On 8 April 2020, the European Commission published its Communication on the “Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak” (the “Framework“).
The Commission recognizes that supply chains have been severely disrupted due to COVID-19, combined with “an asymmetric demand shock caused by either an abrupt decline in consumer demand for certain products and services or a steep rise in demand for other products and services”, notably in the health sector. The duration and intensity of the shock is unknown.
These exceptional circumstances “may trigger the need for undertakings to cooperate with each other in order to overcome or at least mitigate the effects of the crisis to the ultimate benefit of citizens” (para 3).
The purpose of the Framework is to:
(i) explain the main criteria that the Commission will follow when assessing possible cooperation projects between undertakings aimed at addressing the shortage of essential products and services during the COVID-19 outbreak;
(ii) describe the exceptional procedure that the Commission has set up to provide, where appropriate, ad hoc ‘comfort letters’ to undertakings in relation to specific cooperation projects.
The Framework applies to forms of cooperation between undertakings aimed at ensuring the supply and adequate distribution of essential scarce medicinal products and medical equipment (presumably not only medical devices but also personal protective equipment), as well as related services, during the pandemic. Undertakings currently active in the health sector can benefit from it, but so can those active in other sectors that are retooling to focus on scare products. The Framework may be amended or supplemented to cover other forms of cooperation.
Main criteria for the competition assessment of cooperation projects
The Framework reiterates that certain practices do not raise competition concerns in any circumstances, provided that they are subject to sufficient safeguards. For example, a trade association may share aggregated supply gap information with its members, and it may request its members, 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).
However, the adaptation of production, stock management, and distribution may require exchanges of commercially sensitive information and certain coordination (e.g., who produces which medicines to help ensure an adequate supply of all necessary medicines). Such coordination between undertakings is in normal circumstances problematic under the competition rules. Nevertheless, in the current exceptional circumstances, such measures would “not be problematic” under the competition rules or – in view of the emergency situation and temporary nature – they would “not give rise to an enforcement priority” (para 15) for the Commission, to the extent that they are:
(i) 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;
(ii) temporary in nature, meaning that they last only as long there is a risk of shortage or in any event are limited to the duration of the COVID-19 outbreak; and
(iii) not exceeding what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.
The Framework also provides that “undertakings should document all exchanges, and agreements between them and make them available to the Commission on request” (para 15). Further, the Framework indicates that 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 when determining whether or not such cooperation would be problematic under the competition rules or would be an enforcement priority for the Commission.
Finally, the Framework provides that “in the context of an imperative request from public authorities” (para 16) undertakings are allowed to temporarily cooperate in response to urgency situations related to the COVID-19 outbreak.
Exceptional procedure to obtain ad hoc guidance on specific cooperation projects
The Commission has already been providing oral guidance to undertakings during the last weeks with respect to the legality of specific cooperation initiatives. The Framework explains that the Commission is now also ready, exceptionally and at its own discretion, to provide undertakings with a comfort letter concerning specific cooperation projects that need to be swiftly implemented in order to effectively tackle the COVID-19 outbreak. Undertakings should write to a dedicated mailbox COMP-COVID-ANTITRUST@ec.europa.eu to seek informal guidance on specific initiatives.
On 8 April 2020, the Commission already issued a first comfort letter to “Medicines for Europe”, a trade association representing the European generic, biosimilar and value added pharmaceutical industries. The comfort letter addresses a specific voluntary cooperation project among pharmaceutical producers – both members and non-members of the association – aimed at avoiding shortages of critical hospital medicines for the treatment of COVID-19 patients.
The Framework will apply as of 8 April 2020 and remain applicable until withdrawn by the Commission once the underlying exceptional circumstances are no longer present.