On 3 October, the European Commission ("EC") adopted a revised Informal Guidance Notice ("Revised Notice") that provides an expanded mechanism for businesses to obtain "guidance letters" on the application of EU competition rules to their projects.
The key changes compared to the previous notice (in place since 2004) are summarised below:
What do applicants need to provide to the EC?
As well as “full and exhaustive information” on the relevant project, applicants must now also submit their own preliminary assessment as to:
- why the request presents novel/unresolved questions;
- the application of the usual competition law provisions to the questions raised; and
- why public clarification through a guidance letter would provide added value with respect to legal certainty.
While the EC will now see more of an applicant’s own analysis of the issues raised, applicants may also contact the EC to discuss their intended submission in advance – informally and in confidence.
When might a guidance letter be issued?
The EC will now have more flexibility when deciding whether to issue a guidance letter:
- It may decide to do so where “no sufficient clarification” is provided in the existing EU legal framework regarding novel issues (previously, the threshold was that there should be “no clarification” at all).
- The EC must also consider that public clarification on the matter would provide added value in terms of legal certainty. In doing so, it may now take into account whether the arrangement in question would be relevant to the achievement of the EC’s priorities or the EU’s interests, as well as the factors laid out in the previous notice (economic importance of the goods/services concerned, size of investment to be made and whether the arrangement is likely to be widely used in the EU).
The Revised Notice makes clear that the EC will not normally consider a request for guidance where the questions raised are similar to a matter already pending before the EU courts, or the arrangement is already being reviewed by competition authorities.
Who else might be involved in the process?
It has always been the case that applicants may be asked to submit supplementary information in relation to their request for guidance. Now, in exceptional cases, the EC may also ask “other selected parties” to provide additional information (while safeguarding the confidentiality of information provided by the applicants).
How long might it take?
The Revised Notice now provides that the EC must use best efforts to inform the applicant of its intended course of action “within a reasonable time”, although this is not defined further.
What is the effect of a guidance letter?
It is now made very clear that guidance letters do not create any rights or obligations for the applicants (or third parties) and reflect the EC’s observations only.
Helpfully however, the EC clarifies that it will not impose fines on applicants with respect to action taken by them when relying in “good faith” on a guidance letter (so long as the facts on which it was based have not materially changed).
This Revised Notice supports recent statements made by Commission officials that emphasise an ever-increasing focus on Green Deal principles of clean energy, agriculture and transport, and sustainable innovation. Just last month, the Vice President of the EC (and Commissioner for Competition), Margrethe Vestager, stated that "the rules shouldn't discourage companies from working together to make their products more sustainable" and that "there's huge scope to set up these agreements in line with the antitrust rules…we want to encourage companies to ask us for our assessment of specific agreements. And in the right cases, we're ready to give individual guidance"1. The Revised Notice – which has been subject to public consultation since May this year – gives the Commission a more flexible ability to do just that.
How did we get here?
Commission Regulation 1/2003 gives the EC the ability to investigate and prosecute infringements of Articles 101 and 102 of the Treaty on the Functioning of the European Union ("TFEU") – effectively, the provisions which prohibit anticompetitive behaviour in the form of arrangements which prevent, restrict or distort competition, or the abuse of a dominant position. Companies must "self-assess" whether their projects breach these provisions by reference to a host of EU sources including various block exemption regulations, the EC's own decisional practice, guidelines, notices and EU case law. Despite all these resources, self-assessment can often be a complex exercise which raises difficult questions regarding the legality of certain projects – particularly those that involve close cooperation between competitors. Fear of ending up on the wrong side of the competition law line (despite the best of intentions) can therefore put a stop to otherwise innovative deals of real public importance.
The previous notice did give the Commission the ability to provide informal advice to companies on the application of Articles 101 and 102. However, the previous notice incorporated more strict criteria (see our comparison table above) which significantly limited the circumstances in which the Commission could provide such guidance. As a result, while companies may have attempted to utilise the tool, no such guidance was ever formally issued.
The first signs of some potential relaxation to this approach came via the EC's Antitrust COVID Temporary Framework, which allowed companies to apply for "comfort letters" regarding cooperation projects that needed to be quickly implemented during the pandemic, such as those dealing with shortages of critical medicines and medical devices. Even that Temporary Framework only gave rise to two comfort letters2 (and has now been withdrawn via the Revised Notice).
