Competition authorities allow limited cooperation between competitors in response to the coronavirus outbreak

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Updated on Tuesday 7 April - 4pm

 

“The information below in no longer updated. Please refer to our post “Can I work together with other companies to tackle the coronavirus pandemic".

 

The coronavirus outbreak is not only a huge challenge for health care, but it also is having an unprecedented impact on the economy. The retail sector and the food supply chain in particular are under strain and have requested a temporary softening of the existing antitrust principles that will allow them to cooperate to reduce supply chain disruption. In other sectors, businesses may wish to share information and cooperate to find quick and efficient responses to the crisis. The competition authorities and governments across the European Union have reacted by explicitly allowing certain forms of cooperation but at the same time warning that during the crisis antitrust discipline must be maintained and such cooperation should not go beyond what is strictly necessary to correct the market difficulties created by the crisis. Investigations have been opened, for example, against undertakings imposing unjustified and significant price increases for products such as hand sanitizers and respiratory masks that protect against Covid-19.

At the European level

On 23 March 2020, the European Competition Network (“ECN”), the network of the European Commission and national competition authorities from all EU Member States, published a “Joint statement”[1] on the matter.

The key takeaways of this “Joint statement” are:

  • the ECN reconfirms the importance of competition law rules in ensuring a level playing field between companies but acknowledges the extraordinary character of the current situation;
  • the ECN states that competition authorities “will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply” and even adds that in the current circumstances, such measures are unlikely to be problematic as they would either (i) not amount to a restriction of competition under Article 101 TFEU or (ii) generate efficiencies that would most likely outweigh the disadvantages of any such restriction;
  • companies are encouraged to contact the European Commission or national competition authorities for informal guidance if they have any doubts about the compatibility of any such initiative with competition law;
  • finally, the ECN shows readiness to intervene in any case of abuse of dominance or cartelization aiming at raising the prices of products considered essential to protect the health of consumers (e.g. face masks and sanitizing gel) and adds that the current competition rules allow manufacturers to impose maximum prices to limit unjustified price increases at the distribution level.

This statement also concerns the member states of the European Free Trade Association (“EFTA”, Iceland, Liechtenstein, Norway and Switzerland).

Further, the European Commission has set up a dedicated mailbox: COMP-COVID-ANTITRUST@ec.europa.eu that can be used to seek informal guidance on the compatibility with competition law of specific initiatives. In order to facilitate a swift follow-up, companies are asked to provide upfront as much detail as possible on the initiative, including: (i) the firm(s), product(s) or service(s) concerned; (ii) the scope and set-up of the cooperation; (iii) the aspects that may raise concerns under EU antitrust law; and (iv) the benefits that the cooperation seeks to achieve, and an explanation of why the cooperation is necessary and proportionate to achieve those benefits in the current circumstances.

Some reactions at the national level

Belgium

So far, the Belgian Competition Authority has not announced any particular measures, but today it has published a press release explicitly referring to the European Competition Network “Joint Statement”.[2]

The Netherlands

The Autoriteit Consument en Markt (“ACM”) had already on 18 March 2020[3] hinted that the competition law rules were flexible enough to allow for some cooperation between undertakings in the current circumstances and stated that it was ready to answer any questions about collaboration that undertakings wish to launch to combat the crisis. Furthermore, the ACM warned that dominant undertakings will not be allowed to raise prices excessively and that price fixing agreements are still forbidden.

Germany

The Economy Minister, Peter Altmaier, and the head of the Bundeskartellamt (“BKA”), Andreas Mundt, have declared to news outlets that it is not necessary to change existing laws and that competition law allows the authorities to take flexible temporary measures to cope with the crisis.

Italy

The Autorità Garante della Concorrenza e del Mercato (“AGCM”) has started at least two proceedings related to the coronavirus outbreak. The first one relates to false claims that some products have had a preventive efficacy against COVID-19[4] and the second one relates to the unjustified and significant price increases of some products (hand sanitizers and disposable respiratory protection masks) on online sales platforms.[5]

Poland

Poland’s Urząd Ochrony Konkurencji i Konsumentów (“UOKiK”) has initiated proceedings regarding the unfair conduct of wholesalers supplying personal protective equipment to hospitals. The UOKiK has also dedicated a hotline to this issue in which hospital directors can inform it immediately of any such behaviour.[6]

United Kingdom

In the United Kingdom (“UK”, which is not an ECN member anymore), the government has announced that it will temporarily relax elements of competition law as part of a package of measures to allow supermarkets to work together to feed the nation.[7]

In particular, the government is allowing retailers to share data with each other on stock levels, to cooperate to keep shops open, and to share distribution depots and delivery vans. It is also allowing retailers to pool staff with one another to help meet demand. Legislation should be proposed shortly in this regard and the government has added that this will not be more than “a specific, temporary relaxation to enable retailers to work together for the sole purpose of feeding the nation during these unprecedented circumstances”. It will not allow any other activity that does not meet this requirement.

