Commission Guidelines [EU]

Table of Contents

Guidelines on the application of Article 101(3) TFEU

(formerly Article 81(3) TEC)

The Commission sets out the criteria for assessment under Article 101(3) of the Treaty on the Functioning of the European Union (TFEU) (ex-Article 81(3) of the Treaty Establishing the European Community (TEC)) with a view to exempting agreements between undertakings, decisions by associations of undertakings and concerted practices, which are prohibited under Article 101(1) TFEU (ex-Article 81(1) TEC).

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) (ex-Article 81(1) of the Treaty Establishing the European Community (TEC)) prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between European Union (EU) countries and which have as their object or effect the prevention, restriction or distortion of competition. As an exception to this rule, Article 101(3) TFEU (ex-Article 81(3) TEC) provides that the prohibition contained in Article 101(1) TFEU may be declared inapplicable in case of agreements which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits, and which do not impose restrictions which are not indispensable to the attainment of these objectives and do not afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products concerned.

The assessment under Article 101 TFEU thus consists of two parts. The first step is to assess whether an agreement between undertakings that is capable of affecting trade between EU countries has an anti-competitive object or actual or potential anti-competitive effects. Article 101(3) TFEU becomes relevant only when an agreement between undertakings restricts competition within the meaning of Article 101(1) TFEU. In the case of non-restrictive agreements there is no need to examine any benefits resulting from the agreement. The Commission guidelines on vertical restraints, horizontal cooperation agreements and technology transfer agreements contain substantial guidance on the application of Article 101(1) TFEU to various types of agreement.

The second step, which becomes relevant only when an agreement is found to be restrictive of competition, is to determine the pro-competitive benefits produced by that agreement and to assess whether these pro-competitive effects outweigh the anti-competitive effects. The balancing of anti-competitive and pro-competitive effects is conducted exclusively within the framework laid down by Article 101(3) TFEU. The present guidelines examine the four conditions of Article 101(3) TFEU:

efficiency gains;
fair share for consumers;
indispensability of the restrictions;
no elimination of competition.

Given that these four conditions are cumulative, it is unnecessary to examine any remaining conditions once it is found that one of them is not fulfilled. In individual cases it may therefore be appropriate to consider the four conditions in a different order. For the purposes of these guidelines, it is considered appropriate to invert the order of the second and the third condition and thus deal with the issue of indispensability before the issue of pass-on to consumers. The analysis of pass-on requires a balancing of the negative and positive effects of an agreement on consumers. It should not include the effects of any restrictions that already fail the indispensability test and are, for that reason, prohibited by Article 101 TFEU.

Article 101(3) TFEU does not exclude a priori certain types of agreement from its scope. As a matter of principle, all restrictive agreements that fulfil the four conditions of Article 101(3) TFEU are covered by the exception rule. However, severe restrictions of competition are unlikely to fulfil the conditions of Article 101(3) TFEU. Such restrictions are usually blacklisted in block exemption regulations or identified as hardcore restrictions in Commission guidelines and notices. Agreements of this nature generally fail (at least) the first two conditions of Article 101(3) TFEU. They neither create objective economic benefits nor benefit consumers.

The present guidelines are non-binding and without prejudice to the case law of the Court of Justice and the Court of First Instance concerning the interpretation of Article 101(1) and 101(3) TFEU or to the interpretation that the EU courts place on those provisions in the future.

Background

According to Article 1(1) of Regulation (EC) No 1/2003, agreements which are caught by Article 101(1) TFEU and which do not satisfy the conditions of Article 101(3) TFEU are prohibited. According to Article 1(2) of Regulation (EC) No 1/2003, agreements which are caught by Article 101(1) TFEU but which satisfy the conditions of Article 101(3) TFEU are not prohibited, no prior decision to that effect being required. Such agreements are valid and enforceable from the moment that the conditions of Article 101(3) TFEU are satisfied and for as long as that remains the case.

