Prepared by Manfredi de Vita, Andrea Lensi Orlandi, Flavia Caltagirone and Silvia Riga
On April 8, the European Commission published the Communication C(2020) 3200, “Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak”, laying down criteria for the evaluation of possible cooperation projects to overcome the shortage of currently essential goods, products and services.
Indeed, as stated by Margrethe Vestager, Executive Vice-President in charge of competition law, due to the exceptional nature of the situation “to avoid the risk of shortages of essential and scarce products and services because of the unprecedented surge in demand due to the pandemic, we need businesses to cooperate and do it in line with European Competition rules”.
In this respect, the Commission made a concrete commitment to “…urgently provide businesses with sufficient guidance and comfort to facilitate cooperation initiatives boosting the production of products in high demand”.
The EU Commission is then aware that, at this time, cooperation between undertakings could contribute to tackle more efficiently shortage of essential products even if, under normal circumstances, such operation would be against antitrust rules.
Considering the above, the EU Commission defined (i) the main criteria that shall follow in assessing these possible cooperation projects aimed at addressing the shortage of essential products and services during the COVID-19 outbreak, and in setting its enforcement priorities during this crisis; and (ii) a temporary process exceptionally set up to provide, where appropriate, ad hoc written comfort letters to undertakings in relation to specific cooperation projects.
Notably, the response to emergency situations related to the COVID-19 outbreak might require different degrees of cooperation, such us:
- to exchange/communicate information on sales and stocks;
- to coordinate joint transport for input materials;
- identifying those essential medicines for which there are risks of shortages;
- aggregations of production and capacity information, without exchanging individual company information;
- to work on a model to predict demand and identifying supply gaps;
- to share such information and request participating undertakings to indicate whether they can fill the supply gap to meet demand.
These activities, if subject to sufficient safeguards – based on the Commission’s Guidelines on the applicability of Section 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements(1) – shall not raise antitrust concerns.
The Commission’s positive approach in endorsing a “connection” between undertakings seems justified by the temporary nature of the coordination and by the need to address or avoid a shortage of supply of essential products and services used to treat COVID-19 patients. In any case, undertakings should document all exchanges and agreements between them and make them available to the Commission upon request: at the same time, it was pointed out that anti-competitive agreements or abusing the dominant position by undertakings that opportunistically seek to exploit the crisis as a cover for anti-competitive collusions, will not be tolerated. The Commission thus encouraged undertakings and citizens to continue reporting any cartels and other antitrust violations, including abuses of dominant positions, that may come to their attention and constitute an antitrust prejudice.
Although the applicability of the Temporary Framework is anchored to a sectoral approach and limited to “essential goods during COVID-19 outbreak”, however it marks a relevant element of discontinuity from previous practices. Notably, until the current crisis, European antitrust law was enforceable without exceptions, even in times of severe recession, with a very restrictive view towards so-called “crisis cartels”. Indeed, historically speaking, the most significant elaboration concerning a less restrictive application of antitrust laws in times of crisis came across in the competition policy of the United States during first years of the Great Depression and the New Deal and, in particular, in the judgement of March 1933 where the US Supreme Court decided the Appalachian Coal case. By this occasion, in application of the rule of reason, a typical defensive cartel between coal producers was considered compatible with the Sherman Act.
In terms of implementation, taking into account those criteria defined within the Temporary Framework, the Commission, through its Directorate-General for Competition, shall hence continue, exceptionally and at its own discretion, to provide guidance to undertakings and trade associations by means of ad hoc comfort letters to be released especially where there is still uncertainty about whether such initiatives are compatible with EU competition law. It is thus revived a widespread and appreciated instrument in favour of undertakings existing within the framework of previous procedural regime defined by the EEC Regulation no. 17/62, later abounded as a result of the “modernization of the competition rules”, introduced by Regulation (EC) no. 1/2003.
The Commission’s Directorate-General for Competition also set up a webpage (https://ec.europa.eu/competition/antitrust/coronavirus.html) and a dedicated mailbox (COMP-COVID-ANTITRUST@ec.europa.eu) that can be used to seek informal guidance on specific initiatives.
In order to facilitate a swift follow-up, undertakings shall be asked to provide upfront as much detail as possible on the initiative, including: (i) the company(-ies), product(s) or service(s) concerned; (ii) the scope and set-up of the cooperation; (iii) the aspects that may raise concerns under EU antitrust law; and (iv) 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. In the end, the Commission seems aware of the exceptional challenges that undertakings are facing: therefore, alignment and concertation among undertakings is justifiable to the extent that there are more important interests to be pursued. For such reasons, the Communication shall remain applicable until the Commission withdraws it, having regard to the impact of the COVID-19 outbreak.
([1]) Communication from the Commission — Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ C 11, 14.1.2011, p. 1–72.
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