Buying into Buyer Cartels

1.0.          Introduction

The contention in this article is that Licensing Negotiation Groups (LNGs), which have been increasingly gaining support with regulators in both Brussels and Bonn will in fact encourage a new round of cartel behaviour in technology sectors. At one level one can understand why regulators may think permitting LNGs are reasonable. The argument here is that permitting LNGs will allow licensees to create an organisation which can negotiate technology licences directly with the licensors and patent pools. And at first sight this appears to be an attractive argument for balance and countervailing market power between purchasers and licensors, particularly in respect of patent pools. However, it is argued here that the concept of the balancing of the two sides of the technology by enabling LNGs ignores some critical market realities. To start with the Standard Essential Patent (SEP) which at the heart of the deployment of LNGs are already in the hands of licensees before license negotiations commence. As a consequence the commercial leverage which is already with the licensees which will be reinforced by the capacity of the LNG to negotiate for their purchasers. Furthermore, the LNG concept developed by the Commission in its ALNG Informal Guidance and then in the draft TTG draws on EU law, decisional practice and guidance on joint purchasing does not fit the actual market realities in which an LNG would operate in technology markets. Joint purchasing arrangements envisage an independent entity negotiating on a wide range of terms before the purchasers receive the product. The context in technology markets is very different. The product is not only already in the hands of the licensees but also the terms are really limited to one major issue: price/royalties. These realities it is argued undermine the ability to apply a traditional joint purchasing agreement model to an LNG and push the LNG closer to being a buyer cartel, albeit one blessed by a Commission ‘safe harbour’ in the draft TTG1.

There is a sense here of the Commission repeating its error when it sought to expand the jurisdictional scope of Article 22 EUMR so it could be applied to so called ‘killer acquisitions’2. The regulator was seeking to be innovative and address a perceived problem. However, the underlying legal and economic arguments did not on close examination support the case that the Commission was trying to make. And as a consequence the Commission ultimately lost in the Court of Justice of the European Union (CJEU)3.

It is argued here that the Commission may face serious policy conflicts and reputational problems by seeking to develop LNGs in the technology sector. For example, it would be unwise for any regulator to ignore the fact some of the principal supporters of an automotive LNG concept have cartelist antecedents. Before respectively the Bundeskartellamt and the European Commission these cartelists were condemned in the Long Steel4case in 2019 and again in the Car Recycling5 case in 2025 for operating buyer cartels. As discussed below, given the incentives for purchasers to co-ordinate on price, the stripped-down nature of an LNG’s operations in practice, how far can the Commission be confident that they are doing little more than blessing a new form of cartel activity? The danger here for the Commission is that the entire LNG concept rather like the expansion of the scope of Article 22 EUMR will have to be embarrassingly reversed, probably following a trip to the CJEU.

This article first outlines why LNGs, due to the market realities in SEP licensing, are likely to have significant anti-competitive consequences and why in practice they are closer to buyer cartels than joint purchasing agreements. It then turns to the position taken in both the Commission’s Informal Guidance on the German automotive LNG and in the draft TTG which minimise the likely market share thresholds of LNG licensees in technology markets. It is argued that drawing on the Commission’s Market Definition Notice6 and the actual operation of technology markets, the use cases of technology amongst customer types result in smaller markets with much higher market shares. Part three offers a conclusion.

2.0.       LNG’s: ‘A Buyer Cartel Enabler?’

In recent years we have seen a shift toward European regulatory approval of licensing negotiation groups (LNGs). This shift has been encouraged by applications for such approval by German automotive manufacturers. As a consequence, we have seen first a Bundeskartellamt Comfort Letter in 2024 ‘tolerating’ an Automotive Licensing Negotiating Group (ALNG) whose founding members were BMW, Mercedes and VW, alongside Thyssen-Krupp7. And then more recently in July 2025 the same group of companies obtained Informal Guidance from the European Commission on the compatibility of their ALNG with EU competition law. The Informal Guidance saw the Commission, subject to the conditions set on the Guidance and the information provided by the parties, taking a positive view of the ALNG8. It said that the ALNG does not raise concerns under Article 101 TFEU concerning negotiation of Standard Essential Patent (SEP) licences that are not specific to the automotive sector. In a further step toward the normalisation of LNGs, at least in the technology sector, in September 2025 the Commission published its draft Technology Transfer Guidelines (TTG). In the TTG the Commission for the first time provided the basis for a safe harbour for LNGs in the technology sector.

