Out-Law Analysis 4 min. read
06 Sep 2023, 10:02 am
The UK’s Competition and Markets Authority (CMA) has published its long-awaited final guidance on cooperation agreements between actual and potential competitors.
The guidance, which also covers a range of horizontal agreements beyond those falling within the scope of the Horizontal Block Exemption Orders (HBEOs), comes months after two new HBEOs which cover research and development (R&D) agreements (21 pages / 502KB PDF) and specialisation agreements (10 pages / 287KB PDF).
The HBEOs came into force on 1 January 2023 and replaced the UK’s retained Horizontal Block Exemption Regulations (retained HBERs) on R&D and specialisation agreements, which expired on 31 December 2022. However the final UK guidance was only published more than half a year later, on 16 August, following public consultation by the CMA earlier this year. The new UK guidance replaced pre-existing EU guidelines on horizontal cooperation agreements which dated back to 2010.
The HBEOs provide for a two-year transitional period until 31 December 2024 for pre-existing R&D and specialisation agreements that complied with the old rules. R&D agreements between ‘undertakings competing in innovation’ – which are covered by a separate new test in the R&D HBEO – will have to comply with the new rules from 1 January 2024.
The two HBEOs provide updated rules on ‘safe harbours’ for certain R&D and specialisation agreements, exempting them from Chapter 1 of the 1998 Competition Act that prohibits agreements between firms that prevent, restrict or distort competition, provided that conditions set out in the relevant HBEO are satisfied. By avoiding the need to individually self-assess whether these types of agreements comply with competition law, block exemptions provide greater legal certainty and reduce compliance costs.
The UK guidance is intended to help businesses make their own assessment of common types of agreements between actual and potential competitors, known as ‘horizontal agreements’. This includes guidance on:
Compared with the consultation draft, the final UK guidance provides more detail on a range of topics, such as:
A revised chapter on information exchange adds more detail on:
The CMA-initiated road fuel price data scheme is cited as an example of how genuinely public information exchange may increase competition.
Within the EU, corresponding new horizontal block exemption regulations (HBERs) and new guidelines on horizontal cooperation agreements were adopted in June. The final UK guidance is largely aligned with the new EU guidelines (125-page / 3.87MB PDF). Indeed, the UK document frequently cites EU case law and guidance, and many final changes from the UK consultation draft reflect the final EU content.
However, there are also some areas of divergence between the finalised UK and EU guidance documents. For example, the UK guidance:
Other areas of divergence relate more directly to legislative developments within the UK following Brexit. For example, legislative proposals to extend the exterritorial application of Chapter 1 prohibition in the Competition Act; disapplication within the UK of general principles of EU law from 1 January 2024 as result of the 2023 Retained EU Law (Revocation and Reform) Act; and obligations under the UK HBEOs for firms to provide information to the CMA within specified timeframes or risk having the block exemption withdrawn.
Multinational businesses that trade within the UK and EU will need to comply with both sets of rules, depending on whether their activities have an effect on trade within the UK or EU, and therefore will need to be mindful of any current and future divergence between the UK and EU rules and guidelines.
This will ultimately increase complexity, compliance cost and risk for such businesses. It remains to be seen to what extent the CMA’s finalised guidance on sustainability agreements, once it is published, diverges from the EU Guidelines.
Co-written by Tadeusz Gielas of Pinsent Masons.
Out-Law Analysis
29 Mar 2023