As a result of the unprecedented circumstances we are currently facing, exceptional measures are being taken in a number of countries, namely due to the challenges various businesses are facing. On the 23 March 2020, the European Commission, the EFTA Surveillance Authority, and the National Competition Authorities issued a joint statement acknowledging that the current situation may require undertakings to cooperate with one another to ultimately benefit consumers. The Office for Competition, Malta’s national competition authority, issued a statement confirming the contents of the joint statement on 24 March 2020 (see here).
Further to this joint statement, the European Commission (the ‘Commission’) adopted a Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak (the ‘Temporary Framework’) on 8 April 2020. In the Temporary Framework, the Commission acknowledges that cooperation among undertakings may help in efficiently addressing the shortage of supply of essential goods and services amid the coronavirus pandemic, which would, in turn, address shortages of such goods and services.
Such practices could potentially be caught by the Article 101 of the Treaty on the Functioning of the European Union (the ‘TFEU’), which prohibits the entering into of agreements or concerted practices between two or more undertakings that have the object or effect of preventing, restricting, or distorting competition. However, in the Temporary Framework, the Commission does acknowledge that measures taken pursuant to the current situation – such as those that adapt production or manage stock, which may require exchanges of commercially sensitive information and coordination among the undertakings as to which site is to produce what medicines – do not necessarily raise antitrust concerns. This is the case, provided that the measures:
- i. are designed and objectively necessary to increase output in an efficient way to address or avoid a shortage of essential goods or services;
- ii. are temporary; and
- iii. do not exceed what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.
This notwithstanding, it should also be noted that the Temporary Framework is not a novel approach that is being taken to tackle this unprecedented circumstance. Rather, this is a case of applying existing antitrust rules to a novel situation. In fact, the Temporary Framework itself suggests that cooperation among competing undertakings does not raise concerns if previously issued Commission guidelines – in particular the Guidelines on Horizontal Cooperation – are complied with.
These Guidelines demonstrate how, while horizontal cooperation agreements between competing undertakings may, on the one hand, lead to competition concerns, they can also create economic benefits. The assessment as to whether the conduct of two or more undertakings is in breach of Article 101 TFEU comprises of two steps: the first step, under Article 101(1), analyses whether the agreement has an anti-competitive object or effect and the second step, under Article 101(3), which comes into play if the agreement is deemed anti-competitive, determines whether the pro-competitive benefits produced by that agreement outweigh the restrictive effects on competition. Therefore, provided that the conditions of Article 101(3) are fulfilled, the cooperation agreement between undertakings would not fall foul of Article 101.
This is not to say that competition rules should be flouted amid the pandemic. The Commission makes it amply clear that it will continue monitoring the way markets are developing to ensure that no undertaking takes advantage of the current situation by engaging in anti-competitive agreements or, if they hold a dominant position on the market, abusive practices.
Given the exceptional circumstances we find ourselves in, the Commission will also provide “comfort letters” to those undertakings seeking guidance with respect to specific cooperation initiatives with an EU dimension, where compatibility with EU competition law is in doubt.The initiatives need to be of a type that is swiftly implemented in order to effectively tackle the COVID-19 outbreak.The Commission has indicated that it is also willing to provide informal guidance outside the scope of the Temporary Framework.
The Temporary Framework was put into effect on the 8 April 2020 and will remain applicable until it is withdrawn by the Commission. The Commission also retains the discretion to review the Temporary Framework on the basis of how the outbreak continues to evolve.
This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr Annalies Muscat and Dr Laura Spiteri.