One of the main elements of competition law is that cooperation between competitors is prohibited when it leads to the restriction of competition. The current situation with COVID-19 poses challenges for companies which are either booming due to a rapid growth of demand for their products and services or are going through times of economic hardship due to an unprecedented low demand attributed to full or partial suspension of their operations. In both cases, companies may give recourse to cooperation with competitors either to deal with the exponential growth of demand and address the shortages of essential products and services or to minimize cost and survive.

Temporary Framework

The competition authorities are aware of the social and economic consequences triggered by the COVID-19 outbreak and of the potential need for companies to cooperate. The European Commission has recognized the need for facilitating cooperation to boost the production of products in high demand so as to avoid the risk of shortages of essential and scarce products and services, in particular medicines and medical equipment to treat coronavirus patients. In this regard, it has published a Temporary Framework[1] to provide antitrust guidance on permissible cooperation among businesses especially for critical products and services in the health sector. It is recognized that companies may need to coordinate on the organization and increase of production and/or optimization of distribution. To this respect, the Temporary Framework sets the main criteria that the Commission will follow in assessing such cooperation measures. Such measures would not be problematic under EU competition law to the extent that (a) they are designed to, and are objectively necessary to, increase output or facilitate supply in the most efficient way to address or avoid a shortage of supply of essential products or services, (b) they are temporary in nature and (c) they do not exceed what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.

Provision of Guidance

Even though companies are responsible for assessing themselves the legality of their agreements and practices on the basis of the above criteria, the European Commission is ready to provide guidance and, exceptionally, also written comfort (via a comfort letter) concerning specific cooperation projects that are implemented to effectively tackle the COVID-19 outbreak.[2]  For that purpose the European Commission has set up a dedicated mailbox This email address is being protected from spambots. You need JavaScript enabled to view it. that can be used to seek informal guidance on specific cooperation initiatives. For local or national cooperation projects the European Commission recommends that companies, associations or legal advisors contact directly the national competition authority.

Cooperation beyond the Temporary Framework

Apart from the companies active in the health sector which face a tremendous increase of demand for their products and services, many companies active in other sectors of the economy, such as airlines, retailers, restaurants and cinemas, are facing an abrupt decline in consumer demand for their products and services and are, thus, striving to minimize losses and survive. Even though the Commission focuses in its Temporary Framework on the supply of goods and services in the health sector, cooperation initiatives may also be allowed in other sectors of the economy to enable companies to overcome the economic difficulties they face. Such cooperation measures are unlikely to be problematic since they would either not amount to a restriction of competition under Article 101 TFEU or generate efficiencies that would most likely outweigh any such restrictions. In Norway, for instance, the authorities have allowed the airlines SAS and Norwegian during the COVID-19 crisis to coordinate their flight routes. The aim is to preserve a minimum service for airplane passengers.[3] Competition authorities around the globe are currently urged to recognize the need for cooperation and allow cooperation initiatives in light of the criteria set by the European Commission in the Temporary Framework among companies active in sectors of the economy other than the health sector and which would otherwise be prohibited.

As of the above, the Cyprus Competition Commission shall be also requested to provide informal guidance on any local or national cooperation projects amid the COVID-19 crisis.[4]

For more information please contact our Senior Associate Dr. Panagiotis Tsangaris at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

[1] Communication from the Commission, Brussels, 8.4.2020, C(2020) 3200 final, to be found at <https://ec.europa.eu/info/sites/info/files/framework_communication_antitrust_issues_related_to_cooperation_between_competitors_in_covid-19.pdf>.

[2] Such a comfort letter has been provided, for instance, by the European Commission to “Medicines for Europe” (formerly the “European Generics Medicines Association”) for a voluntary cooperation project among generic pharmaceutical companies for the production of the critical hospital medicines which are urgently needed to treat coronavirus patients.

[3] See at <https://www.regjeringen.no/en/aktuelt/airlines/id2693871/>.

[4] To this respect, the Cyprus Competition Commission has posted on its website the Joint statement by the European Competition Network (comprised by the European Commissions, the EFTA Surveillance Authority and the national competition authorities) on the application of competition law during the COVID-19 crisis stating that it has agreed to its publication.

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