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Competition in Coronavirus times: weekly update 10/04/20

10 April 2020
The latest competition weekly update from our team in Poland. 

This update covers, among others, (i) further developments regarding acceptable cooperation between competitors in the COVID-19 era (including Medicines for Europe "comfort letter", cooperation between medical suppliers, and DOJ, FTC and Czech competition agency guidelines on collaborative activities; (ii) International Competition Network (ICN) statement to national authorities addressing key considerations related to competition law enforcement during and after the COVID-19 pandemic; (iii) merger clearance proceedings status in the remote work time, and (iv) further state aid schemes accepted by the European Commission under the Temporary Framework aimed at supporting national economy during the coronavirus outbreak.

COOPERATION

UE Medicines for Europe "comfort letter"

On April 8, the Commission has granted for the first time in 20 years "a comfort letter" for Generic pharmaceuticals association Medicines for Europe which represents manufacturers of prescription medicines, supplying 67% of the European market. Medicines for Europe has developed a project which will assess the large demand spikes for the crucial medicines in countries, working closely with the Commission and the EMA, and the support of countries, to best ensure their supply where they are needed most.

Guidelines on cooperation within the Medicines for Europe project in light of "comfort letter"

  • The project stays open to any pharma manufacturer that’s willing to participate;
  • Minutes of all meetings must be kept and copies shared with the commission;
  • Only indispensable business information must be shared, with the commission setting up a “controlled forum” for the exchange;
  • As well as the Commission, the European Medicines Agency and national health regulators will provide input;
  • And discussion of prices, or discussion of issues that's not strictly necessary to meet the objectives of the project, will meet strict antitrust enforcement;
  • All information will be collected either by Medicines for Europe or a third party, and will be shared with individual companies in aggregate form only;
  • Finally, the cooperation will last only as long as the pandemic does. The commission will tell Medicines for Europe when the project must end.

As part of the project, Medicines for Europe also specified that it would use a third-party consultancy to collect the information. 

The possibility of obtaining “comfort letter” by the undertakings in situations related to the current COVID-19 outbreak has been confirmed by the European Commission in its Communication, according to which Commission stands ready, exceptionally and at its own discretion to provide guidance by such means.

Antitrust framework providing guidance on cooperation between medical suppliers

 

  • The Commission has also adapted a broader antitrust framework specifying e.g. the rules of exchange of information between pharma companies acting on various levels of market in order to address potential medical-supply shortages during the Covid-19 pandemic. The Commission stressed that, in the current exceptional circumstances, such measures would not be problematic under EU competition, to the extent that such measures would be:
  • 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,
  • 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),
  • not exceeding what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply.

Undertakings should document all exchanges, and agreements between them and make them available to the Commission on request.

DOJ and FTC guidelines on collaborative activities

Both US antitrust authorities in the joint statements stressed that guidance on companies cooperation can be seek through regular channels i.e. The Antitrust Division’s Business Review Process and the Federal Trade Commission’s Advisory Opinion Process. 

However in light of the current situation Agencies will aim to respond expeditiously to all COVID-19-related requests, and to resolve those addressing public health and safety within seven calendar days of receiving all necessary information.

The Agencies reminded also the types of collaborative activities designed to improve the health and safety response to the pandemic that would be generally consistent with the antitrust laws. For example:

  • research and development cooperation,
  • sharing technical know-how, rather than company-specific data about prices, wages, outputs, or costs, if necessary to achieve the pro-competitive benefits of certain collaborations,
  • joint purchasing arrangements among healthcare providers, such as those designed to increase the efficiency of procurement and reduce transaction costs, do not raise antitrust concerns,
  • private lobbying addressed to the use of federal emergency authority, including private industry meetings with the federal government to discuss strategies on responding to COVID-19.

FTC has gave further specific instructions on the procedure:

  • Requests for an FTC staff advisory opinion should be submitted to the Bureau of Competition in writing via email at FTCCOVID19@ftc.gov;
  • The request must explain how it is related to COVID-19 and provide:
  • a description of the nature and rationale of the proposal (including the names of the participants, the product(s) or service(s) the proposal will cover, and the temporal and geographic scope of the arrangement),
  • any proposed contractual or other arrangements among the parties (including copies of any documents memorialising the contract or arrangement),
  • the names of the major expected customers, and any available information regarding the competitive significance of other providers of the product(s) or service(s) to be offered,
  • the request must also provide the name and contact information of a person whom staff can contact for additional information,
  • the Bureau’s responses will be in effect for one year from the date of the response. Parties may subsequently request, utilising these expedited procedures, that the Bureau reiterate its intention not to challenge the conduct, if further time is necessary to respond to COVID-19 and its aftermath.

