC) No 2410/92
(OJ, 1992, L 240, p. 18);
Council Regulation (EEC) No 3976/87 (OJ, 1987, L 374, p. 9) (air
transport) as amended by Council Regulation (EEC) No 2411/92
(OJ, 1992, L 240, p. 19);
Commission Regulation (EEC) No 1617/93 (OJ, 1993, L 155, p. 18)
(Block exemption concerning joint planning and coordination of
schedules,
joint operations, consultation on passenger and cargo
tariffs on scheduled air services and slot allocation at airports) as
amended by Commission Regulation (EEC) No 1523/96 (OJ, 1996,
L 190, p. 11) and Commission Regulation (EEC) No 1083/99 (OJ,
1999, L 131, p. 27);
Council Regulation (EEC) No 479/92 (OJ, 1992, L 55, p. 3) (Liner
shipping companies);
Commission Regulation (EC) No 870/95 (OJ, 1995, L 89, p. 7)
(Block exemption covering certain agreements between liner
shipping companies);
Council Regulation (EEC) No 1534/91 (OJ, 1991, L 143, p. 1)
(insurance sector);
Commission Regulation (EEC) NO 3932/92 (OJ, 1992, L 398, p. 7)
(Block exemption covering certain agreements in the insurance
sector).

(10) Council Regulation (EEC) No 4064/89, OJ L 395, 30.12.1989;
corrected version OJ L 257, 21.9.1990; as last amended by
Council Regulation (EC) No 1310/97 of 30 June 1997 amending
Regulation (EEC) No 4064/89 on the control of concentrations
between undertakings, OJ L 180, 9.7.97; corrigendum in OJ L
40, 13.2.1997, p. 17.

that have

17.
In some cases the nature of a cooperation indicates from
the outset the applicability of Article 81(1). This is the case for
restriction of
agreements
competition by means of price fixing, output limitation or
sharing of markets or customers. These agreements are
presumed to have negative market effects. It is therefore not
necessary to examine their actual effects on competition and
the market.

their object

as

a

18. Most horizontal cooperation agreements, however, do
not have as their object a restriction of competition. Therefore,
an analysis of the effects of the agreement is necessary. For this
agreement
analysis
limits
is not
It must also be likely to
competition between the parties.
that
affect competition in the market
negative market effects as to prices, output,
innovation or
the variety or quality of goods and services can be expected.

to such an extent

sufficient

that

the

it

19. Whether the agreement is able to cause such negative
market effects depends on the economic context taking into
account both, the nature of the agreement and the parties’
combined market power which determines,
together with
other structural factors, the capability of the cooperation to
affect overall competition to such a significant extent.

Nature of the agreement

The nature of an agreement relates to factors such as the
20.
area
competitive
and objective of
relationship between the parties and the extent to which they
combine their activities. These factors indicate the likelihood of
the parties coordinating their behaviour in the market.

cooperation,

the

the

Certain types of agreement,

for instance most R & D
21.
agreements or cooperation to set
improve
environmental conditions, are less likely to include restrictions
with respect to prices and output. If these types have negative
effects at all these are likely to be on innovation or the variety
of goods. They may also give rise to foreclosure problems.

standards or

(11) Any reference hereafter to restrictions of competition is meant to

include the prevention and distortion of competition.

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Other types of cooperation such as agreements on
22.
production or purchasing typically cause a certain degree of
commonality in (total) costs. If this degree is significant, the
parties may more easily coordinate market prices and output.
A significant degree of commonality in costs can only be
the area of coop-
achieved under certain conditions: First,
eration,
to
account for a high proportion of the total costs in a given
market. Secondly, the parties need to combine their activities
in the area of cooperation to a significant extent. This is, for
instance, the case, where they jointly manufacture or purchase
an important intermediate product or a high proportion of
their total output of a final product.

for example, production and purchasing, has

It

is inherent

This does, however, not apply if such a provision is
25.
necessary for the functioning of an otherwise non-restrictive
or exemptable agreement. An example would be a production
joint venture which also markets the jointly manufactured
to the functioning of such a joint
goods.
venture that decisions on output and prices are taken jointly
by the parties to such an agreement. In this case, the inclusion
of provisions on prices or output does not automatically cause
the agreement to fall under Article 81(1). The provisions on
prices or output will have to be assessed together with the
other effects of the joint venture on the market following the
framework described below to determine the applicability of
Article 81(1).

Agreements that do not fall under Article 81(1)

Agreements that may fall under Article 81(1)

23.
Some categories of agreements do not fall under Article
81(1) because of their very nature. This is normally true for
cooperation that does not imply a coordination of the parties’
competitive behaviour in the market such as

Agreements that do not belong to the above-mentioned
26.
categories need further analysis in order to decide whether they
fall under Article 81(1). The analysis has to include market-
related criteria such as the market position of the parties and
other structural factors.

(cid:151) cooperation between non-competitors,

(cid:151) cooperation between competing companies that can not
independently carry out the project or activity covered by
the cooperation,

(cid:151) cooperation concerning an activity far removed from the

marketing level.

These categories of cooperation could only come under Article
81(1) if they involve firms with significant market power and
are likely to cause foreclosure problems vis-(cid:224)-vis third parties.

Agreements that almost always fall under Article 81(1)

24.
Another category of agreements can be assessed from
the outset as normally falling under Article 81(1). This
concerns cooperation agreements that have the object
to
restrict competition by means of price fixing, output limitation
or sharing of markets or customers. These restrictions are
considered to be the most harmful, because they directly
interfere with the outcome of the competitive process. Price-
fixing and output-limitation directly lead to customers paying
higher prices or not receiving the desired quantities. The
sharing of markets or customers reduces the choice available
to customers and therefore also leads to higher prices or
reduced output.
these
restrictions have negative market effects. They are therefore
almost always prohibited.

It can therefore be presumed that

Market power and market structure

The starting point for the analysis is the position of the
27.
parties
in the markets affected by the cooperation. This
determines whether or not they are likely to maintain, gain
or increase market power through the cooperation, i.e. have
the ability to cause negative market effects on prices, output,
innovation or the variety or quality of goods and services. To
carry out this analysis the relevant market(s) have to be defined
by using the methodology of the market definition notice of
the Commission (12). Where specific types of markets are
concerned such as purchasing or technology markets, these
guidelines will provide additional guidance.

If the parties together have a weak market position (13),
28.
a restrictive effect of the cooperation is unlikely and no further
analysis is required. Given the variety of cooperation types and
they may cause in different market
the different effects
situations,
is impossible to give a general market share
threshold above which sufficient market power for causing
restrictive effects can be assumed.

it

29.
In addition to the combined market shares, the parties’
individual market shares must be taken into account. A high
combined market share normally cannot be seen as indicating a
restrictive effect on competition in the market if one of two
parties has only insignificant market shares.

(12) See Commission notice on the definition of the relevant market for
the purposes of Community competition law (OJ C 372, 9.12.1997,
p. 5).

(13) In determining the market share of a party in a given market
account must be taken of the undertakings which are connected
to the parties (see Article 4(1) of the draft block exemption regu-
lation on research and development).

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30. Where the combined market position is strong and the
addition of market shares not insignificant, the market concen-
tration, i.e. the position and number of competitors, may have
to be taken into account as an additional factor to assess the
the cooperation on market competition. As an
impact of
indicator the Herfindahl-Hirshman Index ((cid:145)HHI(cid:146)), which sums
up the squares of
shares of all
competitors (14), can be used: With an HHI below 1 000 the
market concentration can be characterised as low, between
1 000 and 1 800 as moderate and above 1 800 as high.

the individual market

31.
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, the countervailing power of buyers/suppliers or
the nature of the products (for example homogeneity, maturity)
have
an impact on
competition in innovation is likely and can not be assessed
adequately on the basis of existing markets, specific factors to
analyse these impacts may have to be taken into account (see
Chapter 3, R & D agreements).

considered as well. Where

to be

these benefits relate to static or dynamic efficiencies, they can
be referred to as (cid:145)economic benefits(cid:146). Economic benefits may
outweigh restrictive effects on competition. For instance, a
cooperation may enable firms to offer goods or services at
lower prices, better quality or to launch innovation more
quickly. Most efficiencies stem from the combination and inte-
gration of different
resources. The parties must
demonstrate that the efficiencies are likely to be caused by
the cooperation and cannot be achieved by less restrictive
means (see also below). Efficiency claims must be substantiated.
Speculations or general statements on cost savings are not
sufficient.

skills or

34.
The Commission does not take into account cost savings
that arise from output reduction, market sharing, or from the
mere exercise of market power.

Fair share for the consumers

1.3.2. Article 81(3)

Agreements that come under Article 81(1) may be
32.
exempted provided the conditions of Article 81(3) are fulfilled.
This is the case if the agreement

(cid:151) contributes to improving the production or distribution of
goods or to promoting technical or economic progress,

of

the

competition within

35.
Economic benefits have to favour not only the parties to
the agreement, but also the consumers. Generally, the trans-
mission of the benefits to the consumers will depend on the
intensity
relevant market.
Competitive pressure will normally ensure that cost-savings
that
are being passed on by way of
companies have an incentive to bring new products to the
market
sufficient
competition which effectively constrains the parties to the
the competitive
agreement
the consumers receive a
process will normally ensure that
fair share of the economic benefits.

is maintained on the market,

as possible. Therefore,

lower prices or

as quickly

if

(cid:151) allows consumers a fair share of the resulting benefit,

Indispensability

and does not

(cid:151) impose restrictions which are not

indispensable to the

attainment of the above listed objectives,

(cid:151) afford the possibility of eliminating competition in respect

of a substantial part of the products in question.

Economic benefits

The

first

33.
agreement
contributes to improving the production or distribution of
goods or to promoting technical or economic progress. As

condition requires

that

the

(14) A market consisting of four firms with shares of 30 %, 25 %, 25 %
and 20 %, has a HHI of 2 550 (900+625+625+400) pre-coop-
eration. If the first two market leaders would cooperate, the HHI
would change to 4 050 (3025+625+400) post-cooperation. The
HHI post-cooperation is decisive for
the
possible market effects of a cooperation.

the assessment of

The restriction of competition must be necessary to
36.
there are less restrictive
achieve the economic benefits.
If
the claimed efficiencies
means to achieve similar benefits,
cannot be used to justify the restrictions of competition.
Whether or not individual restrictions are necessary depends
on market
the
agreement. For instance, exclusivity agreements may prevent
a participating party from free riding and may therefore be
acceptable. Under certain circumstances they may, however,
not be necessary and worsen a restrictive effect.

and on the duration of

circumstances

No elimination of competition

One of

the key elements for the assessment under
37.
Article 81(3)
is the question whether or not competition is
likely to be eliminated. The analysis can be carried out on
the basis of
the assessment of market power and market
structures under Article 81(1). The only difference is that
under Article 81(3) a higher degree of market power
is
permitted provided that significant efficiencies are generated
which outweigh the anti-competitive effects. The absolute
limit for exemption is the elimination of effective competition.
Even considerable efficiency gains cannot
justify the elimi-
nation of effective competition. This is effectively the point at
which the parties are or would be likely to become dominant.

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C 118/19

Block exemption regulations for R & D and specialisation

assumed to be

Under certain conditions the criteria of Article 81(3) can
38.
specified categories of
be
fulfilled for
agreements. This is in particular
the case for R & D and
production agreements where the combination of comple-
mentary skills or assets can be the source of substantial effi-
ciencies. These guidelines should be seen as a complement to
the revised block exemption regulations on R & D and special-
isation which replace Regulation (EEC) No 417/85 and Regu-
lation No 418/85. The block exemption regulations exempt
most common forms of agreements in the fields of production/
specialisation up to a market share threshold of 20 % and in
the field of R & D up to a market share threshold of 25 %
for
provided that
application of the block exemption and do not contain (cid:145)hard
core(cid:146)
the block
restrictions
exemption inapplicable.

