Retained Horizontal Block Exemption Regulations – R&D and specialisation agreements
Detail of outcome
Final recommendation to the Secretary of State
5 December 2022: After the Secretary of State accepted the Competition and Markets Authority’s recommendation, the Competition Act 1998 (Specialisation Agreements Block Exemption) Order 2022 and the Competition Act 1998 (Research and Development Agreements Block Exemption) Order 2022 were laid before Parliament on 5 December 2022, with both orders coming into force on 1 January 2023.
28 June 2022: The CMA has published its recommendation to the Secretary of State for Business, Energy and Industrial Strategy (BEIS) regarding the retained Horizontal Block Exemption Regulations (retained HBERs).
Consultation on proposed recommendation to the Secretary of State
8 April 2022: The CMA has published, for consultation, its proposed recommendations to the Secretary of State. The CMA will consider responses to the consultation before making a final recommendation to the Secretary of State later in 2022.
Feedback received
Detail of feedback received
8 April 2022: We have received the above responses to our call for inputs.
Original consultation
Consultation description
Timetable of work
| Date | Action |
|---|---|
| Early 2023 | Consultation on any CMA Guidance on horizontal cooperation agreements |
| 1 January 2023 | The Competition Act 1998 (Specialisation Agreements Block Exemption) Order 2022 and the Competition Act 1998 (Research and Development Agreements Block Exemption) Order 2022 come into force |
| 31 December 2022 | Retained Horizontal Block Exemption Regulations expire |
| 5 December 2022 | The Competition Act 1998 (Specialisation Agreements Block Exemption) Order 2022 and the Competition Act 1998 (Research and Development Agreements Block Exemption) Order 2022 were laid before Parliament on 5 December 2022, with both orders coming into force on 1 January 2023 |
| 28 June 2022 | CMA’s final recommendation to Secretary of State |
| 8 April 2022 | Consultation on CMA’s proposed recommendation to Secretary of State |
| November 2021 | Call for inputs |
Context
The Competition Act 1998 prohibits agreements between businesses that restrict competition in the UK (unless they meet the conditions for exemption in section 9(1) of the Competition Act or are otherwise excluded). This is known as the Chapter I prohibition. Agreements can be horizontal (entered into between actual or potential competitors) or vertical (entered into by businesses at different levels of the supply chain).
An agreement is exempt from the Chapter I prohibition if it creates sufficient efficiencies and benefits to outweigh any anti-competitive effects. A ‘block exemption’ regulation automatically exempts agreements of a certain category from the Chapter I prohibition if the agreement satisfies the conditions set out in the block exemption regulation. In this way, a ‘block exemption’ regulation provides legal certainty for businesses.
The retained Research and Development Block Exemption Regulation (R&D BER) and the retained Specialisation Block Exemption Regulation (Specialisation BER), together referred to as the Horizontal Block Exemption Regulations (retained HBERs) include automatic exemptions for certain categories of horizontal agreements.
The R&D BER provides an exemption for agreements pursuant to which 2 or more parties agree to collaborate in relation to the research and development of products, technologies or processes.
- The agreement may involve the joint exploitation of the results of the R&D and it may also cover paid-for R&D (where one party finances R&D conducted by the other).
- For an R&D agreement to benefit from the block exemption certain criteria need to be met during the period of research and development and then, if the products are jointly exploited by the parties, for up to 7 years from the time the contract products or technologies are first put on the market in the EU or UK.
The Specialisation BER defines 3 types of specialisation agreement that can benefit from exemption under it, subject to meeting certain criteria.
- Unilateral specialisation agreements: these are agreements between 2 parties that are active on the same product market and where one party agrees fully or partly to cease the production of certain products, or to refrain from producing those products and purchase them from the other party, which agrees to produce and supply those products.
- Reciprocal specialisation agreements: these are agreements between 2 or more parties that are active on the same product market and agree, on a reciprocal basis, fully or partly to cease or refrain from producing certain but different products and to purchase these products from the other parties, which agree to produce and supply them.
- Joint production agreements: these are agreements between 2 or more parties that agree to produce certain products jointly.
If a horizontal agreement meets the conditions of the retained HBERs it is automatically exempt from the Chapter I prohibition. The retained HBERs, therefore, encourage businesses in their research and technological development and specialisation activities, and support their efforts to cooperate with one another by removing the burden that they would otherwise have, if they had to self-assess every R&D agreement or specialisation agreement under the Chapter I prohibition. Instead, those businesses only need to ensure that they comply with the conditions of the relevant block exemption. The retained HBERs also help to ensure that the CMA is able to concentrate resources on other matters that give rise to significant competition concerns.
