The Competition Act 1998 (Specialisation Agreements Block Exemption) Order 2022
| Jurisdiction | UK Non-devolved |
| Citation | SI 2022/1272 |
| Year | 2022 |
2022 No. 1272
Competition
The Competition Act 1998 (Specialisation Agreements Block Exemption) Order 2022
Made 5th December 2022
Laid before Parliament 5th December 2022
Coming into force 1st January 2023
The Competition and Markets Authority has recommended that the Secretary of State make an order specifying certain categories of agreements relating to specialisation for the purposes of section 6 of the Competition Act 19981(“the Act”).
In accordance with section 8 of the Act2, before making the recommendation the Competition and Markets Authority published details of the proposed recommendation and considered the representations about it which were made to it3.
The Secretary of State has decided to give effect to the recommendation without modifications.
The Secretary of State has also decided to vary a retained block exemption regulation under section 10A(1) of the Act4. Before coming to that decision, the Secretary of State has—
(a) in accordance with section 10A(2) of the Act, had regard to the conditions specified in section 9(1) for exemption from the prohibition in Chapter 1 of Part 1 of the Act, and
(b) in accordance with section 10A(5) of the Act, informed the Competition and Markets Authority of the proposed variations and taken into account that Authority’s comments.
The Secretary of State therefore makes the following Order in exercise of the powers conferred by sections 6(2)(a), (5), (6) and (7), 10A(1) and 71(3) of the Act.
Citation, commencement and extent
1. This Order—
(a) may be cited as the Competition Act 1998 (Specialisation Agreements Block Exemption) Order 2022,
(b) comes into force on 1st January 2023, and
(c) extends to England and Wales, Scotland and Northern Ireland.
Interpretation
2.—(1) In this Order—
“block exemption” means the exemption from the Chapter I prohibition5arising by virtue of this Order for the category of agreements6specified in this Order;
“competing undertaking”, in relation to a specialisation agreement, means—
(a) an undertaking that is active on the same relevant market as a party to the agreement, or
(b) an undertaking that, in the absence of the specialisation agreement, would, on realistic grounds and not just as a mere theoretical possibility, be likely to undertake, within not more than three years, the necessary additional investments or other necessary costs to enter a relevant market;
“connected undertakings”, in relation to a party to a specialisation agreement, means—
(a) undertakings in relation to which the party to the specialisation agreement, directly or indirectly—
(i) has the power to exercise more than half the voting rights,
(ii) has the power to appoint more than half the members of the board of directors, or if there is no such board, the equivalent body or bodies responsible for the management of the undertaking, or
(iii) has the right to manage the undertaking’s affairs;
(b) undertakings which directly or indirectly have, in relation to the party to the specialisation agreement, the rights or powers listed in paragraph (a);
(c) undertakings in relation to which an undertaking referred to in paragraph (b) has, directly or indirectly, the rights or powers listed in paragraph (a);
(d) undertakings in relation to which the party to the specialisation agreement together with one or more of the undertakings referred to in paragraphs (a), (b) or (c), or in relation to which two or more of the undertakings referred to in paragraphs (b) or (c), jointly have the rights or powers listed in paragraph (a);
(e) undertakings in relation to which the rights or the powers listed in paragraph (a) are jointly held by—
(i) two or more of the parties to the specialisation agreement or their respective connected undertakings referred to in paragraphs (a) to (d), or
(ii) one or more of the parties to the specialisation agreement or one or more of their connected undertakings referred to in paragraphs (a) to (d) and one or more third parties;
“distribution”, other than in the definition of “product”, means the provision of specialisation products;
“downstream product” means a product for which a specialisation product is used as an input by one or more parties to a specialisation agreement and which is subsequently sold by the party or parties concerned on the market;
“joint”, in relation to distribution, means (other than in the expression “joint team, organisation or undertaking”) activities where the work involved is—
(a) carried out by the parties to a specialisation agreement through a joint team, organisation or undertaking, or
(b) undertaken by a third party distributor jointly appointed by the parties to a specialisation agreement on an exclusive or non-exclusive basis, provided that the third party distributor is not a competing undertaking,