((cid:145)black clauses(cid:146))

agreements

conditions

render

fulfil

that

the

the

1.4. STRUCTURE OF THE FOLLOWING CHAPTERS ON TYPES OF

COOPERATION

The guidelines are divided into chapters relating to
39.
certain types of agreements. Each chapter
structured
according to the analytical framework described above under
point 1.3. Where necessary, specific guidance on the definition
of relevant markets is given (e.g. in the field of R & D or with
respect to purchasing markets).

is

2. AGREEMENTS ON RESEARCH AND DEVELOPMENT

2.1. DEFINITION

Research and development

(R & D) agreements may
40.
vary in form and scope. They range from outsourcing certain
R & D activities to the joint
improvement of existing tech-
nologies or to a cooperation concerning the research, devel-
opment and marketing of completely new products. They may
take the form of a cooperation agreement or of a jointly
controlled company. This chapter applies to all
forms of
R & D agreements including related agreements concerning
the R & D results
the production or commercialisation of
provided that
in
R & D (15).

the cooperation’s centre of gravity lies

in R & D may
duplicative,
41.
Cooperation
unnecessary costs,
lead to significant cross fertilisation of
ideas and experience and thus result in products and tech-
nologies being developed more rapidly than would otherwise
be the case. As a general rule, R & D cooperation tends to
increase overall R & D activities.

reduce

form a
Small and medium-sized Enterprises (SMEs)
42.
dynamic and heterogeneous community which is confronted
by many challenges, including the growing demands of larger
companies for which they often work as subcontractors. In
R & D intensive sectors, fast growing SMEs, more often called
(cid:145)start-up companies(cid:146), also aim at becoming a leader in fast
developing market segments. To meet those challenges and to
remain competitive, SMEs need constantly to innovate.
Through R & D cooperation there is a likelihood that overall
increase and that they will be able to
R & D by SMEs will
compete more vigorously with stronger market players.

Under

certain

43.
R & D
agreements may cause competition problems such as restrictive
effects on prices, output, innovation, or variety or quality of
goods.

circumstances,

however,

2.2. RELEVANT MARKETS

slight

44.
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 a competitive
the spectrum of
constraint on the parties. At one end of
possible situations, the innovation may result
in a product
(or technology) which competes in an existing product (or
technology) market. This is the case with R & D directed
towards
such as new
improvements or variations,
models of certain products. Here, possible effects concern the
market for existing products. At the other end, innovation may
result in an entirely new product which creates its own new
market (for example, a new vaccine for a previously incurable
disease). In such a case, existing markets are only relevant if
they are somehow related to the innovation in question.
Consequently, and if possible, the effects of the cooperation
the
on innovation have to be assessed. However, most of
cases probably concern situations
in between these two
in which innovation efforts may
extremes,
time, replace
create products (or
existing ones
replaced
(for
records). A careful analysis of those situations may have to
cover both,
the
agreement on innovation.

technology) which, over
example, CDs which have

existing markets

impact of

situations

and the

i.e.

Existing markets

a) Product markets

45. When the
cooperation concerns R & D for
improvement or
refinement of
including its close substitutes
existing products
relevant market concerned by the cooperation (16).

existing products,

the
these
form the

(15) With the exception of mergers and joint ventures which fall under

(16) For market definition see the Commission notice on the definition

the merger regulation.

of the relevant market.

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long-term. Consequently,

If the R & D efforts aim at a significant change of an
46.
existing product or even at a new product replacing existing
ones, substitution with the existing product may be imperfect
or
the old and the potentially
emerging new products are not likely to belong to the same
relevant market. The market for existing products may never-
theless 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. An exploitation of power in the existing
market, however, is only possible if the parties together have a
strong position with respect
the existing product
market and R & D efforts.

to both,

47.
If the R & D concerns an important component of a
final product, not only the market for this component may
be relevant for the assessment, but the existing market for
the final product as well. For instance,
if car manufacturers
cooperate in R & D related to a new type of engine, the car
market may be affected by this R & D cooperation. 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 these final products and if the
parties to the R & D agreement are important competitors with
respect to the final products.

b) Technology markets

R & D cooperation may not only concern products but
48.
also technology. When rights
to intellectual property are
marketed separately from the products concerned 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, i.e. other technologies
which customers would substitute at comparable costs. The
methodology for defining technology markets
the
same principles as product market definition (17). The parties’
position in the market for existing technology is a relevant
assessment criterion where the R & D cooperation concerns
the significant improvement of existing technology or a new
technology that is likely to replace the existing technology.
Here the same considerations apply as described above under
(cid:145)existing product markets(cid:146).

follows

therefore not

This is the case where cooperation concerns the development
of new products/technology which either may, if emerging, one
day replace existing ones or which are being developed for a
new intended use and will
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/
two scenarios can be
technology markets.
the innovative
distinguished, depending on the nature of
process in a given industry.

In this respect,

50.
In the first scenario, which is for instance present in the
pharmaceutical industry, the process of innovation is structured
in a way that it is possible at an early stage to identify R & D
poles. R & D poles are R & D efforts directed towards a certain
new product or technology, and the substitutes for that R & D,
i.e. R & D aimed at developing substitutable products or tech-
nology for those developed by the cooperation and having
comparable access to resources as well as a similar timing. In
this case, it can be analysed if after the agreement there will be
a sufficient number of R & D poles left. The starting point of
the parties. Then credible
the analysis
the R & D of
competing R & D poles have to be identified.
In order to
following
assess
aspects have to be taken into account: the nature, scope and
size of possible 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. R & D pole is not a credible competitor if it
can not be regarded as a close substitute for the parties’ R & D
effort from the viewpoint of, for instance, access to resources
or timing.

credibility of competing poles,

the

the

is

In the second scenario,

the innovative efforts in an
51.
industry are not clearly structured so as to allow the identifi-
cation of R & D poles. In this situation, the Commission would,
absent exceptional circumstances, not try to assess the impact
of a given R & D cooperation on innovation in such a scenario,
but would limit its assessment to product and/or technology
markets which are related to the R & D cooperation in
question.

2.3. ASSESSMENT UNDER ARTICLE 81(1)

Competition in innovation (R & D efforts)

2.3.1. Nature of the agreement

R & D cooperation may not, or may not only, affect
49.
competition in existing markets, but competition in innovation.

(17) See Commission notice on market definition; see also, for example,
(cid:145)Shell/Montecatini(cid:146), OJ L 332, 22.12.1994,

merger case M 269,
pp.48 to 70.

2.3.1.1. Agreements that do not fall under Article 81(1)

52. Most R & D agreements do not fall under Article 81(1).
First, this can be said for agreements relating to cooperation in
R & D at a rather theoretical stage,
far removed from the
marketing of possible results.

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C 118/21

53. Moreover, R & D cooperation between non-competitors
does generally not restrict competition (18). The competitive
relationship between the parties has to be analysed in the
context of affected existing markets and/or innovation. If the
parties are not able to carry out the necessary R & D inde-
pendently, there is no competition to be restricted. This can
apply, for example, to firms bringing together complementary
skills, technologies and other resources. The issue of potential
competition has to be assessed on a realistic basis. For instance,
parties cannot be defined as potential competitors simply
because the cooperation enables them to carry out the R & D
activities. The decisive question is whether each party inde-
pendently has the necessary means as to assets, know-how
and other resources.

54.
R & D cooperation by means of outsourcing of
previously captive R & D is often carried out by specialised
companies or
research institutes of universities or other
academic bodies which are not active in the exploitation of
the results. Typically such agreements are combined with a
transfer of know-how and/or an exclusive supply clause
complementary
concerning possible
nature of the cooperating parties in these scenarios, Article
81(1) does not apply.

results. Due

to the

R & D cooperation which does not include the joint
55.
exploitation of possible
licensing,
production and/or marketing rarely falls under Article 81(1).
Those (cid:145)pure(cid:146) R & D agreements can only cause a competition
problem, if effective competition with respect to innovation is
significantly reduced.

results by means of

2.3.1.2. Agreements that almost always fall under Article

81(1)

56.
Cooperation that does not truly concern R & D, but
serves as a tool to engage in a disguised cartel, i.e. otherwise
prohibited price fixing, output limitation or market allocation,
falls under Article 81(1). However, an R & D agreement which
includes the joint marketing of possible future results is not
necessarily restrictive of competition.

2.3.1.3. Agreements that may fall under Article 81(1)

R & D agreements that cannot be assessed from the
57.
clearly non-restrictive may fall under Article
outset
81(1) (19) and have to be analysed in their economic context.

as

(18) An R & D cooperation between non-competitors can however
produce foreclosure effects under Article 81(1) if it relates to an
exclusive exploitation of results and if it is concluded between
firms, one of which has significant market power with respect to
key technology.

(19) Pursuant

to Article 4 (2)(3) of Council Regulation No 17/62,
agreements which have as their sole object joint research and
development need not to, but may, be notified to the Commission.

This applies to R & D cooperation which is set up at a stage
rather close to the market launch and which is agreed between
companies that are competitors on either existing product/tech-
nology markets or on innovation markets.

2.3.2. Market power and market structures

58.
R & D cooperation can cause negative market effects in
three respects: First, it may restrict innovation, secondly it may
cause the coordination of the parties’ behaviour in existing
markets and thirdly, foreclosure problems may occur at the
level of the exploitation of possible results. These types of
negative market effects, however, are only likely to emerge
when the parties to the cooperation have significant power
on the existing markets and/or competition with respect to
innovation is significantly reduced. Without market power
there is no incentive to coordinate behaviour on existing
markets or to reduce or slow down innovation. A foreclosure
problem may only arise in the context of cooperation involving
at least one player with significant market power for a key
technology and the exclusive exploitation of results.

Block exemption

about

bring
it appears

agreements
these conditions

Absent hard core restrictions it can be assumed that
59.
economic
R & D cooperation
benefits. Under
reasonable to
block exempt such agreements which result in a restriction
of competition up to a market share threshold indicating, at
best, a limited degree of market power. Therefore, the revised
Regulation exempts different forms of R & D agreements which
do not
include hard core restrictions (see Article 5) and
provided that the combined market share of the parties in
the affected existing market(s) does not exceed 25 %.

R & D agreements falling outside the block exemption

60.
Agreements falling outside of the block exemption due
to a stronger market position of the parties do not necessarily
the combined
restrict competition. However,
position of the parties on existing markets and/or the more
competition in innovation is restricted, the more likely is the
application of Article 81(1) and the assessment requires a more
detailed analysis.

the stronger

If

the R & D is directed at

61.
the improvement or
refinement of existing products/technology possible effects
concern the relevant market(s) for these existing products/tech-
nology. Effects on prices, output and/or innovation in existing
markets are, however, only likely if the parties together have a

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27.4.2000

if

rarely come under Article 81(1). This
true

strong position, entry is difficult and few other innovation
activities are identifiable. Furthermore,
the R & D only
concerns a relatively minor input of a final product, effects
as to competition in these final products are,
if at all, very
In general, a distinction has to be made between
limited.
pure R & D agreements and more comprehensive cooperation
involving different stages of
the exploitation of results (i.e.
licensing, production, marketing). As said above, pure R & D
is,
agreements
in
limited
particular,
a
improvement of existing products/technology.
in such a
the R & D cooperation includes joint exploitation
scenario,
licensing, restrictive effects such as fore-
only by means of
closure problems are unlikely.
joint production
and/or marketing of the slightly improved products/technology
are included, the cooperation has to be examined more closely.
First, negative effects as to prices and output
in existing
markets are more likely if strong competitors are involved in
such a situation. Secondly, the cooperation may come closer to
a production agreement because the R & D activities may, de
facto, not form the centre of gravity of such a collaboration.

for R & D directed

towards
If

If, however,

62.
If the R & D is directed at an entirely new product (or
technology) which creates its own new market, price and
output effects on existing markets are rather unlikely. The
analysis has to focus on possible restrictions of
innovation
concerning, for instance, the quality and variety of possible
future products/technology or the speed of innovation. Those
restrictive effects can arise where two or more of the few firms
engaged in the development of such a new product, start to
cooperate at a stage where they are each independently rather
near to the launch of the product. In such a case, innovation
may be restricted even by a pure R & D agreement. In general,
however, R & D cooperation concerning entirely new products
is pro-competitive. This principle does not change significantly,
if the joint exploitation of the results, even joint marketing, is
involved.
joint exploitation in these
situations is only relevant where foreclosure from key tech-
nologies play a role. Those problems would, however, not
arise where the parties grant licences to third parties.

the issue of

Indeed,

exploit it), and if they also have a strong position with respect
to R & D A similar effect can occur, if the major player in an
existing market cooperates with a much smaller or even
potential competitor who is just about to emerge with a new
the incumbent’s
product/technology which may endanger
position.