Last updated: 21.02.2011

Guidelines on horizontal cooperation agreements

The Commission has revised the European Union (EU) competition rules on horizontal co-operation agreements. These guidelines are designed to help companies determine on a case-by-case basis whether their co-operation agreements are compatible with the revised competition rules by providing a framework for assessment under Articles 101(1) and 101(3) of the Treaty on the Functioning of the European Union.

Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements [Official Journal C 11 of 14.1.2011].

Cooperation is of a “horizontal nature” if an agreement or concerted practice is entered into between actual or potential competitors. These guidelines also cover horizontal co-operation agreements between non-competitors, for example between two companies active in the same product markets but in different geographical markets without being potential competitors. Often, horizontal co-operation can lead to substantial economic benefits where it is a means of sharing risk, making cost savings, increasing investments, pooling know-how, enhancing product quality and variety and launching innovation faster. On the other hand, horizontal co-operation can lead to competition problems where it causes negative market effects with respect to prices, output, innovation or the variety and quality of products. These guidelines provide an analytical framework for the most common types of horizontal co-operation agreements with a view to determining their compatibility with Article 101 of the Treaty on the Functioning of the European Union (TFEU).

These guidelines only apply to the most common types of cooperation: research and development (R&D) agreements, production agreements, purchasing agreements, commercialisation agreements, standardisation agreements and information exchange. Agreements that are entered into between companies at a different level of the production or distribution chain (vertical agreements) are, in principle, dealt with in the Block Exemption Regulation on vertical restraints and the Guidelines on vertical restraints. However, to the extent that vertical agreements are concluded between competitors, they must be assessed according to the principles applicable to horizontal agreements. Where horizontal agreements result in a concentration, the Merger Regulation applies.

The guidelines set out the criteria for assessing application of the competition rules under Article 101 TFEU. Article 101(1) TFEU is used to assess whether an agreement which is capable of affecting trade between European Union (EU) countries has an anti-competitive object or actual or potential restrictive effects on competition. If an agreement does restrict competition, Article 101(3) TFEU determines whether the pro-competitive benefits outweigh the restrictive effects on competition.

Assessment criteria under Article 101(1) TFEU

Article 101(1) TFEU prohibits agreements which have as their object or effect the restriction of competition. For the purposes of these guidelines, ‘restriction of competition’ includes the prevention and distortion of competition. If an agreement has the object to restrict competition, that is to say that by its very nature it has the potential to restrict competition under Article 101(1) TFEU, then it is not necessary to examine the actual or potential effects of the agreement. If, however, a horizontal co-operation agreement does not restrict competition by object, actual and potential effects must be analysed to determine whether there are appreciable restrictive effects on competition. For there to be restrictive effects on competition under Article 101(1) TFEU, the agreement must have, or be likely to have an appreciable adverse impact on at least one of the parameters of competition on the market, such as price, output, product quality and variety, or innovation. Such an assessment of restrictive effects must be made in relation to the actual legal and economic context in which competition would occur in the absence of the agreement.

The nature of an agreement relates to factors such as the area and objective of co-operation, the competitive relationship between the parties and the extent to which they combine their activities. These factors determine which kinds of possible competition concerns can arise. Horizontal co-operation agreements may limit competition in several ways. For example, production agreements may give rise to a direct limitation of competition where the parties reduce output. The main competition concern pertaining to commercialisation agreements is price-fixing.

Market power is the ability to profitably maintain prices above competitive levels for a period of time or to profitably maintain output in terms of product quantities, product quality and variety or innovation below competitive levels for a period of time. Market power can sometimes result from reduced competition between parties.

The starting point for the analysis of market power is the position of the parties in the markets affected by the co-operation. To carry out this analysis, the relevant market(s) have to be defined, using the Commission’s Notice on the definition of the relevant market, and the parties’ combined market share calculated. If the combined market share is low, horizontal co-operation is unlikely to produce restrictive effects. Given the variety of co-operation agreements and the different effects they may cause in different market situations, it is impossible to indicate a general market share threshold above which sufficient market power for causing restrictive effects can be assumed.

