Commission Exemption Power [EU]

EU rules on concerted practices and agreements between companies

Regulation No 19/65/EEC on application of EU treaties to certain types of agreements and concerted practices between companies

Article 101 of the Treaty on the Functioning of the European Union (TFEU) – competition rules applying to companies

Article 101 (2) states that all agreements that fall within the scope of Article 101(1) are void unless they are exempted under Article 101(3).

Article 101(3), however, allows for exceptions to be made to this rule where these agreements or practices:

benefit the production or distribution of goods; or
promote economic or technical progress; and
allow consumers a fair share of the resulting benefit.

The regulation applies Article 101(3) TFEU to certain types of agreements and concerted practices between companies where their pro-competitive benefits are greater than their anti-competitive impact.

The regulation empowers the European Commission to apply Article 101(3) TFEU by regulation to certain categories of vertical agreements and corresponding concerted practices falling within the ambit of Article 101(1) TFEU.

It lays down the conditions whereby the Commission, having consulted interested parties and the Advisory Committee on restrictive practices and dominant positions, may adopt a regulation declaring that Article 101(1) does not apply to an individual case or to categories of agreements:

• entered into by 2 or more companies, each operating at a different level of the production or distribution chain, and which relate to the conditions under which the parties may purchase, sell or resell certain goods and services;
• to which only 2 companies are party and which include restrictions in relation to acquiring or using industrial property rights, such as patents, utility models, designs or trade marks, or the rights arising out of contracts for assignment of, or the right to use, a method of manufacture or knowledge relating to the use or to the application of industrial processes.

The Commission’s regulation defines the categories of agreements to which it applies and stipulates the restrictions or clauses which may not be contained in the agreements. The same rules apply in relation to categories of concerted practices.

The regulation may also stipulate the conditions which may lead to the exclusion from its application of certain parallel networks of similar agreements or concerted practices operating on a particular market.

Such regulations:

are adopted for a specified period;
may be amended or repealed where the circumstances on which they are based have changed;
may be issued with retroactive effect.

Further to a 1997 Commission green paper on vertical restraints in EU competition policy, Regulation 19/65 was amended, along with Regulation No 17/62 (the first EU competition policy regulation adopted cto implement Articles 85 and 86 of the Treaty of Rome) to pave the way for a single block exemption (BER) regulation for vertical supply and distribution agreements (Regulation (EU) No 330/2010).

The Commission has also issued guidelines on vertical restraints clarifying the conditions for the application of the BER regulation.

The regulation has applied since 6 March 1965.

Exemptions for certain agreements between competing firms

Regulation (EEC) No 2821/71 on the application of the EU Treaty to categories of agreements, decisions and concerted practices

The European Commission may grant individual exemptions to certain agreements, decisions and concerted practices that meet the conditions of Article 81(3) of the Treaty establishing the European Community (EC Treaty) (now Article 101(3) of the Treaty on the Functioning of the European Union (TFEU)).

It may also grant block exemptions by way of regulation.
This regulation enables the Commission to exempt certain agreements, decisions and concerted practices by way of a block exemption.
Scope

This regulation enables the Commission to apply, by way of regulation, Article 101(3) TFEU to certain agreements, decisions and concerted practices which have as their object:

the research and development of products or processes and exploitation of the results, including provisions regarding industrial property rights and confidential technical knowledge;
specialisation, including agreements necessary for achieving it.

Conditions for the exemption regulations

The exemption regulations laid down by the Commission must meet a number of conditions. They must:

contain a definition of the categories of agreements, decisions and concerted practices to which they apply and specify the restrictions, clauses or other conditions which may appear in them;
apply for a limited period, although they may be amended or repealed;
apply with retroactive effect to agreements which, at their date of entry into force, might have benefited from a decision issued with retroactive effect under Article 6 of Regulation No 17 (EEC) which was replaced by Council Regulation (EC) No 1/2003.

The regulations concerned must comply with the following approval procedure:

a draft must be published to enable all persons and organisations concerned to submit their comments to the Commission;
the Commission must consult the Advisory Committee on Restrictive Practices and Monopolies before publishing a draft or adopting a regulation;
where the Commission, either on its own initiative or at the request of a European Union (EU) country or of natural or legal persons, finds that, in any particular case, agreements, decisions or concerted practices to which an exemption regulation applies nevertheless have certain effects which are incompatible with the conditions laid down in Article 101 (3), it may adopt a decision withdrawing the benefit of the regulation.It entered into force on 18 January 1972. In applicant countries, this regulation enters into force on the date of the country’s accession to the EU.