The Indian Competition Authority authorises companies to collaborate and enter into agreements to share information to enhance the efficiency of production, supply, distribution, storage, acquisition during the COVID-19 crisis

Background.

The outbreak of the covid-19 pandemic has pushed the global economy into total shambles. Economies all over the world are on a verge of collapse and the Indian economy has been no exception. The continuous surge in the covid-19 cases along with the countrywide imposition of lockdown has not only resulted in a reduction of the workforce but also in a shutdown of factories and plants. Inevitably, the supply of basic food commodities, fast-moving consumer goods (‘FMCG’), and essential pharmaceutical healthcare commodities such as face-masks, hand sanitizers, gloves, and PPE’s has plummeted. While the non-essential sector is witnessing a deleterious effect on both the demand and supply of its product, the demand in the pharmaceutical sector is at an all-time high. Thus, the increased demand and a simultaneous decrease in the supply of products have pushed the pharmaceutical sector in an intractable situation.

Consequently, to ensure continued supply and fair distribution of products, the CCI has provided a sort of breather to the companies in the form of an advisory dated April 19th, 2020, licensing the companies to work under one umbrella. The advisory allows the companies to collaborate and enter into agreements to share information to enhance the efficiency of production, supply, distribution, storage, acquisition, etc. The authors in this article will analyze CCI’s green light to the companies.

Global MO to the Covid-19 conundrum.

Like the CCI, its antitrust counterparts around the globe have resorted to a similar formula allowing companies to amalgamate in the garb of covid-19. The United States antitrust watchdogs namely the Department of Justice (‘DOJ’) and the Federal Trade Commission (‘FTC’) recognizing the sore need for unprecedented cooperation amongst private businesses to protect health and safety of their fellow countrymen, issued guidelines through the instrumentality of a joint statement to expedite the antitrust procedure for collaborations of businesses. Likewise, the Australian Competition and Consumer Commission (‘ACCC’) came up with laudatory interim authorizations approbating collaboration of companies in a wide gamut of sectors such as banks, supermarkets, medicines, airlines, energy, oil, telecommunications, pharmaceutical companies, shopping centers and healthcare facilities allowing them to work in tandem to maintain a smooth supply of essential commodities in the community. Similarly, the European Commission (‘EC’) through the adoption of communication allowed cooperation between companies. Moreover, the European Competition Network (‘ECN’) in itsjoint statement asserted that to bridge the gap between demand and supply and to maintain fair distribution and cooperation between the companies, the authorities would not actively intervene in the legitimate collaborative conduct of the businesses. Moreover, the EC also allowed the sharing of commercially sensitive information for the reallocation of stocks. Further, the EC also identified different forms of cooperation in the health sector along with recognizing other forms of unproblematic cooperation.

Going the extra mile: Need of the hour

In light of the disarrayed market dynamics, the CCI recognized the need for protecting businesses from the scope of section 3(3) which warrants the CCI to “presume certain concerted actions between competitors to cause an appreciable adverse effect on competition”. In this regard, the CCI resorted to the in-built safeguard provided by Section 19(3) of the Act which “enables the Commission to have due regard, amongst others, to the accrual of benefits to consumers; improvement in production or distribution of goods or provision of services; and promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.”

Unfortunately, unlike its foreign counterparts, the CCI did not grant any additional shelter to the companies engaging in such collaborations. Neither did it lay down modus operandi of its own to keep a check on the anti-competitive behavior that results from such exemption. The US DOJ in addition to the aforementioned joint statement went a step ahead to issue a business letter announcing that it would not interfere in the collaborative efforts of the medical supplies distributors. Similarly, besides its aforementioned communication recognizing a lenient approach in the health sector, the EC went on to set up a dedicated webpage and a dedicated mailbox for providing informal guidance on specific initiatives. Further, to support the aforementioned EC initiative, the Medicines of Europe (‘MOE’) released a comfort letter announcing the development of a project for assessing large demand spikes in the health sector.

