The European Competition Network issues a general joint statement on the application of competition rules during the COVID-19 outbreak

Key Takeaways

  • Following several individual initiatives by member state competition authorities to temporarily relax competition rules in specific sectors, the European Competition Network (which includes the European Commission and all member state competition authorities) has issued a more general joint statement on the application of competition rules during the Corona crisis. The key message is that EU enforcers “will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply” caused by the pandemic.
  • While this approach provides temporary relief to companies struggling to meet consumer demand under extreme conditions, it should not be misunderstood to mean that antitrust enforcement in Europe is generally on hold. Competition authorities have stressed that they remain committed to taking action against anti-competitive conduct, in particular against any attempt by companies to take advantage of the current situation by engaging in collusive or exploitative practices. Several investigations have already been opened, e.g. regarding the distribution and sale of face masks, sanitizing gel and other key medical supplies. Instead, the approach is intended to support appropriately structured joint efforts to expand capacity and bring goods and services to where they are most needed.
  • The general rule is therefore that competition laws continue to apply and that competition authorities will continue to enforce them (although they may face certain practical difficulties as they shift to working remotely). Businesses need to ensure that the necessary safeguards remain in place, in particular when approached by competitors who wish to collaborate in order to mitigate the impact of the current crisis. Situations which, in the spirit of the ECN’s joint statement, appear to merit an exemption from the strict application of competition rules need to be carefully analyzed and may require discussions with the competent competition authority to confirm that there are no red flags.

Relaxation of antitrust rules to avoid shortages of supply. On 23 March 2020, the European Competition Network (ECN) issued a statement acknowledging that the current situation “may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers.” [1] The ECN members, including the European Commission and the National Competition Authorities (NCAs) of the 27 EU Member States, will therefore refrain from actively intervening against “necessary and temporary measures put in place in order to avoid a shortage of supply.” The ECN’s communication is targeted at cooperation intended to address short term deficits in the supply chain which would result in companies no longer being able to meet existing demand. The more lenient enforcement action announced by the ECN does not mean that companies are now at liberty to cooperate in order to remedy situations of overcapacity. Instead, we believe that the ECN’s communication is intended to provide some comfort for collaborative efforts that may be needed to bring essential goods and services to individuals and communities. Examples of collaborative efforts that may not violate competition law standards may include the sharing of information on essential supplies, cooperation on logistics and delivery efforts or joint production of key medical supplies.

Although the United Kingdom’s Competition and Markets Authority (CMA) is no longer part of the ECN, it has taken a similar position. In a guidance paper released on 25 March 2020, the CMA indicated that it will not take enforcement actions against temporary measures taken by businesses to coordinate their actions, where these measures are appropriate and necessary to avoid a shortage or ensure security of supply, and provided that they do not last longer than necessary to deal with these “critical issues”. The CMA also indicated that cooperation ensuring that essential goods and services can be made available to the public or an important sub-set of the public (such as key workers or vulnerable consumers) will be considered as efficiency-enhancing and therefore meet the criteria for exemption from antitrust rules.

Several European countries had previously taken specific measures to relax antitrust rules in sectors particularly affected by the crisis. Germany, the Netherlands and the United Kingdom have announced retail-sector exemptions. Norway has granted an exemption to its national airlines, SAS and Norwegian Airlines, to allow them to collaborate on their flight route offerings and thus maintain the transport of persons and goods in Norway. Other sector-specific exemptions could be adopted by NCAs in the coming days or weeks.

Current enforcement actions. The relaxation of the antitrust rules to address certain specific consequences of the COVID-19 crisis does not mean that antitrust enforcement in Europe will be suspended. European competition authorities have clearly stated that the exemption is limited in scope and that they intend to take action against companies taking advantage of the current situation by colluding or abusing dominant positions, in particular to raise the prices of essential medical supplies and equipment.

Several NCAs have already opened investigations into coronavirus-related price increases. In Italy, the Autorità Garante della Concorrenza e del Mercato (AGCM) is probing Amazon, eBay and other online platforms over the sale of products used to protect against the COVID-19 pandemic. The authority indicated that it is investigating in particular “claims relating to […] the unjustified and substantial increase in prices.” In Greece, providers and distributors of surgical masks, gloves and other medical supplies have come under antitrust scrutiny. The Hellenic Competition Commission (HCC) has sent out questionnaires to a large number of companies active in the production, import and marketing of healthcare products, in particular surgical masks and disposable gloves, as well as other products such as antiseptic wipes and antiseptic solutions, apparently looking for “markets that show signs of unjustified price hikes.” Poland’s Office of Competition and Consumer Protection is investigating whether medical equipment suppliers abused their dominance by cutting off doctors’ access to surgical masks. The wholesalers allegedly cancelled their existing contracts to supply doctors with personal protective equipment so they could re-sign the agreements at significantly higher prices. The investigation will therefore consider whether this renegotiation constitutes an abuse.