64.
Agreements may also fall outside the block exemption
irrespective of the market power of the parties. This applies for
instance to agreements which restrict access of a party to the
results of the work because they do not, as a general rule,
promote technical and economic progress by increasing the
dissemination of technical knowledge between the parties (20).
The block exemption provides for a specific exception to this
general
research
rule in the case of academic bodies or
institutes which are not active in the industrial exploitation
of the results of research and development (21). Nevertheless,
it should be noted that agreements containing exclusive access
rights may, where they fall under Article 81(1), meet
the
criteria for exemption under Article 81(3), particularly where
exclusive access rights are economically indispensable in view
of the market, risks and scale of the investment required to
exploit the results of the research and development.

2.4. ASSESSMENT UNDER ARTICLE 81(3)

2.4.1. Economic benefits

65. Most R & D agreements with or without joint exploi-
tation of possible results, bring about economic benefits by
means of cost savings and cross fertilisation of
ideas and
experience, thus resulting in improved or new products and
rapidly than would
technologies being developed more
those benefits can be
otherwise be the case. Some of
assumed to be caused by R & D cooperation. Therefore a
block exemption is justified. If considerable market power is
created or increased by the cooperation, the parties have to
demonstrate significant benefits
in carrying out R & D, a
launch of new products/technology or other effi-
quicker
ciencies.

63. Most R & D agreements will lie somewhere in between
the two situations described above. They may therefore have
effects on innovation as well as repercussions on existing
markets. Consequently, both the existing market and the
effect on innovation may be of relevance for the assessment
with respect to the parties’ combined positions, concentration
ratios, number of players/innovators and entry conditions. In
some cases there can be restrictive price/output effects on
existing markets and a negative impact on innovation by
slowing down the speed of development. For
means of
instance, if significant competitors on an existing technology
market cooperate to develop a new technology which may one
day replace existing products, this cooperation is likely to have
restrictive effects if the parties have significant market power
(which would give an incentive to
on the existing market

2.4.2. Indispensability

An R & D agreement can not be exempted if it imposes
66.
restrictions that are not indispensable to the attainment of the
above-mentioned benefits. The individual clauses listed in the
block exemption, Article 5, will
in most cases render an
exemption impossible following an individual assessment too,
and can therefore be regarded as a good indication of
restrictions that are not indispensable to the cooperation.

(20) See Article 2(2) of draft block exemption regulation.
(21) See Article 2(2) of draft block exemption regulation.

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2.4.3. No elimination of competition

2.5. EXAMPLES

67.
No exemption will be possible, if the parties are afforded
the possibility of eliminating competition in respect of a
substantial part of the products (or technologies) in question.
Thus, dominance on existing markets and with respect to inno-
vation must not be created or increased. For innovation this is
the case, for example, if the agreement combines the only two
existing poles of research.

Time of the assessment and duration of the exemption

68.
R & D agreements extending to the joint production and
marketing of new products/technology require particular
attention as to the time of the assessment.

technology markets and/or

69.
At the beginning of an R & D cooperation, its success
and factors such as the parties’ future market position as well
as the development of future product or technology markets
are not known. Consequently, the assessment at the point in
time when the cooperation is formed is limited to the (then)
existing product or
innovation
markets as described in this chapter. If, on the basis of this
analysis, competition is not likely to be eliminated, the R & D
agreement can benefit from an exemption. This will normally
cover the duration of the R & D phase plus, in as far as the
joint production and marketing of
the possible results is
concerned, an additional phase for a possible launch and
market introduction. The reason for this additional exemption
phase is that the first companies to reach the market with a
new product/technology will often enjoy very high initial
market shares and successful R & D is also often rewarded by
intellectual property protection. A strong market position due
to this (cid:145)first mover advantage(cid:146) cannot normally be interpreted
as elimination of competition. Therefore, the block exemption
(ex ante) covers R & D agreements for an additional period of
five years (that is, beyond the R & D phase)
irrespective of
whether or not the parties obtain with their new products/
technology a high share within this period. This also applies
to the individual assessment of cases falling outside the block
exemption provided that the criteria of Article 81(3) as to the
other aspects of
the agreement are fulfilled. This does not
exclude the possibility that a period of more than five years
also meets the criteria of Article 81(3) if it can be shown to be
time necessary to guarantee an
the minimum period of
adequate return on the investment involved.

for example,

following a complaint,

If a new assessment of an R & D cooperation is made
70.
after that period,
the
analysis has to be based on the (then) existing market situation.
The block exemption still continues to apply if the parties’
share on the (then) relevant market does not exceed 25 %.
Similarly, Article 81(3) continues to apply to R & D agreements
falling outside the block exemption provided that the criteria
for an exemption are fulfilled.

71.

Example 1

S i t u a t i o n : There are two major companies on the European
market for the manufacture of existing electronic components:
A (30 %) and B (30 %). They have each made significant
investment
in the R & D necessary to develop miniaturised
electronic components and have developed early prototypes.
They now agree to pool these R & D efforts by setting up a
joint venture
the
components, which will be sold back to the parents, who
will commercialise them separately. The remainder of
the
market consists of small firms without sufficient resources to
undertake the necessary investments.

to complete the R & D and produce

A n a l y s i s : Miniaturised electronic components, while likely to
compete with the existing components in some areas, are
essentially a new technology and an analysis must be made
of the poles of research destined towards this future market.
If the joint venture goes ahead then only one route to the
necessary manufacturing technology will exist, whereas
it
would appear likely that A and B could reach the market
individually with separate products. While the agreement
could have advantages in bringing a new technology forward
quicker, it also reduces variety and creates a commonality of
costs between the parties. Furthermore, the possibility for the
parties to exploit their strong position on the existing market
must be taken into account. Since they would face no
competition at the R & D level, their incentives to pursue the
new technology at a high pace could be severely reduced.
these concerns could be remedied by
Although some of
requiring the parties to license key know-how for manufac-
turing miniature components to third parties on reasonable
terms,
it may not be possible to remedy all concerns and
fulfil the conditions for an exemption.

72.

Example 2

S i t u a t i o n : A small research company A which does not have
its own marketing organisation has discovered and patented a
pharmaceutical substance based on new technology that will
revolutionise the treatment of a certain disease. Company A
enters into an R & D agreement with a large pharmaceutical
producer B of products that have so far been used for treating
the disease. Company B lacks any similar R & D programme.
For the existing products company B has a market share of
around 75 % in all EU countries, but patents are expiring over
two other poles of
the next
research at approximately the same stage of development
using the same basic new technology. Company B will
provide considerable funding and know-how for product devel-
opment, as well as future access to the market. Company B is
granted a license for the exclusive production and distribution

five-year period. There exist

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of the resulting product for the duration of the patent. It is
expected that the parties could jointly bring the product to
market in five to seven years.

3. PRODUCTION

AGREEMENTS

(INCLUDING

SPECIAL-

ISATION AGREEMENTS)

A n a l y s i s : The product is likely to belong to a new relevant
market. The parties bring complementary resources and skills
to the cooperation, and the probability of the product coming
to market increases substantially. Although Company B is likely
to have considerable market power on the existing market, this
power will be decreasing shortly and the existence of other
poles of research are likely to eliminate any incentive to
reduce R & D efforts. The exploitation rights during the
remaining patent period are likely to be necessary for
Company B to make the considerable investments needed
and Company A has no own marketing resources. The
agreement is therefore unlikely to restrict competition.

73.

Example 3

S i t u a t i o n : Two engineering companies that produce vehicle
components, agree to set up a joint venture to combine their
R & D efforts to improve the production and performance of
an existing component. They also pool their existing tech-
nology licensing businesses in this area, but will continue to
manufacture separately. The two companies have market shares
in Europe of 15 % and 20 % on the OEM product market.
There are two other major competitors together with several
in-house research programmes by large vehicle manufacturers.
On the worldwide market for the licensing of technology for
these products they have shares of 20 % and 25 %, measured in
terms of revenue generated, and there are two other major
is
technologies. The product
cycle
typically two to three years.
In each of the last five years
one of
the major firms has introduced a new version or
upgrade.

component

the

for

A n a l y s i s : Since neither company’s R & D effort is aimed at a
completely new product, the markets to consider are for the
existing components and for the licensing of relevant tech-
nology. Although their existing R & D programmes broadly
overlap,
the reduced duplication through the cooperation
could allow them to spend more on R & D than individually.
Several other technologies exist and the parties’ combined
market share on the OEM market does not bring them into
a dominant position. Although their presence on the tech-
there are
nology market, at 45 %,
competing technologies and the vehicle manufacturers, who
do not currently licence their technology, are also potential
entrants on this market thus constraining the ability of the
parties to raise price. As described, the joint venture is likely
to benefit from an exemption.

is close to dominance,

3.1. DEFINITION

74.
Production agreements may vary in form and scope.
They may take the form of joint production through a joint
venture (22), i.e. a jointly controlled company that runs one or
several production facilities, or can be carried out by means of
specialisation or subcontracting agreements whereby one party
agrees to carry out the production of a certain product.

75.
Generally, one can distinguish three categories of
production agreements: joint production agreements, whereby
the parties agree to produce certain products jointly, special-
isation agreements, whereby the parties agree unilaterally or
a product
reciprocally to cease production of
and to
purchase
and subcontracting
from the other party,
agreements whereby one party (the (cid:145)contractor(cid:146)) entrusts to
another party (the (cid:145)subcontractor(cid:146)) the production of a product.

it

76.
Subcontracting agreements are vertical agreements. They
are therefore, to the extent that they contain restrictions of
competition, covered by the block exemption regulation and
the guidelines on vertical restraints. There are however two
exceptions to this rule: Subcontracting agreements between
competitors (23),
between
subcontracting
non-competitors involving the transfer of know-how to the
subcontractor (24).

agreements

and

77.
Subcontracting agreements between competitors are
covered by these guidelines (25). Guidance for the assessment
of
non-competitors
involving the transfer of know-how to the subcontractor is
given in a separate Notice (26).

subcontracting

agreements

between

(22) As indicated above,

joint ventures which fall under the merger
regulation are not the subject of these guidelines. Full-function
joint ventures below Community dimension will only be assessed
as cooperation by the Commission if spill-over effects are likely to
be caused. The assessment under Article 81 will then be limited to
the spill-over effects.

(23) Article 2(4) of

the block exemption regulation on vertical

restraints.

(24) Article 2(3) of

notes

the block exemption regulation on vertical
restraints. See also guidelines on vertical restraints, point 28,
which
between
non-competitors under which the buyer provides specifications
to the supplier which merely describe the goods or services to
be supplied are covered by the block exemption regulation on
vertical restraints.

subcontracting

arrangements

that

(25) If a subcontracting agreement between competitors stipulates that
the contractor will cease production of the product to which the
agreement relates, the agreement constitutes a unilateral special-
isation agreement which is covered, subject to certain conditions,
by the specialisation block exemption regulation.
concerning the assessment of

certain subcontracting
agreements in relation to Article 85(1) of the EC Treaty, (OJ C 1,
3.1.1979, p. 2).

