EU Competition Enforcers Permit "Necessary and Temporary" Cooperation to Mitigate Disruption from Ukrainian Conflict
EU competition enforcers will not intervene in "necessary and temporary" cooperation to avoid or to mitigate severe disruptions caused by the conflict in Ukraine.
The European Competition Network ("ECN") issued a policy statement indicating that member agencies will not intervene in legitimate, cooperative efforts to address disruptions caused by the conflict in Ukraine and related sanctions. The ECN is a working group of competition authorities in Europe, including the European Commission, Member State national authorities, and the European Free Trade Association Surveillance Authority. The ECN issued a similar statement at the onset of the COVID-19 pandemic.
In addition to certain "hardcore" restrictions (e.g., price fixing), EU antitrust rules prohibit agreements among companies that have the net effect of reducing competition. Even in the best of times that standard can be difficult or time consuming to apply in practice, and companies often must make a risk/reward calculation about any practice that could harm competition.
The ECN statement acknowledges that the conflict in Ukraine may trigger business disruptions, and that companies may turn to their competition or others in the vertical supply chain for help. ECN antitrust authorities will not intervene in "necessary and temporary" cooperative measures designed to: (i) "ensure the purchase, supply and fair distribution of scarce products and inputs," or (ii) "mitigate severe economic consequences," including those arising from compliance with EU sanctions. According to the ECN, such measures are unlikely to reduce competition or may generate efficiencies that outweigh any negative impact.
The ECN statement provides some—but not complete—comfort to businesses cooperating with competitors or others in the supply chain to address disruptions arising from the Ukrainian conflict. The statement does not detail the types of cooperation or the conditions that companies must fulfill to take advantage of the policy. Although the ECN invites outreach for informal guidance, most companies will still have to rely on a self-assessment to determine whether the practice complies with the competition laws.
When evaluating cooperative efforts, companies should consider the following good practices:
- Document how a business disruption arises from the conflict in Ukraine, and identify how cooperative efforts solve or mitigate the problem;
- Ensure that any cooperation is no broader than necessary to cure a legitimate disruption;
- Regularly reevaluate the need for cooperation as circumstances change. If the cooperation no longer becomes necessary to achieve the intended, procompetitive result, then it may be time to change course; and
- The ECN also warns that no amount of disruption can justify cartel activity (e.g., price fixing, bid rigging, market allocations, sharing competitively sensitive information) or abuse of a dominant position.
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