Antitrust Law: Guidance of the European Commission on business cooperation in times of crisis
The corona crisis is presenting many companies with major economic challenges. Deliveries fail, products are not available, short-time work is ordered or employees are sent to the home office. Companies are increasingly asking themselves to what extent cooperation and concerted practices with competitors or other companies are permitted in order to keep the threatening economic losses as low as possible. In this context, the European Commission ("Commission") published a Communication on April 8, 2020, in which it offers guidance to affected companies. The Commission wishes to make its contribution to facilitating the assessment of the compatibility of business cooperation with EU competition law in times of the Corona crisis. The Communication focuses mainly on those cooperations that are intended to ensure the supply of essential scarce products and services. The Commission hopes that this will encourage companies to cooperate in order to overcome or at least mitigate the effects of the crisis for the ultimate benefit of citizens.
Special procedure during Corona crisis
In principle, the Communication, like the other guidelines issued by the Commission for assessing compatibility with EU competition law (e.g. block exemption regulations), serves as a self-assessment tool for the companies concerned.
Although it is usually the task of companies to assess the legality of their behaviour and the Commission has not so far offered advice on legality, it now wants to give companies a little help. If companies have doubts about the legality of their business activities, there is now an explicit possibility to obtain assistance on a separate website and by contacting the Commission directly (COMP-COVID-ANTITRUST@ec.europa.eu). In individual cases, the Commission even reserves the right to issue an ad hoc communication on the compatibility of cooperation initiatives with EU competition law.
Assessment criteria for admissibility
The Commission recognises that cooperation between competitors and companies can help to address more effectively the shortage of essential products and services during the Corona crisis. In particular, it sees the need to ensure the supply of healthcare products and, above all, of products needed to treat infected patients. Accordingly, it considers a wide variety of measures to be possible to close the gap between supply and demand.
It is conceivable, for example, to increase the production of essential products while postponing the production of other products. Furthermore, the redistribution of stocks between companies could also be necessary. This would in turn require enterprises to exchange information on sales and stocks. It is also conceivable that production lines could be switched from products that are not necessary or not in short supply to essential products such as respiratory masks, protective clothing or even medicines. In addition, companies could increase their production even further and more efficiently by producing only one single drug at a certain location.
On the basis of recent experience, the Commission believes that cooperation in the health sector by commissioning a professional association or an independent consultant is permissible. In this context, the following measures should be considered as safe:
- Coordination of joint transports for input materials;
- helping to identify those essential medicines which, in view of the forecast production, are in danger of becoming scarce;
- to aggregate production and capacity information without exchanging information on individual companies;
- work on a model to forecast demand at Member State level and identify supply gaps;
- exchange information on aggregated supply gaps and invite participating enterprises, on an individual basis and without exchanging this information with competitors, to indicate whether they can fill the supply gap to satisfy demand (either through existing stocks or by increasing production).
As regards cooperation between companies in the health sector, the Commission allows for more far-reaching measures. For example, the exchange of sensitive information and coordination of production may exceptionally be necessary and permissible. This should ensure that all medicines can be produced in sufficient quantities. However, the prerequisite for such an exception is that the measures
are designed and objectively necessary to actually increase output as efficiently as possible in order to eliminate or avoid a shortage of essential products or services, such as the treatment of COVID-19 patients
are of a temporary nature (i.e. they may only be used as long as there is a risk of a shortage of supply or during the COVID-19 outbreak); and
do not go beyond what is strictly necessary to achieve the objective of eliminating or preventing the supply shortage.
Companies should document all exchanges and agreements between them and make them available to the Commission on request.
In assessing whether such an exception exists, the Commission will take into account all the circumstances underlying the cooperation. In particular, the fact that the cooperation has been mandated by a public authority should indicate the legality of such cooperation.
With this Communication, the Commission is offering an initial aid for assessing business cooperation in times of the Corona crisis. In general, the communication remains in force until it is repealed by the Commission. However, as the Commission cannot yet foresee all developments, it reserves the right to amend the Communication further in the course of the corona crisis - companies that are seeking or implementing such cooperation should therefore regularly check for updates.
Should you have any questions in this regard or require general support in matters of antitrust law, our lawyers in Frankfurt am Main, Hamburg and Berlin will be happy to assist you.