Competition law and response to COVID-19

competition law experts in Lithuania

The world seeks for a flexible approach to competition law application?

Business and governments worldwide search for measures to mitigate the damage of the lockdown as well as to produce and supply goods to the market.

Some UK grocery retailers have been in discussion with the Government in pursuance of lobbying the Government to disapply competition laws to allow some coordination of home deliveries. Consequently, the CMA issued an order to relax the application of competition law to supermarkets temporarily.

Also, few grocery retailers in Australia considered seeking Australian competition authority clearance for cooperation in limiting purchasing volumes of goods such as toilet paper, tissues or even rice to ensure sufficient supplies for consumers.

While, the United States Secretary of Health and Human Services, the Department of Justice and Federal Trade Commission considered to convene meetings or consultations with market participants to discuss developing, manufacturing, distributing, purchasing, or storing pandemic countermeasures or products.

Usually, such initiatives would be impeding competition rules.

Cooperation between businesses in COVID-19 times

At the end of March, the European Competition Network published a joined statement regarding the cooperation of business in response to coronavirus. Furthermore, last week the European Commission issued temporary guidelines on such cooperation. The institutions emphasise the importance of competition rules but also admits that ensuring supply chains of essential goods and services may require the cooperation of business.

The examples of such cooperation include:

  • Coordinating the supply of essential products or services.
  • Exchanging information on supply chains, purchase volumes, purchasing arrangements to avoid the risks of shortages.
  • Sharing storage places or logistics channels.
  • Developing common standards for serving clients in the safest sanitized and clean manner.

However, according to the Framework, such cooperation is related to ensuring the supply chains of essential goods. It also establishes conditions of assessment of such cooperation, namely (i) it should be merely for the benefit of consumers, (ii) limited in time, (iii) appropriate and (iv) not going beyond what is necessary. Thus, competition supervision authorities seem to allow usually prohibited cooperation between competitors, but strict conditions apply in order to avoid infringements of competition rules.

Preserve competition laws compliance

Despite the world being in an unprecedented situation, competition laws still apply. Competition supervision authorities made it clear that none of the hardcore restrictions such as output reduction, price-fixing, market or customer sharing will be justified.

Furthermore, even though some actions might seem reasonably necessary with obvious benefit for the customers as well as minimizing the negative outcomes of the outbreak, it is up to the competition authority to decide whether it is justified to bend the competition laws.

One shall notice that competition supervision authorities are ready to advise business both informally and formally whether their planned cooperation is justified. For example, the European Commission announced an email for assessing the cooperation arrangements and providing ‘comfort’ letters to businesses. Also, national authorities themselves are most likely to be active in discussions and advising on both business and governmental responses to the crisis.

Considering the risks and ambiguity in the assessment of allowed corporations, we recommend obtaining legal advice before pursuing any potential cooperation as a measure to respond to COVID-19 caused market situations.

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