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
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EEC) No 2821/71 of the Council of 20 December 1971 on application of Article 85(3) of the Treaty to categories of agreements, decisions and concerted practices (1),
Having published a draft of this Regulation,
After consulting the Advisory Committee on Restrictive Practices and Dominant Positions,
Whereas:
(1) Regulation (EEC) No 2821/71 empowers the Commission to apply Article 101(3) of the Treaty on the Functioning of the European Union (*) by regulation to certain categories of agreements, decisions and concerted practices falling within the scope of Article 101(1) of the Treaty which have as their object specialisation, including agreements necessary for achieving it.
(2) Commission Regulation (EC) No 2658/2000 of 29 November 2000 on the application of Article 81(3) of the Treaty to categories of specialisation agreements (2) defines categories of specialisation agreements which the Commission regarded as normally satisfying the conditions laid down in Article 101(3) of the Treaty. In view of the overall positive experience with the appli cation of that Regulation, which expires on 31 December 2010, and taking into account further experience acquired since its adoption, it is appropriate to adopt a new block exemption regulation.
___________ (1) OJ L 285, 29.12.1971, p. 46. (2) OJ L 304, 5.12.2000, p. 3. (*) With effect from 1 December 2009, Article 81 of the EC Treaty has
become Article 101 of the Treaty on the Functioning of the European Union (TFEU). The two Articles are, in substance, identical. For the purposes of this Regulation, references to Article 101 of the TFEU should be understood as references to Article 81 of the EC Treaty where appropriate. The TFEU also introduced certain changes in terminology, such as the replacement of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will be used throughout this Regulation.
(3) This Regulation should meet the two requirements of ensuring effective protection of competition and providing adequate legal security for undertakings. The pursuit of those objectives should take account of the need to simplify administrative supervision and the legis lative framework to as great an extent as possible. Below a certain level of market power it can in general be presumed, for the application of Article 101(3) of the Treaty, that the positive effects of specialisation agreements will outweigh any negative effects on competition.
(4) For the application of Article 101(3) of the Treaty by regulation, it is not necessary to define those agreements which are capable of falling within Article 101(1) of the Treaty. In the individual assessment of agreements under Article 101(1) of the Treaty, account has to be taken of several factors, and in particular the market structure on the relevant market.
(5) The benefit of the exemption established by this Regu lation should be limited to those agreements for which it can be assumed with sufficient certainty that they satisfy the conditions of Article 101(3) of the Treaty.
(6) Agreements on specialisation in production are most likely to contribute to improving the production or distribution of goods if the parties have complementary skills, assets or activities, because they can concentrate on the manufacture of certain products and thus operate more efficiently and supply the products more cheaply. The same can generally be said about agreements on specialisation in the preparation of services. Given effective competition, it is likely that consumers will receive a fair share of the resulting benefits.
(7) Such advantages can arise from agreements whereby one party fully or partly gives up the manufacture of certain products or preparation of certain services in favour of another party (unilateral specialisation), from agreements whereby each party fully or partly gives up the manu facture of certain products or preparation of certain services in favour of another party (reciprocal special isation) and from agreements whereby the parties
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undertake to jointly manufacture certain products or prepare certain services (joint production). In the context of this Regulation, the concepts of unilateral and reciprocal specialisation do not require a party to reduce capacity, as it is sufficient if they reduce their production volumes. The concept of joint production, however, does not require the parties to reduce their individual production activities outside the scope of their envisaged joint production arrangement.
(8) The nature of unilateral and reciprocal specialisation agreements presupposes that the parties are active on the same product market. It is not necessary for the parties to be active on the same geographic market. Consequently, the application of this Regulation to unilateral and reciprocal specialisation agreements should be limited to scenarios where the parties are active on the same product market. Joint production agreements can be entered into by parties who are already active on the same product market but also by parties who wish to enter a product market by way of the agreement. Therefore, joint production agreements should fall within the scope of this Regulation irre spective of whether the parties are already active in the same product market.
(9) To ensure that the benefits of specialisation will materialise without one party leaving the market down stream of production entirely, unilateral and reciprocal specialisation agreements should only be covered by this Regulation where they provide for supply and purchase obligations or joint distribution. Supply and purchase obligations may, but do not have to, be of an exclusive nature.
