Opinion of the Economic and Social Committee on "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"
Date: 2000-10-19
Institutions: Provisional data
Subjects: EU law, competition, cooperation agreement, horizontal agreement, research and development, trade agreement

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4.2.
In the light of the strategic objectives referred to, which
affect people’s quality of life, it is necessary to develop the
actions provided for in the White Paper on Food Safety and to
establish the Food Agency in order to restore European
consumers’ confidence in the European market.

Tax harmonisation, and the package of measures
4.3.
adopted to that effect by the European Council
in Feira
(Portugal), is one of the priority areas for action which the ESC
would like to stress as a way of ending tax fraud.

4.4.
Also with a view to improving the business environ-
ment, it is necessary to simplify internal market rules to ensure
that the standards can be met by all companies, especially
SMEs.

4.5.
The Committee considers the adoption of the European
Company Statute to be one of the most important precon-
ditions for the smooth operation of the internal market, as a
suitable vehicle not only for mergers but also for the systems
for the participation of workers in the development of their
companies.

Brussels, 19 October 2000.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on ‘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’ (1)

(2001/C 14/03)

On 25 May 2000, the Economic and Social Committee, acting under Rule 23(2) of its Rules of Procedure,
decided to draw up an additional opinion on the above-mentioned communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 27 September 2000. The rapporteur was
Mr Regaldo.

At its 376th plenary session (meeting of 19 October 2000) the Economic and Social Committee adopted
the following opinion with 93 votes in favour and one abstention.

1.

Introduction

1.1.
The two draft Commission regulations on the appli-
cation of Article 81(3) of the EC Treaty to research and
development agreements and specialisation agreements, and
the accompanying draft guidelines on the applicability of
Article 81 to horizontal cooperation, are the result of lengthy
consideration of the need to reform and modernise compe-
tition policy regarding horizontal cooperation agreements.

The draft regulations and guidelines are designed to
1.2.
replace the current regulations on specialisation (Commission
Regulation (EC) No 417/85) and research and development
(Commission Regulation (EC) No 418/85), and the two notices
on cooperation between enterprises (2).

1.3.
The two draft regulations and the notices on the
guidelines for horizontal cooperation agreements are to enter
into force on 1 January 2001 and to apply for ten years,
expiring on 31 December 2010.

(1) OJ C 118, 27.4.2000.

(2) OJ C 75, 29.7.1968 and OJ C 43, 16.2.1993.

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A transitional period is scheduled from 1 January 2001 to
31 December 2001 during which agreements already in force
on 31 December 2000 will not be subject to the Article 81(1)
ban even if they do not satisfy the conditions laid down in the
new regulations; they must however satisfy those of the
existing regulations.

interpret and apply competition law uniformly throughout the
single market. The Committee thinks that the new block
exemption regulations must therefore be designed in antici-
pation of decentralised application.

2. General comments

The Committee is pleased to note that

2.1.
the new
proposed reform of horizontal agreements fits into — and
must be analysed within the context of — the wider revision
of competition rules, which was launched with the new rules
on vertical agreements and the proposals set out in the White
Paper on modernisation of the rules implementing Articles 81
and 82 of the EC Treaty. Taken together, these proposals
radically alter the competition rules which have governed
agreements over the past forty years.

2.2.
The main points of the reform envisaged in the White
Paper (1), such as the lifting of the notification obligation and
the decentralisation to national
level of the application of
competition rules (Articles 81 and 82) with the move from an
authorisation system to a directly applicable exception system,
were weighed up by the Committee in its opinion (2) on the
White Paper.

2.3. While the modernisation of competition policy pro-
posed in the White Paper is to be welcomed (even though the
details of the formal revision of Regulation 17(62) are not yet
known), the reform is not without risks for Community
competition rules on agreements between companies. The
main risks relate to non-uniform application of the rules,
market fragmentation and a renationalisation of competition
policy.

2.4.
The risk that Member States will differ in their assess-
ments or take differing action — especially when dealing with
agreements that fall outside Article 81(1), that exceed the
market-share threshold of the block exemption regulations, or
that are governed by non-binding guidelines — will create
legal uncertainty for companies and may actually threaten the
integrity of the single market.