(26) Notice

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3.2. RELEVANT MARKETS

78.
In order to assess the competitive relationship between
the co-operating parties, the relevant product and geographic
market(s) directly concerned by the cooperation (i.e.
the
market(s) to which products subject to the agreement belong)
must first be defined. Secondly, a production agreement in one
market may also affect the competitive behaviour of the parties
in a market which is downstream or upstream or a neigh-
related to the market directly
bouring market
cooperation (27)
(cid:145)spill-over
(so-called
concerned
markets(cid:146)). However, spill-over effects only occur if the coop-
eration in one market necessarily results in the coordination of
competitive behaviour in another market, i.e. if the markets are
linked by interdependencies, and if the parties are in a strong
position on the spill-over market.

closely

the

by

3.3. ASSESSMENT UNDER ARTICLE 81(1)

3.3.1. Nature of the agreement

79.
The main source of competition problems that can
possibly arise from production agreements is the coordination
of the parties’ competitive behaviour as suppliers. This type of
competition problems arises where the cooperating parties are
actual or potential competitors on at least one of these relevant
market(s), i.e. on the markets directly concerned by the coop-
eration and/or on possible spill-over markets. Foreclosure
problems and other negative effects towards third parties
in the context of
may also arise, but are less
production agreements (28).

frequent

The fact that the parties are competitors does not auto-
80.
matically cause the coordination of their behaviour. In addition,
the parties normally need to cooperate with regard to a
significant part of
to achieve a
substantial degree of commonality of costs. The higher the
degree of commonality of costs, the greater the potential for
a limitation of price competition, especially in the case of
homogenous products.

their activities

in order

3.3.1.1. Agreements that do not fall under Article 81(1)

Production agreements between non-competitors are not
81.
normally caught by Article 81(1) (29). This is also true for
agreements whereby inputs or components which have so far
been manufactured for own consumption (captive production)
are purchased from a third party, unless there are indications

(27) As also referred to in Article 2(4) of the merger regulation.
(28) They are not caused by a competitive relationship between the
parties, but by a very strong market position of at least one of
for a key
the parties (for example, on an upstream market
component, which enables the parties to raise the costs of their
rivals in a downstream market) in the context of a more vertical or
complementary relationship between the cooperating parties.

(29) They may only fall under Article 81(1)

if foreclosure problems

arise.

that the company which so far has only produced for own
consumption could have entered the merchant market
for
sales to third parties without incurring significant additional
costs or risks in response to small, permanent changes in
relative market prices.

82.
Even production agreements between competitors do
not necessarily come under Article 81(1). First, cooperation
between firms which compete on markets closely related to
the market directly concerned by the cooperation, cannot be
defined as restricting competition,
if the cooperation is the
only commercially justifiable possibility to enter a new
market, to launch a new product or service or to carry out a
specific project.

83.
Secondly, an effect on the parties’ competitive behaviour
as market suppliers is highly unlikely if the parties have a small
proportion of their total costs in common. For instance, a low
degree of commonality in total costs can be assumed, where
two or more companies agree to specialise or
to jointly
produce an intermediate product which only accounts for a
small proportion of the production costs of the final product
and,
costs. A low degree of
commonality of total costs can also be assumed where the
parties jointly manufacture a final product, but only a small
proportion as compared to the total output of
the final
product. Even if a significant proportion is jointly manu-
factured, the degree of commonality of total costs may never-
theless be low or moderate, if the cooperation concerns hetero-
geneous products which require a costly marketing.

consequently,

total

the

3.3.1.2. Agreements that almost always fall under Article

81(1)

Agreements which fix the prices for market supplies of
84.
the parties, limit output or share markets or customer groups
have the object of restricting competition and do almost always
fall under Article 81(1). This does, however, not apply to cases

(cid:151) where the parties agree on the output directly concerned by
the production agreement (e.g. the capacity and production
the agreed amount of
volume of a joint venture or
outsourced products), or

(cid:151) where a production joint venture sets the sales prices for
the manufactured products when the joint venture also
carries out the distribution of these products so that the
price fixing by the joint venture is the effect of integrating
the various functions (30).

(30) A production joint venture which also carries out joint distribution
is, however, in most of the cases a full-function joint venture (see
footnote 23 for the assessment of these joint ventures).

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In both scenarios the agreement on output or prices will be
assessed together with the other effects of the joint venture on
the market in order to determine the applicability of Article
81(1).

3.3.1.3. Agreements that may fall under Article 81(1)

Usually the analysis will only involve the relevant
89.
cooperation. Under
market(s) directly concerned by the
certain circumstances, e.g.
if the parties have a very strong
combined position on upstream or downstream markets or
on markets otherwise closely related to the markets directly
concerned by the cooperation, these spill-over markets may
however have to be analysed as well. This applies in particular
to cooperation in upstream markets by firms which also enjoy
a strong combined market position further downstream.

85.
Production agreements that cannot be characterised as
clearly restrictive or non-restrictive on the basis of the above
factors may fall under Article 81(1) (31) and have to be analysed
in their
to cooperation
agreements between competitors which create a significant
degree of commonality of costs, but do not
involve hard
core restrictions as described above.

context. This applies

economic

3.3.2. Market power and market structures

86.
The starting point for the analysis is the position of the
parties in the market(s) concerned. This is due to the fact that
without market power the parties to a production agreement
do not have an incentive to coordinate their competitive
there is no effect on
behaviour as
competition in the market without market power of
the
parties, even if the parties would coordinate their behaviour.

suppliers. Secondly,

Block exemption

they are an instrument

87. Most common types of production agreements can be
assumed to cause some economic benefits in the form of
economies of scale or scope or better production technologies
unless
for price fixing, output
restriction or market and customer allocation. These benefits
outweigh a limited degree of market power.
It is therefore
reasonable to block exempt production agreements which
result in a restriction of competition up to a certain market
share threshold. Therefore, agreements concerning unilateral or
reciprocal specialisation as well as joint production are block
exempted (revised Regulation on specialisation) provided that
they do not contain hard core restrictions (see Article 4) and
they are concluded between parties with a combined
that
market share not exceeding 20 % in the relevant market(s).
The block exemption also applies to related purchasing and
distribution agreements (see Article 2).

Production agreements falling outside the block exemption

Agreements falling outside the block exemption require
88.
a more detailed analysis. The starting point again is the market
position of the parties. This will normally be followed by the
concentration ratio and the number of players as well as by
other factors as described in Chapter 1.

Market position of the parties, concentration ratio, number of players
and other structural effects

If

the parties,

90.
the parties’ combined market share is larger than
20 %, the likely impact of the production agreement on the
market must be assessed. In this respect market concentration
as well as market shares will be a significant factor. The higher
the combined market share of
the higher the
concentration in the market concerned. However, a moderately
higher market share than allowed for in the block exemption
does not necessarily imply a high concentration ratio. For
instance, a combined market share of the parties of slightly
more than 20 % may occur in a market with a moderate
concentration (HHI below 1 800).
In such a scenario a
restrictive effect is unlikely. In a more concentrated market,
however, a market share of more than 20 % is likely to
cause a competition restriction (see also example 1 (point
99)). The picture may nevertheless change,
if the market is
very dynamic with new participants entering the market and
market positions changing permanently.

For joint production, network effects, i.e. links between
91.
a significant number of competitors,
can also play an
important role. In a concentrated market the creation of an
additional link may tip the balance and make collusion in this
market likely, even if the parties have a significant, but still
moderate combined market share (see example 2 (point 100)).

92.
Under specific circumstances a cooperation between
potential competitors may also raise competition concerns.
This is, however,
limited to cases where a strong player in
one market cooperates with a realistic potential entrant, for
instance, with a strong supplier of
the same product or
service in a neighbouring geographic market. The reduction
of potential competition creates particular problems if actual
competition is already weak and threat of entry is a major
source of competition.

(31) Pursuant

to Article 4(2)(3) of Council Regulation No 17,
agreements which have as their sole object specialisation in the
manufacture of products need, under certain conditions, not to be
notified to the Commission. They may, however, be notified.

93.
Joint production of an important component or other
input to the parties’ final product can cause negative market
effects under certain circumstances:

Cooperation in upstream markets

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(cid:151) foreclosure problems (see example 3 (point 102)) provided
that the parties have a strong position on the relevant input
switching between
market
captive and non-captive use would not occur
in the
presence of a small but permanent relative price increase
for the product in question,

(non-captive use) and that

structures(cid:146). Efficiencies and other relevant benefits can justify
even a significant restriction of competition in the market
provided that effective competition is not eliminated and the
creation or strengthening of a dominant position is excluded.

(cid:151) spill-over effects (see example 4 (point 104)) provided that
the input is an important component of costs and that the
parties have a strong position in the downstream market
for the final product.

3.5. EXAMPLES

Joint production

98.
The following two examples concern hypothetical cases
causing competition problems on the relevant market to which
the jointly manufactured products belong.

Specialisation agreements

Reciprocal specialisation agreements with market shares
94.
beyond the threshold of
the block exemption will almost
always fall under Article 81(1) and have to be examined
the risk of market partitioning (see
carefully because of
example 5 (point 105)).

3.4. ASSESSMENT UNDER ARTICLE 81(3)

3.4.1. Economic benefits

95.
For agreements falling under the block exemption, the
existence of economic benefits can be assumed. For those
agreements not covered by the block exemption the parties
have to demonstrate improvements of production or other
efficiencies. Efficiencies that only benefit the parties or cost
savings that are caused by output reduction or market allo-
cation cannot be taken into account.

3.4.2. Indispensability

96.
Restrictions that go beyond what is necessary to achieve
the economic benefits described above will not be accepted.
For
restricted in their
competitive behaviour on output outside the cooperation.

instance, parties

should not be

3.4.3. No elimination of competition

to which the products subject
and on possible

The effects on competition have to be analysed on the
97.
to the cooperation
market
Production
belong
agreements which bring about efficiencies, but involve parties
with significant market power require a detailed analysis as to
the assessment of whether or not effective competition is likely
to be eliminated in the market. The analysis has to include the
(cid:145)market power and market
factors described under the point

spill-over markets.

99.

Example 1

S i t u a t i o n : Two suppliers, A and B, of the basic chemical
product X decide to build a new production plant controlled
by a joint venture. This plant will produce roughly 50 % of
their total output. X is a homogeneous product and is not
substitutable with other products, i.e. forms a relevant market
on its own. The market is rather stagnant. The parties will not
significantly increase total output, but close down two old
factories and shift capacity to the new plant. A and B each
have a market share of 20 %. There are three other significant
suppliers with each 10 to 15 % market share and several
smaller players.

A n a l y s i s : It is likely that this joint venture would have an
effect on the competitive behaviour of the parties because coor-
dination would give them considerable market power, if not
even a dominant position. Severe restrictive effects in the
market
are probable. High efficiency gains which may
outweigh these effects are unlikely in such a scenario where
a significant increase in output cannot be expected.

100.

Example 2

S i t u a t i o n : Two suppliers, A and B, form a production joint
venture on the same relevant market as in example 1. The joint
venture also produces 50 % of the parties’ total output. A and
B each have 15 % market share. There are three other players:
C with a market share of 30 %, D with 25 % and E with 15 %.
B has already a joint production plant with E.

A n a l y s i s : Here the market
is characterised by very few
players and rather symmetric structures. The joint venture
creates an additional
link between the players. Coordination
between A and B de facto would further increase concentration
and also link E to A and B. This cooperation is likely to cause a
severe restrictive effect, and, as in example 1, high efficiency
gains cannot be expected.

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Example 3 also concerns the relevant market to which
101.
the jointly manufactured products belong, but demonstrates the
importance of criteria other than market share (here: switching
between captive and non-captive production).

Specialisation

105.

Example 5

102.

