Exemption for specialisation agreements (from 2023)

SUMMARY OF:

Regulation (EU) 2023/1067 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements

WHAT IS THE AIM OF THE REGULATION?

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) bans agreements between companies that restrict competition. However, Article 101(3) TFEU provides an exception for agreements the benefits of which outweigh their negative effects.
The regulation applies Article 101(3) TFEU to certain types of specialisation agreements* that meet certain conditions, by exempting them from the ban in Article 101(1) TFEU. It creates a legal safe harbour for those agreements, thereby avoiding the need for an individual assessment of their compatibility with Article 101 TFEU.
The regulation aims to ensure effective protection of competition and to provide legal certainty for companies.

KEY POINTS

Types of agreement covered by the regulation

The regulation covers three types of production agreements, which are together referred to as specialisation agreements:

unilateral specialisation agreements*,
reciprocal specialisation agreements*,
joint production agreements*.

The regulation also applies to specialisation agreements that include:

provisions on the assignment or licensing of intellectual property rights to one or more of the parties if those provisions are necessary to implement the agreement and are not its main aim;
exclusive purchase or exclusive supply obligations;
joint distribution of the specialisation products*.

Market share threshold

The exemption provided by the regulation applies on condition that the parties’ combined market share does not exceed 20% on the relevant market(s) to which the specialisation products belong. If those products are intermediary products that are used by one or more of the parties as inputs to produce downstream products that they also sell, the parties’ combined market share must also not exceed 20% on the relevant market to which the downstream products belong.
Where the parties’ combined market share is initially within the 20% threshold but later rises above that threshold, the exemption continues to apply for a grace period of 2 consecutive calendar years.
Market shares are calculated on the basis of sales value data or, if such data are not available, on the basis of other reliable market information, including sales volumes.

Hardcore restrictions

The exemption does not apply to specialisation agreements that contain ‘hardcore restrictions’, including restrictions that:

fix prices when selling the products to third parties, except the prices charged to immediate customers where the agreement provides for joint distribution;
limit output or sales, with the exception of:
- agreed amounts of products in unilateral specialisation or reciprocal specialisation agreements,
- agreed capacity and production volumes in joint production agreements,
- agreed sales targets in the context of joint distribution;
allocate markets or customers.

Withdrawal of the block exemption

The benefit of the block exemption may be withdrawn by the European Commission or by national competition authorities pursuant to Article 29 of Regulation (EC) No 1/2003 where they find that a particular specialisation agreement has effects that are incompatible with Article 101(3) TFEU.

In particular, the Commission may use this power where the relevant market is highly concentrated and competition is already weak, for example due to:

the individual market positions of other market participants;
links between other market participants created by parallel specialisation agreements;
links between the parties and other market participants.

There are transitional rules for agreements that were already in force on 30 June 2023 and that were covered by the previous block exemption for specialisation agreements (Regulation (EU) No 1218/2010), but that do not meet the conditions of the new block exemption. Those agreements remain block-exempted until 30 June 2025.

FROM WHEN DOES THE REGULATION APPLY?

It entered into force on 1 July 2023 and will apply until 30 June 2035.

BACKGROUND

The previous block exemption for specialisation agreements (Commission Regulation (EU) No 1218/2010) expired on 30 June 2023. A new regulation was therefore required. Regulation (EU) 2023/1067 improves the clarity of certain rules and covers more types of production agreements.
Specialisation agreements enable companies with complementary skills and assets to operate more efficiently and supply products more cheaply. With effective competition, consumers can benefit.
The regulation is accompanied by revised horizontal guidelines on the application of Article 101 TFEU to horizontal cooperation agreements.
For further information, see:
- Block exemptions – Horizontal agreements (European Commission).

KEY TERMS

Specialisation agreement. A unilateral specialisation agreement, a reciprocal specialisation agreement or a joint production agreement.

Unilateral specialisation agreement. An agreement between two or more parties active on the same product market, under which one or more parties agree to fully or partly cease producing certain products or not to produce those products and to buy the products from one or more of the other parties.

Reciprocal specialisation agreement. An agreement between two or more parties active on the same product market, under which two or more parties, on a reciprocal basis, agree to fully or partly cease producing or not to produce certain but different products and to buy the products from one or more of the other parties.

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

Specialisation product. A product that is produced under a specialisation agreement.

MAIN DOCUMENT

Commission Regulation (EU) 2023/1067 of 1 June 2023 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 143, 2.6.2023, pp. 20–26).

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