One of the unexpected positives arising from the COVID-19 pandemic has been the number of collaborations between competing firms aimed at delivering benefits to consumers.
Collaborations between competing firms can help to overcome shortages of essential products and fix supply chain disruptions, reducing the need for state intervention or other costly remedies. In the pharma sector, competitor collaborations can enable firms to pool expertise and resources in the research and development of new vaccines and treatments, facilitating the development of products that no single firm could achieve. Pharma companies around the world have indeed entered into many such collaborations in the fight against COVID-19. In the area of plasma-based therapies alone, we have seen the creation of the CoVI-19 Plasma Alliance1 ; Grifols' collaboration with various US public health agencies2; Emergent BioSolutions' partnership with BARDA3; a partnership between Kamada and Kedrion Biopharma4; and Sorrento Therapeutics' collaboration with Mount Sinai Health Systems5.
Whilst competitor collaborations can create significant benefits for consumers (and not just in the context of a response to a global threat as significant as the pandemic), they also have the potential to give rise to competition law issues. Without appropriate safeguards, they can reduce firms' incentives and ability to compete, increase the likelihood of collusive outcomes, and in extreme cases may even put non-participating competitors at a disadvantage, leading to market foreclosure. Businesses therefore need to pay careful attention to general competition law principles and agency guidance when collaborating, or risk facing enforcement action. Measures such as limiting the collaboration in time and scope, and keeping the exchange of commercially sensitive information to a minimum, can help to reduce the competition law risks.
The role of competition authorities
The severe consequences of breaching competition law can sometimes have a chilling effect on firms considering engaging in collaborative action. To mitigate this chilling effect and increase legal certainty, several competition authorities have issued guidance on how firms can cooperate to address the effects of the COVID-19 crisis without falling foul of the competition rules. In March 2020, for instance, the US Federal Trade Commission (FTC) and the Department of Justice (DOJ) published a Joint Antitrust Statement Regarding COVID-196. The European Commission's Temporary Framework7 for assessing antitrust issues arising from Covidrelated business cooperation followed shortly afterwards. In issuing such guidance, authorities sought to strike a careful balance between giving firms the necessary leeway to address market disruptions and ensuring that firms do not use the crisis as an excuse to engage in anti-competitive conduct.
While giving a positive message to the market, general guidance may fail to provide the necessary assurance in less clear-cut cases - and may therefore be insufficient to reduce the risk of a chilling effect. In such cases, more specific guidance may be required. Recognising the urgency of certain situations relating to the pandemic, a number of authorities have put in place mechanisms for speedy and specific ad hoc guidance, in the form of comfort letters or similar tools. In April 2020, for example, the European Commission issued a comfort letter8 to Medicines for Europe (formerly the European Generics Medicines Association), confirming that "in the present exceptional circumstances" the proposed cooperation between pharma suppliers targeting shortages of critical medicines would not raise concerns under the EU competition rules. In the US, firms seeking to collaborate in response to the pandemic can now request an expedited response to a Business Review Letter. In their Joint Antitrust Statement, the FTC and DOJ said they would aim to "respond expeditiously to all COVID19-related requests, and to resolve those addressing public health and safety within seven calendar days of receiving all necessary information".
The global nature of many Covid-related competitor collaborations in the pharma sector has also called for close cooperation between competition authorities. If agencies were to fail to take a joined-up approach to examining pharma collaborations of global scope and to reach radically different views on the competition risks they present, then many such collaborations would struggle to get off the ground. It may be trite to say that COVID-19 knows no borders, but the reality is that the kinds of collaboration needed to address some of the challenges raised were truly international in scope, requiring international agency responses. More broadly, international cooperation between agencies facilitates the exchange of experiences and best practices in dealing with competitor collaborations. In this regard, the UK Competition & Markets Authority's recent statement in its draft Annual Plan9 for 2021/22 that it will "continue [its] close engagement and cooperation with other competition and consumer agencies in the EU and globally" is to be welcomed.
Looking to the future
Competition authorities around the world have demonstrated their ability to act quickly and responsibly in helping firms respond to the pandemic. As we begin to look beyond the present crisis, it is worth considering whether the actions taken by authorities in the last year might provide a template for promoting other forms of welfare-enhancing competitor collaboration. One issue that springs to mind in this context is the climate crisis. The EU's 'Green Deal' emphasised the need for a "modern, resource-effective and competitive economy" to address the challenge of climate change10, and it is now more important than ever that businesses can cooperate and innovate for the benefit of the environment. Agreements between competitors to develop and adhere to high environmental standards, or information-sharing mechanisms to reduce environmental impacts, should not founder for fear of infringing the competition rules.
In Europe, the Commission has recognised in the context of the pandemic that competition law self-assessment often fails to provide sufficient legal certainty for businesses seeking to collaborate with competitors to develop innovative solutions. The Commission's resuscitation of the comfort letter procedure could signal a welcome return to a more positive approach to offering competition law certainty. While the resource-intensive nature of the procedure should not be underplayed, there is nonetheless a case for extending it beyond the current crisis to give businesses a means of protecting themselves before implementing particularly novel or far-reaching initiatives.
At the very least, more concrete guidance is needed from the Commission and other competition authorities on how they will treat arrangements that are put in place for environmental or sustainability purposes. The urgency of the climate crisis calls for more detailed guidance on how the wider social benefits of competitor collaborations will be assessed, including detail on the kind of evidence that can be adduced to demonstrate the net benefits of an initiative. In 2019 the Commission began a review of its Horizontal Cooperation Guidelines and the block exemptions currently in place for research and development and specialisation agreements11. This is an ideal opportunity for a root-andbranch review of the current legal framework for competitor collaborations.
3. https://investors.emergentbiosolutions.com/news-releases/news-release-details/ emergent-biosolutions-joins-us-governments-warp-speed-program
5. https://investors.sorrentotherapeutics.com/news-releases/news-release-details/ sorrento-and-mount-sinai-health-system-jointly-develop-covi
7. https://ec.europa.eu/info/sites/info/files/framework_communication_antitrust_ issues_related_to_cooperation_between_competitors_in_COVID-19.pdf
8. https://ec.europa.eu/competition/antitrust/medicines_for_europe_comfort_letter. pdf
9. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/ attachment_data/file/944608/AnnualPLAN__-.pdf
First published in our Biotech Review of the year - issue 8.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.