2.5.
The new rules on vertical agreements and those now
being proposed for horizontal agreements are preliminary to
the reform envisaged by the White Paper. They are thus vital
for establishing clear, easy-to-apply rules that will enable
companies and the Community and national authorities to

(1) White Paper on modernisation of the rules implementing Articles

81 and 82 of the EC Treaty.

(2) OJ C 51, 23.2.2000.

2.6.
This is vital in order to give companies a high degree
of legal certainty, particularly when they are called on to make
a self-assessment of the economic and competition-related
aspects of
their agreements in the light of Community
legislation and its application at both Community level and
national level. If there is fragmentation, the Committee urges
the Commission to take steps to achieve consistency.

2.7.
On the latter point, previous Committee opinions have
already discussed the principle of a one-stop shop, and
decentralised application should make this a top priority.

The Committee is pleased to note that the Com-
2.8.
mission’s approach to the proposed new regulations and
guidelines is similar to that used for vertical agreements.

The new reform revamps

2.9.
legalistic
interpretation of Article 81 in favour of more economic
criteria, based on the concept of market power. Thus agree-
ments will be assessed in the light of their impact on the
relevant market.

the current

2.10.
By allowing certain agreements to enjoy legal cer-
tainty, the proposal rightly aims to make it easier for economic
operators to respond to rapidly changing markets and adjust to
the keener competition caused by globalisation and technical
advances.

2.11.
The Committee points out that the Commission
proposal recognises the economic benefits of horizontal
cooperation, and that this is an important instrument for
helping SMEs adjust to market change particularly in the case
of R&D agreements.

The Committee also recognises the competition prob-
2.12.
lems that can be caused by concerted practices which can arise
from horizontal cooperation, particularly between competing
companies. As horizontal cooperation can take many forms,
it is vital for companies to have a precise legal framework
enabling them to weigh up both the anti-competitive effects
and the benefits of cooperation under the terms of Article 81.

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2.13.
Here the Committee points out that although the
guidelines setting out the criteria for assessing horizontal
cooperation under Article 81 only supplement the block
exemption regulations on R&D and specialisation agreements,
the Commission also intends to apply them to agreements on
standardisation, joint purchasing and joint marketing, which
are not covered by block exemption agreements. In these latter
cases there may be an objective risk of legal uncertainty in the
assessment of the agreements. Therefore, the Committee calls
on the Commission to develop a block exemption regulation
which covers all types of horizontal cooperation similar to the
block exemption regulation for vertical agreements, and to
further study this question.

The new provisions abolish the current ‘white list’ of
2.14.
explicitly exempted clauses. Instead, the Commission proposes
to establish a safety zone allowing companies to conclude
agreements with general exemption if their combined market
share is below 20 % in the case of specialisation agreements
and 25 % in the case of R&D agreements, on condition that
they do not contain basic restrictions (‘black list’) such as price
fixing,
limitation of output, and sharing of market and
customers, which would make the block exemption inoperable
in practice.

The Committee notes that, assuming that legal cer-
2.15.
tainty for companies is achieved, the reform of horizontal
agreements is bound to help secure the economic benefits
expected from better competition, and to pass these benefits
on to all
in
particular, the consumer.

those affected by the companies’ activities,

The specific comments which follow are designed to
2.16.
increase legal certainty and sharpen up the proposals so that
the abovementioned benefits are easier to achieve.

3.

Specific comments

3.1.

Introduction to specific comments

The Committee welcomes

3.1.1.
the Commission’s
acknowledgement of the need for reform in the field of
inter-firm cooperation in research and development and
specialisation agreements in relation to production of goods
and provision of services. It also welcomes the Commission’s
endorsement of an economic approach to the assessment of
such horizontal agreements as well as the proposed move
away from a clause-by-clause approach to one which allows

improved flexibility in the form of commercial agreements
within the sphere of R&D, unilateral and reciprocal specialis-
ation agreements and joint production agreements. In this
connection, the Committee is pleased to see the proposed
abandonment of the ‘white list’ of exempted clauses.