An agreement will, however, not benefit from the block exemption if it contains any so-called ‘hardcore restrictions’ listed in the retained HBERs. Among others, these include provisions that fix prices or limit output or sales (subject to certain exceptions). In addition, certain other restrictions are ‘excluded’ from the application of the retained R&D HBER and must be assessed on a case-by-case basis.
The Horizontal Guidelines provide guidance to assist businesses in carrying out an assessment of the most common types of horizontal co-operation agreements namely: R&D agreements, production agreements, purchasing agreements, commercialisation agreements and standardisation agreements. The Horizontal Guidelines also set out some general principles for the assessment of the exchange of information between competitors, which are applicable to all types of horizontal co-operation agreements entailing the exchange of information.
The CMA’s review of the retained HBERs
The CMA’s review assesses whether the retained HBERs meet their intended purpose and take account of specific features of the UK economy serving the interests of UK businesses and consumers. The CMA’s review will also consider the European Commission guidelines that accompany the existing HBERs: the Guidelines on Horizontal Co-operation Agreements (the Horizontal Guidelines).
The European Commission launched its review of the HBERs and the accompanying Horizontal Guidelines in July 2019. In May 2021, the European Commission finalised its evaluation phase with the publication of a Staff Working Document in which it concluded that these instruments are still relevant, but their effectiveness can be improved. The CMA will draw on evidence from the European Commission’s evaluation, to the extent that it is relevant to the UK.
What the CMA is planning to do and when
The CMA welcomes views from stakeholders on considerations relating to the application of the retained HBERs in the UK.
The CMA is issuing a Call for Inputs to enable interested parties to share their views, in particular on any UK-specific issues relating to the retained HBERs and the related Horizontal Guidelines. The Call for Inputs will run until 11 January 2022.
The information stakeholders provide in response to this Call for Inputs will help inform our draft recommendation to government, which will be subject to public consultation.
The CMA welcomes responses to this Call for Inputs, in particular from:
- businesses with operations in the UK that rely on the retained HBERs and the Horizontal Guidelines;
- law firms and other advisers advising businesses on the application of competition law to horizontal agreements in the UK;
- industry associations; and
- consumer organisations with an interest in the UK market.
In accordance with our policy of openness and transparency, we will publish non-confidential versions of responses on our webpages. If your response contains any information that you regard as sensitive and that you would not wish to be published, please provide at the same time a non-confidential version for publication on our webpages which omits that material and which explains why you regard it as sensitive. When submitting your response please also let us know if you wish to remain anonymous.
The responses to the present Call for Inputs may also be shared with the Department for Business, Energy and Industrial Strategy in order to facilitate consideration of the CMA’s recommendation.
Please email your response to hbersreview@cma.gov.uk. You can also contact us with any queries using this email address.
Background
Following the UK’s exit from the EU, the EU ‘block exemption’ regulations that were in force under EU law at the end of the Transition Period on 31 December 2020 were retained in UK law. For details on what the retained block exemptions cover, see Guidance on the functions of the CMA after the end of the Transition Period (paragraphs 4.31 to 4.36) (PDF, 529KB).
The CMA has a role in advising the Secretary of State for Business, Energy and Industrial Strategy (Secretary of State) on varying or revoking retained block exemption regulations, or replacing them with UK legislation when they expire.
The CMA has recently completed its review of the retained Vertical Block Exemption Regulation and published its recommendation to the Secretary of State on 3 November 2021. The CMA will be reviewing the other retained block exemption regulations in due course in order to make recommendations to the Secretary of State.
The CMA is reviewing the retained HBERs for the purpose of making a recommendation to the Secretary of State in accordance with the Competition Act 1998 about whether to replace the retained HBERs when they expire on 31 December 2022. These 2 block exemption regulations are complemented by the Horizontal Guidelines. The CMA is considering these guidelines in its review of the retained HBERs.
The CMA plans to consult on its proposed recommendation in early 2022.
Personal data
When handling personal data (like your contact details), we comply with data protection law, as set out in the UK GDPR and the Data Protection Act 2018 and other law designed to protect sensitive information.
For more information about the CMA’s statutory functions, how the CMA processes personal data and your rights relating to that personal data (including your right to complain), please visit the CMA’s Personal Information Charter.
Documents
Updates to this page
Published 24 November 2021Last updated 9 December 2022 + show all updates
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Final recommendation and timetable of work updated.
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Timetable of work and detail of outcome updated.
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Response added.
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First published.