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23 April 2020
The following products are key to tackling the COVID-19 pandemic:
The development of these products depends on pharmaceutical companies, R&D companies, research institutes and universities. However, one question remains: what are the competition rules regarding COVID-19-related R&D?
On 30 January 2020 the European Commission requested(1) expressions of interest to advance the knowledge and assess the impact of COVID-19. The initiative's budget of €10 million was subsequently increased to €47.5 million. In total, 17 shortlisted projects involve 136 research teams from across the European Union and beyond that will work on improving epidemiology and public health, including preparedness and responses to outbreaks, rapid point-of-care diagnostic tests, new treatments and new vaccines. Research teams are expected to share data rapidly so that results can immediately inform the public health response.
To further encourage COVID-19-related R&D, the European Commission has provided for temporary state aid rules allowing national aid measures supporting such R&D. In its "First Amendment of 3 April 2020 to the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak", the European Commission indicated that aid for R&D projects carrying out COVID-19 and other antiviral-relevant research constitutes state aid (and thus must be notified to and approved by the European Commission), but will be considered as compatible with the internal market and will thus be allowed, provided certain conditions are met. These conditions include the following:
R&D regarding COVID-19 in the context of EU or national studies (whether or not it benefits from the abovementioned specific state aid rules) would benefit from collaboration among the R&D parties. However, the COVID-19 crisis does not offer a wildcard to competitors to ignore competition law by freely collaborating and coordinating.
The national competition authorities of the European Competition Network (ECN) stressed in their joint statement that certain forms of cooperation are allowed in the context of the COVID-19 crisis, but that at the same time antitrust discipline must be maintained during the crisis and that such cooperation should not go beyond what is strictly necessary to correct the market difficulties created by the crisis. However, the ECN's joint statement does not specifically mention collaboration in the context of R&D. Similarly, the European Commission published a Temporary Framework for assessing antitrust issues, but that document only provides for loosened antitrust rules for possible forms of cooperation between undertakings in order to ensure the supply and adequate distribution of essential scarce products and services during the COVID-19 outbreak. Consequently, the regular rules on R&D still apply.
In order not to infringe competition law, it is therefore critical for researchers to be able to rely on the safe harbour for R&D agreements offered by the EU Block Exemption Regulation 1217/2010.(2)
Consequently, R&D agreements among competitors in the context of the COVID-19 crisis, providing (for example) for the joint development of new vaccines against COVID-19, diagnostic tests or medicines to cure the disease or the joint exploitation of these results would not be considered anti-competitive if the combined market share of the parties does not exceed 25% on the relevant product and technology markets, provided certain additional conditions are met.
For example, all of the parties must have full access to the final results of the joint R&D, including any resulting IP rights and know-how. Further, the availability of the newly developed COVID-19 vaccines, diagnostic tests or medicines throughout the European Union would be enhanced, as the R&D agreement cannot include hardcore antitrust infringements, like the restriction of the territory in which or of the customers to whom the parties may passively sell the contract products; or the requirement to refuse to meet demand from customers in the parties' respective territories.
After the R&D stage, parties could try to rely on the safe harbour for specialisation agreements offered by the EU Block Exemption Regulation 1218/2010 for different types of joint production.(3) Specialisation agreements among competitors in the context of the COVID-19 crisis, providing (for example) for the joint production of new vaccines against COVID-19, diagnostic tests or medicines to cure the disease, would not be considered anti-competitive if the combined market share of the parties does not exceed 20% on any relevant market and provided certain additional conditions are met.
In case the parties exceed the market share thresholds set by the R&D or EU Specialisation Block Exemption Regulation, competition law still does not absolutely prohibit collaboration. However, in that case, parties will need to be able to show that their collaboration meets the requirements of an 'individual exemption'. Their collaboration must contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit. No restrictions which are not indispensable to the attainment of these objectives must be imposed and competition must not be eliminated. The development of COVID-19 vaccines, diagnostic tests or medicines will undoubtedly be considered as an important benefit for consumers, but parties should nevertheless ensure that their cooperation does not go beyond what is strictly necessary to their joint collaboration project and correct the market difficulties created by the crisis.
The collaboration of researchers to develop COVID-19 vaccines, diagnostic tests and medicines is certainly of benefit to consumers, and competition law does not absolutely prohibit such collaboration. However, despite the current crisis, competition law still applies and imposes limits on such collaboration. To ensure competition law compliance, research parties should ensure that their collaboration meets the strict requirements for an individual exemption or, whichever is easier to prove, falls within the safe harbour of (for example) the R&D or EU Specialisation Block Exemption Regulation.
For further information on this topic please contact Beatrijs Gielen or Carmen Verdonck at ALTIUS by telephone (+32 2 426 1414) or email (email@example.com or firstname.lastname@example.org). The ALTIUS website can be accessed at www.altius.com.
(2) EU Regulation 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of research and development agreements, OJ L 335, 18 December 2010, p 36.
(3) EU Regulation 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of specialisation agreements, OJ L 335, 18 December 2010, p 43.
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