Depending on the market position of the parties and the concentration in the market, other factors should be considered such as the stability of market shares over time, entry barriers, the likelihood of market entry, and the countervailing power of buyers/suppliers.

Assessment criteria under Article 101(3) TFEU

Where a restriction of competition under Article 101(1) has been proven, Article 101(3) can be invoked as a defence. Regulation (EC) No 1/2003 puts the burden of proof on the undertaking invoking the benefit of this provision. There are four cumulative conditions which must be met for co-operation agreements to be exempted:

the restrictive agreement must lead to economic benefits, such as improvements in the production or distribution of products or the promotion of technical or economic progress, i.e. efficiency gains;
the restrictions must be indispensable to the attainment of the efficiency gains;
consumers must receive a fair share of the resulting efficiency gains attained by indispensable restrictions;
the agreement must offer the parties no possible elimination of competition in relation to a substantial part of the products in question.
Where these four criteria are met, the efficiency gains generated by an agreement can be considered to offset the restrictions of competition generated by it.

Information exchange

The guidelines provide general principles on the competitive assessment of information exchange, including the assessment under Articles 101(1) and 101(3) TFEU, which are applicable to all types of horizontal co-operation agreements which include the exchange of information. Information exchange takes various forms such as data shared directly between competitors, data shared indirectly through a common agency or a third party or through the companies’ suppliers or retailers. Information exchange can be beneficial for companies, for example by helping companies save costs by reducing their inventories, as well as directly for consumers, for example by reducing their search costs and improving choice. It can, however, in certain situations also lead to restrictions of competition when it enables companies to be aware of their competitors’ market strategies. Communication of information among competitors may constitute an agreement, a concerted practice, or a decision with the object of fixing prices or quantities. Such types of information exchanges will normally be considered and fined as cartels. Outside the area of cartels, information exchange is only considered to restrict competition by object where competitors exchange individualised information regarding intended future prices or quantities. Exchanges of all other types of information, including current prices, will not be treated as restrictions by object and will be assessed as to their restrictive effects on competition.

Types of co-operation agreement

The guidelines also define the characteristics of certain types of cooperation agreement and apply the assessment framework under Articles 101(1) and 101(3) TFEU described above to each of the following types of agreements:

R&D agreements;
production agreements;
purchasing agreements;
commercialisation agreements;
standardisation agreements.

Information on infringements and complaints

This notice sets out both the arrangements available for the informal submission of market information to the Commission and the procedures applicable to formal complaints. The aim is to encourage citizens and undertakings to provide information about suspected infringements of the competition rules.

Commission Notice 2004/C 101/05 on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty (Text with EEA relevance) [Official Journal C 101, 27.4.2004].

Without prejudice to Regulation EC No 1/2003 and Regulation EC No 773/2004, the Notice intends to provide guidance to citizens and undertakings that are seeking relief from suspected infringements of the competition rules. In addition to recalling the principles related to work-sharing between the Commission and the national competition authorities in the enforcement system established by Regulation 1/2003 that are explained in the Notice on cooperation within the network of competition authorities, the Notice also explains the procedure for the treatment of complaints pursuant to Article 7(2) of Regulation EC No 1/2003 by the Commission.

Under this Article, natural or legal persons who can show a legitimate interest are entitled to lodge a complaint to ask the Commission to find an infringement of Articles 81 and 82 of the EC Treaty. The complaint (see complaints form C, in annex of the Regulation EC No 773/2004) should be submitted in three paper copies as well as, if possible, an electronic copy. In addition, the complainant must provide a non-confidential version of the complaint. The information which could be the starting point for an investigation by the Commission, can be sent by electronic mail to COMP-MARKET-INFORMATION@ec.europa.eu or by post to the following address: European Commission DG Competition B – 1049 Brussels, Belgium.

Correspondence to the Commission that does not comply with the requirements laid down will be considered by the Commission as general information that, where it is useful, can lead to an own-initiative investigation. Persons who wish to inform the Commission of suspected infringements of Articles 81 and 82 of the EC Treaty without revealing their identity to the undertakings concerned may do so; the Commission is bound to respect an informant’s request for anonymity. This special arrangement enables undertakings or citizens to provide market information to the Commission informally and to prompt the Commission to take action.

