COVID-19 outbreak has caused major disruption of supply chains and a steep rise in demand for certain products and services, notably in the health sector. These circumstances risk leading to shortages in critical medical goods used to treat COVID-19 patients, but also in other essential goods and services outside the health sector.
Tackling these exceptional general supply shocks and avoiding shortages in a timely manner may require the swift coordination of companies in order to overcome, or at least mitigate, the effects of the crisis to the ultimate benefit of citizens. However, some forms of cooperation are prohibited by EU competition law.
As a result, the European Commission (EC) has published a Temporary Framework Communication (Communication) to provide:
- Guidance to companies willing to temporarily cooperate and coordinate their activities to increase production in the most effective way and avoid shortages of supply of, in particular, urgently needed hospital medicines, without breaching competition law; and
- A temporary exemption for certain types of cooperation that would ordinarily amount to antitrust violations, but are deemed necessary to increase output and avoid shortages of supply in the current emergency situation.
Examples of cooperation that would not breach EU competition law include cooperation measures through a trade association or an independent advisor, aimed to:
- Coordinate joint transport for input materials;
- Contribute to identifying those essential medicines for which in view of forecasted production, there are risks of shortages;
- Aggregate production and capacity information, without exchanging individual company information;
- Work on a model to predict demand on a Member State level, and identifying supply gaps;
- Share aggregate supply gap information, and request participating undertakings, 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).
The temporary exemption will in turn apply to the following forms of cooperation between competitors:
- Coordination of the reorganisation of production with a view to increasing and optimising output;
- Exchange of commercially sensitive information (e.g. sales and stocks);
- Coordination of which sites produces which medicines (i.e., at a certain site, only one medicine is produced).
However, to benefit from this exemption, such measures must meet the following additional conditions:
- 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 as there is a risk of shortage or in any event during the COVID-19 outbreak); and
- Not exceed what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.
The exemption may also be applicable if such measures are encouraged and/or coordinated by a public authority (or carried out within the framework set up by the latter); or are imperatively requested by public authorities to temporarily cooperate in response to urgency situations related to the current COVID-19 outbreak.
Finally, the EC also repeats its availability to provide “comfort letters” in specific circumstances in response to requests submitted to the dedicated email address it specifically created in that context (see our previous blog post). For example, the EC announced that it has issued a “comfort letter” to Medicines for Europe concerning a specific cooperation project allowing businesses to share competitively sensitive information on stock availability and stock management measures aimed at avoiding situations of shortages of critical hospital medicines during the current pandemic.
There are important parallels between the EC framework and the guidance provided by other national competition authorities, such as the guidance provided by the UK’s Competition and Markets Authority (CMA).
While the Communication and any EC comfort letters do not directly bind the CMA and other national competition authorities, the CMA and the other national competition authorities are under a general requirement to safeguard the consistent application of EU and national competition law, according to Regulation 1/2003. Therefore, they may be expected to take a similar position in their jurisdictions.
The Communication applies as of 8 April and will remain applicable until the EC withdraws it, once it considers that the underlying exceptional circumstances are no longer present.