The spread of the SARS Cov-2 virus ("Covid 19 pandemic") is not limited to health consequences. Due to the necessary restrictions imposed throughout Europe, the health crisis has caused an economic turmoil. The demand for goods has dropped dramatically and supply chains are interrupted. Therefore governments, companies and individuals are scrambling to keep up with a host of unprecedented challenges. In particular, the current situation raises many uncertainties for companies in the field of competition law. Therefore, this client briefing shall offer a brief overview of the current developments in Germany including references on actions taken in order to tackle these challenges by other European jurisdictions.
As competition laws naturally are still in force the cautious observation of statements made by politicians and authorities is more important than ever. On 17 March 2020 the German Federal Cartel Office ("FCO") announced that its operating capacity is currently ensured and it can be contacted by the usual channels. Decisions of the FCO dealing with the effects of Covid-19 are not existing to date. On 23 March 2020 The European Competition Network ("ECN") – which includes the FCO as one of the 27 Members States issued a joint statement reassuring companies that they will not take enforcement action against legitimate cooperation aimed at preserving the supply of goods and services during the Covid-19 crisis. The ECN claims to be fully aware of the social and economic consequences triggered by the COVID-19 outbreak in the EU/EEA. In particular, following cases or conducts raise concerns in regard of competition law:
Under EU and domestic law, companies are generally prohibited from coordinating their behaviour in relation to the supply of products. The distortions in the markets, however, may lead to required closer cooperation between companies that previously have been (fierce) competitors. Companies willing to merge are faced uncertainties concerning e.g. the impact on merger notification deadlines. Unilateral measures by companies such as delivery stops, order cancellations or termination of cooperation agreements might become inevitable in the face of the crisis and may also pose an infringement of competition law. If the companies are dominant or the business partners rely on them these measures might constitute an abuse of market power.
Anticompetitive agreements and abuse of dominance
A relaxation of competition law in Germany was not undertaken yet. However, "Der Spiegel" had reported that the Federal Minister of Economics, Peter Altmaier, wanted to work towards a relaxation of the regulations with the authorities so that retail chains could cooperate more easily. In view of closed borders, retail companies had already complained to the authorities about severe problems. How this relaxation will be designed is currently unclear. In light of Covid-19 pandemic it is to be expected, as already seen in other legal areas in Germany, that certain competition laws limiting the possibilities for cooperation are suspended for a short time period to allow desirable cooperation’s. In this regard, the UK Government announced on 19 March 2020, that it was "temporarily relaxing elements of competition law" as part of a package of measures to allow supermarkets to cooperate to reduce the risk of any food shortages. The move allows retailers to:
- share data with each other on stock levels;
- co-operate to keep shops open;
- share distribution depots and delivery vans; and
- pool staff with one another to help meet demand.
It is to be seen if the FCO takes similar measures. Concerning certain vital industries such as food retailers or drug research/supply coordination and cooperation might be already allowed under German competition law. The prerequisite for this concerted practice is at all times the efficiency benefit for customers. It is obvious that especially now consumers need special protection in order to avoid exorbitant prices for scarce goods e.g. toilet paper, hand sanitizer gel or face masks. According to the ECN the different EU/EEA competition instruments have mechanisms to take into account, where appropriate and necessary, market and economic developments. In this respect the President of the FCO, Andreas Mundt, according to press releases, stated on 20 March 2020: "Competition law allows extensive co-operation between companies if there are sound reasons for this - as in the current situation". Particularly serious infringements of competition law, such as agreements on prices, are obviously not affected by the aforementioned exception and the ECN has warned that price-gouging of products, such as hand sanitizer gel and face masks, will not be tolerated by all means.
Conceivable cooperation’s most likely includes food retailing companies exchanging supply-related (e.g. stock levels) information and splitting the supply of particularly vulnerable customers in order to secure a nationwide food supply. In this regard, the ECN understands by own account that this extraordinary situation may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers. In the current circumstances, the ECN will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply. Nevertheless, companies willing to cooperate with competitors should be accompanied by competition law legal advice and, in case of doubt, reach out to the Commission, the EFTA Surveillance Authority or the national competition authority.
Unilateral measures by dominant companies can always constitute an abuse of market power but in the current vague times such measures must be carefully considered as the impact on business partners and the market is difficult to estimate. Companies are well advised to seek dialogue with their business partners and coordinate with the relevant authorities before taking such unilateral measures.
The FCO and the European Commission endeavours to reduce the number of merger notifications by asking companies to reconsider whether a merger notification needs to submitted as a priority or can be delayed. Companies are not obliged to adhere to this, of course, but it is recommended to exercise restraint, if possible, for the cause of goodwill although the timetable of the merger is thereby postponed. Whereas, the Swiss competition authority and the Czech competition authority is not planning to ask companies to reconsider the date of a merger notification. In this context a spokesman of the Swiss competition authority noted that the situation is: "more or less normal for the moment". The French competition authority has warned stakeholders that delays in the instruction of cases may arise and encouraged businesses to postpone notifications to the extent possible, quite similar to the FCO and the European Commission. The UK Competition and Markets Authority intends to continue progressing its cases, making decisions and meeting statutory deadlines. At the same time, it will continue to monitor timetables including, as permitted, extending statutory timeframes where necessary. Any updates will be communicated to businesses involved in investigations and made public on its website. Whereas, the Greece Hellenic Competition Commission has reduced its opening hours, and requested submissions by e-mail.
Competition law ensures a level playing field between companies. This objective remains relevant also in a period when companies and the economy as a whole suffer from crisis conditions. Competition authorities, as for example the Portuguese, indicated that they will remain vigilant in these times and warned companies to exploit the current circumstances for any anti-competitive behaviour. As only competition authority so far, the Czech competition authority has declared to suspend dawn raids during the Covid-19 pandemic. Further regulations and announcements are expected in the coming days and we will of course keep you informed. For more information please contact one of the contacts listed below.