The price of liberty is eternal vigilance

Apart from adopting a lenient approach, the current situation demands vigilantism from the competition watchdogs like never before. While demand for essential commodities is on the rise, the supply of the same has taken a beating. Consequently, some companies taking undue advantage of the situation did not shy away from abusing their dominant position by selling the essential commodities at exorbitant prices. Antitrust authorities all around the globe have kept a close track on market developments and have resorted to stern measures against companies indulging in anti-competitive behaviour. The Italian antitrust watchdog formally opened two investigations against e-platforms like Amazon and eBay for unjustified price hikes of products such as hand sanitizers and respiratory tract. In the United Kingdom, the Competition & Markets Authority (‘CMA’) has launched the Covid-19 taskforce to ensure market compliance along with setting up a form for its citizens to report anti-competitive business practices. Similarly, the Polish Competition Authority (‘PCA’) instituted a task force for monitoring hike in prices of food and hygiene products. The PCA also conducted a probe against two face mask wholesale companies for unfair conduct. Further in the US, President Trump signed an executive order and some Senators have introduced a federal bill prohibiting price gouging in times of emergency. Countries like South Korea, Japan, Spain, and China have conducted raids, launched investigations and fined companies for indulging in anti-competitive acts. In a similar vein, competition authorities in Europe, the US, Netherlands, and Spain have also warned the companies to avoid resorting to unfair means as the crisis will not shield them from competition law enforcement.

Exclusion of set guidelines: An obscurity in exemption.

The CCI while providing relief to the business companies alerted them not to take undue advantage of such a prodigious moment as the same would result in serious consequences. However, the absence of any sort of guidelines/procedure for the regulation of such collaboration does more harm than good. The CCI is now faced with the daunting task of assessing these collaborative agreements and balancing the pro-competitive effects against the anti-competitive effects that may contort the market dynamics. Further, unlike its European and Australian counterparts, the CCI did not specify the industries and sectors that will come within the ambit of the breather provided by the advisory and those that will be excluded from it. Moreover, the CCI, while focusing majorly on critical healthcare products failed to take note of other essential sectors such as groceries and logistics. At the same time, the CCI is yet to provide clarifications on unclear cautionary terms such as “necessary and proportionate” conducts which would only make the situation cumbersome for the companies.

The outbreak of this pandemic has voiced serious concerns over the multi-faceted disarrayed market dynamics. The CCI is faced with a conundrum wherein on one hand it needs to facilitate the free supply of essential products by allowing companies to collaborate and on the other hand, it needs to ensure that the companies do not violate the principles of the Act in the garb of the ongoing crisis. CCI’s silence on developing the present framework and providing additional self-assessment guidelines on its exemption for legitimate collaboration has pushed bonafide businesses into obscurity and has given a carte blanche to some to take undue advantage of the leniency. It is pertinent to note that on May 25, 2020, the Confederation of Indian Industry (‘CII’) released the Competition Law Compliance Manual (‘manual’) containing guidelines that the companies need to consider while collaborating. However, the non-binding value of CII’s manual and CCI’s silence on its adoption, renders the manual ineffective.

Conclusion

While the breather provided by the CCI’s advisory is praiseworthy, there still exists a dire need for a set standard of exemptions and explicit guidelines on acts the competing enterprises can or cannot indulge to co-operate in current crisis other than merely reiterating section 3(3) and section 19(3) of the Act. Perhaps, the CCI should follow the foreign antitrust bodies to provide additional guidelines delineating the sectors and industries who could take benefit of the advisory and setting up task forces to keep a close eye on the companies. Nonetheless, with the release of the advisory, CCI seems to have plugged the right chords, however, it is yet to be seen whether the CCI will come up with any additional guidelines for the proper regulation of such collaborations.

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Authors

  • National University of Study and Research in Law (Ranchi)
  • National University of Study and Research in Law (Ranchi)

Quotation

Hrishav Kumar, Anish Gupta, The Indian Competition Authority authorises companies to collaborate and enter into agreements to share information to enhance the efficiency of production, supply, distribution, storage, acquisition during the COVID-19 crisis, 20 April 2020, e-Competitions June 2020, Art. N° 95150

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