Czech competition authority guidelines on cooperation

The Czech competition watchdog also provided guidelines in accordance to which companies may be enabled to cooperate during the Covid-19 outbreak and not face antitrust enforcement.

  • The regulator will conduct case by case analyse of each cooperation project. Request of assessment may be file through dedicated mailbox: posta@uohs.cz. Nor blanket approval nor block exemption are taken into consideration;
  • Companies must prove the cooperation to be necessary;
  • Hypothetical and general proposals would not be enough. All relevant information must be provided:
  • competitors involved in the cooperation,
  • nature and purpose of cooperation,
  • goods and services it covers,
  • time and geographical scope,
  • information that would be exchange,
  • estimation of market of participants,
  • The regulator's individual guidelines would not have binding effect.


ENFORCEMENT 

International Competition Network statement to national authorities addressing key considerations related to competition law enforcement during and after the COVID-19 pandemic.

The statement recognises the following issues:

  • It can be appropriate for competition agencies to accommodate collaboration between competitors necessary to address the circumstances of the crisis to the extent that their laws permit;
  • Agency operational or procedural changes and new guidance about enforcement policies and business cooperation should be clear, transparent, and published in a timely manner;
  • Agencies expert advice on policy and legislative measures to ensure that markets function well may prove critical in the coming months and beyond;
  • Agencies shall pay particular attention to consumers and newer and smaller businesses that are often hit hardest in a crisis.

Ongoing antitrust investigations may consider impact of Covid-19

The impact on companies of the Covid-19 outbreak could be assessed by the authority as part of an ongoing sectors' investigations. The British competition authority regulator will analyse in its funeral sector probe all relevant considerations including effects arising from the virus outbreak. The regulator recognised the pandemic as causing unprecedented difficulties for the company, and the sector at large, as funeral providers grapple with mandated restrictions placed on funeral and cremation services. It might be particularly important as the service provides indicate that the UK government’s social-distancing protocols have hampered their operations and removed revenue channels.

Financial firms, attract Spanish antitrust probes over Covid-19 actions

The Spanish Competition Authority is currently examining whether requirements imposed by financial institutions in Spain could amount to an unfair practice. Complaints against the institutions have highlighted various conditions that have been imposed, including a requirement that borrowers take out life insurance to access state-subsidised loans and other financial assistance linked to the government's economic response to Covid-19.

MERGERS

The Commission continues to review merger during pandemic

Around the globe, the pandemic has caused merger-control authorities to suspend deadlines and notifications (e.g. France, the UK, Denmark). That does not apply to European watchdog. Although on March, 13 the European Commission asked companies to hold off on notifying new deals “where possible” and suspended some high-profile merger reviews, recently the regulator has declared that it would continue to review the merger transactions. Nevertheless, some delays must be expected as the current situation is limiting the possibility to obtain the relevant information from both notifying companies and third parties.

The Commission warning about the delays

The Commission's officers stressed that in light of the ongoing situation in cases where companies can anticipate that a comprehensive market investigation will be necessary, it is important to discuss the timing of notification well enough in advance with the commission’s case team. Pre-notification phone calls would be advised to indicate whether or not the Commission expect any practical troubles in conducting market investigation and getting sufficient replies from market participants to its questionnaires.

STATE AID 

In recent days the European Commission has continued to grant approval to national staid aid schemes under the Temporary Framework aimed at supporting national economy during the coronavirus outbreak.

  • 115 million € Poland's grant plan to subsidise interest owed on loans by struggling companies;
  • 3 billion € Flemish program aimed at limiting the risks associated with issuing or restructuring loans for companies so that they can continue activities;
  • 150 million € Lithuanian program, offered by national promotional institution INVEGA, which allows for subsidised loans to companies on favourable terms;
  • 20 million € Portugal's scheme to support to its fisheries and aquaculture sector;
  • 700 million € Poland's euro loan and guarantee program;
  • 1 billion € Croatia's loans program with zero, or very low, interest rates;
  • 255 million € Bulgaria's 255 million euro guarantee program to support SMEs;
  • 110 million € Lithuanian guarantee scheme, for working capital and investment loans granted by commercial banks;
  • 1.2 billion € Greek support scheme for SMEs;
  • 30 million € Luxembourg aid scheme for Covid-19 research and development.

The Commission is now proposing to extend further the scope of the Temporary Framework by enabling Member States the possibility of providing public support in the form of equity or hybrid capital instruments to severely affected companies when it is the most appropriate means of support.

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