In our Q&A “competition authorities allow limited cooperation between competitors in response to the coronavirus outbreak”, 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 corona-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.
As the corona-crisis continues to rage on, the European Commission (“Commission”) felt that a rigid application of the normal antitrust rules could hinder the collective fight against the virus. Consequently, the Commission published its “Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak” (“the Commission Communication”), as it believes that the corona-crisis triggers the need for undertakings to cooperate with each other in order to overcome or at least to mitigate the effects of the crisis to the ultimate benefit of citizens.
In this Communication, the Commission discusses the 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, including notably medicines and medical equipment that are used to test and treat COVID-19 patients.
The Commission thus indicates that cooperation in the health sector might for instance consist of entrusting a trade association (or an independent advisor, or independent service provider, or a public body), to e.g.:
- Coordinate joint transport for input materials;
- Contribute to identifying those essential medicines for which, in view of forecasted production, there are risks of shortages;
- Aggregate production and capacity information, without exchanging individual company information;
- Work on a model to predict demand on a Member State level, and identifying supply gaps;
- Share aggregate supply gap information, and request participating undertakings, on an individual basis and without sharing that information with competitors, to indicate whether they can fill the supply gap to meet demand (either through existing stocks or increase of production).
As long as this Commission Communication is applicable, such activities will not be considered as raising antitrust concerns given the exceptional circumstances of the corona-crisis, provided that they are subject to sufficient safeguards, such as no flow of individualised company information back to competitors. In this regard, the Commission refers to its general Guidelines for the assessment of horizontal cooperation agreements between competitors.
According to the Commission’s Communication, cooperation in the health sector might even need to go further to overcome critical supply shortages. It may, for instance, need to extend to coordinating the re-organisation of production with a view to increasing and optimising output so that not all firms focus on one or a few medicines, and other medicines remain in under-production, where such re-organisation would allow producers to satisfy demand for urgently needed medicines across Member States.
Measures to adapt production, stock management and, potentially, distribution in the industry may require exchanges of commercially sensitive information and a certain coordination of which site produces which medicines, so that not all undertakings focus on one or a few medicines, while others remain in under-production. Such exchanges and coordination between undertakings are in normal circumstances problematic under EU competition rules. Nevertheless, in the current exceptional circumstances, such measures would not be problematic under EU competition law or –in view of the emergency situation and temporary nature – they would not give rise to an enforcement priority for the Commission, to the extent that such measures would be:
- designed and objectively necessary to actually increase output in the most efficient way to address or avoid a shortage of supply of essential products or services, such as those that are used to treat COVID-19 patients;
- temporary in nature (i.e. to be applied only as long there is a risk of shortage or in any event during the COVID-19 outbreak); and
- not exceeding what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply. Undertakings should document all exchanges, and agreements between them and make them available to the Commission on request. The fact that a cooperation is encouraged and/or coordinated by a public authority (or carried out within a framework set up by the latter) is also a relevant factor to be taken into account to conclude that such cooperation would not be problematic under EU competition law or would not be an enforcement priority for the Commission.
Despite the above guidelines, the Commission understands that there can still be uncertainty about whether certain initiatives are compatible with EU competition law. With a view to increasing the degree of legal certainty as regards antitrust guidance within a timeframe that is compatible with the urgency of certain situations related to the current COVID-19 outbreak, the Commission, through its Directorate General for Competition, stands ready to provide such guidance by means of an ad hoc “comfort letter”. This is exceptional, as since the entry into force of Council Regulation (EC) No 1/2003, undertakings in normal circumstances could no longer notify their agreements to the Commission in order to receive an individual exemption, but were themselves responsible for assessing the legality of their agreements and practices. The Commission has now revived the old system of “comfort letters”. To this end, the Commission has set up a dedicated mailbox that can be used to seek informal guidance on specific initiatives:
In order to facilitate a swift follow-up, companies are asked to provide upfront as much detail as possible on the initiative, including:
- the firm(s), product(s) or service(s) concerned;
- the scope and set-up of the cooperation;
- the aspects that may raise concerns under EU antitrust law; and
- the benefits that the cooperation seeks to achieve, and an explanation of why the cooperation is necessary and proportionate to achieve those benefits in the current circumstances.
It is clear that the Commission, when offering such guidance, did not made empty promises. Indeed, it already sent a first Comfort Letter to Medicines For Europe (Comfort Letter and Press Release Medicines For Europe).
These exceptional rules on competitor cooperation in the Commission’s Communication shall remain applicable until the Commission withdraws it, once it considers that the underlying exceptional circumstances are no longer present.
We add that 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 further indicated under which circumstances aid for R&D projects carrying out COVID-19 and other antiviral relevant research, would be considered to be competition law compliant. This is discussed in our Q&A “Does competition law allow competing researchers to collaborate on corona-R&D?”
Finally, we note that national competition authorities also issue COVID-19 related instructions and guidance. For instance, the Belgian Competition Authority requested companies to delay any project of concentration that is not urgent. The Authority further indicated that it is closed until further notice, but that all staff members are teleworking and that the handling of cases will continue. While the Authority strives to ensure the continuity of public service, the containment measures imposed by the Government may have an impact on its ability to handle merger cases as usual. In particular, the Authority noted that the gathering of information from the parties and third parties will be more cumbersome.
To face the exceptional challenges due to the COVID-19 crisis, the Commission has now explained what kind of competitor cooperation would, exceptionally and temporarily, not be considered as an antitrust violation. However, even in these exceptional circumstances, competitor cooperation should not go further then what is strictly necessary in order to tackle the crisis, and should be temporary in nature. The Commission has revived the old system of “comfort letters” to offer companies further guidance on their joint initiatives.
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.