COLLABORATION IN LIFE
SCIENCES FIELD:
COMPETITION CONCERNS
by Craig Simpson, Brussels EU Regulatory Practice
27 September 2006
Introduction
1. Competition Law – Why an issue for biocides
companies?
2. The Basic Framework – Article 81 and Block
Exemptions
3. Case Study: Licensing Technology and related IPRs
4. Horizontal Task Force Agreements regarding
Submission of Collective Dossiers under BPD and
Review Regulations
5. Conclusions
Why you should worry?
 Lengthy investigations
 Fines of up to 10% global turnover
 Void and unenforceable agreements or clauses
 Private actions for damages in national courts
 Criminal sanctions in some jurisdictions (for example,
UK Enterprise Act 2002)
Article 81(1) and Exemptions
 Article 81(1) EU Treaty:
 ‘Agreements between undertakings, decisions by
associations of undertakings and concerted practices which
may affect trade between Member States and which have as
their object or effect the prevention, restriction or distortion
of competition within the common market’
 Not limited to where parties and/or activities based
inside European Union
 Relevant whenever Biocides Companies cooperate or
enter into Licence agreements
Article 81(1) and Exemptions
 Horizontal cooperation
 Formal R&D, joint production and Task Force Agreements
for submission of collective notification dossiers
 When between competitors, cartel potential (informal
‘gentleman’s agreement): price fixing, limitation of output,
allocation of markets
 Vertical cooperation (licensing)
 For example, ‘technology transfer’
 Agreement falling within Article 81(1) not necessarily
breach of competition law – does exemption under
Article 81(3) apply?
Article 81(1) and Exemptions
 Block Exemption (US ‘Safe Harbor’ concept):
 Is there a Block Exemption covering the area, e.g. R&D,
Technology Transfer?
 Does it apply in this case?
• Parties’ individual or combined market shares in relevant markets
below certain thresholds; and
• No ‘hard core’ or non-exempted restrictions
 Presumption of competition compliance
 Individual exemption-complex assessment of economic
context (market entry barriers, number of other market
players and respective shares)
Article 81(1) and Exemptions
 2004 ‘Modernisation’
Death of DG Competition notification and clearance
system
Replaced by self-certification
 BE still yardstick for individual exemption analysis
(hardcore restrictions never likely to be permitted)
Case Study: Technology Transfer
 Licensing intellectual property (especially patent and
know-how) to enable licensee to manufacture and
market contract products
 Technology Transfer Block Exemption Regulation
772/2004 – example of core competition restriction
principles:
 Restriction of price competition
 Market partitioning
 Limitation of output
 Restrictions not warranted by subject matter of agreement
Case Study: Technology Transfer
 Only one example: Parallel restrictions based on same
core principles prohibited in other agreements
 Hardcore restrictions (competitors):
 Restriction of price of licensee’s sales of contract product to
third parties
 Charging royalties on products where licensed technology not
used
 Restriction on territory into which, or customers to whom,
licensee may sell, with certain exceptions
 Restrictions of the licensee's ability to exploit its own
technology or to carry out research and development
 Requirement not to challenge validity of licensor’s IPRs
Cooperation on collective dossier
 BP of Directive 98/8: Article 16(2) Existing Active
Substances Review Programmes
‘Whenever a formulator or a producer is aware of another
notifier’s possible intention to notify the same active
substance, they shall undertake all reasonable efforts to
present a common notification in whole or in part, in order to
minimize animal testing’ (Article 4(1) First Review
Regulation 1896/2000).
 ‘In order to avoid duplication of work, and in particular to
reduce testing involving vertebrate animals, the requirements
concerning preparation and submission of the complete
dossier should be such as to encourage those whose
notifications have been accepted, hereinafter ‘participants’,
to act collectively, in particular by submitting collective
dossiers’ (Recital 9 Second Review Regulation 2032/2003).
Cooperation on collective dossier
 Agreement between Competitors-Competition issues
raised?
 ‘Participants seeking review of the same active substance
for the same product type(s) shall undertake all reasonable
efforts to submit a collective complete dossier, while fully
respecting the Community rules on competition’ (Article
6(5) Regulation 2032/2003).
 European Commission Opinion:
Common notifications do not normally infringe
competition law or constitute participation in a cartel
Cooperation on collective dossier
Issues under Task Force Agreements:
Potential cloak for a cartel - exchange of commercially
sensitive information
Prejudice to non-members of Task Force
Importance of measures to protect Task Force
from allegations that agreement itself or behaviour
of parties infringes competition
Exchange of certain types of information not
prohibited (for example, more than 12 months old,
aggregated, etc.)
Cooperation on collective dossier
 Typical areas of commercially sensitive information:
 Margins, profits, discounts or prices charged to customers/
end users;
 Names of customers or customer-specific translation
information;
 Key terms and conditions for sales;
 Future strategic, business or investment plans;
 Current market shares and sales volumes;
 Suppliers and input costs for key materials;
 Marketing plans and promotions; and
 Suggesting joint actions/boycotts versus a competitor.
Cooperation on collective dossier
 Incorporate Antitrust policy clause in Task Force
Agreement:
‘The Members will limit their activities under the
Agreement to jointly reviewing, sharing, developing
and submitting certain studies and will not exchange
market information in any way that is prohibited by EU
competition law or which goes beyond what is needed
under the Biocidal Directive and its implementing
regulations’.
Cooperation on collective dossier
 Adherence to Antitrust Policy. All task force members
to:
 acknowledge this Antitrust Policy before each Task Force
meeting;
 inform other appropriate personnel involved in the work of
the Task Force about the rules of Antitrust Policy;
 limit all discussions during meetings to the topics in the
agreed agenda;
 protest immediately should the discussion or any meeting
activity appear to fall within the scope of the above
mentioned information to be avoided and leave if continues
(otherwise all members who have not protested taken to have
agreed);
 maintain minutes of all meetings (which should include note
of the acknowledgment of this Antitrust Policy).
Cooperation on collective dossier
 BPD Review Regulations require disclosure to RMS
of sensitive information (Annexes I and II, points 5
and 6 of First Review Regulation)
 Such data must be submitted in case of collective
notification:
 Separately to RMS by each notifier; or
 To a neutral third party
Cooperation on collective dossier
 Refusal of entry of a notifier into Task Force:
restriction of competition?
 Reduce likelihood of competition challenge by
competitors outside Task Force:
 Agree to give letter of access/citation rights in return for
compensation
 Non-arbitrary, non-discriminatory and consistent ground for
refusal of entry, for example, not a ‘participant’ within
meaning of Second Review Regulation (implicit from
Regulation that collective dossier applies specifically to
‘participants’).
Conclusion
 Agreements between biocides companies and
behaviour by parties breaching competition law is
a serious issue.
 Remember the core competition law infringement
areas identified by Technology Transfer Block
Exemption case study:
 Restriction of price competition/ price fixing
 Market partitioning
 Limitation of output
 Restricting parties in areas not warranted by the
subject matter of the agreement.
 Alarm Bells! Consult legal- can restrictions be
exempted?
Conclusion
 Task Force Agreements
 Minimise exposure to allegations of cartel behaviour by
clear antitrust policy on exchange of information
 Reasons for denying access to Task Force Groups must
be objectively justifiable and non discriminatory
 TF Agreement to allow for grant of letter of access