If a case does not display sufficient Community interest to justify (further) investigation, the Commission can reject the complaint.

Implementing EU competition rules: application of Articles 101 and 102 of the TFEU

In the interest of both consumers and businesses, the European Union (EU) has rules to outlaw cartels that fix prices or carve up markets between competitors. The EU also seeks to prevent firms from abusing their dominant position in a market, for example by charging unfair prices or limiting production.

Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty.

WHAT DOES THE REGULATION DO?

It implements the EU competition rules laid down by Article 101 (concerted practices that restrict competition) and Article 102 (abuse of dominant position) of the Treaty on the Functioning of the European Union (TFEU) (formerly Articles 81 and 82 of the treaty establishing the European Community (EC Treaty). It introduced rules that changed, above all, the enforcement aspects of EU competition policy.

It allows for competition rules previously applied by the European Commission to be enforced on a decentralised basis by EU countries’ competition authorities. It thus enhanced the role of national antitrust authorities and courts in implementing EU competition law. This allows the Commission to focus its resources on enforcing the most serious competition infringements with a cross-border dimension.

Article 101 (TFEU) procedures – antitrust

Cases to investigate anti-competitive agreements (e.g. cartels) are triggered by:

a complaint (e.g. from a competitor);
the initiative of the competition authority (national authority or European Commission);
an application under a leniency programme (where a participant in a cartel may avoid a fine or have it reduced if it provides information on the cartel).

Where the European Commission launches an investigation, it has wide-ranging powers. These include the right to request information from companies but also to enter companies’ premises, seize their records and interrogate their representatives.

If, on the basis of its initial investigations, the Commission decides to pursue an in-depth investigation, it sets out a statement of objections (SO) which it sends to the companies in question.

Companies under investigation may access the Commission’s file and respond to the SO. They may also request a hearing. If, after this stage, the Commission is still convinced there is an infringement, it may issue an infringement decision which may include the imposition of fines on the parties.

The Commission may instead decide to adopt a commitment decision where no fines are imposed. Here, the parties make an undertaking to address the Commission’s competition concerns, normally for a given period. If they breach this commitment, they may be fined.

Parties may appeal Commission decisions at the General Court.

Under Directive 2014/104/EU, victims of cartels or antitrust violations may be compensated for damages.

Article 102 (TFEU) procedures – abuse of dominance

A national competition authority or the Commission may open an investigation on its own initiative or following a complaint.

The key first step in such cases is to assess whether the firm involved is ‘dominant’. This involves defining its market both in terms of the product(s) it supplies and the geographic area in which they are sold. As a general rule, if the market share is under 40 %, it is unlikely to be dominant.

Other factors are also taken into account such as whether there are barriers preventing new entrants to the market or the degree to which the firm under investigation is involved at different levels of the supply chain (known as ‘vertical integration’).

The next step is to find out whether this dominant position is being abused due to practices such as predatory pricing (prices that undercut competitors), insisting that the firm is the exclusive supplier, etc.

The competition authorities have the same investigation powers as for Article 101 procedures. Aspects such as rights of defence, the system of SOs, commitment decisions, fines and compensation are also identical.

Lastly, a European competition network consisting of the national competition authorities and the Commission allows them to exchange information, including confidential information, to help them enforce violations of the competition rules.

Guidelines on the effect on trade concept

The concept of “effect on trade” is the ground of jurisdiction which determines whether the European Union (EU) competition rules apply. It is particularly important in the new system for applying the rules, which obliges national courts and competition authorities to apply the EU competition rules to all agreements and practices capable of affecting trade between EU countries. In this context, the guidelines summarise the copious case law of the EU courts and clarify the application of the rules for the implementing authorities and undertakings.

