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Mar 19, 2020

COVID-19 and Antitrust: Crisis and Change

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COVID-19 AND ANTITRUST: CRISIS AND CHANGE

How will European Competition Enforcers Respond?

The COVID-19 pandemic presents an unprecedented challenge to the economy and competition enforcement is no exception. Authorities at EU and national level may need to consider novel solutions to respond to rapidly evolving problems and to protect consumers suffering at the heart of this crisis while upholding the basic objectives of competition law.

So far, the European Commission and other national authorities have:

  • announced a major relaxation of the State aid rules via a new Temporary Framework, similar—although more wide ranging and aggressive—to that used during the financial crisis. At a national level, Denmark will pay 75% of employees’ salaries for the next 6 months and the U.K. has announced GBP 330 billion of Government backed loans and guarantees to all businesses; and
  • continued scrutiny of companies that seek to exploit the pandemic for financial gain (e.g. through excessive pricing of key products).

Competitor cooperation can lead to massive consumer benefits—especially in a pandemic where disruption is not limited to a single sector, resources are constrained and security of supply is paramount…

In Norway, airlines have already been given a three-month waiver from competition rules to allow them to coordinate and maintain critical services for the population.

The broader and widespread market impact of COVID-19 (compared to the 2008 economic crisis) demands a more innovative application of existing competition rules in order to protect consumers through product supply shortages for example. Potential options for the authorities to consider might include:

  • a temporary suspension of competition law rules in the most affected industries during the period of COVID-19, allowing for more extensive competitor collaboration to ensure consumers are protected (for example, market allocation to ensure deliveries of key supplies to consumers in rural areas where local shops are forced to close as a result of COVID-19). Clear guidance could be given to encourage collaboration by competitors joining research efforts to accelerate the search for vaccines. Grocery stores coordinating on logistics to ensure consumer home delivery services are operating at maximum capacity. This falls squarely within Commissioner Vestager’s proposal during a speech just a few weeks ago to “make it clear to businesses how they can cooperate, without harming competition” so as to “unlock new possibilities for cooperation.” In the same speech, Vestager also indicated the Commission would be “ready to give informal guidance when it’s needed—in new or unclear situations, for instance,” suggesting a possibility for guidance on cooperation agreements from the Commission in a novel scenario like that of COVID-19; or
  • alternatively, simply taking a more robust “back to basics” approach, i.e. allowing collaboration between private parties where this is justified in the round by the ultimate goal of competition enforcement—protecting consumers. Outside of the COVID-19 context, supporters of a “greener” approach to competition policy have already asked to consider collective societal benefits outweighing the justification for competition enforcement. Given that EU treaties have an underlying “social” policy that should be maintained by upholding vital societal concerns, the protection of consumer health and welfare across a society consumed by a pandemic clearly fits this scenario.

The above options also need to be seen in the context of the fundamental questions currently being asked about the function and purpose of competition law, brought about by the digital economy, trade wars and larger role of the nation state in the economy. The legacy of COVID-19 may prove to be a more far-reaching review of EU competition rules than might otherwise be the case, in particular as regards the Commission’s Horizontal Guidelines currently under review.

Equally, authorities may choose not to take a more flexible approach here. During the 2008 economic crisis, the Commission displayed its dismay against “encouraging cartelists” with former Commissioner for Competition Kroes stating that “today’s softness is tomorrow’s nightmare.” Even if that is the case, continuing an enforcement trend during COVID-19 may still allow scope for authorities to adopt more flexible remedies when sanctioning conduct, e.g. using commitments or interim measures, or considering COVID-19 as a factor in their analysis of alleged breaches (or when calculating any eventual fine).

Whilst the COVID-19 pandemic should not be seen as a “free pass” for blatant anti-competitive conduct, its significant magnitude and broad market ramifications demand a reassessment of competition law and policy and present an opportunity for potential amendments, all in the name of upholding consumer rights in a time of extraordinary global crisis. Whether this occurs and any potential lasting impact this may have on competition law in future is yet to be seen.

Updates

  • The ECN (European Competition Network - comprising the European Commission, the European Surveillance Authority and all EU/EEA National Competition Authorities) issued a joint statement on March 23 recognizing that the extraordinary situation of COVID-19 may trigger a need for companies to cooperate and ensure the supply and fair distribution of scarce products to consumers. In its related press statement, the Commission noted that all authorities jointly “underline that the competition rules are flexible enough to take into account changes in market circumstances such as these”.
  • The ECN therefore confirmed that it would “not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply”.
  • The ECN also invited parties to approach the Commission or other relevant authorities for informal guidance on this issue in individual cases.
  • The UK government has relaxed certain competition laws on March 19 to allow competing supermarkets to share data on stock levels, cooperate to keep shops open and share distribution depots and delivery vans to support the most vulnerable during the crisis.
  • The German government and competition regulator have reportedly indicated the possibility of temporarily relaxing competition laws to also allow food retailers to cooperate more closely and regulate the flow of supplies.
  • The Commission has reportedly written to retail lobby group Eurocommerce to ask for details on the regulators granting similar exemptions, and asking what particular information competitors are seeking to share. There is in turn a possibility that the Commission will provide further informal guidance on this point.

Authors and Contributors

Matthew Readings

Partner

Antitrust

+44 20 7655 5937

+44 20 7655 5937

+32 2 500 9866

+32 2 500 9866

London

Elvira Aliende Rodriguez

Partner

Antitrust

+32 2 500 9837

+32 2 500 9837

Brussels

James Webber

Partner

Antitrust

+44 20 7655 5691

+44 20 7655 5691

+32 2 500 9800

+32 2 500 9800

London

Sara Ashall

Counsel

Antitrust

+32 2 500 9818

+32 2 500 9818

Brussels

Ruba Noorali

Associate

Antitrust

+44 20 7655 5039

+44 20 7655 5039

London