Does competition law allow competing researchers to collaborate on corona-R&D?

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Carmen Verdonck

Partner

Beatrijs Gielen

Associate

Updated on Friday 15 May 2020 -4pm

The Belgian government has taken draconic measures to limit the damage caused by the new corona-virus. However, at least the following products are key to tackling the COVID-19 pandemic: new vaccines against the SARS-CoV-2 virus , quick and trustworthy diagnostic tests to detect the virus, and effective medicines that can cure the COVID-19 disease. The development of these products depends on pharmaceutical companies, R&D companies, research institutes, universities and the like. However, the question remains of what are the competition rules regarding COVID-19 related R&D?

 

To encourage COVID-19 related R&D, the European Commission has provided for temporary state aid rules allowing national aid measures supporting such R&D. In its “First Amendment of 3 April 2020 to the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak”, the Commission indicated that aid for R&D projects carrying out COVID-19 and other antiviral relevant research, constitutes state aid (and thus must be notified to and approved by the Commission) but will be considered as compatible with the internal market and will thus be allowed, provided certain conditions are met. These conditions include, amongst others, the following:

  • The aid is granted in the form of direct grants, repayable advances or tax advantages by 31 December 2020;
  • The aid for each beneficiary may cover 100% of “eligible costs” for fundamental research and must not exceed 80% of eligible costs for industrial research and experimental development;
  • “Eligible costs” may refer to all the costs necessary for the R&D project during its duration, including amongst others, personnel costs, costs for digital and computing equipment, for diagnostic tools, for data collection and processing tools, for R&D services, for pre-clinical and clinical trials (trial phases I-IV), for obtaining, validating and defending patents and other intangible assets, for obtaining the conformity assessments and/or authorisations necessary for the marketing of new and improved vaccines and medicinal products, medical devices, hospital and medical equipment, disinfectants, and personal protective equipment; phase-IV trials are eligible as long as they allow further scientific or technological advance;
  • The aid beneficiary shall commit to grant non-exclusive licences under non-discriminatory market conditions to third parties in the EEA.

Based on this State Aid Temporary Framework, the Commission has approved two Belgian aid schemes to support corona-virus related R&D, one on 27 April 2020 of €4 million for projects in the Brussels-Capital region (Brussels Press Release and Brussels Decision), and one on 12 May 2020 of €25 million for projects in Wallonia (Wallonia Press Release and Wallonia Decision).

R&D regarding COVID-19 in the context of European or national studies (whether or not benefiting from the above mentioned specific state aid rules) would benefit from collaboration amongst the R&D parties. However, the COVID-19 crisis does not offer a wildcard to competitors to ignore competition law by freely collaborating and coordinating.

In our post “Can I work together with other companies to tackle the coronavirus pandemic?”, we explained that the national competition authorities of the European Competition Network (ECN) stressed in their joint statement that certain forms of cooperation are allowed in the context of the COVID-19 crisis, but that at the same time antitrust discipline must be maintained during the crisis and that such cooperation should not go beyond what is strictly necessary to correct the market difficulties created by the crisis. However, the ECN's joint statement does not specifically mention collaboration in the context of R&D. Similarly, the Commission published a Temporary Framework for assessing antitrust issues, but that document only provides for loosened antitrust rules for possible forms of cooperation between undertakings in order to ensure the supply and adequate distribution of essential scarce products and services during the COVID-19 outbreak. Consequently, the regular rules on R&D still apply.

In order not to infringe competition law, it is therefore critical for researchers to be able to rely on the safe harbor for R&D agreements offered by the Commission’s R&D Block Exemption Regulation No 1217/2010. Consequently, R&D agreements among competitors in the context of the COVID-19 crisis, providing e.g. for the joint development of new vaccines against COVID-19, diagnostic tests or medicines to cure the disease, or the joint exploitation of these results, would not be considered anticompetitive if the combined market share of the parties does not exceed 25 % on the relevant product and technology markets, provided certain additional conditions are met. For example, all the parties must have full access to the final results of the joint R&D, including any resulting IP rights and know-how. Furthermore, the availability of the newly developed COVID-19 vaccines, diagnostic tests or medicines throughout the EU would be enhanced as the R&D agreement cannot include hardcore antitrust infringements, like the restriction of the territory in which, or of the customers to whom, the parties may passively sell the contract products; or the requirement to refuse to meet demand from customers in the parties’ respective territories.

After the R&D stage, parties could try to rely on the safe harbor for specialisation agreements offered by the Commission’s Specialisation Block Exemption Regulation No 1218/2010 for different types of joint production. Specialisation agreements among competitors in the context of the COVID-19 crisis, providing e.g. for the joint production of new vaccines against COVID-19, diagnostic tests or medicines to cure the disease, would not be considered anticompetitive if the combined market share of the parties does not exceed 20 % on any relevant market and provided certain additional conditions are met.

In case the parties exceed the market share thresholds set by the R&D or Specialisation Block Exemption Regulations, competition law still does not absolutely prohibit collaboration. However, in that case, parties will need to be able to show that their collaboration meets the requirements of an “individual exemption”. Their collaboration must contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit. No restrictions which are not indispensable to the attainment of these objectives must be imposed and competition must not be eliminated. The development of COVID-19 vaccines, diagnostic tests or medicines will undoubtedly be considered as an important benefit for consumers, but parties should nevertheless ensure that their cooperation does not go beyond what is strictly necessary to their joint collaboration project and to correct the market difficulties created by the crisis.

Conclusion. The collaboration of researchers to develop COVID-19 vaccines, diagnostic tests and medicines is certainly to the benefit of consumers, and competition law does not absolutely prohibit such collaboration. However, despite the current crisis, competition law still applies and imposes limits on such collaboration. To ensure competition law compliance, research parties should ensure that their collaboration meets the strict requirements for an individual exemption or, which is easier to prove, falls within the safe harbor of e.g. the R&D or Specialisation Block Exemption Regulations.

Do not hesitate to contact Beatrijs Gielen or Carmen Verdonck for further information. 

[1] Commission Regulation No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the functioning of the European Union to categories of research and development agreements, OJ L 335, 18.12.2010, p. 36

[2] Commission Regulation No 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty to categories of specialisation agreements, OJ L 335, 18.12.2010, p. 43.

The above information is merely intended as comment on relevant issues of Belgian law and is not intended as legal advice. Before taking action or relying on the comments and the information given, please seek specific advice on the matters that are of concern to you.

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