Developing alongside this has been a very visible interest on the part of competition regulators in the benefits of competitor collaboration in order to kick-start and support sustainability initiatives. In March this year, for example, the Dutch competition authority informally approved two separate sustainability initiatives in the energy sector3, a year after publishing its own draft guidelines on such agreements. Germany's authority has also been increasingly active in issuing advice clarifying whether sustainability-focused cooperation agreements comply with competition rules4.
As for the EC itself, Vestager has already referred to arrangements such as the joint setting of standards for green products, pooling of resources to speed up green innovation and agreements to cut "dirty" products out of supply chains or cut pollution or carbon emissions as agreements that "help society as a whole", and which it is therefore safe to assume would be prime candidates for the informal guidance procedure. The Revised Notice could, for instance, be used to support initiatives in the automotive sector in particular, where the risk of exchanging sensitive information with competitors likely constitutes a serious barrier to the continued development of automated and electric vehicle capabilities (for example, in relation to the interoperability of public EV charging infrastructure) given the strict prohibitions imposed by the antitrust rules. The Revised Notice therefore provides companies with a meaningful opportunity to seek permission to cooperate closely for the implementation of initiatives which bolster these types of areas, as well as in situations of crisis or emergency more generally.
What types of arrangements might be appropriate candidates for informal guidance?
The EC will have discretion to decide whether a guidance letter should be issued in response to a particular request, based on a consideration of whether:
- novel or unresolved questions arise where there is no sufficient clarity in the existing EU legal framework; and
- public clarification of the applicability of the competition rules through a guidance letter would provide added value with respect to legal certainty, taking into account:
- the actual or potential economic importance of the goods/services concerned – in particular with regard to consumer interests;
- whether the objectives of the agreement/practice are relevant for the achievement of the EC's priorities or interests;
- the level of investment made (or to be made); and
- the extent to which the agreement/practice is likely to involve more widely spread usage.
Agreements/practices which relate to green innovation are therefore likely to fall squarely within the parameters described.
Importantly, the mechanism will not be available for mergers/joint-ventures which must be notified for merger control clearance with the Commission, or for matters which are pending before the EU courts. Nor will the EC consider "hypothetical questions", for example, in relation to agreements/practices which have not reached a sufficiently advanced stage in terms of their planning.
How will it work?
Requests for informal guidance can be submitted by businesses that have already entered into, or intend to enter into, agreements/practices that could fall within the scope of Articles 101 or 102 TFEU. Applicants will need to submit "full and exhaustive information" on all relevant points – including deal documentation – as well as their own preliminary assessment of the issues raised. Businesses should therefore bear in mind that the information supplied will remain available to the EC, and could be used if the EC subsequently decides to open proceedings which relate to the agreement/practice.
Guidance letters will be published on the Commission's website (although business secrets will be removed, and applicants will have the chance to agree to the form of the public version of the guidance letter before it is published).
Overall, the Revised Notice offers an exciting new opportunity for businesses involved in novel or quickly evolving sectors to obtain a greater level of legal certainty around agreements/practices that do not otherwise qualify for EC clearance. The mechanism clearly complements the EC's increasing interest in encouraging innovation and collaboration around sustainability and ESG projects, and represents a new high water mark in terms of the EC's commitment to encouraging growth in these areas.
If you are embarking on a project which involves collaboration with competitors in order to address sustainability or other "green" goals, please contact the team at Mayer Brown. We would be happy to discuss how the new informal guidance mechanism could be used to provide an enhanced level of legal certainty for your business.
2 Comfort letters were issued on 8 April 2020 to Medicines for Europe in relation to a voluntary cooperation project to address the risk of shortages of critical hospital medicines to treat patients infected with COVID, and on 25 March 2021 to co-organisers of a pan-European matchmaking event which aimed at addressing bottlenecks in the production of COVID vaccines and accelerating the use of additional available capacities across Europe.
3 One initiative related to plans for members of the Energy, Environment and Water Association to jointly enter into long term contracts to purchase sustainable energy from a particular wind farm. The other related to a proposal on the part of distribution system operators to work together to reduce CO2 emissions by agreeing to use a uniform price for CO2 in calculation models for grid investments.
4 The Federal Cartel Office issued a statement publicising its review of two agreements between food retailers, one to commit to common standards for wages downstream in the supply chain (bananas) and the other to pay farmers an animal welfare premium.