The European Commission and European Competition Network (ECN) have taken unprecedented action to try and relieve the pressure on businesses and consumers.

EU ANTITRUST RULES RELAXED FOR CERTAIN COLLABORATIONS

On 8 April 2020, the European Commission issued a Temporary Framework Communication, providing guidance and criteria regarding competitor collaboration projects in response to the economic shocks caused by the Coronavirus (COVID-19) crisis. The focus is on collaboration projects aimed at mitigating or eliminating shortages of “essential scarce products and services”—especially critical medicines—even if such collaboration may otherwise risk infringing competition laws.

While companies remain responsible for assessing their own proposed conduct, the European Commission will provide informal, oral guidance to businesses or—exceptionally—a “comfort letter” to allow projects to be implemented quickly. At the same time, businesses are cautioned that opportunistic anticompetitive conduct, such as limiting supply or abusing a dominant position by charging excessive prices, will be targeted for enforcement.

This follows an unprecedented “joint statement” by the European Competition Network with a similar message that its members will not actively intervene against “necessary and temporary” measures, including cooperation among competitors, in order to avoid a “shortage of supply” of critical products. In the days preceding and following the joint statement, several national competition authorities and governments went further, authorising temporary waivers, amending competition legislation or otherwise indicating flexibility in their approach to competition law enforcement in critical industries.

Principles of Competitor Collaboration

The key takeaway of these developments is that the competition rules still apply, but are sufficiently flexible to allow limited critical industry adjustments to address severe economic shocks. Businesses should carefully assess any proposed collaboration project to ensure compatibility with applicable competition laws, and should seek guidance from relevant regulators where appropriate or necessary.

Low-Risk Conduct

Collaborations between companies that do not compete in the relevant field, and which do not involve competitively sensitive information (such as prices, capacity or customers) are generally considered lowerrisk. For example, the sharing of best practices to mitigate the impact of COVID-19 on the workforce is unlikely to raise concerns, as long as participation in the discussions and implementation of any recommendations is voluntary.

Similarly, companies active nationally may seek to co-ordinate their purchasing with other businesses in an effort to ensure continued comprehensive supply of necessary consumer products. EU competition law has precedent for such co-operations in the form of the pan-European supermarket purchasing alliances that competition authorities have previously accepted under certain conditions.

High-Risk Conduct

Certain types of conduct have a particularly high risk of being considered objectively anticompetitive and not justifiable, regardless of the circumstance. Such conduct would expose companies to significant fines and includes

• Price fixing or coordinating price fixing

• Limiting or coordinating capacity

• Agreeing to or refusing to deal with a particular customer(s) or suppliers(s)

• Exchanging competitively sensitive information among competitors, in particular pricing strategies, or an agreement to exchange information.

In addition, companies that hold significant market power or have a “dominant” position may face antitrust risk under Article 102 of the Treaty on the Functioning of the European Union (TFEU) or even stricter national rules if they unilaterally impose excessive prices, refuse to supply certain customers or discriminate between customers without justification.

Conduct that May Be Permitted but Still Requires Careful Consideration

Recent developments show that certain conduct, including collaborations, may be permitted if it is necessary, limited in time and scope, and benefits consumers by preventing the scarcity of essential goods and services. Businesses should, however, carefully assess any proposed collaboration project, implement appropriate safeguards and, where needed, seek guidance from relevant regulators where appropriate or necessary. Examples of potentially permissible collaborations include

• Joint purchasing or production

• Stock management and distribution of critical products

• Shared use of assets or staff • Exchange of information on, for example, stock levels, distribution patterns or stock shortfall (not prices)

• Standardising COVID-19 research and development (R&D) projects

• Co-operation between suppliers at different levels of the distribution chain to enable wholesale sales to end customers.

While these examples of temporary co-operation appear feasible in light of current enforcement statements and the extraordinary circumstances, they are still not without risk and should be undertaken only after careful consideration and, possibly, notification to the relevant authorities.

COMMISSION PERMITS CERTAIN STATE AID

On 19 March 2020, the European Commission adopted a temporary framework that allows Member States to grant certain State aid to businesses to help them face the economic and financial consequences of the health crisis. The temporary framework is based on Article 107(3)(b) TFEU, which allows for State aid “to remedy a serious disturbance in the economy of a Member State.”

Companies active nationally may seek to co-ordinate their purchasing with other businesses.

The Commission expanded the temporary framework on 3 April 2020 to include measures aiming to accelerate the R&D of Coronavirus relevant products, to protect jobs and to further support the economy. On 9 April 2020, the Commission sent out to Member States, for consultation, a proposal to extend the scope of the framework to recapitalisation measures.

The temporary framework currently in place provides for several types of aid:

1. Direct grants, selective tax advantages and advance payments of up to €800,000

2. State guarantees for loans taken by companies from banks

3. Subsidised public loans to companies

4. Safeguards for banks that channel State aid to the real economy. The temporary framework makes clear that such aid is considered as direct aid to the banks’ customers, not to the banks themselves

5. Short-term export credit insurance

6. Support for Coronavirus-related R&D

7. Support for the construction and upscaling of testing facilities

8. Support for the production of products relevant to tackle the Coronavirus outbreak

9. Tax payment deferrals and/or suspensions of social security contributions

10. Wage subsidies for employees.

The Council of the European Union also endorsed, on 23 March 2020, the activation, for the first time, of the general escape clause of the Stability and Growth Pact, which enables Member States to depart from their normal budget requirements in a coordinated and orderly manner.

The European Commission has authorised dozens of aid schemes, most of them in a record time of 48 hours upon notification and in accordance with Article 107(3) (b) TFEU and the temporary framework.

For example, only two days after the adoption of the temporary framework, the Commission authorised three separate French support schemes expected to mobilise more than €300 billion of liquidity: two schemes enabling Bpifrance to provide State guarantees on commercial loans and credit lines for enterprises with up to 5,000 employees; and a scheme to provide State guarantees to banks on portfolios of new loans for all types of companies.

Since then, the Commission has authorised schemes including:

• A €.2 billion French Solidarity Fund scheme for small enterprises

• A €10 billion French guarantee scheme to support the domestic credit insurance market

• A German aid scheme allowing for direct grants, repayable advances tax or payment advantages, loans, guarantees and equity

• Loan schemes allowing the German State-owned Kreditanstalt für Wiederaufbau and other regional authorities and promotional banks to provide subsidised loans.

More information on these topics can be found here and here.