The present alert intends to provide a brief overview of the changes which may be anticipated first in relation to antitrust enforcement. In the weeks to follow, we will focus on merger control and State aids.
3 months after Covid-19 outbreak in France, the way the Autorité de la concurrence (“the FCA”) and the European Commission are adapting their assessment and enforcement start to clarify.
As far as antitrust is concerned, the rules are largely unchanged and French businesses should ensure compliance with the provisions on coordinated practices and abuses just as before the outbreak, which can be a challenge when exceptional decisions with potential antitrust consequences are taken almost everyday.
Certainly, the pandemic created needs which cannot be ignored and the European Commission rapidly announced increased flexibility in relation to medicines and scarce products, as well as its availability to deliver comfort letters, where relevant. In other fields, no announcements have been made but enforcement priorities seem to be shifting to the evolving environment.
Exceptional guidance for competitor collaboration directly aimed at addressing the pandemic needs
One of the first actions implemented by the European Commission when the outbreak hit the EU was to announce increased antitrust flexibility so that essential products and services remain accessible to all, under fair conditions, despite a sudden and massive increase in demand at the global level.
Acknowledging that these challenges may require increased cooperation between competing businesses, the European Commission has published a Temporary Framework Communication1, which will remain in force until further notice, providing specific guidance on the compatibility with competition law of competitor collaboration concerning medicines and essential products or services.
Medicines and medical equipment – The focus is first on medicines and medical equipment necessary to test and treat Covid-19 patients or otherwise mitigate the outbreak. The Commission expressly acknowledged that preventing shortages of such products may require adapting production, stock management or distribution and hence entail exchanges of commercially sensitive information and a certain degree of coordination between competitors that would in normal circumstances potentially not be admissible under EU competition rules.
In the health sector, such measures will not be considered problematic or at least not be an enforcement priority “in the current exceptional circumstances”, as long as they (i) are objectively necessary to increase output in the most efficient way to address or avoid a shortage of supply of essential products or services, (ii) are temporary in nature and (iii) do not exceed what is strictly necessary.
Other essential products and services – The Temporary Framework also covers forms of cooperation aiming at the shortage of other “essential scarce products and services”.
The document particularly emphasizes the role of trade associations in that context and notes that they can be entrusted with certain missions such as coordinating joint transportation for input materials, contributing to identify risks of shortages, working on demand prediction models, gathering of production and capacity information without exchanging individual company information, etc. without raising competition concerns, provided adequate safeguards are implemented (e.g. no individualized company information should be shared among competitors).
In a joint statement, the European Competition Authorities had already made clear that they would not actively intervene against necessary and temporary forms of cooperation aiming at preventing shortage of supplies of scarce products, since they would in most cases presumably not amount to restrictions of competition or would otherwise generate consumer efficiencies that would most likely outweigh such restrictions2. In a separate release3, the FCA indicated that it will be supporting and “ready to assist” cooperation initiatives aiming “to guarantee the production and fair distribution of essential products to all consumers”.
A number of uncertainties however remain. The extent to which the authorities will extend this flexible approach to the supply of essential products and services outside the health sector is indeed quite unclear at this stage. It can also be noted that none of these documents defines the conditions under which a product or service would qualify as essential.
R&D agreements – R&D agreements are absent from the EU guidance published to date in response to the pandemic. Major health crisis such as the one at hand create a need to organise cooperation to reinforce the ability to rapidly develop effective treatments, vaccines or protection equipment. In order to address the timing issue, exchanging commercially sensitive data, including on wider researches, which would have not been shared under normal circumstances, may become key.
As it is, companies will have to rely on the existing rules of the R&D Block Exemption Regulation or enquire whether more flexibility may be envisaged in the current circumstances on a case-by-case basis under Article 101(3) TFEU.
Informal guidance and “comfort letters” – As no other guidance was released to date, businesses in diverse industries need to assess any potential competition risks before entering into cooperation with competitors and, as the case may be, implement adequate safeguards.
As a sign of these exceptional times, more than 15 years after the abolition of the notification and exemption system, the European Commission has declared it would temporarily (and where relevant) provide guidance on specific cooperation projects envisaged in the context of the current crisis, by means of “ad hoc comfort letters”4. The European Commission for instance already granted such a letter to a trade association representing manufacturers of critical prescription medicines, concerning a project aiming at preventing a shortage of these medicines.
The FCA has also indicated that it currently stands ready to provide businesses with increased legal certainty and answer such requests swiftly, including those that do not fall within the scope of the EU Temporary Framework, and it has for instance already provided such guidance to a professional association of French opticians in its dealings with its members’ renters on their behalf.
The fact that a cooperation will mitigate consequences of the outbreak and/or is being supported by public authorities or the Government may be taken into account but is by no means a guarantee that it will comply with competition rules. The ability to obtain guidance should be used in particular in such cases to limit the risk that the cooperation is challenged ex post.
No truce to be expected, but priorities are shifting
In the overall crisis context, it is likely that Competition Authorities will continue the fight against cartels and abuses, but presumably in a slightly different mode considering the difficult situation faced by many companies post lock down. Competition Authorities may themselves face a number of difficulties to collect evidence and may, more largely, revisit their enforcement priorities in the light of the new situation.