Example 3

S i t u a t i o n : A and B set up a production joint venture for an
intermediate product X through restructuring current plants.
The joint venture sells X exclusively to A and B. It produces
40 % of A’s total output of X and 50 % of B’s total output. A
and B are captive users of X and are also suppliers of the
non-captive market. A’s share of total industry output of X is
10 %, B’s share amounts to 20 % and the share of the joint
venture to 14 %. On the non-captive market, however, A and B
have respectively 25 % and 35 % market share.

the

cooperation may not

strong position on the
A n a l y s i s : Despite the parties’
non-captive market
eliminate
effective competition in the market for X, if switching costs
between captive and non-captive use are small. However, only
very rapid switching would counteract the high market share
of 60 %. Otherwise this production venture raises serious
competition concerns which cannot even be outweighed by
significant economic benefits.

Example 4 concerns

an
103.
important intermediate product with spill-over effects on a
downstream market.

cooperation

regarding

i.e. A will

S i t u a t i o n : A and B each manufacture and supply the homo-
geneous products X and Y which belong to different markets.
A’s market share of X is 28 %, of Y it is 10 %. B’s share of X is
10 %, of Y it is 30 %. Because of scale economies they agree to
specialise,
in future only produce X and B will
produce only Y. Both agree on cross-supplies so that they
will stay both as suppliers in the markets. Due to the homo-
geneous nature of the products, distributions cost are minor.
There are two other manufacturing suppliers of X and Y with
market shares of roughly 15 %, the remaining suppliers have 5
to 10 % shares.

there

A n a l y s i s : The degree of commonality of costs is extremely
remain
high, only the relatively minor distribution costs
separate. Consequently,
room for
competition left. The parties would gain market power
their behaviour on the markets X
through coordination of
and Y. Furthermore,
the market
likely that
is
it
supplies of Y from A and X from B will diminish over time.
The case raises competition problems which the economies of
scale can hardly outweigh.

rather

little

very

is

The scenario may change if X and Y were heterogeneous
products with a very high proportion of marketing and
distributing costs (for example 65 to 70 % of total costs). If
furthermore the offer of a rather complete range of the differ-
entiated products was a condition for competing successfully,
the withdrawal of one or more parties as suppliers of X and/or
Y would be rather unlikely. In such a scenario the criteria for
exemption may be fulfilled (provided that the economies are
significant), despite the high market shares.

104.

Example 4

S i t u a t i o n : A and B set up a production joint venture for an
intermediate product X. They will close their own factories,
which have been manufacturing X and will cover their needs
of X exclusively from the joint venture. The intermediate
the final
product accounts for 50 % of
product Y. A and B have each a share of 20 % in the market
for Y. There are two other significant suppliers of Y with each
15 % market share and several smaller competitors.

the total costs of

4. PURCHASING AGREEMENTS

4.1. DEFINITION

106.
This chapter focuses on agreements concerning the
joint buying of products. Joint buying can be carried out by
a jointly controlled company or by a company in which many
firms hold a small stake or by a contractual arrangement or
even looser form of cooperation.

the

commonality of

is high,
A n a l y s i s : Here
furthermore the parties would gain market power through
coordination of their behaviour on the market Y. The case
raises competition problems, and the assessment
is almost
identical to example 1 though here the cooperation is taking
place in an upstream market.

costs

their bigger

107.
Purchasing agreements are often concluded by small
and medium-sized enterprises to achieve similar volumes and
discounts as
competitors. These agreements
between small and medium-sized enterprises are therefore
normally pro-competitive. Even if a moderate degree of
market power
this may be outweighed by
economies of scale provided the parties really bundle volume.
Joint buying occurs in many sectors; most frequently it seems
to occur in the retail sector.

created,

is

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first

agreements have

Joint purchasing may involve both horizontal and
108.
vertical
to be
agreements. These
assessed according to the principles described in the present
guidelines. If this assessment leads to the conclusion that a
cooperation between competitors in the area of purchasing
would in principle be acceptable, a further assessment will be
necessary
included
agreements concluded with suppliers or retailing members.
This assessment should be based on the principles set out in
the guidelines on vertical restraints (32), for instance as regards
the list of hardcore restrictions which are unlikely to be
exempted in vertical agreements.

restraints

examine

vertical

the

to

109.
An example would be an association formed by a
group of retailers for the joint purchasing of products. The
agreement to set up the association and the conditions under
which it engages in joint purchasing would be examined under
the present guidelines. The resulting vertical agreements,
between the association and an individual member, or
between the association and an outside supplier, are covered,
up to a certain limit, by the block exemption for vertical
restraints (33). Those agreements falling outside the vertical
block exemption will not be presumed to be illegal but may
need individual examination.

4.2. RELEVANT MARKETS

110.
There are two markets which may be affected by joint
buying: first, the market(s) directly concerned by the coop-
i.e. the relevant purchasing market(s); secondly, the
eration,
selling market(s),
the market(s) downstream where the
participants of the joint purchasing arrangement are active as
sellers.

i.e.

111.
The definition of relevant purchasing markets follows
the principles described in the Commission notice on market
definition and is based on the concept of substitutability to
identify competitive constraints. The only difference to the
definition of (cid:145)selling markets(cid:146) is that substitutability has to be
defined from the viewpoint of supply and not
from the
the suppliers’ alter-
viewpoint of demand.
natives are decisive in identifying the competitive constraints
on purchasers. These could be analysed for
instance by
examining the suppliers’ reaction to a small but lasting price
decrease. If the market is defined, the market share can be
calculated as the percentage which the purchases for
the
parties concerned account for out of the total sales of the
purchased product or service in the relevant market.

In other words:

for 900 units.
sales of X to car manufacturers account
However, X is also sold to manufacturers of other products
than cars. All sales of X account for 1 800 units. Then the
(purchasing) market share of the group is 15 %.

If the parties are in addition competitors on one or
113.
more selling markets, these markets are also relevant for the
assessment. Restrictions of competition on these markets are
more likely if the parties will achieve market power by coor-
dinating their behaviour and if the parties have a significant
proportion of their total costs in common. This is, for instance,
the case if retailers which are active in the same relevant retail
market(s) jointly purchase a significant amount of the products
they offer for resale.
It may also be the case if competing
manufacturers and sellers of a final product jointly purchase
a high proportion of their input together. The selling markets
have to be defined by applying the methodology laid down in
the Commission Notice on market definition.

4.3. ASSESSMENT UNDER ARTICLE 81(1)

4.3.1. Nature of the agreement

4.3.1.1. Agreements that do not come under Article 81(1)

114.
By their very nature joint buying agreements will be
concluded between companies that are at least competitors on
the purchasing markets.
If however competing purchasers
cooperate who are not active on the same relevant market
further downstream (for example, retailers which are active in
different geographic markets and can not be regarded as
realistic potential competitors), Article 81(1) will rarely apply
unless the parties have a very strong position in the buying
markets, which could be used to harm the competitive position
of other players in their respective selling markets.

In most cases,

115.
joint buying will be agreed between
companies that are competitors on both the purchase and
the selling market (see 4.3.1.3).

112.

Example 1

A group of car manufacturers agree to buy product X jointly.
Their combined purchases of X account for 270 units. All the

(32) Guidelines on vertical restraints
(33) Article 2(2) of Commission Regulation (EC) No 2790/1999.

4.3.1.2. Agreements that almost always fall under Article

81(1)

116.
Purchasing agreements only come under Article 81(1)
by their nature if the cooperation does not truly concern joint
buying, but serves as a tool to engage in a disguised cartel, i.e.
otherwise prohibited price fixing, output limitation or market
allocation.

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4.3.1.3. Agreements that may fall under Article 81(1)

117. Most purchasing agreements have to be analysed in
their legal and economic context. The analysis has to cover
both the purchasing and the selling markets.

4.3.2. Market power and market structures

a

for

accounts

agreement

sufficiently

inefficiencies

lessening of

118.
The starting point for the analysis is the examination of
the parties’ buying power. Buying power can be assumed if a
purchasing
large
the total volume of a purchasing market so
proportion of
that prices can be driven down below the competitive level
or access to the market can be foreclosed to competing
buyers. A high degree of buying power over the suppliers of
a market may bring about
such as quality
innovation efforts, or ultimately
reductions,
sub-optimal supply. However,
the primary concerns in the
context of buying power are that lower prices may not be
passed on to customers further downstream and that it may
cause cost increases for the purchasers’ competitors on the
selling markets because either suppliers will
try to recover
price reductions for one group of customers by increasing
prices for other customers or competitors having less access
to efficient suppliers. Consequently, purchasing markets and
selling markets are characterised by interdependencies as set
out below.

Interdependencies between purchasing and selling market(s)

of

The

competing

cooperation

119.
can
appreciably restrict competition by means of creating buying
power. Whilst the creation of buying power can lead to lower
prices
always
buying
pro-competitive and may, under certain circumstances, even
cause severe negative effects on competition.

consumers,

purchasers

power

not

for

is

First,

lower purchasing costs

120.
resulting from the
exercise of buying power cannot be seen as pro-competitive,
if the purchasers together have power on the selling markets.
In this case, the cost savings are probably not passed on to
consumers. The more combined power the parties have on
their selling markets,
the
parties to coordinate their behaviour as sellers. This may be
facilitated if the parties achieve a high degree of commonality
of costs through joint purchasing. For instance, if a group of
large retailers buys a high proportion of
their products
together, they will have a high proportion of their total cost
in common. The negative effects of joint buying can therefore
be rather similar to joint production.

is the incentive for

the higher

121.
Secondly, power on the selling markets may be created
or increased through buying power which is used to foreclose
competitors or to raise rivals’ costs. Significant buying power
by one group of customers may lead to foreclosure of

competing buyers by limiting their access to efficient suppliers.
It can also cause cost increases for its competitors because
suppliers will try to recover price reductions for one group
of customers by increasing prices for other customers (for
example, rebate discrimination by suppliers of retailers). This
is only possible if the suppliers of the purchasing markets also
have a certain degree of market power.
In both cases,
competition in the selling markets can be further restricted
by buying power.

There is no absolute threshold which indicates that a
122.
buying cooperation creates some degree of market power and
it is
thus falls under Article 81(1). However,
unlikely that market power exists
to the
if
agreement have a combined market share of below 15 % on
both the purchasing market(s) and also the selling market(s). In
any event, at that level of market share it is likely that the
conditions of Article 81(3) explained below are fulfilled by
the agreement in question.

in most cases,
the parties

123.
A market share above this threshold does not auto-
matically indicate that a negative market effect is caused by
the cooperation but requires a more detailed assessment of
the impact of a joint buying agreement on the market
the market concentration and
involving factors
possible
Joint
strong suppliers.
buying that involves parties with a combined market share
significantly above 15 % in a concentrated market is likely to
come under Article 81(1), and efficiencies that may outweigh
the restrictive effect have to be shown by the parties.

such as
countervailing power of

4.4. ASSESSMENT UNDER ARTICLE 81(3)

4.4.1. Economic benefits

124.
Purchasing agreements can bring about economic
benefits such as economies of scale in ordering or transporting
which may outweigh restrictive effects. If the parties together
have significant buying or selling power,
the issue of effi-
ciencies has to be examined carefully. Cost savings that are
caused by the mere exercise of power and which do not
benefit the consumers cannot be taken into account.

4.4.2. Indispensability

125.
Purchasing agreements can not be exempted if they
impose restrictions that are not indispensable to the attainment
of the above mentioned benefits. An obligation to exclusively
buy through the cooperation can in certain cases be indis-
pensable to achieve the necessary volume for the realisation
of economies of scale. However, such an obligation has to be
assessed in the context of the individual case.

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4.4.3. No elimination of competition

126.
Joint buying agreements can never be exempted if they
afford the parties the possibility of eliminating competition in
respect of a substantial part of the products in question. This
assessment has to cover buying and selling markets. The
combined market shares of the parties can be regarded as a
starting point.
It then needs to be evaluated whether these
market shares are indicative of a dominant position, and
whether there are any mitigating factors, such as countervailing
power of suppliers on the purchasing markets or potential for
market entry in the selling markets. A dominant position on
either the buying or selling market excludes exemption under
Article 81(3).

