All EU competition authorities jointly address application of competition law during Corona pandemic
***** Update 09.04.2020: European Commission publishes Temporary Antitrust Framework for assessing antitrust issues related to business cooperation in times of Covid-19 *****
Following the European Competition Network´s joint statement on the application of competition law during the Corona pandemic, the International Competition Network, a global community of competition agencies, also issued a statement addressing key considerations related to competition law enforcement during and after the Covid-19 pandemic. The statement points out the relevance of competition to economies in crisis and urges member agencies to remain vigilant to anti-competitive conduct. At the same time, the statement recognizes the ability of agencies to evaluate and consider good faith efforts and limited collaborations among competitors in order to provide needed goods and services.
The European Commission now has published a Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current Covid-19 outbreak (“Antitrust Framework”). The EU Commission recognizes the need of legal certainty for businesses with respect to cooperation initiatives aiming at ensuring efficient supply of scarce products. The Antitrust Framework explains when and how companies can obtain guidance or written comfort on whether their envisaged cooperation is in line with EU competition law. It will be applied by the EU Commission as of 8 April and until further notice.
In a nutshell
Ordinarily, companies cannot request the EU Commission to assess and approve a contemplated agreement with a supplier, customer or competitor. Companies need to self-assess antitrust compliance on the basis of the law, interpretative guidance, and decisions. The Antitrust Framework acknowledges that, these days, companies may need specific guidance in relation to cooperation initiatives in order to facilitate their antitrust compliance self-assessment. In certain cases, companies may even need ad-hoc feedback or comfort on the legality of specific initiatives. Therefore, as of 8 April, the EU Commission will apply its Antitrust Framework and stands ready to provide guidance by means of an ad-hoc “comfort” letter to companies in exceptional situations and at the EU Commission’s discretion.
Availability of general guidance
The Framework states that the Covid-19 outbreak requires different degrees of cooperation, which trigger a varying scale of potential antitrust concerns.
Exemplary, the Antitrust Framework addresses certain forms of cooperation in the health sector. It identifies unproblematic forms of cooperation that do not raise concerns provided that appropriate safeguards are put in place. One example relates to a trade association that is entrusted with certain tasks by its members – such as the coordination of joint transport for input materials; contributing to identify essential medicines for which there are risks of shortages; sharing aggregate supply gap information, and request participating companies, on an individual basis and without sharing that information with competitors, to indicate whether they can fill the supply gap to meet demand.
The Antitrust Framework also identifies situation where there might be need for more extensive exchanges of commercially sensitive information between companies as part of their cooperation initiative, for instance, to ensure efficient production, stock management and distribution. In such a case, the EU Commission will refrain from action if the measure is:
- 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;
- temporary in nature (i.e. to be applied only as long 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 the shortage of supply.
Companies should document all exchanges, and agreements between them and make them available to the EU Commission on request.
Possibility for comfort letters
In exceptional situations and at its own discretion, the EU Commission is prepared to provide guidance by means of an ad-hoc “comfort” letter. Such letter provides legal certainty as to the competition law compatibility of a cooperation initiative.
While the comfort letter will be an exceptional instrument, it should be noted that the EU Commission did already issue a comfort letter to “Medicines for Europe”. The comfort letter addresses a specific voluntary cooperation project amongst pharmaceutical producers – both members and non-members of the association – that targets the risk of shortage of critical hospital medicines for the treatment of coronavirus patients.
The Antitrust Framework emphasizes the EU Commission’s preparedness to find pragmatic solutions in order to increase legal certainty for companies. However, companies should note that the Antitrust Framework is temporary in nature. This is particularly relevant for measures such as the exchange of sensitive information that usually are not – or only in exceptional cases – compatible with competition law. Companies are thus well-advised to document the scope and reasons for the exchanges very carefully. Comfort letters by the EU Commission will only be available in exceptional constellations.
The EU Commission’s set up a dedicated web page providing an overview of the applicable competition rules during the time of the coronavirus pandemic. The website also contains details on how to seek guidance from the EU Commission (via a special mailbox).
***** Update 30.03.2020: European Commission sets up special mailbox to provide guidance to companies regarding the application of competition law during the corona pandemic *****
After the joint statement on the application of competition law during the corona pandemic, the European Commission set up a website providing an overview of relevant legal documents so that companies can better assess whether their conduct complies with antitrust law. In addition, companies can request guidance via a newly set up mailbox in case they are still uncertain whether their corona pandemic related business initiatives are in line with EU antitrust law. Guidance is available for “specific cooperation initiatives with an EU dimension, that need to be swiftly implemented in order to effectively tackle the coronavirus pandemic.”
