News – 04.06.2020

Procopé & Hornborg Competition blog: Response by Competition Authorities to COVID-19 crisis – The safe space for Essential Initiatives

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COVID-19 and response from Competition Authorities

Businesses are facing huge challenges due to the COVID-19 crisis and competition authorities have responded. The Commission quickly adopted the Temporary Framework Communication on 8th April 2020, setting out the main criteria for assessment of co-operation projects for shortage of supply of essential products and services during the outbreak. The Commission also has in place an exceptional procedure to provide ad hoc guidance on specific co-operation projects aimed at addressing the problems caused by the COVID-19 outbreak and has stated its willingness to issue guidance. The Commission has issued, for example, a comfort letter to Medicines for Europe aimed at avoiding situations of shortages of critical hospital medicines.

The national competition authorities, including the Finnish competition authority (FCA) and the European Competition Network (ECN) have also published statements on COVID-19 outbreak, some of them identifying the essential markets affected such as medicines and personal protective equipment. 

At the same time the competition authorities have – rightly so – reminded us that competition law enforcement has not been suspended. They will not tolerate conduct by businesses that seek to exploit the crisis as a cover for anti-competitive collusion or abuses of their dominant position such as charging prices above competitive level. Businesses need to co-operate but do it in compliance with competition law.

Safe space for Essential Initiatives

The authorities have acknowledged that the COVID-19 outbreak is a severe public health emergency for citizens and societies. The private sector plays a crucial role in overcoming and mitigating the effects of the crisis. Commission acknowledges that the response to emergency situations might require different degrees of swift co-operation, with varying scale of potential antitrust concerns.

Basically, under competition law, co-operation, information exchange or R&D between competitors could either not amount to a restriction of competition or efficiency defense could be invoked – meaning the collaboration would generate efficiencies that would most likely outweigh the negative effects of such a restriction. The framework of competition law is a sharp apparatus and the crisis management by the authorities proves that enforcement of competition law is flexible to a certain extent, as are the current rules and communications. And some more room to maneuver has been provided. 

The Commission’s Framework Communication refers to different types of co-operation and information exchange between competitors. The Commission states that certain activities do not raise antitrust concerns. Of certain measures, it does state that they are in normal circumstances problematic under EU competition rules. Nevertheless, the Commission states, in the current exceptional circumstances – and upon specific conditions – such measures would not be problematic under EU competition law or they would not give rise to an enforcement priority for the Commission. Also, the fact that a co-operation is encouraged and/or coordinated by a public authority, is also a relevant factor in assessing the legality of the co-operation. In the assessment, emphasis could be placed for the role of the trustee to provide “a clean team function” which could be a trade association, independent advisor or service provider, or a public authority. In this blog, I have named such emergency co-operation “Essential Initiatives”.

Neither the Commission Framework Communication nor the issued Comfort Letter provide a safe harbor for businesses. But they do provide a safe space for Essential Initiatives.

The undertones in assessing the Essential Initiatives – general interest, efficiencies or consumer welfare

The Commission is hands on because this is an unprecedented shock to the economies. The Commission’s style of communication refers to economic terms, shortages of supplies and bridging the gap between demand and supply. But we are also talking about non-economic factors, the lives and health of COVID-19 patients and us all, the urgent policy priority for all public authorities.

For a practicing lawyer it is captivating to consider the doctrines, undertones, arguments and different concepts when assessing the legal basis and appropriate safeguards to legality of Essential Initiatives: is it so that the emergency, exceptional circumstances, general interest and public policy aspect signifies that the Essential Initiatives do not at all fall under antitrust rules and one can rule out that the co-operation is restrictive of competition, akin to the Wouters doctrine? Or is it the fact that the co-operation is temporary, with no permanent impact on the competitive situation on the relevant market? Or are we talking about efficiencies outweighing possible restrictive effects? Is this also a question of factoring in or quantifying non-economic arguments as efficiency benefits?  Or might the question be of market failure which calls for rapid intervention, prioritization or non-enforcement of competition law? One can also throw in the concept of consumer benefit and consumer welfare which is the underlying goal of competition law enforcement. I am a fan of a more modern, refined concept of consumer welfare – a concept which is often bluntly described under pure economic terms as if all consumers would have identical requirements and choices. All these are big questions and interpretation goes case-by case.

Preparation for the Next Generation

As we overcome the current crisis, we might witness the doctrines or legal instruments put in place by authorities for Essential Initiatives evolve. We might also see new undertones in mainstream competition law enforcement or new niche enforcement policy considerations. Afterall, this will not be our last crisis. The niche instruments and legal justifications for Essential Initiatives might be in frequent need also in the future.