It is official, we are having a Déjà vu. Remember last year's review process and adoption of the Vertical Block Exemption Regulation and Vertical Guidelines?

Well, these days, a wind of change is blowing horizontally. OnJune 1, 2023,the European Commission (“Commission”) implemented significant changes to its Horizontal Block Exemption Regulations, i.e., Research & Development Block Exemption Regulation(“R&D BER”)and Specialization Block Exemption Regulation(“Specialization BER”), collectively known as HBERs. Hand in hand with the revised regulations, the Commission also introduced the updated Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) to cooperation agreements between competitors(“Horizontal Guidelines”).

To jog one’s memory, Article 101(1) of the TFEU prohibits any agreements between undertakings, decisions made by associations of undertakings, or concerted practices affecting trade between EU countries which could prevent, restrict, or distort competition. The block exemption regulations give us a clue on the conditions under which certain types of agreements are exempted from the prohibition of restrictive agreements laid down in Article 101(1).

The refurbished HBERs and the accompanying Horizontal Guidelines replace their 2011 predecessors. New regulations aim to achieve three main objectives: (i) enhance clarity, provide more legal certainty and flexibility (ii) incorporate recent case law developments, and (iii) support the green and digital transitions by facilitating legitimate cooperative endeavours for businesses.

But let’s not get ahead of ourselves and let’s take a leap into regulations themselves. HBERs – it’s your time to shine!

Recognizing the importance of collaborative R & D efforts and coordination of businesses in their activities to enhance efficiency and productivity, the Commission has revised the regulations concerning R & D agreements and Specialisation agreements. The revised HBERs both have the same goal: striking a balance between cooperation and competition, while also factoring in other vital considerations, such as the ‘go green’ agenda, sustainability, innovation, digitalization etc.

While themarket shares thresholdsare kept at the same level, 25% for R & D agreements and 20% for specialization agreements, the Commission did a little change of tune. To avoid any ambiguity regarding the calculation of market shares, the Commission has clarified that if the sales data for the previous calendar year do not accurately reflect the parties actual position in the relevant market, the sales data from the three preceding calendar years should be utilized. In cases where sales value data is unavailable, sales volume data can be employed as an alternative.

The‘grace period’ streamlinewas up to next. ‘Grace period‘ is a period during which an R & D and specialization agreements retain the benefits of the safe harbour, even if the parties market shares exceed the applicable threshold. Under the new HBERs, if, during the exemption, the combined market share of the relevant parties surpasses the prevised threshold, the exemption remains valid for 2 consecutive calendar years starting from the year in which the relevant market share threshold was first exceeded.

Also, the revised HBERs extended the power of the Commission and the National Competition Authorities towithdraw the benefit of the exemptionif they find that the conditions set by R & D BER and Specialization BER are not met. However, as that famous film adage says: “With great power comes great responsibility!”, so they are not allowed unbridled freedom. Only in a scenario where the relevant market is highly concentrated and competition is already weak, the Commission and the National Competition Authorities may put their power to use.

In addition to the above changes, the scope of both HBERs was expanded to cover new concepts (e.g., competition in innovation) and new types of horizontal agreements (e.g., unilateral specialization agreements between more than 2 parties), all to ensure that the SMEs, among other businesses, can benefit from the block exemption in line with innovation, sustainability, and digitization goals.

Accompanying the changes to the HBERs, the Commission released the updated Horizontal Guidelines, providing businesses with detailed instructions on how to effectively navigate the revised regulations.

The centrepiece of the revised Horizontal Guidelines is the information exchange and there is a good reason for that – a noticeable and substantial rise in data exchange in the past few years. Alongside the expanded definition of ‘information’ and ‘exchange’, one of the major changes is the guidance on how to approach the exchange of digital content and data, and the much- needed elaboration of some concepts like aggregation and age of information. The guidelines provide user friendly examples and tools for self-assessment, including charts and tables, which are meant to minimize the risk of competition law infringements in this regard.

Further, by acknowledging theEU Green Deal(set of policies for reducing net greenhouse gas emissions), the Horizontal Guidelines have clarified that antitrust rules do not seek to hinder agreements between competitors that aim to achieve environmental, social or othersustainability objectives,as listed in the Horizontal guidelines. Together with the list of sustainability agreements that are deemed hardly likely to raise competition concerns, the new rules introduced a so called ‘soft safe harbour’ for sustainability standardization agreements, if they meet certain cumulative conditions (transparency, no exchange of commercially sensitive information between parties, no obligation of the parties to comply with the standard etc.). With this, the Horizontal guidelines introduce the collective perspective to the efficiency assessments, which now see beyond ‘just’ consumers and take into account the society as a whole.

The updated HBERs entered into force on July 1, 2023. The transitory regime will continue from July 1, 2023, to June 30, 2025, but the HBERs themselves will be in force for the next 12 years.

We are excited to see the newfound glory of HBERs in practice, and even more excited to see how the new HBERs will impact the regulatory framework in Serbia. As always, we expect that the Serbian watchdog shall have a close look at this invaluable guidance by the Commission, especially when assessing possible anticompetitive conduct on the market.