In the midst of the COVID-19 pandemic, not a single day passes without the news on shortages of medicines or medical equipment. The issue of ‘shortages of essential products and services’ is not specific to the UK, Italy or Spain. At these challenging times, the shortages are occurring on a daily basis on a global scale. Here in Europe, the European Commission (Commission) has published a Temporary Framework Communication, dated 8 April 2020 (C(2020) 3200 final), which sets out forms of cooperation among companies, such as in the health sector, which may be allowed in order to tackle and to avoid “shortages of essential products and services resulting first and foremost from the rapid and exponential growth of demand” (such as in medical supplies needed to treat COVID-19 patients).
Temporary Framework Communication
The Temporary Framework Communication sets out the main criteria to be used for assessing possible cooperation projects by companies. It makes clear that it is not limited to the health sector, but does give specific guidance in the health sector based on recent experience from requests received from companies and trade associations. In particular, it notes the possibility of coordination to boost production of key medicines in short supply, which might be at the expense of other products. It also notes that cooperation may be limited to entrusting a trade association (or an independent advisor, or independent service provider, or a public body) to engage in cooperation initiatives, such as:
- to coordinate joint transport for input materials;
- to contribute to identifying those essential medicines for which there are risks of shortages;
- to aggregate production and capacity information;
- to work on a model to predict demand on a Member State level, identifying supply gaps; and
- to share aggregate supply gap information, and request participating companies to indicate whether they can fill the supply gap to meet demand.
In the Temporary Framework Communication, the Commission acknowledges that exchanges of commercially sensitive information may not be regarded as problematic provided that safeguards are put in place: (i) individualised company information should not flow back to competitors; (ii) the activities must be objectively necessary to actually increase output to address supply shortages if essential products for dealing with COVID-19 patients; (iii) be temporary; and (iv) not exceed what is strictly necessary to achieve the objective. These echo the criteria found in Article 101(3) of the TFEU.
Further, the Temporary Framework Communication stresses that the Commission stands ready to provide ad-hoc guidance by means of a “comfort letter” where a specific cooperation initiative needs to be implemented swiftly. In this regard, the Commission notes that it will closely monitor activities in the relevant market to detect conduct where companies are seeking to take advantage of the situation in order to breach competition law.
On the same day as it adopted the Temporary Framework Communication and the Commission Guidelines, the Commission also issued a comfort letter to “Medicines for Europe” which supplies over 67% of all medicines across Europe. According to the Commission’s press release, this comfort letter addresses a specific voluntary cooperation project among pharmaceutical producers and gives assurance that such temporary cooperation will be justifiable under EU competition law as long as the objective of cooperation remains within the scope communicated to the Commission.
In the global pandemic, companies are facing exceptional challenges not only financially but also logistically. It is reassuring that the Commission has acted promptly in response to market demand to afford legitimate cooperation designed to mitigate or to prevent the shortages of essential products and services in Europe. This Communication is applicable as of 8 April and will remain in force until the Commission withdraws it.