We appear to be therefore moving into a new era where LNGs, at least in the technology sector, will have the blessing of some major competition regulators. At first sight this appears to not be an unreasonable step give existing European antitrust precedent. The Commission clearly in both the Informal Guidance and the draft TTG was drawing upon the developed law, decisional practice and guidance on joint purchasing agreements9. European Union antitrust law has developed over time in a direction which supported the view that it is legitimate for purchasers to co-operate to set up an entity which integrates purchasing and negotiation of terms, so that that independent purchaser entity can negotiate with suppliers on behalf of its members. This is viewed as providing purchasers with some countervailing market power. And it is seen as providing a means of obtaining efficiencies by reducing the cost of negotiations and potentially the cost of products. As long as the collective purchaser entity undertaking the negotiations has its objectives set out in writing in advance, is transparent with suppliers, has protections against transfer of confidential information between purchaser members, such joint purchasing arrangements are likely to be deemed lawful. Critically, throughout Commission discussion of the legality of joint purchasing agreements the purchasers would collectively have only limited market power.

In the draft TTG one can see the impact of the existing law, decisional practice and guidance in respect of joint purchasing agreements on the development of its thinking on the legitimacy of LNGs10. However, on closer analysis the actual effect of an LNG is more like that of a buyers cartel than a joint purchasing agreement.

To start with an LNG under the proposed safe harbour where licensee implementers will be seeking via their LNG to negotiate with SEP holders will have very little to negotiate compared with a traditional joint purchaser entity. The entire structure of a joint purchasing entity which negotiates all the terms of trade with the suppliers for its purchaser members is not really relevant here. The whole idea with SEPs is that the technology is available to licensees before a license is agreed. In other words, purchasers already have the ‘product,’ and they do not have to negotiate before they have access to the relevant technology. This reality significantly shifts commercial leverage in any SEP negotiation in the purchasers’ favour, which is now reinforced by the capacity to jointly negotiate via the LNG. It also narrows the scope for the work of an LNG compared to a joint purchaser entity. In essence for an LNG there is not much to negotiate beyond price.

This reduction of the LNG to largely a question of price/royalties creates further questions as to the value of the LNG. It clearly makes much of the structure of the LNG pointless. Having only one key metric also creates incentives to and facilitates the transfer of information between purchasers and it also makes it easier to organise co-ordination between purchasers with just that one key metric.

Of even greater concern is the holdout issue. Purchasers would now be permitted by the European Commission to run an LNG to negotiate with licensors and patent pools via the LNG and could decide to hold out agreeing a final price/royalty against the rightsholders. The incentives to do so are significant. As they already have the product, they can hold firm on price and can via the LNG seek to force down the price/royalties. There is no incentive for the members of the LNG to defect and do an individual deal with rightsholders as long as there is a possibility that a lower price may be negotiated by the LNG.

This rather renders otiose the Commission’s condition in the TTG that no member may negotiate bilaterally for the first six months of LNG negotiations. Why would any member of an LNG wish to exit to negotiate a bilateral deal given the potential rewards from a hold-out operation? It is true that the Commission prohibits co-ordinated hold-outs by purchasers. But what is a co-ordinated hold out by purchasers and what is a decision by an LNG legitimately protecting its members interests to seek a better (lower) price? The ‘safe-harbouring’ of LNGs by the Commission is in effect providing regulatory cover for the operation of a buyers cartel.

It is true that the LNG will formally be a distinct entity acting for the purchasers in negotiation with rightsholders-which should put it beyond the reach of being considered a buyers cartel. However, as explained given the reality of an LNG negotiating a SEPs licence, the negotiations come down almost wholly to an argument on price. Such a focus almost wholly on price changes the nature of the LNG pushing it away from a joint purchaser agreement like model and closer to that of a buyer cartel. Compound that reality with the fact that the purchaser already has the product, with the consequent shift of commercial leverage to the purchasers and now the LNG-what we really have here is the Commission authorising an LNG structure which permits a buyer cartel.

Given the dangers here of the Commission accidentally creating a vehicle for the promotion of buyer cartels, the efficiencies case for LNGs looks very thin. The draft TTG argues that there are efficiency gains from LNGs, notably a reduction in transaction costs from the reduction of bilateral negotiations or the pooling of expertise of the licensees via the LNG. One has to ask whether any such efficiencies are sufficiently valuable to justify providing a mechanism granting licensees the capacity to so increase their market power.

One cannot also ignore the innovation question here. Both in the Informal Guidance and the draft TTG the Commission justifies LNGs as supporting the development and distribution of innovation. If one looks in particular at the ALNG endorsed in the Informal Guidance one finds it difficult to make out the innovation case. As explained above the key incentive for purchasers with a ALNG or LNG is to focus on key metric: price. The clear danger here is for purchasers to use these vehicles to run what amounts to a collective hold out to push down the price. How is enabling purchasers capacity to run a holdout operation pro-innovation?.