More generally, the Spanish Comisión Nacional de los Mercados y la Competencia (CNMC) announced that it is keeping a vigilant eye on potential abuses or practices that could hinder supply or increase prices of products necessary for health protection, although no specific investigation has been opened yet. It even encouraged the population to collaborate in the detection of any anticompetitive behaviour. In the United Kingdom, the CMA created on 20 March 2020 a specific taskforce in charge of scrutinizing market developments to identify harmful sales and pricing practices as they emerge, and taking enforcement action if there is evidence that firms may have breached competition or consumer protection law. In parallel, the authority has already sent an open letter to the pharmaceutical and food and drink industry, following “reports that a minority of firms in [these] sector[s] are seeking to capitalise on the current situation by charging unjustifiably high prices for essential goods or making misleading claims around their efficacy.” Finally, the Swiss Competition Commission (ComCo) issued a statement on 26 March 2020 to remind the business community that it will not tolerate companies using the Covid-19 emergency situation to breach antitrust rules. Only measures ordered by the government or local authorities may be exempt from antitrust enforcement.

Investigations linked to the COVID-19 pandemic are likely to be prioritized by the European competition authorities in the very short term, considering the urgency related to medical supplies in the current situation.

Practical challenges for enforcers and companies. Several European countries are already under lock down and most competition authorities have closed their offices to the public. A vast majority of European enforcers are currently working remotely, with procedural consequences – including on dawn raids and leniency applications:

  • Due to social distancing requirements, the authorities are currently not in a position to conduct on-site investigations, including dawn raids. The Czech Office for Protection of Competition (UOHS) officially announced the suspension of all dawn raids on 19 March 2020, but the European Commission and all other NCAs are facing the same issues and are very unlikely to conduct raids for the time being. Requests for information may still be addressed to companies, though.
  • Leniency applications cannot be submitted orally any more to most European competition authorities, owing to the closure of their offices. This does not prevent companies from filing for a marker, but corporate statements, which are usually submitted orally only to avoid the risk of discovery, need to be delayed. The European Commission is encouraging undertakings to use its new e-Leniency process, but businesses may be reluctant to do so, as the impact on discovery – in particular in the United States – is still unclear at this stage. That said, antitrust enforcement activities continue both at the European Commission and NCAs levels. All authorities have indicated that they will continue ongoing administrative proceedings and investigations, and remain available to receive complaints (either formal or informal) and respond to companies’ queries.

Practical considerations for businesses. While European competition authorities have moved quickly to demonstrate that they are willing to show some flexibility in times of crisis, exemptions remain, at least for the time being, limited in scope. The overriding message is that competition laws continue to apply and will continue to be enforced, as has been the case in previous periods of economic distress. While competition authorities may, either formally or informally, allow certain specific types of cooperation, business should liaise closely with the authorities and make sure that any divergence from their standard practices remains within the precise scope and duration of the exemptions.

Companies should also keep in mind that any relief granted by enforcers will be temporary. Businesses who engage in so-called “crisis cartels” intended to address cyclical overcapacity during and after the crisis can expect to be investigated and fined by the authorities. Indeed, levels of antitrust enforcement will typically rapidly increase in the aftermath of a crisis. Experience from previous crises (cf. ECJ judgment in Irish Beef, C-209/07) and ensuing recessions shows that competition authorities in the EU generally believe that crisis-related overcapacity issues should be resolved by market forces rather than competitor cooperation.

Footnotes

[1A similar statement was jointly issued by the United States Department of Justice (DoJ) and the Federal Trade Commission (FTC) on 24 March 2020 – see Dechert OnPoint “COVID-19 Coronavirus: The DOJ and the FTC Announce Expedited Antitrust Guidance for Collaborative Public Health and Safety Efforts”.

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Quotation

Laurence Bary, Alec J. Burnside, Mélanie Thill-Tayara, Clemens York von Wartenburg, The European Competition Network issues a general joint statement on the application of competition rules during the COVID-19 outbreak, 23 March 2020, e-Competitions March 2020, Art. N° 93952

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