3.1.2.
The Committee welcomes in general the Guidelines
which provide guidance which is more comprehensive than
the earlier Notices and Regulations. The Committee neverthe-
less asks the Commission to take a more practical view in its
guidelines on horizontal agreements. Companies, competition
authorities and — in the future system of ex-post control —
national courts need practical advice on how to apply the new
rules for horizontal agreements.

3.1.3. While therefore welcoming the direction of this
reform, the Committee wishes to make a number of sugges-
tions for improvement based on its experience with industrial
and commercial life.

3.2. Some issues common to the two draft regulations

The Commission appears to recognise the need for a
3.2.1.
reform of horizontal agreements on a scale similar to vertical
agreements but has ended up with a two-tier approach. Only
R&D and specialisation agreements received the benefit of the
block exemption. A number of other horizontal agreements,
joint purchasing agreements, commercialisation agree-
e.g.
ments and standardisation agreements are covered by the
guidelines but not by the block exemption. The fact is that if
the Commission recognises that such agreements are largely
pro-competitive, they should in principle provide the legal
certainty of a block exemption. It would be a pity if after all
the efforts to achieve a new legal framework concerned with
economic effects, we end up in a position where undertakings
feel they have to distort horizontal agreements to fit into the
existing block exemptions.

The Commission has not provided for retrospective
3.2.2.
notification of horizontal cooperation in the form of R&D and
specialisation agreements. If it is concerned to encourage such
agreements, would it not be appropriate to consider an
amendment to Article 4(2) of Regulation 17 to allow retrospec-
tive notification of agreements as was enacted in the context
of the new rules on vertical agreements? Such a step would go
a long way to deal with the disquiet attached to the task of
calculating market shares to which the Committee has drawn
the Commission’s attention in its past opinions. The Com-
mittee suggests that
the Commission seek the necessary
authorisation to make this change.

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3.2.3.
Furthermore the parties’ good faith effort to evaluate
their market share position should explicitly be taken into
consideration in the regulation or guidelines.

3.3. The proposed R&D regulation

The Committee welcomes the wider scope and
3.3.1.
greater flexibility in the proposed new Article 1 as well as the
abandonment of the framework agreement requirement. The
Committee also welcomes the changes made to make the
proposed new regulation more attractive to commercial and
industrial undertakings. The R&D block exemption has not
been one of the Commission’s most conspicuous successes in
the past. It is hoped that the Commission will consider some
further changes to make the regulation even more ‘user
friendly’ than the proposed draft.

3.3.2.
The Commission acknowledges the importance of
R&D agreements for the ability of the EU to be competitive in
the world markets. It has also acknowledged that the new legal
framework is concerned with the encouragement of types of
cooperation which potentially generate efficiency gains and
specifically excludes other types of agreements between com-
petitors such as information agreements or minority sharehol-
dings. As it points out
the criteria of
Article 81(3) can be assumed to be fulfilled particularly in the
case of R&D agreements and production agreements where
the combination of complementary skills or assets can be the
source of substantial efficiencies (para. 38). The Commission
also claims that it wishes this legal framework to provide a
balanced assessment taking into account economic benefits as
well as anti-competitive effects such as excessive market
power, price and output fixing or market sharing.

in its guidelines,

3.3.4.
Furthermore, the Committee has concerns about the
difficulties of calculating market shares in a field where the
agreements often relate to new products and new types of
innovation markets. In the circumstances, it would suggest
that the Commission give more specific guidance in the
guidelines in relation to the identification of markets and the
calculation of market shares in the case of horizontal R&D
agreements.

3.3.5.
The Committee agrees with the Commission’s
decision to distinguish between R&D agreements between
non-competing manufacturers and those between competing
manufacturers. The Commission has exempted R&D agree-
ments between non-competing manufacturers for the duration
of such agreements but in the case where the results are jointly
exploited the exemption is restricted to five years from the
time the contract products are first put on the market.

