The New Block Exemption Regulation on Research & Development Agreements and Horizontal Guidelines: the Commission’s Proposals

On 1 March 2022, the European Commission (“EC”) published for consultation two draft revised horizontal block exemption regulations (“BERs”) on research and development (“R&D”) and specialisation agreements, as well as draft revised guidelines on horizontal cooperation (“the Guidelines”). The updated EC regulations and Guidelines are expected to enter into force on 1 January 2023. 

One of the main changes in the draft R&D BER is a focus on agreements for the development of new products, technologies and processes and for R&D efforts directed primarily towards a specific aim or objective (so-called R&D poles). The draft text introduces additional wording focusing on the application of the R&D BER to completely new technologies or products. In addition, the EC has  revised the accompanying R&D section in the Guidelines to provide better guidance to businesses.

A. Revised exemption under the R&D BER

According to the EC, when competitors pool their R&D efforts to develop new products, technologies or processes, a restriction on competition may arise. The EC proposes that the block exemption only apply to innovation agreements if there are already  at least three competing R&D efforts underway. This would effectively mean that there must be four competing R&D efforts for the block exemption to apply. 

It is not clear how at the start of a confidential R&D process companies are supposed to ascertain whether three other competing R&D efforts exist in order to benefit from the exemption. This is a point that will undoubtedly raise questions during the consultation process.

B. Other changes to the R&D BER

The EC’s stated aim with the revision of the texts is to give better legal certainty to companies wishing to cooperate in R&D agreements, as well as simplify the administrative supervision. The draft R&D BER proposes to:

• Simplify the grace period applicable when market shares increase beyond the threshold for exemption;
• Modify the definition of ‘potential competitor’ and take out a reference to a ‘small but permanent increase in prices’;
• Add new definitions and clarify the wording of existing ones, including for ‘new product or technology,’ ‘R&D pole, ‘active/passive sales,’ ‘contract technology/product, and others;
• Calculate market shares on the basis of the preceding calendar year or the average of three preceding years, depending on the market in question (the current R&D BER only allows for calculation based on the preceding calendar year);
• Introduce a withdrawal article, based on existing language in the current R&D BER.

C. Changes to the Guidelines

The current horizontal guidelines contain a chapter on R&D agreements limited to an analysis of agreements between competitors under the general prohibition on anti-competitive agreements found in Article 101(1) TFEU with a possible individual exemption under Article 101(3) TFEU. The current horizontal guidelines also do not make reference to the R&D BER. 

The draft text addresses this shortcoming by introducing a new section dedicated to explaining the application of the R&D BER, including its concepts and definitions, in order to provide better guidance to companies seeking to understand the relevant rules.

On the other hand, a certain degree of comfort that was provided for agreements that did –for good reasons- not meet all the requirements of the R&D BER has been removed, notably with regard to the requirement for parties to provide each other ‘full access’ to any relevant prior rights or results. This will make it more difficult for businesses to carry out a self-assessment in situations where access by one of the parties will be limited as a condition for the R&D collaboration to take place.   

D. Takeaway

Notably the new requirement for collaborative innovation to be in competition with at least three comparable R&D efforts for the R&D BER to apply, ads unnecessary complexity that will be hard to meet in practice.

Also, the deletion in the Guidelines of any practical guidance in situations where parties do not find it commercially feasible to grant full access to any relevant prior rights and results, as required by the R&D BER, reduces legal certainty as compared to the current situation. 

On the other hand, the explicit references in the Guidelines to the R&D BER, explaining certain relevant concepts and definitions is a welcome change. 

The authors wish to thank Julien Haverals, International Trainee, Norton Rose Fulbright LLP Brussels for his contribution.