Horizontal cooperation agreements refer to agreements between firms operating at the same level of production or distribution chain, and share common interests that serve as a foundation for their collaboration. These agreements have become increasingly popular in many industries over recent years. In response, the European Commission formulated guidelines on horizontal cooperation agreements in 2001.
The guidelines aim to provide legal clarity, promote competition and prevent anti-competitive practices. They set out the conditions under which horizontal cooperation agreements are permissible and under what circumstances they are considered anti-competitive.
The guidelines emphasize that coordination between firms is illegal if it leads to collusion, market sharing, price fixing, or limitation of production and supply. However, cooperation is legal if it ultimately leads to benefits for consumers, such as lower prices, improved quality, increased innovation, and supply chain efficiencies.
The guidelines distinguish between hardcore restrictions (which are always considered anti-competitive) and other restrictions that may be permissible under certain circumstances. Hardcore restrictions include price-fixing, limiting production or sales, dividing markets or customers, and collective boycotts.
Other restrictions such as joint purchasing, joint production, and research and development agreements may be permissible if they are essential, necessary for a specific purpose, and proportionate. The parties to the agreement must demonstrate that the benefits of the arrangement outweigh any potential harm to competition.
To determine whether an agreement is anti-competitive, the guidelines outline the factors that may be taken into account including market structure and size, entry barriers, market share, and degree of concentration. The guidelines also consider other factors such as the duration of the agreement, the nature of the product or service involved, and the level of transparency and information exchange.
In conclusion, the guidelines on horizontal cooperation agreements 2001 provide a legal framework for firms wishing to engage in collaborations. The guidelines are essential in ensuring that firms do not use horizontal cooperation agreements to engage in anti-competitive practices. It is crucial to consult the guidelines before entering into any horizontal cooperation agreement to ensure that the agreement does not violate EU competition law.