3.3.6.
The Committee wonders whether existing references
in the proposed guidelines are adequate to deal with R&D
agreements based on substantial investments which are not
likely to be recouped in the five-year period. The Commission
acknowledges in recital 11 of the proposed R&D regulation
only that ‘The joint exploitation of results can be considered
as a natural consequence of joint research and development.’

3.3.7.
The Committee’s view is that joint exploitation is
often more important than being merely a consequence. It can
often be an essential prerequisite for undertakings to cooperate
in the first place in risky investments. In the interests of
promoting R&D cooperation, the Committee thinks that the
expression of the principle of longer periods of exemption for
joint exploitation where investments are made which are not
likely to be recouped in five years, mentioned in paragraph 69
of the guidelines, should be stated in the recitals.

3.3.3.
The Committee wonders whether the Commission
has got the balance entirely right in the proposed R&D
regulation when it restricts the availability of
the block
exemption to agreements between competing manufacturers
where the parties have a combined market share of no higher
than 25 % of the relevant market. If the Commission accepts
that the types of horizontal agreements are broadly speaking
beneficial, then it would make sense to achieve consistency
with the vertical agreements block exemption regulation and
set it at 30 %. This is particularly true when the Commission
has retained the safeguards of Article 5 in the proposed R&D
regulation which appear to address all of the Commission’s
competition concerns with such agreements.

The Committee wonders if it is necessary for the
3.3.8.
Commission to insist in Article 2(3) of the proposed regulation
on R&D that for ‘pure’ R&D agreements to qualify for the
exemption each party must be free to exploit independently
the results of the joint research and development and any
pre-existing necessary know-how. The Committee fails to
understand why the policy expressed in Article 4(e) of the
existing R&D regulation, which allows exploitation of R&D to
be restricted between non-competitors to one or more fields
of technical application, cannot be retained. The proposed
change introduces a new rigidity into a situation where
industry needs to be able to adapt.

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3.3.9.
The current draft regulation is silent on the question
of the relationship between the R&D regulation and the
technology transfer regulation. The Commission should at
least state explicitly that parties to agreements covered by the
R&D regulation may benefit from the rules of the technology
transfer regulation.

3.3.10.
the Com-
The Committee is concerned about
mission’s use of the concept of products capable of being
improved or replaced by the contract product which is used
in the R&D draft for assessing whether manufacturers are
competitors and whether they have market power. This too
needs further clarification in the guidelines.

3.3.11.
The Committee is also worried about the width of
the definition of ‘competing manufacturers’ because it extends
to actual and potential competitors. The concept of potential
competitors is too wide in this context. The Committee
suggests that the Commission qualifies this term by changing
it to ‘real potential competitors’ as in the guidelines on vertical
restraints. The Committee further suggests that the explanation
of ‘real potential competitor’
in the guidelines on vertical
restraints should be incorporated in the guidelines on horizon-
tal agreements.

3.3.12.
The Commission appears convinced that it can
remove the non-opposition procedure from its proposed R&D
regulation because all restrictions will be dealt with in the new
block exemption regulation on R&D. Yet these exemptions are
subject to certain restrictions and a non-opposition procedure
would be beneficial to the process of encouraging R&D
agreements.

3.3.13.
The Committee is in agreement in principle with
the use of the black list as the limit to the block exemption.
The Committee thinks however that the Commission should
review its use of the black list to prohibit passive sales during
the first five years from the time the contract products are
first put on the market within the common market. The
Commission should accept the need to provide protection to
risky investments in new technology cooperation in R&D
agreements just as it has in technology transfer agreements.

3.4. The proposed specialisation block exemption regulation

3.4.1.
The Committee welcomes the widened scope of the
proposed new Article 1 to cover unilateral and reciprocal
specialisation agreements as well as joint production agree-
ments and ancillary provisions and to extend to products in
the form of services.

The Committee also agrees with the simplification of
3.4.2.
related purchasing and marketing agreements and with the
Commission proposal’s deletion of the turnover threshold.