The negative impact on innovation is reinforced by an observation from the Commission’s Informal Guidance on the ALNG. The Commission points out that SEP licensing represents only a very small proportion of the total cost of the product. The data relied on by the Commission suggests that the automotive ALNG members costs of 4G SEP licences amounted to less than 0.1% of the price of the best-selling cars they produced11. With the cost of the licenses being so low in relation to the total price of the product, why is the Commission set upon increasing the market power of licensees to this degree? And is there not a dangerous, potentially negative impact on EU innovation due to the loss of revenue to rightsholders (many of which are EU based)?.

There are also questions as to the way that both the Informal Guidance and the draft TTG view the calculation of the level of market share at which LNG members would be viewed as having market power. As explained below the calculation of that 15% threshold of demand on the relevant technology markets is not what it appears. It raises further concerns that the LNG vehicle as outlined in the draft TTG will provide a means for creating very significant market power for purchasers over rightsholders.

3.0.       The Market Share Issue.

In the Informal Guidance the Commission follows the Horizontal Guidelines on Co-operation Agreements (hereafter Horizontal Guidelines)12. They take the view that market power is unlikely to be of concern in respect of a joint purchasing agreement where the purchaser beneficiaries have a combined market share that does not exceed 15% of the purchasing market. The Commission draws upon that 15% threshold analysis to make the case that the ALNG in question is unlikely to have market power. It argues that in respect of licences not specific to the automotive market it is unlikely that the ALNG’s members who hold a combined market share does not exceed 15% of total demand has market power. The Draft TTG, though with very little market definition analysis, also assumes that members of an LNG who have a combined share of demand on the relevant technology markets less than 15% are also unlikely to have market power.

At first sight this drawing upon the Horizontal Guidelines to establish a 15% market share threshold appears to be a reasonable basis for assessing market power. However, the adoption of that threshold in respect of the Informal Guidance provided to the German ALNG suggests that that the calculation of this threshold in the LNG technology context can be extremely problematic. It raises the question whether the market share analysis the Commission seeks to apply to an LNG is correct in economic terms or consistent with the Commission’s own Market Definition Notice; in fact, the approach it has chosen would have the likely effect of disguising significant market power.

The key difficulty here is that in the Informal Guidance the Commission distinguishes between general SEP licences which multiple customers from mobile phone, smart meter and vehicle manufacturers may want to purchase and SEP licences which are specific to the automotive sector. If one takes account of the entire SEP licensing market for mobile communications for mobile telecommunications, it is unlikely that any particular product segment would exceed the 15% threshold.

However, it is very doubtful this analysis is correct when applied to technology markets and specifically SEP licensing markets when considering purchasing by automotive manufacturers. The difficulty here is that the while smartphones, smart meters and vehicles may also be using the same technology their field of licensing practices, use, value, price and function are different. It is also the case that some of the standards set out in general SEP licences will be valued differently by different products. For example, there is the issue of latency (time delay) in mobile communications. For vehicles very low latency is very important, even critical. For smart meters, by contrast, it is not that vital. This varied importance for different markets of different features of general SEP licences can have a significant market impact. For instance, the shift upward in capability from 4G to 5G was for the mobile telecommunications market an evolution of capability. By contrast the shift to 5G in the automotive market was very significant permitting a wide range of uses and capabilities to be rolled out in the automotive sector which were not possible before.

As a consequence it is difficult to see how the Commission can easily sustain its market analysis in in respect of the ALNG and more broadly in respect of LNGs in the technology sector as envisaged in the draft TTG.  This view is reinforced when one considers the Commission’s own Market Definition Notice. In that Notice the Commission indicates that when there is price discrimination among types of customers for the same product for reasons unrelated to costs, there can be distinct markets by type of customer. More specifically the Notice indicates that this discrimination by customer type is likely to be the case if the following cumulative conditions are met13:

-it is possible to clearly identify which type of customer an individual customer belongs to;

-arbitrage between different type of customers is unlikely, and

-the price discrimination between type of customers is persistent over time.

In the context of SEP licensing in the communications sector, it is difficult see how the cumulative conditions set out above appear cannot but apply here. It is clear that types of customers can be identified by the end use of the product and consumers would not consider substitutability to be possible. Again due to the very differing nature of the end use of the licensed technology in products arbitrage is not possible and it is clear that given again the end use differentiation price discrimination will be persistent over time.

Where the Market Definition Notice takes us to is a focus on end use by type of customer and much narrower market definitions in relevant technology markets. For the ALNG which was the subject of the Commission’s Informal Guidance the probability is that the market power of its members is collectively significantly more than 15% of relevant demand. More broadly this analysis raises questions as to the viability of the draft TTG which appears to be willing to proceed on the same basis as the Informal Guidance, with no substantive underlying market analysis to underpin it.

