Some comfort at last - European Commission issues informal guidance endorsing Automotive Licensing Negotiation Group

On 9 July 2025, the European Commission (EC) issued informal guidance (aka a ‘comfort letter’) that the creation of a Licensing Negotiation Group (LNG) in the automotive sector will, provided certain conditions are met, not conflict with the Article 101 TFEU prohibition on anti-competitive agreements.

LNGs are industry groups or associations which negotiate licences on behalf of a group of licensees; in this case, the group comprises a number of automotive companies which require access to Standard Essential Patents (SEPs) due to their use of essential telecommunications technology in cars.

It has long been common for SEP holders to license their IP through ‘patent pools’, which the EC encourages as an efficient solution that promotes clearer terms and closer attention to the essentiality of patents admitted to the pool. Coordination on the licensee-side, however, has remained controversial. The EC’s Horizontal Guidelines accept that joint purchasing arrangements may be pro-competitive, but distinguish ‘buyer cartels’ which have as their object the restriction of competition. Opponents of LNGs have expressed concerns that – in the context of SEP licensing where implementers typically start using the patented technology prior to entering licence negotiations – LNGs enable implementers to employ collective bargaining power and ‘hold-out’ tactics to extract sub-FRAND rates and should be classed as cartels.

This is not the EC’s conclusion. The guidance letter mirrors the June 2024 decision of the German Federal Cartel Office to endorse an Automotive LNG (ALNG) with the same members and confirms that the ALNG will not raise concerns under Article 101, provided the following safeguards apply:

The standards for which the ALNG negotiates licences must be relevant beyond the automotive sector such that the combined market share of the ALNG members does not exceed 15% of the total demand for the relevant SEPs – notably this is assessed across all demand for SEPs, rather than being considered on an industry-by-industry basis;

The ALNG must be open to other interested manufacturers and suppliers in the automotive industry, up to the 15% cap;

SEP holders must be able to enter and terminate negotiations with the ALNG on a voluntary basis; and

Information exchange between the ALNG members must be limited to that which is objectively necessary for the purpose of the joint licensing negotiations, and must not involve the sharing of commercially sensitive information.

The combined market share of ALNG members is relevant because Article 101 prohibits agreements which are likely to have the effect of restricting competition even where that is not their object. The Horizontal Guidelines regard an aggregate share of 15% as a safe limit up to which a joint purchasing arrangement is unlikely to have restrictive effect. The limit generally applies to the downstream (selling) market as well as the upstream (licensing) one, but the guidance letter indicates that a higher market share of the market on which the members manufacture or sell vehicles or components (as could well be the case) is unlikely to give rise to restrictive effects, as the cost of SEP licences represents a small fraction of the parties’ total downstream costs.

The EC also found that the ALNG aims to increase efficiency in the licensing of SEPs related to digital technologies, which is expected to contribute to Europe's decarbonisation and net-zero goals under the Clean Industrial Deal as well as the recently published Industrial Action Plan for the European automotive sector, which will involve an urgent transition towards “software-enabled, AI-powered connected and autonomous vehicles”, which will rely on access to SEPs. 

The ALNG guidance letter was released at the same time as a second letter regarding a joint purchasing agreement in a non-SEP context, although it also involves the setting of minimum technical specifications, akin to informal standardisation. These are the first ‘comfort letters’ the EC has issued under the revised Informal Guidance Notice adopted in 2022, which increases the scope of the informal guidance tool. By comparison, no informal guidance was provided under the stricter Notice in place from 2004-2020.

We may soon see further guidance on the compatibility of LNGs and patent pools with competition law. The EC has signalled that it may include guidance on LNGs for the first time in its revised Technology Transfer Guidelines (on which we expect consultation later this year), as well as potentially some changes to the existing guidance on patent pools (see our earlier analysis here). The CMA has also recently sought views on this subject as part of its consultation on reforms to the Assimilated Transfer Technology Block Exemption (see also here). The CMA has proposed to leave both LNGs and patent pools outside the scope of the block exemption, but to consider dealing with them in a guidance document.

The EC’s press release on the ALNG guidance letter is available here. A non-confidential version of the guidance will be published in due course.