(10) It can be presumed that, where the parties’ share of the relevant market for the products which are the subject matter of a specialisation agreement does not exceed a certain level, the agreements will, as a general rule, give rise to economic benefits in the form of economies of scale or scope or better production technologies, while allowing consumers a fair share of the resulting benefits. However, where the products manufactured under a specialisation agreement are intermediary products which one or more of the parties fully or partly use as an input for their own production of certain downstream products which they subsequently sell on the market, the exemption conferred by this Regulation should also be conditional on the parties’ share on the relevant market for these downstream products not exceeding a certain level. In such a case, merely looking at the parties’ market share at the level of the intermediary product would ignore the potential risk of foreclosing or increasing the price of inputs for competitors at the level of the downstream products. However, there is no presumption that specialisation agreements are either caught by Article 101(1) of the Treaty or that they fail to satisfy the conditions of Article 101(3) of the Treaty once the market share threshold set out in this Regulation is
exceeded or other conditions of this Regulation are not met. In such cases, an individual assessment of the specialisation agreement needs to be conducted under Article 101 of the Treaty.
(11) This Regulation should not exempt agreements containing restrictions which are not indispensable to the attainment of the positive effects generated by a specialisation agreement. In principle, agreements containing certain types of severe restrictions of competition relating to the fixing of prices charged to third parties, limitation of output or sales, and allocation of markets or customers should be excluded from the benefit of the exemption established by this Regulation irrespective of the market share of the parties.
(12) The market share limitation, the non-exemption of certain agreements and the conditions provided for in this Regulation normally ensure that the agreements to which the block exemption applies do not enable the parties to eliminate competition in respect of a substantial part of the products or services in question.
(13) The Commission may withdraw the benefit of this Regu lation, pursuant to Article 29(1) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the imple mentation of the rules on competition laid down in Articles 81 and 82 of the Treaty (1), where it finds in a particular case that an agreement to which the exemption provided for in this Regulation applies nevertheless has effects which are incompatible with Article 101(3) of the Treaty.
(14) The competition authority of a Member State may withdraw the benefit of this Regulation pursuant to Article 29(2) of Regulation (EC) No 1/2003 in respect of the territory of that Member State, or a part thereof where, in a particular case, an agreement to which the exemption established by this Regulation applies never theless has effects which are incompatible with Article 101(3) of the Treaty in the territory of that Member State, or in a part thereof, and where such territory has all the characteristics of a distinct geographic market.
(15) The benefit of this Regulation could be withdrawn pursuant to Article 29 of Regulation (EC) No 1/2003 where, for example, the relevant market is very concen trated and competition is already weak, in particular because of the individual market positions of other market participants or links between other market participants created by parallel specialisation agreements.
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(1) OJ L 1, 4.1.2003, p. 1.
(16) In order to facilitate the conclusion of specialisation agreements, which can have a bearing on the structure of the parties, the period of validity of this Regulation should be fixed at 12 years,
HAS ADOPTED THIS REGULATION:
Article 1
Definitions
1. For the purposes of this Regulation, the following defi nitions shall apply:
(a) ‘specialisation agreement’ means a unilateral specialisation agreement, a reciprocal specialisation agreement or a joint production agreement;
(b) ‘unilateral specialisation agreement’ means an agreement between two parties which 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 those products;
(c) ‘reciprocal specialisation agreement’ means an agreement between two or more parties which 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;
(d) ‘joint production agreement’ means an agreement by virtue of which two or more parties agree to produce certain products jointly;
(e) ‘agreement’ means an agreement, a decision by an association of undertakings or a concerted practice;
(f) ‘product’ means a good or a service, including both inter mediary goods or services and final goods or services, with the exception of distribution and rental services;
(g) ‘production’ means the manufacture of goods or the prep aration of services and includes production by way of subcontracting;
(h) ‘preparation of services’ means activities upstream of the provision of services to customers;
(i) ‘relevant market’ means the relevant product and geographic market to which the specialisation products
belong, and, in addition, where the specialisation products are intermediary products which one or more of the parties fully or partly use captively for the production of downstream products, the relevant product and geographic market to which the downstream products belong;
(j) ‘specialisation product’ means a product which is produced under a specialisation agreement;
(k) ‘downstream product’ means a product for which a special isation product is used by one or more of the parties as an input and which is sold by those parties on the market;
(l) ‘competing undertaking’ means an actual or potential competitor;
(m) ‘actual competitor’ means an undertaking that is active on the same relevant market;
(n) ‘potential competitor’ means an undertaking that, in the absence of the specialisation agreement, would, on realistic grounds and not just as a mere theoretical possi bility, in case of a small but permanent increase in relative prices be likely to undertake, within not more than 3 years, the necessary additional investments or other necessary switching costs to enter the relevant market;
(o) ‘exclusive supply obligation’ means an obligation not to supply a competing undertaking other than a party to the agreement with the specialisation product;
(p) ‘exclusive purchase obligation’ means an obligation to purchase the specialisation product only from a party to the agreement;
(q) ‘joint’, in the context of distribution, means that the parties:
(i) carry out the distribution of the products by way of a joint team, organisation or undertaking; or
(ii) appoint a third party distributor on an exclusive or non-exclusive basis, provided that the third party is not a competing undertaking;
(r) ‘distribution’ means distribution, including the sale of goods and the provision of services.
