On 3 October 2022, the European Commission ("Commission") adopted a revised notice on informal guidance ("Revised Notice") that provides an expanded mechanism for businesses to obtain enhanced comfort – through so-called "guidance letters" –- on the application of the EU competition rules to novel or unresolved questions.
The Revised Notice permits businesses that have doubts about the legality of certain agreements/practices (including cooperation agreements) under competition law to approach the Commission and seek informal guidance. The procedure may lead, in practice, to informal clearance of agreements and unilateral conduct that meet specified criteria, thereby providing considerable comfort to companies engaged in innovative initiatives, for example in areas such as green energy.
This Revised Notice follows recent statements made by the Commission that emphasise an ever-increasing focus on Green Deal principles in relation to clean energy, agriculture, transport and sustainable innovation. For example, the Vice President of the Commission and Commissioner for Competition, Margrethe Vestager, has 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.
How did we get here?
Commission Regulation 1/2003 gives the Commission the ability to investigate and prosecute infringements of Articles 101 and 102 of the Treaty on the Functioning of the European Union ("TFEU") – the provisions which prohibit anti-competitive 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 the Commission's own decisional practice, various block exemption regulations, guidelines, notices and EU case law. Despite all these resources, self-assessment is often a complex exercise which raises difficult questions regarding the legality of certain projects – particularly those that involve close cooperation between competitors. Fear of breaching competition law (despite the best of intentions) can therefore impede otherwise innovative forms of collaboration of real public importance.
A previous notice of 2004 gave the Commission the ability to provide informal advice to companies on the application of Articles 101 and 102. However, that notice incorporated strict requirements (see the comparison below) which significantly limited the circumstances in which the Commission could provide such guidance. As a result, while companies may have attempted to utilise this instrument, no such guidance was ever formally issued.2
The first sign of a potential relaxation to this approach came in the form of the Commission's Antitrust COVID Temporary Framework, which allowed companies to apply for "comfort letters" regarding cooperation projects that needed to be implemented quickly 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 letters3 (and has now been withdrawn via the Revised Notice).
Developing alongside this has been a very visible interest on the part of national competition authorities in the benefits of collaboration involving competitors in order to kick-start and support sustainability initiatives. In March 2022, for example, the Dutch competition authority informally approved two separate sustainability initiatives in the energy sector,4 a year after publishing its own draft guidelines on such agreements. In Germany, the Federal Cartel Office has also been increasingly active in issuing advice clarifying whether sustainability-focused cooperation agreements comply with competition rules.5
As for the Commission itself, Commissioner Vestager has already referred to arrangements such as the joint setting of standards for green products, pooling of resources to accelerate green innovation and agreements to eliminate "dirty" products from 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 where – following recent high profile competition investigations – concerns about the risks of exchanging sensitive information might hinder collaboration in related to autonomous and electric vehicles. The Revised Notice therefore provides companies with a meaningful opportunity to seek permission to cooperate closely in the implementation of initiatives which promote the development of such sectors, as well as in situations of crisis or emergency more generally.
What types of arrangements might be appropriate candidates for informal guidance?
The Commission will have discretion to decide whether a guidance letter should be issued in response to a particular request, based on consideration of whether:
- ·novel or unresolved questions arise where there is insufficient 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 Commission's priorities or EU interests;
- the magnitude of the investment made (or to be made); and
- the extent to which the agreement/practice is likely to involve more widespread usage of the relevant goods/services.
Agreements/practices which relate to green innovation are therefore in general likely to fall squarely within the parameters described above.
Importantly, the mechanism will not be available for mergers/joint-ventures which must be notified for merger control clearance to the Commission, or for matters which are pending before the EU courts. Nor will the Commission 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 Commission, and could be used if the Commission subsequently decides to open proceedings which relate to the agreement/practice. However, it is unlikely that, in practice, the Commission will open infringement proceedings in respect of arrangements that it has “cleared” (in the absence of material new facts).
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 a valuable new opportunity for businesses involved in novel or quickly evolving sectors to obtain a greater level of legal certainty in respect of agreements/practices that do not otherwise qualify for Commission clearance. The mechanism clearly complements the Commission's increasing interest in encouraging innovation and collaboration in relation to sustainability and ESG projects, and is a clear sign of the Commission'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/"green" goals or other novel forms of innovation, please contact the team at Mayer Brown. We would be happy to discuss how the new informal guidance mechanism could be used to provide enhanced legal certainty for your business.
Summary of key changes
Key differences between the Revised Notice and the 2004 notice include the following:
What do applicants need to provide to the Commission?
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 EU competition law to the questions raised; and
- why public clarification through a guidance letter would provide added value with respect to legal certainty.
The Commission will now receive an applicant’s own analysis of the issues raised, and applicants may also contact the Commission to discuss their intended submission in advance – informally and in confidence.
When might a guidance letter be issued?
The Commission will now have more flexibility when deciding whether to issue a guidance letter:
- It may decide to do so where “no sufficient clarity” is provided in the existing EU legal framework regarding novel issues (previously, the threshold was that there should be “no clarification” at all).
- The Commission 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 Commission’s priorities or the EU’s interests, as well as the factors laid out in the previous notice (the 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 Commission 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 subject to proceedings before the Commission, a member state court or a member state competition authority.
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 Commission 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 Commission 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?
The Revised Notice makes clear that guidance letters do not create any rights or obligations for the applicants (or third parties) and reflect the Commission’s observations only. In practice though, we would expect a national court to attach significant weight to the Commission's analysis.
However, the Commission also states 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 changed materially).
2 Until 2004, comfort letters played a significant part in the regime that (before "modernisation" by Council Regulation 1/3003 of the EU regime governing restrictive agreements) required notification of restrictive agreements to the Commission. Under that regime, formal exemption decisions were relatively rare, and companies were used in practice to placing a considerable reliance on comfort letters.
3 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.
4 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.
5 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.