Competition, R&D and innovation: what is the thinking of the European Commission?
Last Tuesday, the European Commission’s DG Competition hosted a workshop on its review of the R&D Block Exemption (the safe harbor that protects R&D collaborations from EU competition law). It was a fascinating, even revealing event. Participants included representatives from industry and law firms.
The main objective of the EC was to obtain additional feedback on its proposal to introduce a new threshold excluding certain R&D collaborations from the safe harbor. If applicable, the new threshold requires parties to identify at least 3 comparable independent R&D efforts if Safe Harbor is to apply.
To focus the discussion, the EC had circulated in advance a hypothetical case on which it would seek comments. The hypothesis concerned a collaboration in the development of vaccines “at the beginning of the COVID crisis”. He made it clear that the parties were not competitors in COVID vaccines or COVID vaccine technology – they could not be because no such product or technology yet existed. Nevertheless, the hypothesis suggested a concern that if collaboration did not create efficiency, competition in innovation might be unduly restricted (by limiting the number of independent research efforts). Could such situations justify the new threshold?
The EC may have been disappointed by the general reaction of workshop participants. First, they expressed skepticism about the plausibility of the hypothesis. Was it likely, given the magnitude of the rewards offered for rapid independent innovation, that the parties would waste time negotiating anti-competitive collusion. Second, and perhaps more importantly, they pointed out that, in fact, the Pfizer-BioNTech and Oxford-AstraZeneca vaccines were the result of beneficial collaborations.
More generally, summarizing participants’ final comments, EC officials noted:
- little or no support for new thresholds;
- a general concern that the current block exemption is too complex and takes too long to apply; and
- specific concerns about obligations to share R&D results and pre-existing intellectual property with all parties (if Safe Harbor is to apply) – especially as some parties may be from jurisdictions where little respect may be given to the protection of intellectual property.
None of these reactions are surprising. Sophie Lawrance and I have noted similar concerns before. There is, however, an important lesson here. The EC (like other competition regulators, including the CMA) is currently extremely sensitive to threats to innovation competition. In the short term at least, this is likely to have a significant influence on its enforcement activity.
This influence may be most evident in merger cases (see here for example), but it may also have effects in other areas – such as sustainability initiatives perhaps – where the EC may put more emphasis on the risks of industrial collaborations than on their potential benefits. Regarding the block exemption for R&D, this seems to be the current direction. The good news is that the EC continues to engage on these issues. It will be interesting to see if he listens as well.