On March 16, 2020, the European retail and wholesale lobby, EuroCommerce, announced that in the wake of the COVID-19 crisis certain retailers have been cooperating to share information, and that governments and competition authorities had indicated that they might waive normal competition rules to allow such exchanges while the crisis continues.¹ Within 48 hours, newswires were reporting that the European Commission (EC) had asked EuroCommerce for details of the information that retailers would like to share, which regulators had indicated that they may grant a waiver from the competition rules, and what guidance the sector may need.²

On March 17, European Commissioner for Competition, Margrethe Vestager, posted a message on her Twitter feed³ congratulating educational tech companies in her native Denmark for "coming together to offer their platforms for free" while schools are closed. The full story in pov.international⁴ explains that collaboration between several EdTech companies and the Ministry of Education means that 48 digital learning companies will make their platforms available free of charge for as long as Danish schools need to be closed.

On March 18, the Norwegian government announced that it has granted airlines a three-month waiver from domestic competition rules to allow them to coordinate their schedules,⁵ and on March 19, the UK government reported a temporary softening of the competition laws to allow supermarkets to work together and share resources.⁶

The UK's Competition and Markets Authority (CMA) has also issued a statement advising companies that it has "no intention of taking competition enforcement action against cooperation between businesses or rationing of products to the extent that it is necessary to protect consumers." It will not, however, tolerate non-essential collusion and specifically any exchange of information that is "not necessary to meet the needs of the current situation".⁷ Similarly, on March 23, the European Competition Network (ECN) said that it "will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply", but the ECN warned against companies taking advantage of the crisis to engage in anticompetitive conduct.⁸

As each of these stories shows, the COVID-19 pandemic has had a highly disruptive effect upon business, firms and the trade associations that represent them are eager to understand in this new environment how European antitrust rules apply to their businesses, and antitrust agencies are cognizant that companies need clarification.

It is clear from the EC's letter to EuroCommerce that it would be foolhardy for business to believe that the COVID-19 crisis could lead to any generalized suspension of the European competition rules: in times of crisis, the EC and national agencies need their enforcement powers to hold to account businesses that seek to exploit the vulnerabilities of other businesses and consumers.⁹ As the Danish EdTech case shows, however, it is also patently wrong to suggest that all cooperation between competitors is illegal.¹⁰

This Wilson Sonsini Alert reminds business of the safe harbors enshrined in European antitrust law and offers practical guidance as to what companies might do to stay on the right side of the line as they adjust the ways that they do business in response to the pandemic.

European Safe Harbors for Horizontal Agreements

Compliance with the European competition rules as they apply to horizontal agreements is primarily a matter for self-assessment. EC regulations and guidelines give examples of coordinated activity that are low-risk, highlight the more egregious forms of anticompetitive cooperation that are likely to be sanctioned, and puts the onus on businesses to self-assess their agreements.

• As applied to coordination between competitors, the most generous safe harbor in EU law is for joint research and development—valuable in the immediate short term for pharmaceutical and life science companies collaborating in the quest for treatments for the virus. Specifically, joint R&D agreements providing for the development of new products or the joint exploitation of the results are presumed, as a matter of EU law, to benefit from a safe harbor if the parties' combined share does not exceed 25 percent on competing markets.¹¹
• Likewise, legislation provides that specialization agreements including many forms of joint production agreements will presumptively enjoy block exemption protection if the combined share of the parties to the agreement does not exceed 20 percent on any relevant market.¹²
• In its Horizontal Guidelines, the EC acknowledges that joint purchasing agreements and joint selling agreements between competitors are unlikely to raise antitrust concerns if the parties' combined share does not exceed 15 percent.¹³ Again, this rule may prove valuable for firms trying to procure and deliver vital stocks in the health sector or in food distribution and retail.
• Finally, the EC's De Minimis Notice provides that an agreement is presumed not to appreciably restrict competition if the combined market share of the parties does not exceed 10 percent on any affected market.¹⁴

In each case, the benefit of the safe harbor is typically lost if the agreement includes any black-listed restrictions, and more specifically agreements fixing prices, capping output, or allocating customers.

If the Conditions for Safe Harbor Protection Are Inapplicable

There are many reasons why the parties to a horizontal agreement may be unable to invoke safe harbor protection. The parties' combined share may exceed the market share threshold laid out in the law or their agreement may contain one or more provisions that disapply the block exemption.

When an agreement does not qualify for safe harbor protection, that does not automatically mean that it is illegal and unenforceable, although it does force the parties to conduct a self-assessment: first to identify and quantify the likely harm to competition and then the benefits to consumers (in much the same way as would arise in the analysis of a horizontal merger¹⁵). Best practice in these circumstances is to draw up—with external counsel to protect privilege—a list of the pros and cons.