2. For the purposes of this Regulation, the terms ‘under taking’ and ‘party’ shall include their respective connected undertakings.
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‘Connected undertakings’ means:
(a) undertakings in which a party to the specialisation agreement, directly or indirectly:
(i) has the power to exercise more than half the voting rights;
(ii) has the power to appoint more than half the members of the supervisory board, board of management or bodies legally representing the undertaking; or
(iii) has the right to manage the undertaking’s affairs;
(b) undertakings which directly or indirectly have, over a party to the specialisation agreement, the rights or powers listed in point (a);
(c) undertakings in which an undertaking referred to in point (b) has, directly or indirectly, the rights or powers listed in point (a);
(d) undertakings in which a party to the specialisation agreement together with one or more of the undertakings referred to in points (a), (b) or (c), or in which two or more of the latter undertakings, jointly have the rights or powers listed in point (a);
(e) undertakings in which the rights or the powers listed in point (a) are jointly held by:
(i) parties to the specialisation agreement or their respective connected undertakings referred to in points (a) to (d); or
(ii) one or more of the parties to the specialisation agreement or one or more of their connected under takings referred to in points (a) to (d) and one or more third parties.
Article 2
Exemption
1. Pursuant to Article 101(3) of the Treaty and subject to the provisions of this Regulation, it is hereby declared that Article 101(1) of the Treaty shall not apply to specialisation agreements.
This exemption shall apply to the extent that such agreements contain restrictions of competition falling within the scope of Article 101(1) of the Treaty.
2. The exemption provided for in paragraph 1 shall apply to specialisation agreements containing provisions which relate to the assignment or licensing of intellectual property rights to one or more of the parties, provided that those provisions do not
constitute the primary object of such agreements, but are directly related to and necessary for their implementation.
3. The exemption provided for in paragraph 1 shall apply to specialisation agreements whereby:
(a) the parties accept an exclusive purchase or exclusive supply obligation; or
(b) the parties do not independently sell the specialisation products but jointly distribute those products.
Article 3
Market share threshold
The exemption provided for in Article 2 shall apply on condition that the combined market share of the parties does not exceed 20 % on any relevant market.
Article 4
Hardcore restrictions
The exemption provided for in Article 2 shall not apply to specialisation agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object any of the following:
(a) the fixing of prices when selling the products to third parties with the exception of the fixing of prices charged to immediate customers in the context of joint distribution;
(b) the limitation of output or sales with the exception of:
(i) provisions on the agreed amount of products in the context of unilateral or reciprocal specialisation agreements or the setting of the capacity and production volume in the context of a joint production agreement; and
(ii) the setting of sales targets in the context of joint distribution;
(c) the allocation of markets or customers.
Article 5
Application of the market share threshold
For the purposes of applying the market share threshold provided for in Article 3 the following rules shall apply:
(a) the market share shall be calculated on the basis of the market sales value; if market sales value data are not available, estimates based on other reliable market information, including market sales volumes, may be used to establish the market share of the parties;
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(b) the market share shall be calculated on the basis of data relating to the preceding calendar year;
(c) the market share held by the undertakings referred to in point (e) of the second subparagraph of Article 1(2) shall be apportioned equally to each undertaking having the rights or the powers listed in point (a) of that subparagraph;
(d) if the market share referred to in Article 3 is initially not more than 20 % but subsequently rises above that level without exceeding 25 %, the exemption provided for in Article 2 shall continue to apply for a period of 2 consecutive calendar years following the year in which the 20 % threshold was first exceeded;
(e) if the market share referred to in Article 3 is initially not more than 20 % but subsequently rises above 25 %, the exemption provided for in Article 2 shall continue to apply for a period of 1 calendar year following the year in which the level of 25 % was first exceeded;
(f) the benefit of points (d) and (e) may not be combined so as to exceed a period of 2 calendar years.
Article 6
Transitional period
The prohibition laid down in Article 101(1) of the Treaty shall not apply during the period from 1 January 2011 to 31 December 2012 in respect of agreements already in force on 31 December 2010 which do not satisfy the conditions for exemption provided for in this Regulation but which satisfy the conditions for exemption provided for in Regulation (EC) No 2658/2000.
Article 7
Period of validity
This Regulation shall enter into force on 1 January 2011.
It shall expire on 31 December 2022.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 14 December 2010.
For the Commission The President
José Manuel BARROSO
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