Economic Law

Covid-19 and Competition law

By 16 April 2020 No Comments
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The coronavirus crisis is forcing companies to face supply problems, a drop or shortage of production in certain sectors, logistical problems or significant variations in demand for certain products, without this list being exhaustive.

In order to overcome these exceptional circumstances, competing undertakings might naturally be tempted to cooperate and help each other, for example through swift agreements, whereas they should continue to compete on the market. Moreover, trade unions and professional associations, mobilised to defend the interests of the sectors concerned and limit the risks of the crisis, would be led to encourage their members to adopt a common approach towards their customers and/or suppliers.

Aware of this difficulty, the competition authorities, including the French Competition Authority, reacted quickly to draw up some guidelines specific to the current context.

However, these guidelines, issued rapidly by these authorities, are not sufficiently detailed and do not cover all possible practical situations. Thus, despite the current context, companies are still required to carry out all the necessary checks to ensure the compatibility of their agreements with competition law, even if these agreements have to be implemented quickly.

  1. The temporary framework defined by competition authorities for commercial practices implemented to address the COVID-19 crisis
  • In order to provide guidance to companies, the European Commission has published a temporary framework for business initiatives with a European dimension, in particular in the health sector, to respond to emergency situations related to the current pandemic.
    Thus, cooperation between competitors, such as stock reallocation, the coordination of joint transport or the sharing of certain aggregated information on production or capacity, would not give rise to a “an enforcement priority” of the competition rules, as long as they are:

(i) 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 used to treat COVID-19 patients;

(ii) temporary in nature; and

(iii) not exceeding what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.

  • For its part, the British competition authority (the CMA), on 25 March 2020, published guidelines in which it describes in a more comprehensive manner the approach it intends to take with regard to commercial cooperation between companies during the COVID-19 crisis.

The CMA thus undertakes not to take enforcement action against agreements that (i) are appropriate and necessary to ensure security of supply, (ii) are clearly in the public interest, (iii) contribute to the benefit or wellbeing of consumers, (iv) cover only critical issues arising in connection with the COVID-19 pandemic, and (v) last no longer than necessary.

  • In addition, to assist companies in their risk assessment (all sectors), the French Competition Authority has announced that it will provide informal advice on the compliance with competition law of  cooperation projects submitted to it.

Beyond informal assistance, the European Commission could return to the old practice of “comfort letters”. Thus, on 8 April 2020, the European Commission granted an administrative letter of compatibility concerning a cooperation project between pharmaceutical producers to address the risk of shortage of critical hospital medicines for the treatment of coronavirus patients.

2. Ongoing monitoring by competition authorities

  • While stressing that competition authorities will take the context into account in their assessments, these authorities nevertheless unanimously recalled that competition rules continued to apply (and therefore possible sanctions were in sight). Though this exceptional situation does not allow to violate “antitrust” rules.
  • Illustrating the vigilance of competition authorities in the current context, the French Authority announced on 6 April 2020 that it had closed a week-long “express” investigation into exclusive import practices in the medical equipment sector for hospitals in French Guiana and the French West Indies. The supplier implicated in these proceedings promptly undertook before the Competition Authority to open up its distribution system so that importers wishing to purchase its respiratory assistance products for distribution in French Guiana, Guadeloupe and Martinique could obtain supplies directly from it or from any other authorised distributor.

The urgency caused by the current crisis must in no way leave any uncertainty as to the compatibility with competition law of an agreement with a competitor, a customer or a supplier, which includes a restriction on the commercial freedom of the contracting party.

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