It is also critical to remember that the assessment of an agreement requires the comparison of competitive conditions that are likely to result from the agreement with the conditions that would have prevailed but-for the agreement.¹⁶ Competition authorities generally consider that competitive conditions existing at the time of the agreement constitute the relevant comparison for evaluating the effects of the agreement (the counterfactual), but antitrust authorities also need to recognize that in many markets in late-March 2020 the prospect of prevailing conditions continuing in the short-to-medium term is unrealistic.¹⁷

Wilson Sonsini Observations

In these challenging times, to protect themselves from legal challenge, the parties to horizontal agreements should seek, so far as possible, to agree terms that are consistent with well-established EU rules. To minimize the antitrust risk associated with arrangements with competitors in the context of COVID-19:

1. The parties should work with counsel to memorialize their agreement in writing. Recitals should be used to explain the market failure that the agreement is trying to address, and the scope of coordination should be defined as carefully as possible.
2. The agreement should be temporary and for a fixed short-term. As the situation is evolving quickly, at this stage a one-month fixed term would not appear unreasonable.
3. The agreement should provide that it cannot be renewed tacitly. If, after the short initial fixed-term, the market failure has not been corrected, a new written agreement needs to be negotiated and signed. The discipline of requiring the parties to sign a new agreement will enable management to test whether the justification for collaboration is still present.
4. Any agreement should be signed by the companies' senior executives (and not delegated to country managers, for example). It is important that senior executives understand the commitments that the company is making and the risks that it might be assuming.
5. The terms of any restrictions agreed by competitors should not go beyond what is necessary to achieve their legitimate objectives. If the same objective can be achieved through another less restrictive form of cooperation, the parties should choose the less restrictive option. A record should be kept of the reasons underpinning the company's decision.
6. If possible, the arrangement should not allow for the setting of prices, restricting of output or capacity, or the sharing of customers or markets, unless permitted by law (e.g., the price charged to intermediate customers in the context of joint distribution).¹⁸
7. The parties should not exchange competitively sensitive information, and in particular information about any one of the parties' standalone plans for capacity, output or price. If it is necessary to exchange such information to address a short-term issue triggered by the current crisis, robust clean team arrangements should be put in place, documented and properly policed.

Schweta Batohi and François Vanherck contributed to the preparation of this Wilson Sonsini alert.

[1] “Coronavirus—Statement”, EuroCommerce press release (March 16, 2020), available at: https://www.eurocommerce.eu/media/174759/Cornavirus%20statement%202020%2003%2016.pdf.

[2] “Retail-sector antitrust exemptions in Covid—19 crisis draws eye of EU enforcers,” MLex Market Insight (March 19, 2020), available to MLex subscribers at: https://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=1172140&siteid=190.

[3] See https://twitter.com/vestager/status/1239979615327850499.

[4] See https://pov.international/covid19-krisen-gratis-digitale-laeringsplatforme-til-samtlige-danske-uddannelsesinstitutioner/.

[5] “Airlines allowed to cooperate, for now,” NEWSinENGLISH.no (March 18, 2020), available at: https://www.newsinenglish.no/2020/03/18/airlines-allowed-to-cooperate/.

[6] “UK eases competition law so supermarkets can co-operate in crisis,” Reuters (March 19, 2020), available at: https://uk.reuters.com/article/us-health-coronavirus-britain-competitio/uk-eases-competition-law-so-supermarkets-can-co-operate-in-crisis-idUKKBN2163OX.

[7] “COVID-19: CMA approach to essential business cooperation,” CMA news story (March 19, 2020), available at: https://www.gov.uk/government/news/covid-19-cma-approach-to-essential-business-cooperation.

[8] “Antitrust: Joint statement by the European Competition Network (ECN) on application of competition law during the Corona crisis”, ECN press release (March 23, 2020), available at: https://ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf.

[9] On March 22, MLex reported that the Greek competition agency has sent questionnaires to companies active in the production, import, and marketing of surgical masks, disposable gloves, and various antiseptic wipes and solutions. “Suppliers of medical masks, gloves face Greek antitrust probe,” MLex Market Insight, available to MLex subscribers at: https://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=1172608&siteid=190.

[10] The EC’s guidelines explicitly acknowledge that horizontal cooperation “can lead to substantial economic benefits, in particular if they combine complementary activities, skills, or assets. Horizontal cooperation can be a means to share risk, save costs, increase investments, pool know how, enhance product quality and variety, and launch innovation faster”. Guidelines on Horizontal Cooperation Agreements, 2011 (Horizontal Guidelines), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52011XC0114(04)&from=EN, para.2.

[11] Regulation 1217/2010 on joint research and development agreements, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32010R1217&from=EN, Article 4.

[12] Regulation 1218/2010 on specialization agreements, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32010R1218&from=EN, Article 3.

[13] EC, Horizontal Guidelines, paras. 208 (joint purchasing/procurement) and 240 (joint selling/commercialization).

[14] Notice on Agreements of Minor Importance that Do Not Appreciably Restrict Competition Under Article 101(1), 2014, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014XC0830(01)&rid=1. See also EC Staff Working Document, Guidance on Restrictions of Competition “By Object”, 2015 (Staff Working Document), available at: https://ec.europa.eu/competition/antitrust/legislation/de_minimis_notice_annex_en.pdf.

[15] EC, Horizontal Guidelines, para. 21.

[16] EC, Horizontal Guidelines, para. 29.

[17] On March 20, MLex reported that the head of the German Federal Cartel Office, Andreas Mundt had written to them that “Competition law permits extensive cooperation between companies if there are good reasons for this—which is the case in the current situation”. See “German retailers to be allowed to coordinate supply to avoid Covid-19 shortages,” MLex Market Insight, available to MLex subscribers at: https://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=1172429&siteid=190.

[18] Regulation 1218/2010, Article 4(a); see also Regulation 1217/2010, Article 5. Other exceptions to the rule recognized by the EC in its pre-existing practice can be found in Staff Working Document.