June 9, 2020

Italian Competition Authority approves two emergency cooperation projects: one for joint distribution of surgical masks and one common moratorium scheme on consumer lending

On May 27, 2020, for the first time the Italian Competition Authority (“AGCM”) applied its communication on cooperation agreements in the context of the COVID-19 emergency (“Italian Communication”), applicable since April 24, 2020. Two national associations of pharmaceutical distributors (Associazione Distributori del Farmaco or “ADF”; and Federfarma) voluntarily submitted to the AGCM a cooperation project for the distribution of disposable surgical masks through pharmacies and parapharmacies, which the AGCM examined to assess its compatibility with national and EU competition law. The same day, the AGCM, together with the European Commission (“Commission”), also evaluated the agreement reached within the Italian association of consumer credit and mortgage lending (“ASSOFIN”) to implement a common moratorium program for consumer lending.

The background

On April 8, 2020, the Commission published a communication containing a temporary framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak (“European Communication”). At the same time, the Commission issued its first written comfort letter to an association of manufacturers of generic and non-generic medicines (Medicines for Europe) on the compatibility of a specific cooperation project that targets the risk of shortage of essential medicines for hospital use with the prohibition on anti-competitive agreements (our previous analysis of the European Communication is available here).

In the wake of the position taken by the Commission, the AGCM published the Italian Communication, expressly referring to the European Communication and providing a brief overview of its content, with minor additions. In particular, the AGCM acknowledged that the current circumstances require both the adoption of exceptional measures to avoid shortages of supplies – notably in healthcare and agri-food sectors – and the issuing of comfort letters (though on a temporary and discretionary basis only). In summary, according to the AGCM, for a cooperation project to be eligible for exemption due to the emergency context, it must meet three essential requirements: (i) be objectively necessary to actually increase output in the most efficient way to address or avoid a shortage of supply of essential products or services; (ii) be proportionate, i.e., not exceeding what is strictly necessary to achieve the objective in point (i); and (iii) be temporary in nature.

The cooperation agreement for surgical mask distribution

The cooperation agreement submitted to the AGCM was entered into by ADF and Federfarma, associations of pharmacists and parapharmacies, and the extraordinary commissioner for the COVID-19 emergency, a public official in a special office created to facilitate and secure an efficient administrative response to the crisis and assigned with centralized procurement tasks for that purpose. The agreement lays out rules for the joint purchase of surgical masks and their subsequent pro-rata allocation among distributors at the unit purchase price negotiated with suppliers.

Due to the fact that the cooperation agreement has impact on cross-border trade, it falls within the scope of application of EU law (namely, Article 101 TFEU on the prohibition of anticompetitive agreements) and, therefore, in assessing its compatibility with competition law, the AGCM consulted with the Commission within the context of the European Competition Network of competition authorities. As a result of that consultation, the AGCM deemed there were no elements justifying further scrutiny of the agreement on the grounds that: (i) it is aimed at managing the supply of essential products, such as surgical masks, during the health emergency; (ii) it is designed to guarantee an effective and regular supply of surgical masks throughout the national territory, ensuring supplies of essential protective equipment from pharmacies and parapharmacies; and (iii) its effects will terminate on June 30, 2020.

The moratorium scheme on consumer lending promoted by ASSOFIN

The AGCM referred to the same parameters – i.e., necessity, temporary nature, and proportionality of the agreed measures – when assessing compatibility of the ASSOFIN decision concerning its associated credit institutions adopting a common moratorium scheme on consumer credit lending. In particular, the AGCM concluded that opening a formal investigation was not necessary considering: (i) the pro-consumer aim of the decision and the fact that it is was taken in line with a Bank of Italy recommendation to support categories of consumers or undertakings that were not addressed by other government assistance; (ii) the implementation of the scheme by ASSOFIN’s affiliates is voluntary and non-associated credit institutions may participate as well; (iii) beneficiaries of the scheme are people in financial distress because of specific situations that occurred between February 21 and June 30.

Nevertheless, the AGCM has warned the association and the related undertakings that the scheme should not involve direct or indirect exchange of sensitive information between competing undertakings and that ASSOFIN should track and record any exchange of information that is deemed objectively necessary and proportionate to the intended purpose of the scheme so that it can be made available to the AGCM upon request.

Conclusion

The reasoning followed by the AGCM in assessing the protective mask joint distribution agreement and the ASSOFIN moratorium program confirms the importance of the criteria set out in the Italian Communication in assessing compatibility of cooperation agreements with competition law in light of the emergency context.

Moreover, the two approved cooperation projects show the extent to which the tools provided by the Italian Communication can be used in practice to address hurdles and shortages caused by the healthcare crisis and could pave the way for further and complementary cooperation projects to address the emergency in sectors other than healthcare, e.g., financial services.

Finally, the coordination between the AGCM and the Commission in assessing the agreements corroborates both the close link between the Italian and European Communications and the close cooperation between the two institutions to ensure a common and uniform approach and thus legal certainty and a level playing field between Member States in addressing the emergency. Overall, the fact that the AGCM has officially and publicly expressed its view on cooperation projects falling under Article 101 TFEU (rather than only under the national equivalent) confirms that the AGCM is not shying away from responding to consultations regarding projects that exceed its sole jurisdiction and stepping into the concurring Commission’s remit.

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