Information provided via the mailbox will be treated with utmost confidentiality and just be shared within the European Competition Network. Nonetheless, it seems prudent to draft the request for guidance carefully and only provide data truly necessary for the European Commission’s assessment in order to keep the review process lean and allow for a swift response. If the initiative primarily concerns a particular Member State, the European Commission recommends directly contacting the national competition authority.
***** Updated on 27.03.2020: European Union Commissioner for Competition warns companies against taking advantage of the present situation by cartelizing or abusing dominant market positions *****
After the recent joint statement on the application of competition law during the Corona pandemic by the European Competition Network, EU Commissioner for Competition Margrethe Vestager now reiterated one of the core messages of the joint statement.
She pointed out that “a crisis not a shield against competition law enforcement” and that the enforcement activities of the European Commission would continue against all forms of collusion be it small cartels or large tech companies abusing their market power. In fact, the European Commission might stay extremely vigilant “if there is a risk of virus profiteering”.
This statement clarifies that even in times of crisis competition rules serve as a general framework for an efficient market economy. While the competition authorities in Europe might be more inclined to regard necessary and temporary cooperation and information exchanges ensuring supply and distribution of essential goods (e.g. food or protective clothing) as compatible with competition law, Ms. Vestager made it very clear that there will be no general relaxation of competition law enforcement.
***** News publised on 23.03.2020 *****
On 23 March, the European Competition Network (“ECN”) – consisting of the European Commission and the national competition authorities of all Member States – issued a joint statement on the application of competition law during the Corona pandemic.
In particular, the statement addresses the flexibility of the current competition law frameworks regarding cooperation initiatives aimed at tackling shortages of supply in the food sector. At the same time, it issues a strong warning against cartelizing or abusing a dominant position to take advantage of a market situation.
No active intervention against necessary and temporary measures put in place in order to avoid a shortage of supply
The ECN clarifies that competition rules ensure a level playing field between companies and that this objective remains relevant also in a period of crisis.
However, it also acknowledges that the Corona pandemic may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers. To this end, the ECN will not actively intervene against necessary and temporary measures put in place by companies in order to avoid a shortage of supply.
It stands to reason that this is a direct response to vocal players addressing the concerns of retail, wholesale, and other trading companies all over Europe over the last week: For example, EuroCommerce stated, “retailers have […] been cooperating to share information on supplies and arranging deliveries to the homes of people who cannot get out.” The UK government went a step further and published a press release announcing that it would relax competition laws so that supermarkets can join forces “to feed the nation”- Germany’s economy minister Peter Altmaier said, “If the food industry and retailers cooperate to ensure there are no shortages for the citizens during the crisis, then we will take up antitrust issues with the competition authorities and find a solution.”
Legally, the ECN reasons that measures aimed at avoiding or remedying a shortage of supply are unlikely to cause competition law concerns since they would either not amount to a restriction of competition in the first place or at least generate efficiencies that would most likely outweigh any such restriction. However, companies should bear in mind that they carry the (potentially severe) risk of assessing the competition law compatibility of their actions. The ECN suggests that when in doubt companies should present the contemplated cooperation initiatives to the competent authority in order to receive (informal) guidance. Considering that informal guidance requests usually do not enjoy high priority with the authorities, the authorities will have to prove over the next weeks that they are capable of finding fast and pragmatic solutions together with the companies.
ECN will closely scrutinize the market for companies taking advantage by cartelizing or abusing a dominant position
At the same time, the ECN stresses the need to ensure that products considered essential to protect the health of consumers in the current situation remain available at competitive prices.
More specifically, the ECN warns companies against taking advantage of the present situation by cartelizing or abusing their dominant position. The ECN even asks manufacturers to consider maximum retail prices for their products – which are allowed under the existing competition law framework – in order to limit (unjustified) price increase at the distribution level.
While the UK government considers legislation that foresees a specific, temporary relaxation of the UK Competition Act enabling retailers to work together for the sole purpose of feeding the nation, the ECN joint statement only stresses the flexibility of the competition law frameworks already in place. These frameworks on the EU and Member State level allow many forms of cooperation. However, companies have to carefully self-assess whether or not their specific cooperation initiatives are compatible with these frameworks. To this end, the joint statement provides limited guidance. In particular, it does not address when and to what extent an information exchange between competitors might be justifiable during this pandemic. It remains a case-specific question what necessary and temporary measures are against which the authorities may not actively intervene. In case of doubt, companies can, however, request (informal) guidance from the competent authority.
Any questions? Please contact: Dr Jens Peter Schmidt, Dr Fabian Hübener
Practice groups: Antitrust & Competition, Commerce & Trade