Covid-19 and EU Competition Law: Bring the Informal Guidance On

Societies and citizens have been hit hard by the public health emergency of the Coronavirus disease (Covid-19). Competition law enforcers have already taken up a new role of providing informal guidance for businesses in Europe and globally. This is most welcome and could represent an opportunity for a long-term informal engagement between authorities and businesses in a more digital and sustainable economy. Antitrust enforcers around the world have responded swiftly to the call to the army, opening themselves up to dialogue with the business community. The International Competition Network have explained that ‘this extraordinary situation may trigger the need for competitors to cooperate temporarily in order to ensure the supply and distribution of scarce products and services that protect the health and safety of all consumers’,1 and the European Competition Network has confirmed that its authorities ‘will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply’.2 Mindful of the exceptional situation, competition law enforcers have been engaging with companies and trade associations to help them in assessing the legality of their cooperation plans and have them put in place adequate safeguards against longer term anticompetitive effects. Requests for informal guidance can now be emailed to dedicated mailboxes of enforcers—for example, comp-covid-antitrust@ec.europa.eu or covid.monitoring@cma.gov.uk in Europe and atr.covid19@usdoj.gov, ftccovid19@ftc.gov, or cb-covid19-bc@canada.ca in North America. The European Commission (hereafter, the Commission) has adopted a ‘temporary framework’ to explain when and how firms can obtain comfort on whether their cooperation complies with the competition rules.3 In addition to oral guidance,4 the Commission is also ready to exceptionally provide companies with a written ‘comfort letter’. This would be with respect to specific cooperation initiatives that ‘need to be swiftly implemented’ to effectively address the Covid-19 crisis, especially where there is still ‘uncertainty’ on their compliance with the law. The same day of the adoption of its temporary framework, the Commission issued a comfort letter addressing a specific voluntary cooperation project among pharmaceutical producers which targets the risk of shortage of critical hospital medicines for the treatment of Covid-19 patients.5 This comfort letter expressly finds that 'in the present exceptional circumstances the cooperation practices as set out above do not raise concerns under Article 101'. It remains to be seen whether future EU comfort letters will contain such substance findings or be more limited to a statement on the enforcement priorities of the Commission.6 This new policy of EU comfort letters echo the work that US agencies have been doing with their business reviews (for the Antitrust Division of the Department of Justice) or the advisory opinion (for the Federal Trade Commission) processes to evaluate proposed conduct.7 The pandemic is affecting—to different degrees—most sectors of the economy. For this reason, the Commission has shown foresight in showing willingness to consider collaboration in ‘other sectors’ or ‘other forms of cooperation’.8 The ultimate legal test would remain the objective ‘to overcome or at least to mitigate the effects of the crisis to the ultimate benefit of citizens’. At the same time, authorities have rightfully clarified that they will not tolerate any ‘Corona washing’, i.e. conduct by firms that opportunistically seek to exploit the crisis as a cover for anticompetitive behaviour.9 Crisis cartels will not be excused. For example, a European authority some years ago did not hesitate to pursue a joint scheme by beef processors to reduce the capacity of the industry (as facilitated by a well-known business management consultancy).10 In this vein, the EU temporary framework refers to cooperation which is ‘objectively necessary’ to meet the pro-competitive objective, ‘temporary in nature’, and ‘not exceeding what is strictly necessary’, which seems to remind us of the proportionality principle applied for the ancillary-restraint doctrine.11 For example, the EU comfort letter states that it `does not cover any discussion of prices or any other possible coordination on issues which are not strictly necessary for effectively achieving the aims set out above'. The Commission also offers in its temporary framework some practical suggestions such as entrusting the cooperation mechanics to a trade association or an independent advisor (to avoid the flow of individualised company information back to competitors) or to document all exchanges (to make them available to the Commission on request). The strict approach of enforcers would include abusing the dominant positions conferred by the particular circumstances of this crisis by, for example, charging prices above normal competitive levels or limiting production to the detriment of consumers (even though it remains to be seen how that can be addressed by those competition authorities that do not have consumer-protection powers).12 The comfort letter for Medicines for Europe was the first comfort letter by the Commission (post-Regulation 1/2003), which had never used before its power to offer informal guidance.13 Such protracted non-use of the informal-guidance power (for almost 20 years) may have been due to the restrictive conditions attached to it.14 The EU was keen to exclude any return to the former notification system, which had been abolished to allow the Commission to focus its enforcement policy on the most serious infringements.15 The Commission’ tool box for a competition law enforcement which engages with, and steers, the business community includes today inapplicability decisions,16 guidance letters, and now comfort letters.17 The Commission has just opened this box (as it has not issued any inapplicability decisions or guidance letters, yet), but we trust this first comfort letter, which can represent a stepping stone for a continued oral or written dialogue with businesses, for example, in relation to novel or unsettled forms of cooperation. This would align with the Commission’s recent policy of rewarding cooperation by the parties in antitrust cases other than cartels (even though in the different context of a violation of the rules rather than cooperation that is intended as being pro-competitive).18 This would also follow the broader EU ‘better regulation’ agenda to design and evaluate EU policies and laws transparently (which for competition rules has already translated in key consultations and workshops with stakeholders in recent years). Companies should remain responsible for self-assessing the legality of their agreements and practices, relying on the extensive guidance provided by the Commission and other enforcers. At the same time, informal guidance could be offered in exceptional yet regular cases where new forms of cooperation are being explored. Informal guidance would not represent a legitimate expectation as the Commission would still use its discretion on whether to issue a comfort letter, also subject to its other enforcement priorities.19 But the regularity of informal guidance would shape a flexible and engaging enforcement. A new Procedural Regulation (or in any case a codification of these new and/or revamped tools and procedures) could rely on a decentralized application of EU competition rules, yet with informal dialogue between the Commission and the business community on novel or unsettled questions for consistency and steering purposes. Informal guidance would be particularly appreciated in the next years which will see the EU economy to change to meet the two EU twin objectives of an EU digital single market and an EU green deal.20 Since the outbreak of Covid-19 and probably in the medium term, individuals and businesses will communicate more digitally (generating more written records and evidence of possible wrongdoings). In addition, the experiences gained from the remote working due to the Covid-19 pandemic will inform future policies such as data sharing and broadband connectivity, e-Health, digital education and e-Government. The business community will need the Commission guidance on several key issues, such as compliance by design, algorithms, e-commerce and chat-room collusion. While enforcers have published extensively and already clarified certain issues,21 companies may still benefit from informal guidance in the (now accelerated) transition to digital. Businesses will also need guidance in moving away from short-term performance to long-term sustainability of our systems. That starts today from our healthcare systems but needs to continue with our other physical assets, infrastructure services, supply chains and cities. In the current economic climate, with near-zero interest rates for the foreseeable future and government support when liquidity is lacking, it will be a key for institutions and corporations to invest in climate-resilient infrastructure. In turn, the transition to a lower carbon future can drive significant job creation while increasing economic resilience for the long term. Neither this pandemic nor climate change can be addressed without cooperation between market players. Examples can include open knowledge-sharing platforms, joint procurement of recycled materials, and technical standards on the environmental performance of products or processes. We need to avoid a ‘tragedy of the commons’, where the private gain to a firm from increasing its growth is smaller than the public cost to others. Again, no green-washing, but rather cooperation, which advances sustainability in a measurable manner—for example, relying on the EU taxonomy for green investments. The Corona-dedicated mailboxes of competition authorities could be maintained, and informal guidance offered on a regular basis, be it orally or in written form to provide needed comfort.22 A competition law enforcement, which includes exceptional but regular informal dialogue, would represent a treble win: for the businesses, who could obtain legal certainty and be incentivized to invest in digital and sustainability; for the authorities, who would obtain more regular insight into novel forms of cooperation; and for the citizens, who could benefit from the digital and green objectives of the EU.

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