European Competition Law Update

Transcription

1 European Competition Law Update Collaboration with Competitors the New EU Competition Rules Anne MacGregor Joost Haans

2 Agenda 1. Introduction and Highlights 2. Information Exchange 3. Research and Development 4. Production Agreements 5. Purchasing Agreements 6. Agreements on Commercialisation 7. Standardisation 2

3 Introduction and Highlights 3

4 Horizontal Cooperation Agreements Cooperation agreements between companies active at the same level of the same product market (actual and potential competitors) Can create competition problems: disguised cartels, direct limitation of competition, collusion, foreclosure But also substantial economic benefits: share risk, save costs, increase investment, pool know how, enhance quality and variety, accelerate innovation 4

5 EU Legal Regime Horizontal Cooperation Agreements On 1 January 2011 the EU Commission Block Exemption Regulations ( BERs ) entered into force for a period of 12 years The BERs on R&D (1217/2010) and Specialisation (1218/2010) are accompanied by Guidelines on Horizontal Cooperation Agreements ( Guidelines ) The BERs and Guidelines generally embody the EU competition law rules for horizontal cooperation agreements 5

6 Summary of Market Share Safe Harbours Information exchange / standardisation no market share safe harbour 25% - R&D 20% - Joint production - specialisation 15% - Commercialisation / joint purchasing 100% 10% - De minimis 6 6

7 Highlights Status Block Exemptions directly applicable Guidelines not legally binding, but useful guidance Structured approach to assessment Centre of gravity approach Restrictions by object and by effect Restrictions by object and hardcore restrictions Article 101(3) criteria Inapplicability of Article 101(1) Intra-group agreements (G 11) Mandated by law (G 22) Inability to carry out projects independently (G 30) 7

8 Information Exchange Demystifying Dominance: Practical Rules for the Business on Abuse of Market Power 8 8

9 Information exchange New 13 page comprehensive distillation of decisional practice and Community case law Information exchange includes the sharing of data: directly between competitors through a common agency (e.g. trade association) through a third party by means of publishing No safe harbour New coverage - unilateral announcements (G 62, 63) Important to get it right! 33.6 million fine on Royal Bank of Scotland (unilateral disclosure UK, OFT, 2010) 88 million fine on five Dutch mobile phone operators (one-off discussion on payments to dealers - Netherlands, NMa, 2002) 900,000 fine on Spanish perfume association (Spain, CNC, 2011) 9

10 Restriction by object The object box : individualised intentions concerning future conduct regarding prices or quantities Rules out current information, other non-price/quantity information as anti-competitive by object? Future prices = actual prices, discounts, rebates, reductions, increases Future quantities = intended future sales, market shares, territories and sales to particular groups of customers 10

11 Restrictive by effect Issue: likely adverse impact on price, output, product quality, variety or innovation? If they reduce or remove the uncertainty as to the operation of the market in question (ECJ in Asnef-Equifax v. Ausbanc) The Test: is the exchange sufficiently detailed and frequent to allow participants: to reach a common understanding on the terms of coordination to identify and retaliate against deviations from the common policy in a timely manner, and to identify and target new market entry in order to sustain the coordination in light of 1. The economic conditions on the market; and 2. The characteristics of the information exchanged 11

12 (1) Economic Structure of the Market Likely adverse impact more likely in tightly oligopolistic markets (transparent, concentrated, non-complex, stable, symmetric), or If the exchange changes market conditions so as to facilitate coordination by increasing transparency, reducing complexity, buffering instability or compensating for asymmetry 12

13 (2) Type of information exchanged Strategic information more likely to be caught by Article 101 Price and quantity most strategic; then costs and demand data Also strategic: customer lists production costs quantities turnover sales capacity qualities marketing plans risks technologies investments R&D programs and results 13

14 Market coverage Do non-participants constrain the effects? No specific safe harbour - though 20% was considered NB information exchange can shelter in another safe harbour 14

15 Aggregated/individualised Effects unlikely if too difficult to recognise individual company information Aggregated information can still allow better-informed decisions But caveat for tight oligopolies - see Example 4 Guidelines in practice: UK OFT Motor Insurance (2011) - OFT analysis of insurance data suggested minimum number in motor insurance industry is five 15

16 Age of data Historic data unlikely to lead to anti-competitive collusion Market-specific issue More than one year old? Benchmark in Guidelines: historic information is several times older than average length of industry contracts Guidelines in operation: - Dutch hospitals (2010): no exchange of data unless (1) at least 12 months old or (2) aggregated for general benchmarking purposes 16

17 Frequency of exchange Long term contracts: infrequent exchange may be sufficient Short term contracts: infrequent exchange unlikely to have adverse effect 17

18 Public/non-public data/ method of exchange Genuinely public information is OK i.e. generally equally accessible to all competitors/customers Public domain does not guarantee that it is genuinely public Do collection costs deter competitors/customers? NB ability to gather from customers does not make it genuinely public A public exchange may reduce the likelihood of collusion if competitors/customers can constrain effects But an information exchange is only genuinely public if it makes the data equally accessible to all 18

19 Research & Development [change title in View/Header and Footer] 19 19

20 BER Research & Development Agreements The BER covers: Joint R&D with and without joint exploitation. - Exploitation means production, distribution, applying of technologies, licensing or the communication of know-how - Paid for R&D where one of the parties finances the R&D carried out by another party - Agreements between competitors whose combined market share does not exceed 25%. There is no market share threshold for noncompeting parties - The BER will apply for the duration of R&D and in case of joint exploitation for 7 years from the moment the products are marketed. For competitors the BER applies if 25% market share threshold not exceeded. The BER continues to apply after that as long as the 25% market share threshold is not exceeded 20

