COVID-19: EU Temporary Antitrust Framework For Essential Cooperation

COVID-19: EU Temporary Antitrust Framework For Essential Cooperation

Client Alerts

Contributors

Read more in our Coronavirus (COVID-19) Center.

View All

On April 8, 2020 the European Commission (the ‘EC’) published a temporary antitrust framework for assessing business cooperation to ensure the supply of “essential scarce products and services” during the COVID-19 outbreak (the ‘Temporary Antitrust Framework’, or ‘TAF’).1 The EC also issued Guidelines for EU Member States on the optimal and rational use of medicines,2 which address a similar purpose.

These measures for essential cooperation are summarized below. Notably, we outline the conditions for their application and the procedure that companies can use to obtain EU guidance on whether their cooperation is lawful. We also note the first example of cooperation under the TAF: a ‘comfort’ (no-action) letter to a trade association, Medicines for Europe.3

While most relevant to suppliers of medicine and medical equipment, the principles laid down may apply also to cooperation in other sectors of industry deemed essential to combat the pandemic.

WilmerHale’s European Antitrust and Competition team is closely monitoring these issues and regularly advises trade associations on antitrust compliance. The lawyers listed below would be happy to assist with any follow-up questions.

WilmerHale has formed a Coronavirus (COVID-19) Task Force to lead the legal and strategic counseling of clients around the world in response to the outbreak. The task force consists of WilmerHale lawyers in multiple key disciplines. The Crisis Management and Strategic Response Group is also involved in helping clients respond to these challenges.

EU Temporary Antitrust Framework For Cooperation (TAF)

EC encouragement of pro-competitive cooperation: The EC notes first that cooperation between businesses may ensure the continued supply and distribution of essential scarce products and services during the COVID-19 crisis.4

As a rule in EU law, companies must assess the legality of their agreements and practices themselves taking account of the EC’s regulations and guidelines. To facilitate this self-assessment of cooperation projects in the pandemic and their swift implementation, the EC has set out the main criteria that it will use to assess compliance with EU competition law.

The EC has also set up an exceptional procedure to provide comfort letters to companies as to specific cooperation projects.

Main cooperative activities envisioned: The EC explains that it expects cooperation in the health sector to be in various forms, some of which may raise varying degrees of competitive concern.

Independent entities such as a trade association, an independent advisor, an independent service provider or a public body may be suited to coordinate cooperation between companies in the health sector.5 In the EC’s view, such an independent entity can:

  • Coordinate joint transport for input materials.
  • Contribute to identifying essential scarce medicines in view of forecasted production.
  • Aggregate production and capacity information (while avoiding exchanges of individual company information).
  • Estimate demand on an EU Member State level and identify supply gaps.
  • Share aggregate supply gap information and request individual companies to indicate confidentially whether they can meet supply gaps.

While the EC indicates that such activities do not raise antitrust concerns, the EC emphasizes that safeguards must be in place to avoid companies sharing confidential information with competitors.6

Products covered: The TAF expressly covers medicines and medical equipment used for testing and treatment of COVID-19 patients, and products that are necessary to mitigate the effects of and eradicate the pandemic.7 However, the EC notes that cooperation may need to go further in order to avoid under-production of other vital medicines.8

Three criteria for assessment: In the TAF, the EC states that, while coordinating output or exchanging commercially sensitive information normally would raise concerns under EU competition rules, such cooperation can be acceptable and not an enforcement priority in the current exceptional circumstances, if three criteria are met. The cooperation must be:

  1. Necessary to increase output or avoid a shortage of essential products.
  2. Temporary in nature and not exceed the duration of the COVID-19 outbreak.
  3. Not more than strictly necessary to achieve the objective of addressing or avoiding shortage of supply.

In the TAF, the EC notes that companies should document all exchanges of information and agreements in this context. Documenting permissible exchanges of information between competitors is generally a best practice in any event.

The EC also states that it will take into account whether a public authority has encouraged or required the cooperation.9

Comfort letters: Given the need for swift implementation of projects to address the supply of essential products, and to increase the degree of legal certainty, the EC states in its communication that the EC is willing to provide exceptional discretionary guidance through comfort letters.10 A comfort letter is a letter in which the EC indicates that it does not intend to take any action against companies.

On April 8, 2020, the EC issued its first comfort letter to Medicines for Europe (formerly known as the European Generics Medicines Association).11 Medicines for Europe, representing manufacturers of prescription medicines, has developed a project which would assess the large demand spikes for intensive care unit (‘ICU’) medicines for the treatment of COVID-19 patients on a country basis to ensure the supply of such medicines where they are most needed.12

The EC notes that the objective of Medicines for Europe’s project is aligned with the EC’s efforts to avoid shortages of medical supplies during the pandemic.

The text has not been published by the EC. However it is reported that the comfort letter allows a set of cooperative practices, namely sharing active pharmaceutical ingredients or intermediates, communicating to optimize production at different sites, and coordinating distribution.13 In addition to the conditions in the TAF, the EC also appears to have stated:

  • The project must be open to all interested participants.
  • Minutes of meetings must be shared with the EC.
  • Medicines for Europe, or a third party, must collect and share only indispensable and aggregate information with the company participants.
  • The project must end when the pandemic ends or when the EC requests its end.14

The EC assessed that the proposed cooperation addressed the risk of a shortage of critical hospital medicines for the treatment of COVID-19 patients. The EC concluded that this temporary cooperation was justifiable under EU competition law, given its objective and the envisaged safeguards to avoid antitrust issues.15

The EC also warns that any discussion that is not necessary to achieve the objectives of the project will be subject to strict antitrust enforcement.16

Conclusion

 The TAF appears to be a useful step for the health care and life science industries, which may give them the opportunity to cooperate and help tackle the pandemic with some antitrust security. As noted in our earlier alert, similar principles may apply to other “essential products”, potentially outside health care and life sciences.

It is also noteworthy to see the EC issuing a comfort letter when it had stopped doing so for almost 20 years. We would expect that this will be a model for EU Member State competition authorities.

Companies remain responsible and must self-assess their cooperative conduct under EU competition law. The EC’s TAF only complements the regulations in effect for companies active in the health care and life science sector given the exceptional current circumstances.

With thanks to Su Şimşek and Alessia Varieschi for their assistance.

Contributors