LATEST IN COMPETITION LAW: “Covid-19 outbreak – Commission provides guidance on allowing limited cooperation among businesses, especially for critical hospital medicines during the coronavirus pandemic”

The Commission first witnesses a supply shock resulting, on the one hand, from the disruption of supply chains, and on the other hand, from a demand shock caused by an abrupt decline in consumer demand for certain products and services notably related to the health sector. In order to avoid shortages of essential medical products, the Commission finds that it might be necessary to enable companies to quickly coordinate and minimize the impact of the crisis. Although the focus is primarily on the health sector, the Commission points out that supply emergencies resulting from the pandemic may also occur for other essential goods and services outside the health sector.

Regarding the cooperation arrangements aiming at avoiding the shortfall of essential products, they could for instance consist of:

• coordination of joint transport for input materials;
• identification of essential medicines;
• aggregation of production and capacity information;
• shaping of a model to predict shortages; and
• aggregate information sharing on these shortages.

According to the Commission, these practices will not be likely to raise competition concerns, as long as they do not lead to exchange of competitively sensitive information.

The Commission also envisions production-sharing agreements between competitors in order to prevent certain companies from focusing on the production of the same product. It provides that they will not raise any competition issues, despite the fact that competitively sensitive information will be exchanged.

These agreements should however be :

• designed and objectively necessary to actually increase output in the most efficient way to avoid or address shortages of essential products or services;
• temporary in nature (i.e., to be applied as long as 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 of shortages.

 

The control of this cooperation

Regarding the assessment of this cooperation in the light of competition law, this assessment is in the first place performed by companies themselves, who should self-assess their draft agreements.

The Commission can also provide the companies with oral and informal assistance.

By way of exception, the Commission announces that it stands ready to provide comfort letters for specific draft cooperation agreements that have to be implemented swiftly in order to counter the outbreak. In its press release, the Commission indicates it already has granted such a comfort letter to “Medicines for Europe”, in relation with a cooperation project among pharmaceutical producers that targets the risk of shortage of critical hospital medicines for the treatment of patients.

 

A reminder of the compliance requirement with the general framework of competition rules

In these exceptional circumstances, the Commission stresses that it is more important than ever for companies and consumers receive protection under competition law. It announces therefore that it will continue to actively monitor market developments in order to identify companies that will take advantage of the current situation to breach competition law rules, either by engaging in anti-competitive agreements or abusing their dominant position.

This Communication of the Commission echoes the French Competition Authority’s release from last 23 March, which spread the European Competition Network’s (gathering all competition authorities from Member States of the European Union) message. The ECN recalled that should companies have any concern with respect to the compliance of their initiative with competition law rules, they could anytime reach out to the Commission or the relevant national competition authority to get informal guidance, taking into account the very specific context at stake.

We are at your entire disposal to answer all your questions concerning the cooperation that your company could consider in the context of the sanitary crisis.