21 EU - R&D Conditions for Exemption The BER applies only if: - All parties have full access to the results - This may be limited in case of: - exploitation limitation or specialisation - research bodies not active in exploitation - Access may be subject to compensation - In case of joint R&D without joint exploitation, both parties must give access to pre-existing know-how indispensable for exploitation - Joint exploitation limited to IPR/know-how protected results from joint R&D, necessary for the contract products / services - A party entrusted with manufacturing the products must fulfil orders from the other parties, unless joint or exclusive distribution 21

22 EU - R&D Hardcore Restrictions The BER is lost for the entire agreement if: - Restriction on R&D in unconnected field, or after completion R&D in any (including connected) field - Agreement to limit output or sales, except: - Production targets when producing jointly - Sales targets when distributing or licensing jointly - Specialisation of exploitation - Non-compete during joint exploitation - Fixing selling prices, except to immediate customers / licensees when exploiting jointly (which includes distribution allocated to one party) - Restricting passive sales - Restricting active sales in the absence of exclusive exploitation (previously limited to 7 years) 22

23 EU - R&D Excluded Restrictions The benefit of the BER is lost for the following restrictions: - No-challenge clause - Obligation not to license third parties, unless the agreement provides for the exploitation of the R&D results and such exploitation takes place vis-à-vis third parties 23

24 Production Agreements 24

25 BER Specialisation Agreements - Scope of the BER: - Unilateral specialisation - Reciprocal specialisation - Joint production (from cooperative JV to horizontal subcontracting) - The BER applies if the combined market share of the parties does not exceed 20% - In case of intermediary products this threshold relates to the intermediary products but also to one or more parties downstream products (captive use) - The BER applies to specialisation agreements whereby the parties: - Accept an (exclusive) purchase or supply obligation - Jointly (and not individually) distribute the products 25

26 EU - Specialisation Hardcore Restrictions The BER is lost for the entire agreement when: Fixing prices to third parties, except when jointly distributing to immediate customers Limiting output or sales, except: Agreeing amount of products in case of specialisation Setting production and capacity volume in case of joint production Setting sales targets in case of joint distribution Allocating markets or customers 26

27 EU - Specialisation Competition Concerns The mentioned hardcore restrictions are assumed to restrict competition by object, but is this correct? In Specialisation or joint production agreements, competition concerns can also result from effects on competition caused by: Commonality of costs Exchange of commercially sensitive information Such effects should be balanced against pro-competitive efficiencies resulting from the arrangement, which is a factual case-by-case analysis 27

28 Purchasing Agreements 28

29 EU - Joint Purchasing Joint purchasing can be carried out by a jointly controlled company or through a looser form of cooperation (eg. an alliance or buying group ). The effects on competition on both the upstream purchasing market and the downstream selling market should be considered, particularly when the parties compete on the downstream selling market. Joint purchasing is unlikely to restrict competition if the parties combined market share on the upstream and downstream markets does not exceed 15%, except hardcore restrictions. 29

30 EU - Joint Purchasing Main Competition Concerns Competition can be restricted on the upstream and/or downstream markets: Foreclosing competitors from access to supplies Coordination downstream (price fixing, market allocation) Commonality of costs Information exchange NB: In the context of joint purchasing agreeing on a purchase price may be allowed. 30

31 Agreements on Commercialisation 31

32 EU - Joint Commercialisation The Guidelines include a section on joint commercialisation, which covers cooperation between competitors as regards: Selling Distribution Marketing and promotion Joint commercialisation is unlikely to restrict competition if the parties combined market share does not exceed 15%, except hardcore restrictions 32

33 EU - Joint Commercialisation Main Competition Concerns Depending on the level of cooperation, the competition concerns are: Price fixing Hardcore restriction, mainly a risk in case of joint selling Market allocation Hardcore restriction, mainly a risk in case of joint distribution Output limitation Hardcore restriction, mainly a risk in case of joint selling / distribution Commonality of costs Information exchange 33

34 Standard Setting Demystifying Dominance: Practical Rules for the Business on Abuse of Market Power 34 34

35 Standardisation Competitors in an industry agree amongst themselves on common technical/quality standards, e.g. Bluetooth, Wi-Fi Often organised through Standard Setting Organisations ( SSOs ) Extensive new guidance and safe harbour for SSOs: 1. Unrestricted: all interested actors can participate (no bias, objective system for voting rights) 2. Transparent: stakeholders can get information about standardisation work 3. Clear and binding IPR policy requiring IPR disclosure and FRAND commitment (plus transfer) Ex ante disclosure of most restrictive licensing terms (including maximum royalty fees) presumptively lawful SSO may be able to secure more advantageous terms from technology owners for technologies included in the standard 35

36 Standardisation main competition concerns Risk of reduction in price competition Foreclosure of innovative technologies Exclusion of, or discrimination against, certain companies precluded from effective access to a standard. 36

37 Standardisation Safe Harbour Standardisation will not raise competition issues where: Participation is unrestricted and open to all competitors on the market Transparency to ensure that stakeholders can inform themselves of upcoming, on-going and finalised standardisation work at each appropriate stage Effective access to the standard on fair, reasonable and non-discriminatory ("FRAND") terms 37

38 Standardisation Self-assessment Outside the safe harbour - need to self-assess: Whether the members of a standard-setting organisation remain free to develop alternative standards or products Whether the result of a standard is broadly accessible to all, or only accessible on discriminatory terms, for participants or third parties Whether access to the standard-setting process is open Market shares of goods and services based on the standard The extent to which a standard discriminates against any participating or potential participants SSOs with different IP rights disclosure models - the extent to which these models guarantee effective access Agreements that provide for ex ante disclosure of most restrictive licensing terms will not usually restrict competition 38

39 European Competition Law Update Collaboration with Competitors the New EU Competition Rules Anne MacGregor Joost Haans