Enforcement of competition law during COVID-19 crisis

Since the outbreak of COVID-19 in Europe, several national competition authorities have already opened investigations into potential infringements of competition laws. Italian competition authority has opened an abuse of dominance investigation into the sale of medical masks, gloves, and hand gels at alleged anti-competitive prices by Amazon and eBay, while the Greek competition authority has launched a pre-investigation inquiry into price increases and availability shortages of the same products and some other medical supplies. Meanwhile, the Polish Competition Authority has initiated proceedings on the conduct of wholesalers supplying personal protective equipment to hospitals to examine whether it constitutes abuse of dominance or results from price-fixing.

In order to provide some clarity on this issue, the European Competition Network (ECN), which consists of the European Commission, the European Surveillance Authority, and the national competition authorities of each EU/EEA Member States, issued on 23 March 2020 a joint statement on the application of competition law during the coronavirus crisis. Some national competition authorities have issued individual guidelines. For example, the UK Competition and Markets Authority (CMA) issued a guidance on the approach to business cooperation in response to COVID-19, and an open letter to the pharmaceutical and food and drink industries.

The ECN acknowledged the social and economic consequences triggered by the COVID-19 outbreak in the EU/EEAm but it communicated that even at this time ensuring a level playing field between companies is an objective that remains relevant. This means there is no suspension of competition law. However, the ECN stressed three points.

Firstly, it acknowledged that in this extraordinary occurrence companies may need to establish closer cooperation in order to ensure the supply and fair distribution of scarce products to all consumers. In that sense, the ECN “will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply”. Any such measure that is temporary and necessary in the current situation would in any event likely  satisfy the conditions set out in Article 101(3) of the Treaty on the Functioning of the European Union for exemption of restrictive agreements from prohibition. Article 101(3) TFEU provides that agreements are exempted from prohibition if they contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which do not (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives, and (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. The CMA made a similar point in its guidance stating that it would not investigate action where temporary* measures to coordinate action taken by businesses: (a) are appropriate and necessary in order to avoid a shortage, or ensure security, of supply; (b) are clearly in the public interest; (c) contribute to the benefit or wellbeing of consumers; (d) deal with critical issues that arise as a result of the COVID-19 pandemic; and (e) last no longer than is necessary to deal with these critical issues.

Clearly, no competition authority will consider COVID-19 situation as a free pass for undertakings to engage in otherwise prohibited cooperation which is unrelated to or unnecessary for ensuring stability of supply and distribution of essential products and services to consumers. Therefore, any exchange of sensitive information on prices, future business strategies, price-fixing to increase prices or keep them artificially high, is expected to be scrutinised, possibly even more vigilantly than before the crises.

Secondly, the ECN stressed the importance of ensuring that products considered essential to protect the health of consumers in the current situation (e.g. face masks and disinfectants) remain available at competitive prices, and expressed readiness to take action against companies taking advantage of the current situation, whether by cartelising or through the abuse of dominant position. As mentioned above, some national competition authorities have already taken action against such practices. Other countries resorted to price regulation, such as France, where the government imposed price control on hand sanitizer to counter price-gouging or Serbia, which put a ceiling on the prices protective masks and gloves, and Bosnia and Herzegovina, which capped prices of basic foodstuff and hygienic products.

Thirdly, the ECN reminded the manufacturers that they have a tool at their disposal to set maximum prices for their products and thus prevent unjustified price increase at the distribution level. Setting maximum prices or recommended prices to distributors or retailers is not prohibited and in this case may be a way to control the prices charged to consumers for products which are high in demand and low in stock.

Considering that Serbia, Montenegro, and Bosnia and Herzegovina do not have the self-assessment system for individual exemptions, technically, any agreement that does not satisfy the conditions for group exemption (because of the  market shares of the parties or the contents of the agreement) must be notified to the competition authority for individual exemption. The Serbian Commission for Protection of Competition has issued a statement reiterating this. It said nothing on the rule that the agreement cannot be implemented before the exemption is granted, meaning that the rule continues to apply. The deadline for the Serbian competition authority to decide on individual exemption is 60 days from the submission of request. Moreover, this deadline is suspended during the state of emergency, and the authority is at reduced rate of remote work. As previously clarified by the Serbian authority, the fact that the conditions for individual exemption are met is not a valid defence in the proceedings for infringement which consists of the implementation of the agreement before the exemption is obtained. This means that the parties will not be able to implement the agreements subject to individual exemption despite the urgency. It is to be hoped that the Serbian authority would act similarly as CMA in that it would not prosecute technical infringements if the agreements between undertakings are appropriate and necessary in order to avoid a shortage or ensure security of supply, clearly in the public interest, contribute to the wellbeing of consumers, deal with critical issues that arise as a result of the COVID-19 pandemic, and last no longer than is necessary to deal with these issues. It would certainly help if the authority stated that publicly.

* All enmphasis are from the guidance.