European Competition Authorities Provide Guidance on Application of Competition Rules in Times of COVID-19 - Part II

As the economy in Europe continues to face serious challenges due to the COVID-19 outbreak, the European Commission stands ready to assist companies tackling the crisis with advice on the application of the competition rules in these exceptional circumstances. In its Temporary Framework Communication the Commission covers possible forms of cooperation which enable companies to supply and adequately distribute essential scarce products. Also, “comfort letters” are making a comeback allowing the Commission to provide companies with written comfort on specific cooperation projects.

We previously reported on the joint statement the European Competition Network (ECN) issued on March 23 regarding the application of the competition rules during the COVID-19 crisis, as well as several initiatives taken by national competition authorities. Since then, the European Commission and other European competition authorities have not been resting on their laurels.

On March 30, the Commission announced the launch of a dedicated website where it collects the different legal instruments regarding COVID-19 and competition law in one place. The Commission also launched a dedicated mailbox which companies can use for informal guidance on specific cooperation initiatives.

On April 8, the Commission adopted a Temporary Framework Communication, setting out the main criteria that it will follow when assessing cooperation projects aimed at addressing a shortage of supply of essential products and services during the COVID-19 outbreak. The document also foresees the possibility of providing companies with written comfort (via ad hoc “comfort letters”) on specific cooperation projects. The first of these letters was sent to Medicines for Europe, the trade association for generic pharmaceutical companies. The comfort letter addresses a specific cooperation project among pharmaceutical producers that targets the risk of shortage of critical hospital medicines for the treatment of coronavirus patients.

Cooperation specifically in the health sector might extend to adapting production, stock management and, potentially, distribution. Such measures will not be problematic under EU competition law or will at least not give rise to enforcement action by the Commission, provided the following conditions are met:

• The measures are 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 that are used to treat COVID-19 patients;
• The measures are temporary in nature, i.e. to be applied only as long there is a risk of shortage or in any event during the COVID-19 outbreak; and
• The measures do not exceed what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.

All information exchanged and agreements concluded need to be documented and should be ready to be provided to the Commission on its request. The fact that cooperation is encouraged and/or coordinated by a public authority is also a relevant factor to be taken into account.

In several Member States competition authorities have followed suit

In the UK, the competition rules are temporarily relaxed to allow the dairy industry to maintain capacity in order to meet future demand, to avoid waste and address the current challenges in the market. Also in the UK, the competition rules are suspended for the Isle of Wight ferry services. The three operators offering the ferry service can agree on routes and coordinate staffing to ensure that essential food, freight and medical supplies can still be transported.

On April 13, the Romanian Competition Authority announced it would introduce flexibility for the pharmaceutical sector to ensure sufficient supply of medicines treating COVID-19, referencing to the abovementioned Temporary Framework Communication.

On April 21, the Dutch Competition Authority announced it would allow health insurers to cooperate to grant continuity contributions and pre-payments to healthcare providers who are not directly involved in battling COVID-19 (such as physiotherapists, maternity support workers, and district-nursing providers). Coordination between health insurers is necessary, because healthcare providers usually conclude agreements with various insurers.

Companies taking advantage of the crisis will not be spared

Unfortunately, not every company in Europe is combatting the crisis. Some are taking advantage of the current situation to breach EU competition law. The Commission will not tolerate conduct by companies that opportunistically seek to exploit the crisis as a cover for anticompetitive collusion or abuses of their dominant position by charging prices above normal competitive levels or limiting production. Therefore, the European Commission continues to monitor relevant market developments and detect infringements.

In the Czech Republic, the competition authority is also actively monitoring the market and ready to intervene when necessary. Likewise, in Poland the authority monitors prices for food and hygiene products, both in physical shops and online, after receiving complaints about price hikes. More specifically, it is looking into the termination of contracts for the supply of surgical masks by wholesalers to hospitals in order to re-conclude these contracts at a higher price. The authority is also keeping an eye out for companies unfairly using contractual clauses in the agricultural and food sector.

In the UK and the Netherlands, Expedia and Booking.com are under scrutiny over consumer-friendly changes to their terms and conditions as a result of the COVID-19 pandemic. The platforms allow consumers, for example, to cancel hotel reservations without a fee. After discussions with the Dutch authority, the platforms implemented changes to provide a better balance between the interests of consumers and businesses. The Dutch competition authority has also closed an investigation into Roche Diagnostics in connection with expanding test capacity for the virus after Roche offered commitments.

Several competition authorities, including the Romanian competition authority and Spanish regional authorities (Catalonia and Basque Country) have announced that they are looking into excessive prices hikes. The Norwegian Competition Authority also received information about disproportional price hikes, explicitly mentioning face masks. Likewise, the Swiss Competition Authority has gotten questions regarding excessive price hikes for masks and disinfectants, and is coordinating with other authorities to tackle this issue. Lastly, on April 22, the competition authority in Greece carried out dawn raids in the food sector after significant price increases for specific citrus products and restrictions of their distribution in the domestic market.