4.5. EXAMPLES

127.

Example 2

S i t u a t i o n : Two manufacturers, A and B, decide to jointly
buy component X. They are competitors on their selling
market. Together their purchases represent 35 % of the total
sales of X in the EEA, which is assumed to be the relevant
six other manufacturers
are
geographic market. There
(competitors of A and B on their selling market) accounting
for the remaining 65 % of the purchasing market; one having
25 %, the others account for significantly less. The supply side
is rather concentrated with six suppliers of component X, two
with 30 % market share each, and the rest between 10 and
15 % (HHI of 2 300 to 2 500). On their selling market, A
and B achieve a combined market share of 35 %.

for roughly 50 % of each retailer’s total costs. The retailers
can buy more than the minimum volume through the organi-
sation, but they may also buy outside the cooperation. They
have a combined market share of 20 % on each the purchasing
two large
and the selling market. A and B are their
competitors, A has a 25 % share on each of
the markets
concerned, B has 35 %. The remaining smaller competitors
have also formed a buying group. The 15 retailers achieve
economies by combining a significant amount of volume and
buying tasks.

A n a l y s i s : The retailers may achieve a high degree of
they finally buy more than the
commonality of costs if
agreed minimum volume together. However,
together they
only have a moderate market position on the buying and the
the cooperation brings about
selling market. Furthermore,
some economies of scale. This cooperation is likely to be
exempted.

129.

Example 4

S i t u a t i o n : Two supermarket chains conclude an agreement
to jointly buy products which account for roughly 50 % of
their total costs. On the relevant buying markets for the
the parties have shares
different categories of products
selling market
between 25 % and 40 %, on the relevant
(assuming there is only one geographic market concerned)
they achieve 40 %. There are five other significant retailers
each with a 10 to 15 % market share. Market entry is not likely.

the group by increasing smaller

A n a l y s i s : Due to the parties’ market power in their selling
market, the benefits of possible cost savings may not be passed
on to final consumers. Furthermore, the joint buying is likely
to increase the costs of the parties’ smaller competitors because
the two powerful suppliers probably recover price reductions
customers’ prices.
for
Increasing concentration in the downstream market may be
the result. In addition, the cooperation may lead to further
concentration among suppliers because smaller ones, which
may already work near or below minimum optimal scale,
they cannot reduce
may be driven out of
prices
further. Such a case probably causes a significant
restriction of competition which may not be outweighed by
possible efficiency gains from bundling volume.

the business if

128.

Example 3

S i t u a t i o n : 15 small retailers conclude an agreement to form
a joint buying organisation. They are obliged to buy a
minimum volume through the organisation which accounts

It

is likely that

this joint buying arrangement
A n a l y s i s :
the
would have an effect on the competitive behaviour of
parties because coordination would give them significant
market power. This is particularly the case if entry is weak.
The incentive to coordinate the behaviour is higher if the costs
are similar. Similar margins of
the parties would add an
incentive to have the same prices. Even if efficiencies are
caused by the cooperation,
it is not likely to be exempted
due to the high degree of market power.

130.

Example 5

S i t u a t i o n : Five small cooperatives conclude an agreement to
form a joint buying organisation. They are obliged to buy a
minimum volume through the organisation. The parties can
buy more than the minimum volume through the organisation,
but they may also buy outside the cooperation. Each of the
parties has a total market share of 5 % on each of
the
purchasing and selling markets, giving a combined market
share of 25 %. There are two other significant retailers each
with a 20 to 25 % market share and a number of smaller
retailers with market shares below 5 %.

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A n a l y s i s : The setting up of the joint buying organisation is
likely to give the parties a market position on both the
purchasing and selling markets of a degree which enables
them to compete with the two largest retailers. Moreover, the
these two other players with similar levels of
presence of
market position are likely to result in the efficiencies of the
agreement being passed on to consumers. In such a scenario
the agreement is likely to be exempted.

A further distinction should be drawn between
133.
agreements where the parties agree only on joint commercial-
isation and agreements where the commercialisation is related
to another cooperation. This can be for instance the case as
regards joint production or joint purchasing. These agreements
will be dealt with as in the assessment of those types of coop-
eration.

5. COMMERCIALISATION AGREEMENTS

5.1. DEFINITION

131.
The agreements covered in this section involve coop-
eration between competitors in the selling, distribution or
promotion of their products. These agreements can have a
largely varying scope, depending on the marketing functions
which are being covered by the cooperation. At the one end of
the spectrum, there is joint selling that leads to a joint deter-
mination of all commercial aspects related to the sale of the
product
there are more
limited agreements that only address one specific marketing
function, such as distribution, service, or advertising.

including price. At the other end,

The most important of these more limited agreements
132.
would seem to be distribution agreements. These agreements
are generally covered by Block Exemption Regulation (EC) No
2790/1999 and the Guidelines on Vertical Restraints unless the
parties are actual or potential competitors. In this case, Block
Exemption Regulation (EC) No 2790/1999 only covers
non-reciprocal vertical agreements between competitors, if (a)
the buyer, together with its connected undertakings, has an
annual turnover not exceeding EUR 100 million, or (b) the
supplier is a manufacturer and a distributor of goods and the
buyer is a distributor who is not also a manufacturer of goods
competing with the contract goods, or (c) the supplier is a
provider of services at several levels of trade, while the buyer
does not provide competing services at the level of trade where
it purchases the contract services (34). If competitors agree to
distribute their products on a reciprocal basis there is a possi-
bility in certain cases that the agreements have as their object
or effect the partitioning of markets between the parties or that
they lead to collusion. The same is true for non-reciprocal
agreements between competitors exceeding a certain size.
These agreements have thus first to be assessed according to
the principles set out below. If this assessment leads to the
conclusion that a cooperation between competitors in the
area of distribution would in principle be acceptable, a
further assessment will be necessary to examine the vertical
restraints
assessment
included in such agreements. This
should be based on the principles set out in the guidelines
on vertical restraints (35),
for instance as regards the list of
hardcore restrictions which are unlikely to be exempted in
vertical agreements.

(34) Article 2(4) of Commission Regulation (EC) No 2790/1999.
(35) Guidelines on vertical restraints

5.2. RELEVANT MARKETS

To assess the competitive relationship between the
134.
cooperating parties, first the relevant product and geographic
market(s) directly concerned by the cooperation (i.e.
the
market(s) to which products subject to the agreement belong)
have to be defined. Secondly, a commercialisation agreement in
one market may also affect the competitive behaviour of the
parties in a neighbouring market closely related to the market
directly concerned by the cooperation.

5.3. ASSESSMENT UNDER ARTICLE 81(1)

5.3.1. Nature of the agreement

5.3.1.1. Agreements that do not come under Article 81(1)

135.
The commercialisation agreements covered by this
section only fall under the competition rules if the parties to
the agreements are competitors. If the parties clearly do not
compete with regard to the products or services covered by the
agreement, the agreement cannot be restrictive of competition.
This also applies if a cooperation in commercialisation is
objectively necessary to allow one party to enter a market it
could not have entered individually, for example because of the
costs involved. A specific application of this principle would be
consortia arrangements that allow the companies involved to
mount a credible tender for projects that they would not be
able to fulfil, or would not have bid for, individually. As they
are therefore not potential competitors for the tender, there is
no restriction of competition.

5.3.1.2. Agreements
Article 81(1)

that

almost

always

come under

The principal competition concern about a commer-
136.
cialisation agreement between competitors
is price fixing.
Agreements limited to joint selling have as a rule the object
and effect of coordinating the pricing policy of competing
In this case they not only eliminate price
manufacturers.
competition between the parties but also restrict the volume
of goods
to be delivered by the participants within the
framework of the system for allocating orders. They therefore
restrict competition between the parties on the supply side and
limit the choice of purchasers and fall under Article 81(1).

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This appreciation does not change if the agreement is
137.
non-exclusive. Article 81(1) continues to apply even where the
parties are free to sell outside the agreement, as long as it can
be presumed that the agreement will lead to an overall coor-
dination of the prices charged by the parties.

In any event, at that level of
market share of below 15 %.
market share it is likely that the conditions of Article 81(3)
explained below are fulfilled by the agreement in question.

5.3.1.3. Agreements that may come under Article 81(1)

138.
For commercialisation arrangements that fall short of
joint selling there will be two major concerns. The first is that
the joint commercialisation provides a clear opportunity for
exchanges of sensitive commercial information particularly on
marketing strategy and pricing. The second is that, depending
on the cost structure of the commercialisation, a significant
input to the parties’ final costs may be common. As a result
the actual scope for price competition at the final sales level
may be limited. Joint commercialisation agreements therefore
can fall under Article 81(1) if they either allow the exchange of
sensitive commercial
they influence a
information, or
significant part of the parties’ final cost.

if

type is

139.
A specific concern related to distribution arrangements
between competitors which are active in different geographic
markets is that they can lead to or be an instrument of market
partitioning. In the case of reciprocal agreements to distribute
each other’s products, the parties to the agreement allocate
markets or customers and eliminate competition between
themselves. The key question in assessing an agreement of
this
in question is objectively
necessary for the parties to enter each other’s market. If it is,
the agreement does not
the
agreement falls under 81(1). If the agreement is not reciprocal,
the risk of market partitioning is less pronounced.
It needs
however
the non-reciprocal agreement
constitutes the basis for a mutual understanding to not enter
each other’s market or is a means to control access to or
competition on the (cid:145)importing(cid:146) market.

to be assessed if

fall under 81(1).

the agreement

is not,

If

it

if

5.3.2. Market power and market structure

As indicated above, agreements

140.
involve price
fixing will always fall under Article 81(1) irrespective of the
the parties. They may, however, be
market power of
exemptable
conditions
under
described below.

under Article 81(3)

that

the

141.
Commercialisation agreements between competitors
which do not involve price fixing are only subject to Article
if the parties to the agreement have some degree of
81(1)
market power.
is unlikely that market
it
power exists if the parties to the agreement have a combined

In most cases,

joint

likely impact of

If the parties’ combined market share is larger than
142.
commercialisation
the
the
15 %,
agreement on the market must be assessed.
In this respect
market concentration, as well as market shares will be a
significant
the
more useful
information about prices or marketing strategy
to reduce uncertainty and the greater the incentive for the
parties to exchange such information (36).

factor. The more concentrated the market

5.4. ASSESSMENT UNDER ARTICLE 81(3)

5.4.1. Economic benefits

The efficiencies

143.
to be taken into account when
assessing whether a joint commercialisation agreement can be
exempted will depend upon the nature of the activity. Price
fixing can generally not be justified, unless it is objectively
necessary for the integration of other marketing functions,
and this integration will generate substantial efficiencies. The
the efficiencies generated depends inter alia on the
size of
importance of
the joint marketing activities for the overall
cost structure of the product in question. Joint distribution is
thus more
for
producers of widely distributed consumer goods than for
producers of industrial products which are only bought by a
limited number of users.

likely to generate

efficiencies

significant

In addition,

144.
the claimed efficiencies should not be
savings which result only from the elimination of costs that
are inherently part of competition, but must result from the
integration of economic activities. A reduction of transport
cost which is only a result of customer allocation without
any integration of the logistical system can therefore not be
regarded as an efficiency that would make an agreement
exemptable.

145.
Claimed efficiency benefits must be demonstrated. An
important element in this respect would be the contribution by
both parties of significant capital, technology, or other assets.
Cost savings through reduced duplication of resources and
facilities can also be accepted. If, on the other hand, the joint
commercialisation represents no more than a sales agency with
no investment, it is likely to be a disguised cartel and as such
can not fulfil the conditions of Article 81(3).