4.0.       Conclusion: The Downsides of LNG Endorsement

The unrecognised and underlying problem with LNGs is the lack of awareness of the greater danger of buyer cartels compared to seller cartels. Although it is not wholly accurate to say seller cartels are so unstable most are likely to fail14 as it is possible to develop trust strategies to ensure their viability.15 The case is very different with buyer cartels. There the incentive is wholly to remain with the cartel. One cannot defect from the cartel, cut prices and generate additional revenue at the expense of other cartel members. Hence with a buyer cartel there are no gains from defection. The incentive is to remain and sustain the cartel. That is one reason why the evidence suggests that buyer cartels tend to be sustained longer than seller cartels. In such context providing a safe harbour for collective purchasers to use LNGs in the TTG draft would be unwise. That is even more so when in the context of SEP licensing, the licensees already have access to the technology, i.e., can immediately derive a profit from it by making use of it themselves and selling it to their customers, and therefore almost all the entire negotiation will be on price/royalties.

It is not surprising as are result that increasing Commission support for LNGs in technology markets has drawn criticism from the US Deputy Assistant Attorney General for International Policy and Appellate Dina Kallay. Nor the fact that the Antitrust Division has launched an investigation into the four German founders of the ALNG over their licensing practices16. The US has always been more suspicious of joint purchasing agreements as mechanisms for running buyer cartels than the EU. Given however, the particular features of LNGs in respect of SEP licensing (in terms of technology access, focus on price and the potential for hold-out) one can see why the US authorities are concerned. Practically this concern is likely to have consequences in that as much SEP licensing is global, it will be difficult for LNGs to function if major competition authorities outside the EU take the view that an LNG is a disguised buyers cartel.

It is also not impossible that the Commission may also encounter opposition within the EU. National Competition Authorities (NCAs) may well, given the past history of its proponents, and the cartel-like features of LNGs be drawn into investigating an LNG or members of an LNG adjacent cartel, which casts a dark shadow on the operation of the LNG. They may also have local firms who are significant holders of intellectual property rights who file a complaint with their NCA, rather than filing a complaint with the pro-LNG Commission. While an NCA cannot override EU competition law with a ruling under national competition law it can apply EU competition law in respect of Article 101 TFEU. The draft TTG provides a framework for a safe harbour. However, that safe harbour can be lost as a result of an NCA investigation which is able to establish to its satisfaction that the LNG is in fact a buyers cartel. Given the issue is an issue of Union law, it is amenable to a reference to the CJEU, with the prospect of the Luxembourg judges then subjecting the what will then be the actual TTG to a similar judicial filleting to that which the Commission’s failed expansion of Article 22 EUMR received.

• 1Communication from the Commission, Approval of the Content for a Draft for a Commission Regulation on the Application of Article 101(3) of the Treaty on the Functioning of the European Union to Categories of Technology Transfer Agreements and a Draft for Commission Guidelines on the Application of Article 101 of the Treaty to Technology Transfer Agreements, C/2025/5024, Brussels 16th September 2025.
• 2Riley, Killer Acquisitions a Step Too Far? Kluwer Competition Blog, 30th August 2023.
• 3Riley, Illumina/Grail: What is the Solutions for Killer Acquisitions Now? Kluwer Competition Blog, 15th October 2024.
• 4German Car Manufacturers Find for Anticompetitive Practices in the Purchase of Steel,
• 5Commission Fines Car Manufacturers and Association €458 million over End of Life Vehicle Recycling Cartel§1. 4, European Commission Brussels, 1st April 2025.
• 6Commission Notice on the definition of the relevant market for the purposes of Union competition law, C/2024/1645,European Commission, Brussels,
• 7BMW, Mercedes, Thyssenkrup and VW can Negotiate Acquisition of Certain Technology Licences,
• 8Case AT 409.79-Guidance Automotive LNG C(2025) 4526 Final, European Commission, Brussels, 9th July 2025 (hereafter Informal Guidance).
• 9Guidelines on the Applicability of Article 101 to Horizontal Co-operation Agreements, OJ 2023 C259/1
• 10This is particularly the case in respect of the conditions for the proposed safe harbour for LNGs in Para 326 of the draft TTG, op cit.
• 11Informal Guidance,op cit, para 27.
• 12op cit.
• 13Market Definition Notice, op cit.
• 14Stigler, A Theory of Oligopoly (1964) The Journal of Political Economy 44 et seq.
• 15Leslie, Trust, Distrust and Antitrust (2004) Texas Law Review 315 et seq.
• 16BMW, Volkswagen, others under DOJ Antitrust Investigation over Licensing, MLex, 26th March 2026.