Chillin'Competition

Last week, I faced the very pleasant situation of having to lecture on horizontal cooperation agreements a day only after the adoption of the new horizontal framework by the Commission…

The good thing is that it gave me an opportunity to read the text from top to bottom.

So here’s my own assessment of this lenghty set of Guidelines. I like: (i) the introduction of a chapter on information exchange agreements; and (ii) the examples, which are very instructive and draw on national practice, §§107 and 109 notably (or the bottom-up learning effects that arise with decentralization)..

However, there’s a heap of less satisfactory things in the Guidelines. To structure things a little, I distinguish between formal (1) and substantive (2) issues.

1.     Formal issues

Unpractical self-assessment method. The Guidelines stick to the good old Article 101(1)-Article 101(3) sequence. But why not endorse a simpler self-assessment method which involves:

• First step:  screening of the agreement through incompatibility presumptions (hardcore provisions); followed by screening of compatibility presumptions (de minimis; market share thresholds; and conditions);
• Second step: detailed assessment of possible restrictive effects under 101(1); followed by detailed assessment of possible pro-competitive effects

Incorporation of the rules on environmental agreements within the standardisation section. Why are those agreements no longer worth a specific section?

Linguistic mistakes in French version. The concept of “vente groupée” used under the section on agreements on commercialization is confusing. The Commission and Court routinely refer it in relation to bundling under Article 102 and the EUMR (see Microsoft and Tetra Laval).

Perfunctory treatment of Article 101(3) arguments. The Guidelines often say that horizontal cooperation agreements bring significant efficiencies, pro-competitive effects, and so on. Yet, when it comes to providing guidance on efficiencies, the Guidelines dedicate little time and space to the issue (or they simply restate in substance what has been said under Article 101(1), check the section on standardization agreements). True though, one can find help in the unhelpful Article 101(3) General Guidelines.

2.    Substantive issues

Inconsistent, and old-fashioned analytical framework for collusion. There’s been a number of great books on tacit collusion in the past decade, and more importantly, good judgments  and soft law instruments (the Airtours ruling, the Guidelines on horizontal mergers, the Article 102 Guidance Communication). All set out a modern, consensual framework for the assessment of  collusion concerns which hinges on the proof of 4 cumulative conditions. Very remarkably – and to the exception of a footnote in the section of information exchanges – the new Guidelines suggest however to test tacit collusion through an impressionistic, structural, and reduced range of factors. The section on purchasing agreements which refers to commonality of costs and exchange of information (§§213-216) brings a glaring illustration of this. But the same applies to production (§§175-182) and commercialization (§§242-245) agreements. My question: are the dark times of the checklist approach back? Of course, this approach leaves more leeway to enforcement authorities, but it generates huge legal uncertainty + high type I errors risks. And it is wholly inconsistent with the approach taken under the EUMR, which pursuant to §21, has “certain common elements … pertaining to the potential restrictive effects, in particular as regards joint ventures“.

The §§ on FRAND terms are devoid of legal basis, and should be disregarded. To draw possibly on the expertise gathered in the Qualcomm and Rambus cases, the section on standardisation agreements devotes some wording to what is, and how to self-assess, a FRAND price. Now, under EU competition law, it is well settled that unilateral conduct falls short of an agreement under Article 101 TFEU. Assume that following the adoption of a standard, a party unilaterally decides to request terms which other parties challenge as unFRAND (the classic patent ambush story). In such a setting where firms antagonize, there is no, and there cannot be, an unlawful agreement under Article 101 TFEU. Since the Bayer and VW rulings, the fact that the parties have, in the past, co-operated in the SSO is no longer sufficient to trigger the applicability of Article 101 TFEU (those cases repealed the “contractual framework” doctrine inherited from the Ford case). And by the way, everyone knows this. To date, allegations of unFRAND terms have only been brought under Article 102 TFEU (notably by discontent parties which had participated to the standardization process).

PS: The new texts were given a number today. The R&D BER is Regulation 1217/2010 and the specialisation BER is Regulation  1218/2010.

PS2: The GCLC will have a conference on the horizontal package in February 2011.