(36) The exchange of sensitive and detailed information which takes
place in an oligopolistic market might as such be caught by
Article 81(1). The Judgements of 28 May 1998 in the (cid:145)Tractor(cid:146)
Cases (C-8/958 P: New Holland Ford and C-7/95 P: John Deere)
and of 11 March 1999 in the (cid:145)Steel Beams(cid:146) Cases (T-134/94,
T-136/94, T-137/94, T-138/94, T-141/94, T-145/94, T-147/94,
T-148/94, T-151/94, T-156/94 and T-157/94) provide useful clari-
fication in this respect.

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5.4.2. Indispensability

restrictions

A commercialisation agreement can not be exempted if
146.
indispensable to the
it
imposes
attainment of
the abovementioned benefits. As discussed
above, the question of indispensability is especially important
for those agreements involving price fixing or the allocation of
markets.

that are not

5.4.3. No elimination of competition

Joint

commercialisation agreements

147.
can never be
exempted if they enable the parties to eliminate competition
in respect of a substantial part of the products in question. In
making this assessment, the combined market shares of the
parties can be regarded as a starting point. One then needs
to evaluate whether these market shares are indicative of a
dominant position, and whether
there are any mitigating
factors, such as the potential for market entry. Arrangements
between competitors who have a combined market share
equivalent to dominance will not normally fulfil the conditions
of Article 81(3).

common brand) can only be achieved credibly if all aspects of
marketing, including price, are standardised. As the parties do
not have market power and the agreement creates significant
efficiencies it is compatible with Article 81.

149.

Example 2

S i t u a t i o n : Two producers of ball bearings, each having a
market share of 5 %, create a sales joint venture which will
market the products, determine the prices and allocate orders
to the parent companies. They retain the right to sell outside
this structure. Customers continue to be delivered directly from
the parents’
this will create effi-
ciencies as the joint sales force can demonstrate the parties’
products at the same time to the same client thus eliminating a
the joint
wasteful duplication of sales efforts.
venture would, wherever possible, allocate orders
to the
closest factory possible, thus reducing transport costs.

factories. They claim that

In addition,

5.5. EXAMPLES

148.

Example 1

the overall

S i t u a t i o n : Five small food producers, each with 2 % market
food market, agree to: combine their
share of
distribution facilities; market under a common brand name;
and sell
their products at a common price. This involves
significant investment in warehousing, transport, advertising,
marketing and a sales force. It significantly reduces their cost
base, representing typically 50 % of the price at which they
sell, and allows
them to offer a quicker more efficient
distribution system. The customers of the food producers are
large retail chains.

Three large multinational food groups dominate the market,
each with 20 % market share. The rest of the market is made
up of small independent producers. The product ranges of the
parties to this agreement overlap in some significant areas. But
in no product market does their combined market share exceed
15 %.

A n a l y s i s : The agreement involves price fixing and thus falls
under Article 81(1), even though the parties to the agreement
is not
cannot be considered as having market power.
exemptable under Article 81(3), as the claimed efficiencies
are only cost
reductions derived from the elimination of
competition between the parties.

It

150.

Example 3

S i t u a t i o n : Two producers of soft drinks are active in two
different, neighbouring Member States. Both have a market
share of 20 % in their home market. They agree to reciprocally
distribute each other’s product in their respective geographic
market.

Both markets are dominated by a large multinational soft drink
producer, having a market share of 50 % in each market.

the marketing and distribution appears
efficiencies which are of benefit

A n a l y s i s : The agreement involves price fixing and thus falls
under Article 81(1), even though the parties to the agreement
can not be considered as having market power. However, the
to
integration of
provide
to
significant
improved service, and lower
customers both in terms of
costs. The question is therefore whether the agreement
is
exemptable under Article 81(3). To answer this question it
must be established whether the price fixing is objectively
necessary for the integration of the other marketing functions.
In this case, the price fixing can be regarded as necessary, as
the clients (large retail chains) do not want to deal with a
the aim (a
multitude of prices.

is also necessary, as

It

then their

falls under Article 81(1)

can be presumed to be potential

if
the
A n a l y s i s : The agreement
parties
competitors.
Answering this question would thus require an analysis of
the barriers to entry into the respective geographic markets.
If the parties could have entered each other’s market inde-
pendently,
competition
agreement
between them. However, even though the market shares of
the parties indicate that they could have some market power,
an analysis of the market structure indicates that this is not the
case. In addition, the reciprocal distribution agreement benefits
customers
in each
the
geographic market. The agreement would thus be exemptable
even if it were considered to be restrictive of competition.

eliminates

increases

available

choice

as

it

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6. AGREEMENT ON STANDARDS

6.1. DEFINITION

Standardisation agreements have as

their primary
151.
objective the definition of technical or quality requirements
with which current or future products, production processes
or methods may comply (37). Standardisation agreements can
cover various issues, such as standardisation of different grades
or sizes of a particular product or technical specifications in
markets where compatibility and interoperability with other
products or systems is essential. The terms of access to a
particular quality mark or for approval by a regulatory body
can also be regarded as a standard.

Not covered by these guidelines are standards related to
rules of

152.
the provision of professional
admission to a liberal profession.

such as

services,

6.2. RELEVANT MARKETS

153.
Standardisation agreements produce their effects on
three possible markets, which will be defined according to
the Commission notice on market definition. First,
the
product market(s) to which the standard(s) relates. Standards
on entirely new products may raise issues similar to those
raised for R & D agreements, as far as market definition is
the service market
concerned (see point 2.2). Second,
for
standard setting,
standard setting bodies or
agreements exist. Third, where relevant, the distinct market
for testing and certification.

if different

6.3. ASSESSMENT UNDER ARTICLE 81(1)

to set

Agreements

standards (38) may be

either
154.
concluded between private undertakings or set under
the
aegis of public bodies or bodies having been entrusted with
the operation of services of general economic interest, such as
the standards bodies recognised under Directive 98/34/EC (39).
The involvement of such bodies is subject to the obligations of

(37) Standardisation can take different

ranging from the
adoption of national consensus based standards by the recognised
European or national standards bodies, through consortia and fora,
to agreements between single companies. Although Community
law defines standards in a narrow way, these guidelines qualify
as standards all agreements as defined in this paragraph.

forms,

(38) Pursuant

to Article 4(2)(3) of Council Regulation No 17,
agreements which have as their sole object the development or
the uniform application of standards and types need not to, but
may, be notified to the Commission.

(39) Directive 98/34/EC of the European Parliament and of the Council
on 22 June 1998 laying down a procedure for the provision of
information in the field of
technical standards and regulations
(OJ L 204, 21.7.1998, pp. 37 to 48).

Member States regarding the preservation of non distorted
competition in the Community.

6.3.1. Nature of the agreement

6.3.1.1. Agreements that do not fall under Article 81(1)

155. Where participation in standard setting is unrestricted
and transparent, standardisation agreements as defined above,
which set no obligation to comply with the standard or which
are parts of a wider agreement
to ensure compatibility of
products, do not restrict competition. This normally applies
to standards adopted by the recognised standards bodies
which are based on non-discriminatory, open and transparent
procedures.

No appreciable restriction exists for those standards
156.
that have a negligible coverage of
the relevant market, as
long as it remains so. No appreciable restriction is found
either in agreements which pool together SMEs to standardise
access forms or conditions to collective tenders or those that
standardise aspects like minor product characteristics, forms
and reports, which have an insignificant effect on the main
factors affecting competition in the relevant markets.

6.3.1.2. Agreements that almost always fall under Article

81(1)

157.
Agreements that use a standard as a means amongst
restrictive agreement aimed at
other parts of a broader
excluding actual or potential competitors will almost always
be caught by Article 81(1). For
instance, an agreement
whereby a national association of manufacturers would set a
standard and put pressure on third parties not
to market
products that do not comply with the standard would be in
this category.

6.3.1.3. Agreements that may fall under Article 81(1)

insofar as they grant

Standardisation agreements may be caught by Article
158.
81(1)
the parties joint control over
production and/or innovation, thereby restricting their ability
to compete on product characteristics, while affecting third
standardised
parties
products. The assessment of each agreement must take into
account the nature of the standard and its likely effect on
the markets concerned, on the one hand, and the scope of
possible restrictions that go beyond the primary objective of
standardisation, as defined above, on the other.

like suppliers or purchasers of

the

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from either developing alternative

The existence of a restriction of competition in stan-
159.
dardisation agreements depends upon the extent to which the
parties remain free to develop alternative standards or products
that do not comply with the agreed standard. Standardisation
agreements may restrict competition where they prevent the
parties
standards or
commercialising products
that do not comply with the
standard. Agreements that entrust certain bodies with the
exclusive right
to test compliance with the standard go
beyond the primary objective of defining the standard and
may also restrict
impose
restrictions on marking of conformity with standards, unless
imposed
restrict
by
competition.

competition. Agreements

provisions, may

regulatory

also

that

6.3.2. Market power and market structures

160.
High market shares held by the parties in the market(s)
affected will not necessarily be a concern for standardisation
agreements. Their effectiveness is often proportional to the
share of the industry involved in setting and/or applying the
standard. On the other hand, standards that are not accessible
to third parties may discriminate or foreclose third parties or
segment markets according to their geographic scope of
the agreement
application. Thus,
restricts competition will focus, necessarily on an individual
basis, on the extent to which such barriers to entry are likely
to be overcome.

the assessment whether

6.4. ASSESSMENT UNDER ARTICLE 81(3)

6.4.1. Economic benefits

161.
The Commission generally takes a positive approach
towards agreements that promote economic interpenetration
in the common market or encourage the development of
new markets and improved supply conditions. To materialise
those economic benefits, the necessary information to apply
the standard must be available to those wishing to enter the
market and an appreciable proportion of the industry must be
involved in the setting of the standard in a transparent manner.
It will be for the parties to demonstrate that any restrictions on
the setting, use or access to the standard provide economic
benefits.

limit

In order

should not

to reap technical or economic benefits,
162.
innovation. This will depend
standards
primarily on the lifetime of
in
the associated products,
connection with the market development stage (fast growing,
growing, stagnant). The effects on innovation must be analysed
on a case by case basis. The parties may also have to provide
evidence that collective standardisation is efficiency-enhancing
for the consumer when a new standard may trigger unduly
rapid obsolescence of existing products, without objective
additional benefits.

6.4.2. Indispensability

In some cases,

By their nature, standards will not include all possible
163.
specifications or technologies.
it would be
necessary for the benefit of the consumers or the economy
at large to have only one technological solution. However,
this standard must be set on a non-discriminatory basis.
Ideally, standards should be technology neutral. In any event,
it must be justifiable why one standard is chosen over another.

All competitors

164.
in the market(s) affected by the
standard should have the possibility of being involved in
setting
discussions. Therefore, participation in standard
should be open to all, unless
the parties demonstrate
important
in such participation or unless
inefficiencies
recognised procedures are foreseen for the collective represen-
tation of interests, as in formal standards bodies.

165.
As a general rule there should be a clear distinction
between the setting of a standard and, where necessary, the
that
related R & D, and the commercial exploitation of
standard. Agreements on standards should cover no more
than what is necessary to ensure their aims whether this is
technical compatibility, or a certain level of quality. For
instance, it should be very clearly demonstrated why it is indis-
pensable for the economic benefits to materialise that an
agreement
to disseminate a standard in an industry where
only one competitor offers an alternative should oblige the
parties to the agreement to boycott the alternative.

6.4.3. No elimination of competition

is likely to lead to the creation of a de

There will clearly be a point at which the specification
166.
firms that are jointly
of a private standard by a group of
dominant
facto
industry standard. The main concern will then be to ensure
that these standards are as open as possible and applied in a
clear non-discriminatory manner. To avoid elimination of
competition in the relevant market(s), access to the standard
must be possible for third parties on fair, reasonable and
non-discriminatory terms.

To the extent that private organisations or groups of
167.
companies set a standard or
their proprietary technology
becomes a de facto standard, then competition will be elim-
third parties are foreclosed from access to this
inated if
standard.

