The EU Commission publishes a temporary framework for assessing antitrust issues related to business cooperation in response to the COVID-19 outbreak

On 8 April 2020, the Commission published a Temporary Framework to assess possible forms of business cooperation in response to the emergency situation caused by the COVID-19 pandemic. More specifically, the Temporary Framework seeks to provide guidance to companies considering cooperation in order to ensure the supply and distribution of essential products, including medicines and medical equipment. The Temporary Framework envisages cooperation between undertakings that are already active in the health sector, as well as between undertakings that are active in other sectors, which for example decide to convert part of their production lines to start producing scarce products.

First, the Temporary Framework aims to outline the Commission’s enforcement priorities during this crisis and to establish the main criteria on the basis of which the Commission will assess cooperation projects addressing the shortage of essential products and services. According to the Commission, an adequate response to this crisis might require varying degrees of cooperation.

On one hand, the Temporary Framework identifies a number of activities which may lawfully be entrusted to a trade association, an independent advisor, a public body, or an independent service provider, provided that they are subject to sufficient safeguards (e.g., ensuring that no individualised company information flows back to competitors). Such activities include:

• coordinating joint transport for input materials; • contributing to identifying those essential medicines for which there are risks of shortages; • aggregating production and capacity information, without exchanging individual company information; • modelling demand on a Member State level and identifying supply gaps; and • sharing aggregate supply gap information, and requesting participating undertakings, on an individual basis and without sharing information with competitors, to indicate whether they can fill the supply gap to meet demand (either through existing stocks or increase of production).

On the other hand, the Temporary Framework acknowledges that cooperation between businesses might require a degree of cooperation which would under normal circumstances raise EU competition law concerns. By way of example, overcoming critical supply shortages may require measures to adapt production, stock man- agement, exchanges of commercially sensitive information and a level of coordination on which site produces which medicines, while others remain in under-production. However, in light of the current crisis, the Commission considers that cooperation meas- ures may either be not problematic under EU competition law or would not give rise to an enforcement priority for the Commission, provided that they are:

• designed and objectively necessary to actually increase out- put in the most efficient way to address or avoid a shortage of supply of essential products or services, such as those used in the treatment of COVID-19; • temporary, i.e., applied only as long as there exists 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.

To determine whether a cooperation project is problematic under EU competition law or whether it should constitute an enforcement priority, the Commission will also take account of the fact that such cooperation is encouraged, coordinated and/or carried out within a framework set out by a public authority. In any event, cooperation between businesses – for example, in the form of organising production and delivery to meet an urgent need to maintain the functioning of healthcare for COVID-19 patients – must be allowed when it stems from an imperative request from public authorities to undertakings.

Second, where there is still uncertainty about whether contemplated initiatives are compatible with EU competition rules, the Temporary Framework sets out an exceptional procedure for DG Competition to provide ad hoc guidance to undertakings and trade associations on specific cooperation projects aimed at addressing the shortage of essential products and services during the out- break. In this context, the Commission will, exceptionally and at its own discretion, provide its guidance by way of ad hoc comfort letters. To this end, DG Competition has set up a dedicated web- page and an e-mail address that can both be used to seek informal guidance on specific initiatives. Companies and trade associations that seek guidance from the Commission are requested to pro- vide detailed information on the initiative, including: (i) the firm(s), product(s) and service(s) concerned; (ii) the scope and set-up of the cooperation; (iii) the aspects that may raise concerns under EU competition law; and (iv) the benefits that the cooperation seeks to achieve and an explanation as to why the cooperation is neces- sary and proportionate to achieve said benefits under the current circumstances.

Third, the Temporary Framework emphasises that the present circumstances require that both undertakings and consumers enjoy the continued protection of competition law. Accordingly, the Commission will actively monitor relevant market developments to detect anticompetitive conduct on the part of undertakings which seek to exploit the crisis to unlawfully collude or abuse their dominant position. In particular, the Temporary Framework identifies the following behaviours as problematic: (i) exploiting consumers and customers by charging prices above normal competitive levels; and (ii) limiting production to the ultimate prejudice of consumers by obstructing attempts to scale up production to face shortages of supply. Therefore, undertakings and citizens are encouraged to report suspected cartels and antitrust violations, including abuses of dominant positions, through the leniency or whistle-blower tools at their disposal. The Temporary Framework has been applicable since 8 April 2020 and will remain so until its withdrawal by the Commission, which may review it depending on the evolution of the COVID-19 outbreak.

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Author

  • Van Bael & Bellis (Brussels)

Quotation

Martin Favart, The EU Commission publishes a temporary framework for assessing antitrust issues related to business cooperation in response to the COVID-19 outbreak, 8 April 2020, e-Competitions April 2020, Art. N° 94752

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