and references to distributing a specialisation product “jointly” are to be construed accordingly;
“joint production agreement” means a specialisation agreement of a kind referred to in article 3(2)(c);
“preparation of services” means activities carried out prior to and with a view to the provision of services to customers;
“product” means a good or a service, and includes both intermediate goods or services and final goods or services, but does not include distribution or rental services;
“production” means the manufacture of goods or the preparation of services, including by way of subcontracting, and “produce” and related expressions are to be construed accordingly;
“reciprocal specialisation agreement” means a specialisation agreement of a kind referred to in article 3(2)(b);
“relevant market”, in relation to a specialisation agreement, means—
(a) a product and geographic market to which one or more of the specialisation products belongs, and
(b) where any of the specialisation products is an intermediate product which one or more of the parties use wholly or partly as an input for their own production of a downstream product, a product and geographic market to which the downstream product belongs;
“specialisation agreement” has the meaning given in article 3(2);
“specialisation product” means a product which is produced under a specialisation agreement;
“unilateral specialisation agreement” means a specialisation agreement of a kind referred to in article 3(2)(a).
(2) In this Order—
(a)
(a) any reference to a “party” to an agreement is a reference to an undertaking which is a party to the agreement and, in relation to a particular specialisation agreement, a reference to “the parties” is a reference to the undertakings which are party to the agreement concerned, and
(b)
(b) any reference to “the specialisation products” is, in relation to a particular specialisation agreement, a reference to the specialisation products produced under the specialisation agreement concerned.
(3) For the purposes of this Order, the terms “undertaking” and “party”, include their respective connected undertakings.
Block Exemption
3.—(1) The category of agreements identified in paragraph (2) as specialisation agreements, which includes the types of agreement referred to in paragraph (4), is specified for the purposes of section 6 of the Competition Act 19987.
(2) Subject to paragraph (3), for the purposes of this Order the following are specialisation agreements—
(a)
(a) an agreement entered into between two or more undertakings which are active on the same product market and by virtue of which—
(i) one or more of the parties agree that they will, wholly or partly, cease or refrain from producing a particular product and will purchase the product concerned from the other party or parties, and
(ii) the other party or parties agree to produce the product concerned and supply it to the party or parties who (wholly or partly) cease or refrain from producing it;
(b)
(b) an agreement entered into between two or more undertakings which are active on the same product market and by virtue of which—
(i) two or more of the parties agree, on a reciprocal basis, that they will, wholly or partly, cease or refrain from producing a particular, but different, product and will purchase the product concerned from the other party or parties involved in the reciprocal arrangement, and
(ii) in each case the other party or parties agree to produce the product concerned and supply it to the party or parties who (wholly or partly) cease or refrain from producing it;
(c)
(c) an agreement—
(i) entered into between two or more undertakings which are already active on the same product market or which wish to enter a product market by way of the agreement concerned, and
(ii) by virtue of which two or more of the parties agree to produce a particular product jointly.
(3) Specialisation agreements which include provisions which relate to the assignment or licensing of intellectual property rights to one or more of the parties are specified provided that those provisions—
(a)
(a) do not constitute the primary object of the specialisation agreements concerned, and
(b)
(b) are directly related to and necessary for the implementation of the specialisation agreements concerned.
(4) Specialisation agreements are specified even if the obligations under the agreements relating to the purchase or supply of any of the specialisation products include provisions under which—
(a)
(a) one or more of the parties accept an exclusive purchase obligation or an exclusive supply obligation, or
(b)
(b) the parties distribute any of the specialisation products jointly and do not sell them independently.
(5) In this article—
“exclusive purchase obligation”, in relation to a...
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