6.5. EXAMPLES

168.

Example 1

Standard

EN 60603-7:1993

the
S i t u a t i o n :
requirements to connect television receivers to video-generating
accessories such as video recorders and video games. Although
the standard is not legally binding, in practice manufacturers
both of
television receivers and of video games use the
standard, as the market requires so.

defines

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A n a l y s i s : Article 81(1) is not infringed. The standard has
been adopted by recognised standards bodies, at national,
through open and trans-
European and international
level,
parent procedures, and is based on national
consensus
reflecting the position of manufacturers and consumers. All
manufacturers are allowed to use the standard.

169.

Example 2

S i t u a t i o n : A number of videocassette manufacturers agree to
develop a quality mark or standard to denote the fact that the
videocassette meets certain minimum technical specifications.
The manufacturers are free to produce videocassettes which do
not conform to the standard and the standard is freely available
to other developers.

A n a l y s i s : Provided that the agreement does not otherwise
restrict competition, Article 81(1) is not infringed, as partici-
pation in standard setting is unrestricted and transparent, and
the standardisation agreement does not set an obligation to
comply with the standard.
the parties agreed only to
If
produce videocassettes which conform to the new standard,
the
and
prevent
from selling different products which
the parties
would infringe Article 81(1).

agreement would limit

technical development

170.

Example 3

interdependent with products

S i t u a t i o n : A group of competitors active in various markets
that must be
which are
compatible, and with over 80 % of
the relevant markets,
agree to jointly develop a new standard that will be introduced
in competition with other standards already present in the
market, widely applied by their competitors. The various
products complying with the new standard will not be
compatible with existing standards. Because of the significant
investment needed to shift and to maintain production under
the new standard, the parties agree to commit a certain volume
of sales to products complying with the new standard so as to
create a (cid:145)critical mass(cid:146) in the market. They also agree to limit
their individual production volume of products not complying
with the standard to the level attained last year.

A n a l y s i s : This agreement, owing to the parties’ market
power and the restrictions on production, falls under Article
81(1), while not being likely to fulfil the conditions of Article
81(3), unless access to technical information would be provided
on a non-discriminatory basis and reasonable terms to other
suppliers wishing to compete.

7. ENVIRONMENTAL AGREEMENTS

7.1. DEFINITION

Environmental agreements (40) are those by which the
171.
parties undertake to achieve pollution abatement, as defined in
environmental law, or environmental objectives, in particular,
those set forth in Article 174 of the EC Treaty. Therefore, the
target or the measures agreed need to be directly linked to the
reduction of a pollutant or a type of waste identified as such in
relevant regulations (41). This excludes agreements that trigger
pollution abatement as a by-product of other measures.

172.
Environmental agreements may set forth standards on
the environmental performance of products (inputs or outputs),
or production processes (42). Other possible categories may
include agreements at the same level of trade, whereby the
parties provide for the common attainment of an environ-
mental target such as recycling of certain materials, emission
reductions, or the improvement of energy-efficiency.

Comprehensive,

173.
industry-wide schemes are set up in
many Member States for complying with environmental obli-
gations on take-back or
recycling. Such schemes usually
comprise a complex set of arrangements, some of which are
horizontal, while others are vertical in character. To the extent
that these arrangements contain vertical restraints they are not
subject to these guidelines.

7.2. RELEVANT MARKETS

174.
The effects are to be assessed on the markets to which
the agreement relates, which will be defined according to the
relevant notice. When the pollutant is not itself a product, the
relevant market encompasses that of the product into which
the pollutant
for collection/recycling
agreements,
in addition to their effects on the market on
which the parties are active as producers or distributors, the
effects on the market of collection services potentially covering
the good in question must be assessed as well.

incorporated. As

is

(40) The term (cid:145)agreement(cid:146) is used in the sense defined by the Court of
Justice of the European Community in the case law on Article 81.
It does not necessarily correspond to the definition of an
(cid:145)agreement(cid:146) in Commission documents dealing with environmental
issues such as the Communication on environmental agreements
COM(96) 561 final of 27.11.1996.

(41) For instance, a national agreement phasing out a pollutant or
waste identified as such in relevant community directives may
not be assimilated to a collective boycott on a product which
circulates freely in the community.

(42) To the extent

that some environmental agreements could be
assimilated to standardisation, the same assessment principles for
standardisation apply to them.

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7.3. ASSESSMENT UNDER ARTICLE 81(1)

7.3.1.3. Agreements that may fall under Article 81(1)

175.
Some environmental agreements may be encouraged or
made necessary by State authorities in the exercise of their
public prerogatives. The present guidelines do not deal with
in
the question of whether
conformity with the Member State’s obligations under the EC
Treaty. They only address the assessment that must be made as
to the compatibility of the agreement with Article 81.

intervention is

such State

181.
Environmental agreements covering a major share of
an industry at national or EC level are likely to be caught by
Article 81(1) where they appreciably restrict the parties’ ability
to devise the characteristics of their products or the way in
which they produce them, thereby granting them influence
over each others production or sales. In addition to restrictions
between the parties, an environmental agreement may also
third parties,
reduce or substantially affect
either as suppliers or as purchasers.

the output of

7.3.1. Nature of the agreement

7.3.1.1. Agreements that do not fall under Article 81(1)

Some environmental agreements are not likely to fall
irres-

176.
within the scope of the prohibition of Article 81(1),
pective of the aggregated market share of the parties.

For instance, environmental agreements, which may
182.
phase out or significantly affect an important proportion of
the parties’ sales as regards their products or production
process, may fall under Article 81(1) when the parties hold a
significant proportion of
the market. The same applies to
agreements whereby the parties allocate individual pollution
quotas.

This may arise if no precise individual obligation is
177.
placed upon the parties or if they are loosely committed to
contributing to the attainment of a sector-wide environmental
target.
In this latter case, the assessment will focus on the
discretion left to the parties as to the means that are technically
and economically available in order to attain the environmental
objective agreed upon. The more varied such means, the less
appreciable the potential restrictive effects.

the

setting

Similarly,

agreements

178.
environmental
performance of products or processes that do not appreciably
affect product and production diversity in the relevant market
or whose importance is marginal
for influencing purchase
decisions do not
fall under Article 81(1). Where some
categories of a product are banned or phased out from the
market, restrictions cannot be deemed appreciable insofar as
their share is minor in the relevant geographic market or, in
the case of Community-wide markets, in all Member States.

179.
Finally, agreements which give rise to genuine market
creation, for instance recycling agreements, will not generally
restrict competition, provided that and as long as, the parties
would not be capable of conducting the activities in isolation,
whilst other alternatives and/or competitors do not exist.

Similarly,

holding
agreements whereby
183.
important market shares in a substantial part of the common
market appoint an undertaking as exclusive provider of
collection and/or recycling services for their products, may
also appreciably restrict competition, provided other actual or
realistic potential providers exist.

parties

7.4. ASSESSMENT UNDER ARTICLE 81(3)

7.4.1. Economic benefits

184.
The Commission takes a positive stance on the use of
environmental agreements as a policy instrument to achieve
the goals enshrined in Article 2 and Article 174 of the EC
Treaty as well as in Community environmental action plans (43),
provided such agreements are compatible with competition
rules (44).

either

Environmental agreements caught by Article 81(1) may
185.
individual or
attain economic benefits which,
aggregate consumer level, outweigh their negative effects on
competition. To fulfil
there must be net
this condition,
benefits in terms of reduced environmental pressure resulting
from the agreement, as compared to a baseline where no
the expected economic
In other words,
action is
benefits must outweigh the costs (45).

taken.

at

7.3.1.2. Agreements
Article 81(1)

that

almost

always

come under

the cooperation does not

Environmental agreements come under Article 81(1)
180.
truly concern
by their nature if
environmental objectives, but serves as a tool to engage in a
disguised cartel, i.e. otherwise prohibited price fixing, output
limitation or market allocation, or if the co-operation is used as
a means amongst other parts of a broader restrictive agreement
which aims at excluding actual or potential competitors.

(43) Vth Environmental Action Programme (OJ C 138, 17.5.1993, p. 1);
European Parliament and Council Decision No 2179/98/EC of
24.9.1998 (OJ L 275, 10.10.1998, p. 1).

(44) Communication on environmental agreements COM(96) 561 final
of 27.11.1996, points 27 to 29 and Article 3(1)(f) of European
Parliament and Council Decision No 2179/98/EC. The Communi-
cation includes a (cid:145)checklist for environmental agreements(cid:146)
ident-
ifying the elements that should generally be included in such an
agreement.

(45) This is consistent with the requirement to take account of the
potential benefits and costs of action or lack of action set forth
in Article 174(3) and Article 7(d) of European Parliament and
Council Decision No 2179/98/EC.

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Such costs include the effects of lessened competition
186.
along with compliance costs for economic operators and/or
effects on third parties. The benefits might be assessed in
two stages. Where consumers individually have a positive
rate of return from the agreement under reasonable payback
periods,
there is no need for the aggregate environmental
benefits to be objectively established. Otherwise, a cost-benefit
analysis may be necessary to assess whether net benefits for
consumers in general are likely under reasonable assumptions.

7.4.2. Indispensability

The more objectively the economic efficiency of an
the more clearly
is demonstrated,
to the
the environmental goal within its economic

187.
environmental agreement
each provision might be deemed indispensable
attainment of
context.

188.
An objective evaluation of provisions which prima facie
might be deemed not indispensable must be supported with a
cost-effectiveness analysis showing that alternative means of
attaining the expected environmental benefits, would be more
economically
reasonable
under
assumptions. For instance,
it should be very clearly demon-
strated that a uniform fee, charged irrespective of individual
costs for waste collection, is indispensable for the functioning
of an industrywide collection system.

financially

costly,

or

7.4.3. No elimination of competition

technological

189. Whatever the environmental and economic gains and
the necessity of the intended provisions, the agreement must
not eliminate competition in terms of product or process
innovation or market entry in
differentiation,
the short or, where relevant, medium run. For instance,
in
case of exclusive collection rights granted to a collection/
recycling operator with potential competitors, the duration of
such rights should take into account the possible emergence of
an alternative to the operator.

7.5. EXAMPLES

190.

Example

S i t u a t i o n : Almost all EU producers and importers of a given
domestic appliance (for example, washing machines), agree,
with the encouragement of a public body, to no longer manu-
facture and import into the EU products which do not comply
with certain environmental criteria (e.g. energy efficiency).
the EU market. The
the parties hold 90 % of
Together,
products which will be thus phased out of
the market
account for a significant proportion of total sales. They will
be replaced with more environmentally friendly, but also more
expensive products. Furthermore,
indirectly
(e.g. electric utilities,
third parties
the output of
reduces
suppliers of components incorporated in the products phased
out).

the agreement

their

A n a l y s i s : The agreement grants the parties control of indi-
vidual production and imports, concerns an appreciable
proportion of
sales and total output, whilst also
reducing third parties’ output. Consumer choice, which is
partly focused on the environmental characteristics of
the
is reduced and prices will probably rise. Therefore,
product,
the agreement is caught by Article 81(1). The involvement of
the public authority is irrelevant for this assessment.

of

the

situation

environmental

However, newer products are more technically advanced and
by reducing the environmental problem indirectly aimed at
(emissions from electricity generation), they will not inevitably
create or increase another environmental problem (e.g. water
consumption, detergent use). The net contribution to the
improvement
overall
outweighs increased costs. Furthermore, individual purchasers
of more expensive products will also rapidly recoup the cost
increase as the more environmentally friendly products have
lower running costs. Other alternatives to the agreement are
shown to be less certain and less cost-effective in delivering the
same net benefits. Varied technical means are economically
available to the parties in order to manufacture products
which do comply with the environmental characteristics
agreed upon and competition will still take place for other
for an
characteristics. Therefore,
product
exemption under Article 81(3) are fulfilled.

conditions

the