Exemption for specialisation agreements

SUMMARY OF:

Regulation (EU) No 1218/2010 – application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements

Article 101 TFEU – Common rules on competition, taxation and approximation of laws – Chapter 1 – Rules on competition – Section 1 – Rules applying to undertakings

WHAT IS THE AIM OF THE REGULATION AND OF THE ARTICLE?

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements between companies that may affect trade between European Union (EU) Member States and that prevent, restrict or distort competition. However, Article 101(3) TFEU exempts from that prohibition agreements that create sufficient benefits to outweigh their restrictive effects.
The regulation grants a block exemption from Article 101(1) TFEU for specialisation agreements* that meet certain conditions.

KEY POINTS

Conditions for the application of the regulation

The regulation applies to specialisation agreements, on condition that:

the parties’ combined market share does not exceed 20% on any relevant market; and
the agreement does not contain certain severe restrictions of competition (hardcore restrictions).

Specialisation agreements are defined by the regulation as:

agreements between companies that are active on the same product market, under which one or more of the parties agrees to fully or partly cease producing one or more products, or to refrain from producing them, and to buy the products from the other party or parties, which agree to produce and supply them; and
joint production agreements.

Specialisation agreements that provide for joint distribution of the products produced under the agreement and/or contain exclusive supply or purchase obligations and/or certain provisions on the assignment or licensing of intellectual property rights to one or more of the parties are also covered by the regulation.

Application of the market share threshold

For the purpose of applying the market share threshold, the relevant markets include:

the relevant product and geographic market to which the products produced under the specialisation agreement belong; and
if the specialisation products are intermediary products that one or more of the parties use captively for the production of downstream products that they also sell, the relevant product and geographic market to which the downstream products belong.

Market shares are calculated on the basis of market sales value or, if such data are not available, on the basis of other reliable market information, including market sales volumes. If, after a certain time, the parties’ combined market share rises above the 20% threshold but remains below 25%, the exemption continues to apply for 2 years. However, if the combined market share rises above 25%, the exemption only applies for the calendar year that follows.

Hardcore restrictions

The exemption provided by the regulation does not apply to specialisation agreements that, directly or indirectly, aim to:

fix sale prices, except for the fixing of prices charged to immediate customers in the context of joint distribution;
limit output or sales, except where the parties agree the amount of products in the context of specialisation, or production volumes in the context of joint production, or where they set sales targets in the context of joint distribution;
allocate markets or customers.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 1 January 2011 and was originally due to expire on 31 December 2022. Amending Regulation (EU) 2022/2456 extends the period of application of Regulation (EU) No 1218/2010 to 30 June 2023.

BACKGROUND

For further information, see:

EU competition rules – research and development agreements and specialisation agreements (extending the validity) (European Commission).

KEY TERMS

Specialisation agreement. An agreement to produce a specific product under a unilateral specialisation agreement*, a reciprocal specialisation agreement* or a joint production agreement* (see below).

Unilateral specialisation agreement. An agreement between two parties that are active on the same product market, by virtue of which one party agrees to fully or partly cease production of certain products or to refrain from producing those products and to purchase them from the other party, who agrees to produce and supply them.

Reciprocal specialisation agreement. An agreement between two or more parties that are active on the same product market, by virtue of which two or more parties on a reciprocal basis agree to fully or partly cease or refrain from producing certain but different products and to purchase these products from the other parties, who agree to produce and supply them.

Joint production agreement. An agreement under which two or more parties agree to produce certain products jointly.

MAIN DOCUMENTS

Commission Regulation (EU) No 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements (OJ L 335, 18.12.2010, pp. 43–47).

Successive amendments to Regulation (EU) No 1218/2010 have been incorporated into the original text. This consolidated version is of documentary value only.

Consolidated version of the Treaty on the Functioning of the European Union – Part Three – Union policies and internal actions – Title VII – Common rules on competition, taxation and approximation of laws – Chapter 1 – Rules on competition – Section 1 – Rules applying to undertakings – Article 101 (ex Article 81 TEC) (OJ C 202, 7.6.2016, pp. 88–89).