Within the thoughtful review the Commission is conducting over EU Competition Law, one of the most important topics is the revision of the framework that sets out the rules on horizontal cooperation. concretely the rules under which European competitors enter into cooperation agreements to pursue different business goals. This week the Commission has closed the final consultation on the draft revised texts of the Horizontal “Guidelines and the Block Exemptions Regulations on Specialisation and Research & Development”, as a result of the feedback gathered from stakeholders after two years of interactions and recent Case Law.
The revised proposals make a significant improvement compared to the current ones, providing further guidance and examples in the reaching of the different types of cooperation agreements. They also clarify certain aspects and adapt the current tools to the challenges emerged by the Digital Economy and the Green transition. However, there are still relevant items that require to be urgently addressed by the Commission to ensure the legislative tools are future proof and provide full legal certainty in the new ways of cooperation.
A flexible and future-proof guidance for mobile infrastructure sharing agreements
The Commission has included, for the first time, specific guidance on the conditions under which telecom operators should enter into network sharing agreements, with a special recognition of the importance of connectivity networks as an essential output for the digitalization and the Digital Economy, in the way that quality, coverage, innovation and faster network roll-out can be achieved, among others, through the sharing of the networks. But the benefits of mobile infrastructure sharing go beyond cost reductions and quality improvements – they also exert environmental benefits, such as lower emissions and reduction of the ecological footprint.
The Horizontal Guidelines properly establish that network sharing agreements should be analyzed on a case-by-case basis, considering the specificities of the national markets and the agreement as such. However, they set out principles and factors that do not reflect neither the technical evolution networks nor attend to the market realities in the assessment of mobile infrastructure sharing agreements.
On the one hand, the proposed technological distinction between passive, active RAN and spectrum pooling agreements is still applicable in the short-term. However, the Horizontal Guidelines does not consider future development in technology, where new sharing modalities might arise. For instance, with the virtualization of networks with 5G and 6G, this current differentiation becomes unworkable. This differentiation could evolve even further in the future according to the new technologies developed, where it is all about software and where hardware will become a commodity. Therefore, a flexible approach should be taken by the Commission in the appraisal of future network sharing agreements.
In addition, the negative bias taken by the Commission in active RAN and spectrum pooling, making a presumption that these types of sharing make more likely for the parties to collude (especially negative for the spectrum pooling), puts at odds the parties’ ability to enter into network sharing agreements. It cannot be presumed that a given agreement, just because the parties share active or spectrum infrastructure, is more likely to restrict competition no matter the reach of the cooperation. Even if there is the deepest level of sharing, as long as the core is separate, the different network slices of the operators could be differentiated.
On the other hand, the geographical scope and market structure factors are no longer applicable for the assessment of network sharing agreements. The first, because networks operators have reached the site limit, so there is maximum network extension (mainly because of coverage obligations). The latter, because the oligopolistic nature of the telecom sector make easily that the sharing parties reach a joint market share that exceeds 50%. Nevertheless, the number of competitors outside the market and the competitive pressure exerted by them, as well as to prevent foreclosure effects, are factors that should be considered in the appraisal of network sharing agreements.
Need to ensure balance of interests in the standardization process
As the Horizontal Guidelines establish, cooperation in standard-setting organizations may give rise to restrictions in price competition and limitations or control of production, innovation and technical development. Among the channels of exclusion foreseen, “exclusion of, or discrimination against, certain undertakings by prevention of effective access to the standard” is of particular importance to ensure access to innovation and a fair play among industry members in the market. However, access to standards is as relevant as ensuring that within the standardization process all parties are heard on equal terms.
Balance of interests in standardization processes is essential to ensure that standard setters are not allowed to create and leverage unbalanced processes to adopt favourable self-regulation that constitute a competitive advantage for the incumbent participants, to the detriment of consumer choice. This implies that no single interest category constitutes a majority of the membership of a consensus body.
Information Exchange – further adaptation to the Digital Economy and full legal certainty
The proposed guidance on the new ways of Information Exchange, the further guidance to provide full legal certainty for the sharing parties when they exchange information, as well as the upfront identification of commercially sensitive information, are good points taken in the revised Horizontal Guidelines. Nevertheless, the draft Horizontal Guidelines are not sufficiently adapted to the Digital Economy and the challenges emerged by digitalization, and this is particularly critical in the guidance provided with regard to Information Exchange.
On the one hand, new cooperation models require a certain degree of information exchange and data sharing between the participating companies. Clear guidance on this new cooperation models would help undertakings in the appraisal of these agreements regarding the boundaries of permitted information exchange in such cooperation.
On the other hand, the consideration of data sharing and data pooling agreements as a specific type information exchange would lead to consider that any information shared within this of agreements might be considered commercially sensitive and therefore subject to a strict approach by undertakings because of the fear of breaching antitrust rules. Moreover, considering that this type of cooperation will become even more common than before within the Digital Economy, ad-hoc guidance on data sharing and data pooling agreements would be extremely helpful to provide legal certainty for undertakings in their assessment under antitrust rules.
These matters, alongside other -and not less important- ones, are gathered in the Telefónica’s response to the public consultation, that can be found here.