Agreements are a natural and essential part of the economy. They are set up to solve problems that cannot be solved more effectively individually. Despite these positive effects, some agreements may also compromise effective competition. For this reason, article 81(1) prohibits all agreements that restrict competition. In order to distinguish between agreements that have overall positive or negative effects, article 81(3) exempts all agreements were the positive effects for the consumers outweigh the negative ones. To assess which of the effects is the largest can often be a rather difficult task. The European Commission therefore commissioned Copenhagen Economics to develop a practical guidance on how to conduct an efficiency analysis in context of article 81(3). Our guidance is based on three different tests. Screening: The purpose of is to determine whether there is a need for a detailed assessment of the agreements pro- and anti-competitive effects. Simple indicators are used. Measuring: Here we identify and measure the magnitude of any anticompetitive effects and efficiency gains stemming from the agreement. Measuring can be complicated and we propose a three step approach; Identification, Substantiation, and Quantification. Balancing: At last we determine whether the efficiency gains are larger than the anti-competitive effects. If this is the case, we can conclude that the agreement is exempted according to Article 81(3). In all other cases, the agreement will be incompatible with EC law. The guidance can be downloaded here For further information you can contact Dr Claus Kastberg Nielsen