The European Commission specifies the conditions for cooperation in accordance with competition law between undertakings in response to the COVID-19 pandemic.
On 8 April 2020, the European Commission (hereinafter the “Commission“) published a communication establishing the conditions under which European undertakings can cooperate to respond to emergency situations arising from the current pandemic of COVID-19 without infringing Article 101 of the Treaty on the Functioning of the European Union, which prohibits anti-competitive agreements (see framework_communication_antitrust_issues_related_to_cooperation_between_competitors_in_covid-19.pdf ). This communication entered into force the same day.
1. The communication of 8 April 2020 is mainly intended for the production and distribution of medicines and medical equipment allowing the treatment of patients affected by COVID-19 but not only. One could thus imagine that it could soon be applied to the agricultural sector and agro-business, given the difficulties that they are encountering in meeting due to the pandemic. The communication covers several possible forms of cooperation between undertakings aimed at ensuring the adequate distribution of scarce and essential goods and services during the current crisis and thus preventing or bringing a solution to possible shortages of these goods and services resulting from an exponential increase in their demand.
The Commission finds that the current pandemic causes a disruption in supply chains coupled with an asymmetric shock resulting from a sudden drop in demand for several goods and services and a significant increase in demand for other, particularly in the health sector. It acknowledges that in order to overcome or at least mitigate the effects of this crisis, it may be necessary to establish forms of cooperation between undertakings operating in the relevant sectors or in other sectors and e.g. willing to convert part of their production lines to manufacture scarce goods or services or at risk of becoming scarce.
2. In particular, in order to bridge the imbalance between supply and demand for medicines, the Commission recognizes that, without raising any antitrust concerns and provided that they are subject to sufficient safeguards, a trade association, an independent advisor, an independent service provider or a public body may be entrusted with the following tasks:
(i) the coordination of the joint transport of input materials;
(ii) the identification of the essential medicines and medical devices for which there are risks of shortages;
(iii) the aggregation and transmission of production and capacity data, without exchanging individual undertaking’s data;
(iv) working to develop a model to predict demand on the national level and identifying supply gaps; and
(v) the sharing of aggregated data on supply gap and for the constitution of these data, the collection of individual data from undertaking, without exchanging these individual data.
The Commission has gone even further by accepting more advanced forms of cooperation to end shortages in the supply of critical goods and services so e.g. that producers do not all manufacture the same drug when others needed remain in under-production.
These more advanced forms can consist of exchanges of sensitive commercial data or coordination of production, stock management or distribution. If in normal times these practices do generally not comply with competition law, they can be implemented without raising any competition concerns given the current circumstances or they would not give rise to an enforcement priority from the Commission due to the emergency situation as far as these measures
(i) are designed and objectively necessary to
(a) actually increase output in the most efficient way to address or
(b) avoid a shortage of essential products or services, such as those used to treat Covid-19 patients;
(ii) are temporary in nature, i.e. they will be applied only as long as there is a risk of shortage or during the current outbreak; and
(iii) do not exceed what is strictly necessary to avoid a shortage of supply.
The Commission still requires that these measures and the exchange of information shall be documented so that they can be communicated upon its request.
Furthermore, it asserts that if undertakings coordinate upon an imperative request from national authorities to cooperate temporarily to respond to urgency situations relating to the current crisis, this cooperation will be authorized.
3. In addition, since 2014, it was up to undertakings to carry out their own assessment of their practices without being able to seek comfort from or to refer their project to the Commission as before. In view of the current particular circumstances, the Commission announced that it will help undertakings to assess the legality of their contemplated cooperation by giving them assurances by phone but also, exceptionally, by means of a comfort letter (see dedicated page of website of the Directorate-General for Competition of the Commission at the following address: https://ec.europa.eu/competition/antitrust/coronavirus.html).
The Commission thus released to have addressed to the trade association Medicines for Europe (formerly called European Association of Generic Medicines) such a letter, without giving the content. This letter relates to a temporary and voluntary cooperation project between producers, members or not of this association, of generic drugs in order to prevent the risk of shortage of critical hospital drugs to treat patients with COVID-19. It acknowledges that the contemplated cooperation is justified under UE competition law, taking into account its objective and the guarantees provided to eliminate any competition concerns, subject to the compliance with the limits communicated to the Commission.
4. Finally, the Commission recalls that it will not tolerate any infringement of EU competition law committed in the wake of the current crisis and that it will continue to actively monitor the market to detect them.
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