It is with pleasure that we present the 12th edition of Spotlight to you.
These are unprecedented times, with people all over the world learning new ways of living, working, and surviving. Thus, it is only fitting for us to be discussing the impact of COVID-19 on businesses and how jurisdictions all over are contemplating temporary suspension of competition laws for essential business collaborations.
We look forward to hearing your thoughts and suggestions.
Guidance, but Minimal Comfort
Competition Guardrails for Business Collaborations in Response to COVID-19
The COVID-19 outbreak has shaken the global economy in unprecedented ways. There is a general supply shock resulting from the disruption of supply chains, combined with an asymmetric demand shock caused by either an abrupt decline in consumer demand for certain products and services or a steep rise in demand for other products and services, notably those related to the health sector.
Since there is great uncertainty on both the duration and intensity of this shock, collaboration among businesses has taken precedence, whereas in normal circumstances competition would be needed in markets to keep the prices low.
The exceptional circumstances of this time have triggered the need for companies to collaborate to overcome this crisis and maximise the benefits for consumers. Such collaboration could be to the extent of ensuring the supply and fair distribution of essential products and services to all consumers. Authorities over the world have recognised this need and allowed exemptions under their competition legislations keeping in mind the greater public interest at play.
What’s Happening Around the World?
|Steering Group of the International Competition Network: April 09, 2020||Joint efforts like temporary cooperation between competitors may be a necessary response to protect consumers and provide products or services if they are limited in scope and duration and necessary to assist those affected by COVID-19.|
|Office for the Protection of Competition, Czech Republic: March 27, 2020||Cooperation between competitors may be permissible where the supply of essential goods and services is concerned and the parties are threatened by the impact of COVID-19.|
|Competition and Markets Authority (CMA), UK: March 25, 2020||Measures that are temporary, appropriate, and necessary to avoid a shortage, in the public interest, and do not last longer than necessary, will not attract enforcement.|
|Federal Trade Commission & US Department of Justice, US: March 24, 2020||Issued guidelines for collaborations of businesses working to protect the health and safety of citizens. A collaboration among five entities to redress the shortfall of personal protective equipment would not be challenged.|
|Australian Competition & Consumer Commission (ACCC), Australia: March 24, 2020 onwards||Allowed cooperation between companies in various sectors, such as retail and supermarkets, banks, insurance companies, wholesalers, and manufacturers of medicines, healthcare.|
|European Competition Network & European Commission, European Union: March 24, 2020, onwards||Issued a temporary framework highlighting that cooperation to overcome problems in the health sector, shortages of medicines, or critical hospital supplies would be favourably considered.|
|Finnish Competition and Consumer Authority, Finland: March 23, 2020||It will take into account that cooperation may be necessary to ensure the adequate supply and equal distribution of products to consumers.|
|Icelandic Competition Authority, Iceland: March 22, 2020||In some circumstances, it will grant exemptions from antitrust rules to travel agencies and distributors of pharmaceuticals.|
|Competition Bureau, Canada: March 20, 2020||It would accommodate pro-competitive collaborations between companies to support the delivery of affordable goods and services.|
|German Competition Authority (Bundeskartellamt), Germany: March 20, 2020||Allowed pro-competitive agreements between companies competing in the same market; green light is given for the retail industry and supermarkets.|
|South African Government: March 19, 2020||Introduced laws that grant block exemptions to the healthcare sector, which includes measures, such as sharing information on capacity and utilisation as well as procurement of essential goods.|
|Ministry of Trade and Industry, Norway: March 18, 2020||A temporary exemption from the cartel prohibition to two domestic airlines, SAS and Norwegian, allowing them to coordinate their schedules to maintain minimum services for three months.|
As with any legislative leeway, there is also a possibility of misuse. To alleviate such concerns, all authorities have cautioned businesses against unscrupulous activities exploiting the crisis as a cover for non-essential collusions.
After the rapid action globally, the Competition Commission of India (CCI) issued an ‘Advisory to Businesses in Times of COVID-19’ (Advisory) on April 19, 2020, recognising that joint action and collaboration is need of the hour. The Advisory recognises that in such extraordinary situations, certain businesses may need to coordinate their activities by sharing data on production, stock levels and timing of production; sharing of the distribution network and infrastructure, R&D, logistics, etc. in the larger public interest.
The Advisory suggests that the test to determine whether the parties to a business collaboration have violated competition laws or not will be the ‘necessity and proportionality’ of the conduct to address the concerns arising out of COVID-19. While this is a welcome step which demonstrates that the CCI is taking note of the situation and its severity, in reality, it only states and explains the law as it stands and highlights the exception as given under Section 3(3) of the Competition Act, 2002 (Act).
The advisory further goes on to say that the Act itself has in-built safeguards that would protect businesses from sanctions for certain coordinated conduct, provided such arrangements result in increased efficiencies. The most notable of such safeguards is enumerated under Section 19(3) of the Act, which states that CCI shall give due regard to factors, such as accrual of benefits to consumers; improvements in production or distribution of goods or provision of services; and promotion of technical, scientific and economic development using production or distribution of goods or provision of services.
Even though the Advisory is a notable step that provides some guidance, the industry needs more comfort and clarity at such unprecedented times which would reduce the burden on companies from inadvertent violations of the law. Thus, CCI must issue more details in respect of the Advisory in terms of what the industry ought to do. It must proactively engage with companies and guide them through what will be acceptable and what may still account as a contravention of the law.