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Coronavirus - Communication on relaxation of competition law - Italy

  • United Kingdom
  • Competition, EU and Trade
  • Coronavirus - Competition issues

07-05-2020

Introduction

The coronavirus has forced antitrust authorities both at EU and national level to adopt an exceptional approach on competition rules. At an EU level, on 8 April the European Commission approved specific guidance to guide companies in their cooperation projects in order to clarify if and when such coordination, even with potential direct competitors, can amount to a breach of Art. 101 TFEU or, by contrast, can be considered consistent with the treaties since it would generate efficiencies and it would avoid shortage for essential products during the health emergency, especially in the agro-food and health sector.

Other national competition authorities have also been very active by offering informal guidance – as also suggested by a joint declaration released by the European Competition Network (“ECN”) back in March – or by publishing specific guidelines such as the Competition Market Authority in the UK.

The Italian Competition Authority (“ICA”) has been silent for a while on competition law rules and in its enforcement action preferred an approach focused on the application of the Consumer Code with the view to control the marketing of products that may result necessary for consumers in such a pandemic context such as COVID-19 tests or personal protective equipment (respirators, plastic gloves etc.).

On 24 April, the ICA has nonetheless published a communication to finally explain its formal approach in relation to any cooperation agreements between undertakings during COVID-19 emergency and any support that it could provide to the interested companies.

The ICA’s communication

First of all, the ICA has clarified that the relaxation of antitrust rules refers to the possible cooperation aiming at promoting the production and adequate distribution of essential goods and services that could suffer a shortage during COVID-19 emergency, in particular in the pharmaceutical and agro-food sector.

However, it cannot be excluded a priori that the principles enshrined in the communication may find cross application to other essential sectors in the current pandemic, such as those of transport and logistics.

That noted, the ICA has recognized that, at this stage, companies may need indications that can facilitate their self-assessment of cooperation projects. As a result, the ICA has said it will be available to offer all the necessary information to companies or trade associations if uncertainties remain with regard to the compatibility of these initiatives with the competition law.

To this end, a specific e-mail address has been provided (accordi-cooperation-COVID@agcm.it) to which requests for clarifications can be sent.

The ICA then reported the criteria to assess certain cooperation agreements, mainly taking up what has already been clarified at European level by the Commission in its guidance. Specifically, with reference to the health sector (and possibly in the agro-food sector), cooperation could, for example, be limited to attributing to trade associations or independent third parties - without incurring in a violation of Art. 101 of the TFEU - the tasks to:

i)             coordinate the transport and distribution of raw materials

ii)            identify for which drugs or medical devices (or for which food) scarcity problems may arise

iii)           provide aggregate information (not related to individual companies) on production and available capacity or on any gaps in the offer

In this phase, moreover, the ICA admitted that the cooperation could go further to remedy inter alia critical supply shortages, for instance aiming to reorganize an entire production sector to avoid the risk of focusing on production of certain products at the expense of others (equally essential). These agreements could be evaluated in this pandemic context with greater flexibility where:

i)             they were necessary to facilitate the production of drugs or medical devices used for the fight against the virus or of goods and services deemed essential during COVID-19 outbreak;

ii)            they were applied for the strictly necessary time ('temporary nature' of the agreement);

iii)           they were proportional to the objective.

Lastly, the ICA has incentivized companies, in case of vertical agreements, to set maximum resale prices in order to limit unjustified price increases by the retailers.

However, the Authority pointed out that will not hesitate to take action against companies that will try to profit from the current situation, through cartel agreements or by abusing their dominant position.

Lastly, the ICA, in order to provide a higher degree of legal certainty, declared that it may, exceptionally and at its own discretion, express its assessments in writing with a comfort letter on specific initiatives submitted by the interest companies or trade associations. These comfort letters will exclusively concern the application of the national antitrust law (i.e. Law no. 287/90).

Conclusion

This clarification of the ICA was awaited by Italian companies and trade associations. Although on the one hand the ECN has published a communication on the need to provide at least informal guidance on cooperation projects by national authorities and on the other hand the European Commission itself has published guidelines for companies potentially applicable by analogy by national authorities, this clarification was absolutely necessary.

In addition, unlike other national authorities that have simply created a specific COVID hub to provide informal guidance to businesses, the ICA has gone further by declaring to be available to send comfort letters on specific cooperation projects.

The availability of the ICA to provide comfort letters in this context is something unexpected; we should consider in this regard that the notifications of agreements to obtain a specific exemption pursuant to Art. 101 para 3 of the TFEU has been only possible until the approval of Reg. 1/2003 which marked the switch from the old prior authorization regime to the legal exception regime.

It is therefore a great opportunity for companies interested in starting certain collaboration with other competitors as well as for those companies that simply aim at an efficient allocation of resources and to avoid a shortage in their offer. Obtaining a compliance assurance by the ICA would give, on the one hand, a great relief to the company - ensured by the possibility of not being subject to an antitrust assessment – and, on the other, it would give greater push to certain business projects.

From this point of view, a specialistic legal support is absolutely necessary, firstly, to understand if the agreement can fall within the scope of application of the communication and, secondly, in order to manage all the interactions with the Authority aimed in particular at obtaining clarifications but above all to convince the sending of these comfort letters that - it shall be recalled - can be issued at the totally discretion of the Authority and only in exceptional cases.

Further resources

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