3.4.3.
The Committee thinks however that the 20 % market
share limit is too low. It recommends an increase to 25 %,
bearing in mind the protections of the black list in Article 4.

3.4.4.
the non-opposition procedure.

The Committee also recommends the retention of

3.5.

Joint purchasing agreements

3.5.1.
The Committee wonders why joint purchasing agree-
ments have been singled out for inconsistent treatment. In the
first place, as horizontal agreements, they are covered by the
guidelines but not by a block exemption, but as vertical
agreements some are covered by the block exemption, e.g.
those under 50 million Euro turnover for each company.
Secondly, as horizontal agreements they are given a maximum
market share of 15 % but as vertical agreements they may rise
to a market share of 30 %. The Committee wishes the
Commission to look again at these discrepancies and keep this
area of joint purchasing agreements under constant review.

The Committee shares the Commission view that is
3.5.2.
indispensable for SMEs to cooperate in buying, as also the
view expressed in paragraphs 107-108 of the guidelines, and
consequently asks the Commission to show flexibility in
assessing these agreements. In particular, the Commission
should better clarify the different horizontal and vertical
aspects of such agreements.

The Committee also fails to understand why the
3.3.14.
Commission insists on maintaining a ‘black list’ in the de
minimis notice. As the Committee pointed out in its opinion
on vertical agreements,
this step is not consistent with
an ‘economic’ approach to the regulation of commercial
agreements. The Committee calls for a revision of the de
minimis notice.

The Committee however disagrees that joint buying
3.5.3.
is to be assessed by taking into account a 15 % combined
market share on both the purchasing market(s) and the selling
market(s). This underestimates the pro-competitive effects
of joint buying and overestimates the negative effects on
competition of a 15 % market share. Furthermore this
would trigger application of Article 81(1) to joint purchasing

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agreements even if there is no negative effect on competition.
The Committee is concerned that paragraphs 122 and 141 of
the guidelines fix a 15 % maximum market share and urges
the Commission to increase this ceiling to 20 % for SME joint
purchasing.

The Committee suggests that the Commission pro-
3.5.4.
vide clearer methodology in order to help companies evaluate
the economic effects of the horizontal and vertical agreements
on the relevant market. The Committee is of the opinion that
all the buying activities of groupings are to be considered more
in essence. The Committee also
vertical
believes that due to the specificity of purchasing agreements,
the Commission has to focus more prominently on the market
downstream where the participants of the joint purchasing
agreements are active as sellers.

than horizontal

4. Conclusions

4.1.
In the light of the above general and specific comments,
the Committee expresses its satisfaction with the considerable
work carried out by the Commission and therefore broadly
supports the proposed reform of horizontal cooperation
agreements.

4.3.
The Committee would also like to see retrospective
notification of horizontal agreements as is the case for vertical
agreements, and would like the Commission to take steps to
resolve this problem.

4.4.
The Committee recognises that the Commission would
need a specific mandate from the Council for this. It therefore
urges the Commission to seek such a mandate.

4.5.

The Committee would also recommend:

— a market share of 30 % for research and development

agreements

— a market share of 25 % for specialisation agreements

— a market share of 20 % for SME joint purchasing

agreements.

4.6.
The Committee points out that the new rules on
horizontal agreements and those on vertical agreements are
preliminary to the reform envisaged by the White Paper and
must therefore be designed in anticipation of decentralised
application.

The Committee urges the Commission to recognise the
4.7.
need for transparency, clarity and simplicity, and this requires
less complexity in the legal framework particularly in the case
of the market share requirements.

The Committee is nevertheless concerned with the
4.2.
partial nature of the reform. The Committee would prefer a
single comprehensive block exemption on horizontal agree-
ments, so that all relevant agreements obtain the benefit of the
block exemption

The Committee recommends that

the transitional
4.8.
period for adaptation of the existing rules to the new provisions
be extended from one year to two, i.e. to 31 December 2002.
Until then, agreements which comply with the existing rules
should be allowed to continue unchanged.

Brussels, 19 October 2000.

The President

of the Economic and Social Committee

Göke FRERICHS