The present guidelines spell out a rule indicating when agreements are in general unlikely to be capable of appreciably affecting trade between EU countries. They are not intended to be exhaustive. The aim is to set out the methodology for the application of the effect on trade concept and to provide guidance on its application in frequently occurring situations. Although not binding on them, these guidelines also intend to give guidance to the courts and authorities of the EU countries in their application of the effect on trade concept contained in Articles 101 and 102 TFEU.

The effect on trade criterion confines the scope of application of Articles 101 and 102 TFEU to agreements and practices that are capable of having a minimum level of cross-border effects within the EU.

In the case of Article 101 TFEU, it is the agreement that must be capable of affecting trade between EU countries. If the agreement as a whole is capable of affecting trade between EU countries, there is EU law jurisdiction in respect of the entire agreement, including any parts of the agreement that individually do not affect trade between EU countries. In cases where the contractual relations between the same parties cover several activities, these activities must, in order to form part of the same agreement, be directly linked and form an integral part of the same overall business arrangement. If not, each activity constitutes a separate agreement.

In the case of Article 102 TFEU, it is the abuse that must affect trade between EU countries. This does not imply, however, that each element of the behaviour must be assessed in isolation. Conduct that forms part of an overall strategy pursued by the dominant undertaking must be assessed in terms of its overall impact. Where a dominant undertaking adopts various practices in pursuit of the same aim, for instance practices that aim at eliminating or foreclosing competitors, in order for Article 102 TFEU to be applicable to all the practices forming part of this overall strategy, it is sufficient that at least one of these practices is capable of affecting trade between EU countries.

Analysis of the concept of affecting trade requires that three aspects in particular be addressed:

The concept of “trade between EU countries”: the concept of “trade” is not limited to traditional exchanges of goods and services across borders. It is a wider concept, covering all cross-border economic activity including establishment. This interpretation is consistent with the fundamental objective of the Treaty to promote free movement of goods, services, persons and capital. The requirement that there must be an effect on trade “between EU countries” implies that there must be an impact on cross-border economic activity involving at least two EU countries;

The notion “may affect”: the function of the notion “may affect” is to define the nature of the required impact on trade between EU countries. According to the standard test developed by the Court of Justice, the notion “may affect” implies that it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or fact that the agreement or practice may have an influence, direct or indirect, actual or potential, on the pattern of trade between EU countries. In cases where the agreement or practice is liable to affect the competitive structure inside the EU, EU law jurisdiction is established;

The concept of “appreciability”: the effect on trade criterion incorporates a quantitative element, limiting EU law jurisdiction to agreements and practices that are capable of having effects of a certain magnitude. Appreciability can be appraised in particular by reference to the position and the importance of the relevant undertakings on the market for the products concerned. The assessment of appreciability depends on the circumstances of each individual case, in particular the nature of the agreement and practice, the nature of the products covered and the market position of the undertakings concerned. In its notice on agreements of minor importance, the Commission states that agreements between small and medium-sized enterprises rarely affect trade between EU countries to a significant degree. The Commission holds the view that in principle agreements are not capable of appreciably affecting trade between EU countries when the following cumulative conditions are met:

The threshold of EUR 40 million is calculated on the basis of total EU sales excluding tax during the previous financial year by the undertakings concerned, of the products covered by the agreement (the contract products). Sales between entities that form part of the same undertaking are excluded. In order to apply the market share threshold, it is necessary to determine the relevant market.

The Commission will apply the negative presumption to the application of the concept of affecting trade to all agreements, including agreements that by their very nature are capable of affecting trade between EU countries as well as agreements that involve trade with undertakings located in non-EU countries. Outside the scope of negative presumption, the Commission will take account of qualitative elements relating to the nature of the agreement or practice and the nature of the products that they concern.

The positive presumption relating to appreciability in the case of agreements also takes into account whether and how agreements and practices cover several EU countries, whether they are confined to a single EU country or to part of a single EU country. Agreements and practices involving non-EU countries are also dealt with. In the case of agreements and practices whose object is not to restrict competition inside the EU, it is normally necessary to proceed with a more detailed analysis of whether or not cross-border economic activity inside the EU, and thus patterns of trade between EU countries, are capable of being affected.