The UK’s competition authority (the Competition and Markets Authority, “CMA”) has published guidance on its priorities and its approach to exemption during the crisis.

Regarding its priorities, the CMA has made clear that it will focus on what matters to consumers. In particular, the CMA will not take enforcement action when these:

  1. are appropriate and necessary in order to avoid a shortage, or ensure security, of supply;
  2. are clearly in the public interest;
  3. contribute to the benefit or wellbeing of consumers;
  4. deal with critical issues that arise as a result of the COVID-19 pandemic; and
  5. last no longer than is necessary to deal with these critical issues.

This does not give a ‘free pass’ to businesses to engage in conduct that could lead to harm to consumers in other ways.[8]

Regarding its approach to exemption, the CMA (after clearly stating that it is only how the CMA itself will apply the criteria and that business should perform a self-assessment of their practices themselves, based on this guidance) states that actions that:

  1. avoid a shortage, or ensure security, of supply;
  2. ensure a fair distribution of scarce products;
  3. continue essential services; or
  4. provide new services such as food delivery to vulnerable consumers,

are most likely to be unproblematic from a competition law perspective based on the exemption criteria [9] – provided that they do not go further than what can reasonably be considered necessary.

More details on the approach of the CMA can be found at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/875468/COVID-19_guidance_-.pdf

Conclusion

Collaborating with competitors, also during a crisis, entails competition law risks. The antitrust rules continue to apply and companies must be careful not to exchange business information or extend any cooperation to manage the crisis beyond what is strictly necessary. It is important to remain vigilant. Collaboration between competitors must be carefully assessed under competition law and updated and specific compliance policies should be reviewed to limit any competition law risks.

ALTIUS will keep you informed about the latest developments in this area and we are available for any questions you might have.

Please do not hesitate to contact Carmen Verdonck or Quentin Silvestre for further information.

The above information is merely intended as comment on relevant issues of Belgian and EU law and is not intended as legal advice. Before taking any action or relying on the comments and the information given above, please seek specific advice on the matters that are of concern to you.

 

[1] Available at: https://ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf.

[2] See https://www.belgiancompetition.be/sites/default/files/content/download/files/20200319_press_release_13_bca_0.pdf.

[3] See https://www.acm.nl/en/publications/acms-oversight-during-coronavirus-crisis.

[4] A decision was taken on 22 March 2020, see https://www.agcm.it/media/comunicati-stampa/2020/3/PS11722)

[5] See https://en.agcm.it/en/media/press-releases/2020/3/ICA-Coronavirus-the-Authority-intervenes-in-the-sale-of-sanitizing-products-and-masks)

[6] See https://www.uokik.gov.pl/news.php?news_id=16277.

[7] See https://www.gov.uk/government/news/supermarkets-to-join-forces-to-feed-the-nation.

[8] The CMA’s examples of types of conduct that it will not tolerate include:

(a) businesses exchanging with their competitors commercially-sensitive information on future pricing or business strategies, where this action is not necessary to meet the needs of the current situation;

(b) retailers excluding smaller rivals from any efforts to cooperate or collaborate in order to achieve security of supply, or denying rivals access to supplies or services;

(c) a business abusing its dominant position in a market (which might be a dominant position conferred by the particular circumstances of this crisis) to raise prices significantly above normal competitive levels;

(d) collusion between businesses that seeks to mitigate the commercial consequences of a fall in demand by artificially keeping prices high to the detriment of consumers; or

(e) coordination between businesses that is wider in scope than what is actually needed to address the critical issue in question (for example, if the coordination extends to the distribution or provision of goods or services that are not affected by the COVID-19 pandemic).

[9] Section 9 of the Competition Act 1998 in the UK, or Article 101(3) TFEU for the European Union and Article IV.1, §3 of the Belgian Code of Economic law.

 

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