Crisis cartels – Crisis tend to generate strong incentives to cooperate with competitors to ensure business continuity, preserve jobs and meet customer needs and a number of cartels have emerged in such contexts in the past and strong enforcement actions have been taken notwithstanding the crisis. We expect that this will continue, although Competition Authorities will pay attention on the level of fines in the present context and may even decide to differ the treatment of cases in distressed industries.
On the other hand, no change of doctrine should be anticipated. As recently stressed by the EU Competition Commissioner Margrethe Vestager, the Covid-19 crisis is not a “shield against competition enforcement”. And if conditions are particularly difficult at present, it might not be such an effective defense once most will hopefully recover. It may be noted, though, that crisis cartels are part of the work program of the International Competition Network for 2020-2021.
New enforcement priorities – The European Competition Authorities are first expected to shift priorities to focus on the most egregious forms of infringements in the present context, taking immediate actions in relation to any product or service considered essential to protect the health of consumers.
A number of investigations have already been launched in the EU into potential infringements by suppliers of such products or services. These include potential cartels and refusal to supply, but the main focus of most enforcers so far is on excessive pricing practices e.g. by online retailers of masks and sanitising gel (in France and in Italy), private health facilities and testing facilities, detergents or protective gloves (in Italy), hygiene products suppliers (in Greece), funeral services (in Spain), etc.
The FCA has notably indicated that it is closely monitoring market conditions to make sure that products considered essential remain available at competitive prices, and invites all stakeholders to report any practice that would seem potentially anticompetitive using its dedicated mailbox5. The FCA, has set up a dedicated team to monitor potential anticompetitive activities, handle complaints in relation to the Covid-19 outbreak and take action where necessary6.
Pre-existing restrictions of access to such products or services are also under close scrutiny. The FCA for instance opened an investigation against a supplier of respiratory systems and products used to treat COVID-19 patients, which had entrusted the import of these products in some French overseas territories to a single US operator, thus preventing any other alternative from supplying local distributors (such exclusive importation agreements being prohibited in overseas territories under French law). The supplier immediately agreed to clarify the conditions of supply of its products in these overseas territories and the procedure was wrapped up in a few days.
Digital markets are a top priority – By contrast to other enforcement priorities that may temporarily be side-lined, digital markets remain a very high priority for the European Commission and the FCA. Both authorities are expected to remain particularly vigilant with respect to practices from major digital players likely to affect competition.
EU and French investigations into major digital players are also continuing as shown by the latest case announcements. On 16 June 2020, the European Commission announced the opening of formal investigations into Apple’s AppStore rules and into Apple Pay and Amazon is expected to receive a Statement of Objections in the ongoing investigation into the potentially anticompetitive use of third party vendors’ information. The FCA has itself delivered two decisions against Google in late 2019 and again in 2020.
If GAFAs have played a key role maintaining access to essential products and services during the lock down period and are expected to provide continued support to develop tracking tools using mobile data, they are directly concerned by several wide-ranging legislative projects at the EU and National levels : the revision of the Vertical Block Exemption and of the Relevant Market Notice are particularly focused on adapting the existing framework to the latest evolutions of the digital economy. On 2 June 2020, the Commission launched “landmark” consultations on a proposed Digital Services Act providing for a modernised regulatory framework of online platforms and on a New Competition Tool that would allow addressing structural competition problems without going through individual infringement procedures7. The FCA is supporting and even actively promoting the need to adapt tools to face digital challenges8.
Impact on other ongoing cases – One may wonder how the current situation may affect the treatment of ongoing cases in other sectors. Will the construction industry still count among the enforcement priorities of the FCA? How about the various ongoing cases in the food and retail industries, which emerge from the lock down period as essential industries feeding nations and agreeing to serve as first line soldiers in the fight against the virus?
It is certainly too early to tell as authorities are still struggling with bringing ongoing procedures back on tracks. In French procedures, the clock has recently started ticking again for replies to statements of objections, leniency procedures and hearings9. During the lock down, officials worked from home and procedures are continuing but dawn raids have in practice been suspended and are unlikely to resume shortly. Requests for information are likely to be more frequently used.
This is where Competition Authorities are likely to face the same situation as many businesses: it will be a challenge to recoup two months of activity until the end of the year.
1 European Commission, Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak (the “Antitrust Temporary Framework”), 8 April 2020, available at: https://ec.europa.eu/info/sites/info/files/framework_communication_antitrust_issues_related_to_cooperation_between_competitors_in_covid-19.pdf
2 ECN, Joint Statement of 27 March 2020, available at: https://ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf
3 FCA, The Autorité clarifies the options of a professional association for dealing with its members’ rent during the COVID-19 pandemic, 22 April 2020, available at: https://www.autoritedelaconcurrence.fr/en/press-release/autorite-clarifies-options-professional-association-dealing-its-members-rent-during
4 A dedicated mailbox was set up for businesses seeking guidance on their cooperation projects during the outbreak: COMP-COVID-ANTITRUST@ec.europa.eu.
6 A dedicated page on the FCA’s website is available at: https://www.autoritedelaconcurrence.fr/en/basic-page/covid-19
9 FCA, Reinstatement of deadlines for responding to statements of objections and reports, 11 May 2020, available at: https://www.autoritedelaconcurrence.fr/en/press-release/reinstatement-deadlines-responding-statements-objections-and-reports