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Competition law in times of Corona – An overview for companies and representatives

Pia Meetz
24/03/2020

Locations

Germany

Updated version of 15.04.2020

Introduction

The corona virus leads to exceptional circumstances for companies, including the area of competition law. The European competition authorities of the European Competition Network (ECN) already recognised this and published a joint statement on 23 March 2020 on possible loosening but also with warnings (Link to download the joint statement on the BKartA website). The authorities explicitly warn not to exploit the situation for charging excessive prices in the health care sector, but also announce possible loosening in some areas of competition law.

In the following we summarise the significance of the Corona crisis in terms of competition law and provide an overview of developments in individual countries.

Loosening of competition law
The authorities said they are aware of the social and economic consequences of the Corona virus. Cooperation between competitors to ensure the distribution of scarce products might be possible, the authorities announced in their joint statement. Companies willing to cooperate could contact the competition authorities if they had any concerns.

The German Federal Minister of Economics Altmaier had already considered the loosening of the anti-trust law in Germany, at least for retail chains, due to the border closures, and allowing cooperation between the food industry and retail trade. In the UK, food retailers could be allowed to exchange information on stock levels and cooperate on transport, storage capacities and personnel to ensure deliveries (see also the CMA's notification).

Relationship to competitors
Many cartels in the past had their origins in crisis. Corona is already having a huge impact on the German economy.  However, the crisis does not give any "right of self-defence" for competition law violations. Coordinated actions with competitors are critical from a competition law perspective. Discussions and agreements between competitors on how to deal with the crisis, e.g. price increases for increased costs or concerted rejection of supplier/customer claims, are considered as restricting competition. This also applies, of course, when competitors meet in associations. Companies should therefore check possible contacts with competitors to ensure that they are permitted under competition law. Discussions e.g. on possible protective and hygiene measures in companies may be permissible.

Impact on dealers' prices
In their joint statement, the authorities clarify that manufacturers may use price caps to force their dealers not to exploit the situation for "unjustified price increases". The ban on cartels still applies with regard to minimum prices. Should the dealer decide to reduce prices to stimulate business, suppliers may not counteract this or even prohibit it. Suppliers may also issue non-binding price recommendations. But this only applies as long as the recommendations do not lead to a fixed price, e.g. by granting incentives or threaten with disadvantages.

Note: The Corona virus often also affects the supply relationships between suppliers and customers. "Force majeure" can lead to a suspension of contractual performance obligations (we will be happy to send you a Fieldfisher overview on request).

Abusive Prices
In their joint statement, the authorities also issue a warning not to take advantage of the situation to charge excessive prices, especially in the health care sector. The problems in the supply chain and the shortage of essential products are already leading to significant price increases of certain products due to the enormous demand. Some companies already charge four times the average price for certain hygiene products. Such practices are currently being monitored by the cartel authorities.

For example, the English CMA has already established a COVID-19 taskforce to combat negative effects on competition (CMA's notification). The CMA fears that companies could exploit the current situation by charging excessive prices or giving misleading statements about their products. The CMA has already contacted companies and platforms on suspicion. The Greek HCC also initiated investigations following numerous consumer complaints and already sent questionnaires to various companies active in the production, import and marketing, especially for surgical masks and disposable gloves.

In Germany, especially market-dominant companies are subject to special conduct obligations, but also any other company is also subject to certain limits in its pricing. In Germany, usury is even punishable.
In the Joint Statement, the authorities warn that they will not hesitate if they become aware of such behaviour.

Scarce goods
Corona can lead to disruption of supply chains and thus to shortages of certain products. Should this occur with dominant companies, they must serve their customers in a non-discriminatory manner.

Merger control
In the context of merger control, companies must expect longer waiting times. Various competition authorities have already announced delays. For this reason, the Bundeskartellamt, the European Commission and the French Autorité de la concurrence, for example, are asking companies and their representatives to reconsider whether it is absolutely necessary to submit proceedings and to postpone notifications as far as possible (link to the Commission communication/ Bundeskartellamt communication).

Cartel damages: Longer duration of proceedings
Companies planning to claim for cartel damages must be prepared for longer proceedings. On the one hand, courts are already largely occupied with ongoing proceedings. On the other hand, courts in many federal states are in course of the crises required to take measures to prevent the spread of the Corona virus. This includes the closure of court rooms and the cancellation of hearings (announcement of the Dusseldorf Regional Court). As a result, a considerable proportion of the proceedings already scheduled are postponed. The management may be obliged to examine possible claims for damages. When considering whether to sue for damages (as well as evaluating settlement proposals), the longer duration of proceedings may become relevant.

Cartel detection
The Corona crisis will have no impact on the disclosure and prosecution of cartels by the authorities. The cartel authorities remain operational. The Bundeskartellamt already announced that the authority's ability to work is assured (notification of the BKartA). The Bundeskartellamt's whistleblower system also remains active. Companies can only receive a 100% immunity from fines if they are the first to approach the Bundeskartellamt and uncover a cartel or play a decisive role in uncovering it through their contribution. All other cartel members can receive a reduction of up to 50% if they cooperate with the Bundeskartellamt on a permanent and unrestricted basis.

Besides coping with the economic challenges and losses caused by the Corona crisis, those responsible in companies are still required to ensure compliance with competition law, because even in times of crisis the risk of a violation of competition law is not reduced. In particular, the challenges of dealing with competitors needs to be kept in mind. You can find further information in our Corona Executive Update on our website.

International Overview
  • Europe: The European Commission has explained the possibilities of limited cooperation between companies, in particular on critical hospital drugs during the coronavirus outbreak, and issued a "Temporary Framework Communication" (download the Communication here). Cooperation initiatives can receive a confirmation, a so-called "Comfort Letter", which is intended to avoid shortages e.g. in the supply of medicines to hospitals. This was particularly welcomed by the association "Medicines for Europe" which represents a large part of the manufacturers of prescription drugs and was the first to receive the Comfort Letter from the Commission (link to the press release and to the statement of the association's president). At the same time, the Commission continues to warn against taking advantage of the current situation (link to press release).

    EU Commissioner for Health and Food Safety, Stella Kyriakides, presented guidelines on 8 April 2020 for optimising the supply and availability of medicines during the corona crisis (the guidelines can be downloaded here).

    The ICN (International Competition Network) has also issued a statement on the core problems of competition during and after the crisis (link to the press release and to download the statement) and calls on member organisations to remain vigilant against anti-competitive behaviour during the crisis.

    The European Commission had already launched a website on coronavirus and rapid response (link to the Commission website). Here, the Commission publishes, among other things, measures against the coronavirus, but also provides information on e.g. fraud scams on the Internet.

    The Commission's competition department has also set up an information page on coronavirus (link to website. The pege refers to the joint ECN statement (see above) and the general guidelines (horizontal / vertical). The Commission has also set up a separate e-mail address for informal inquiries regarding planned initiatives: COMP-COVID-ANTITRUST@ec.europa.eu. For country-specific cooperation the Commission refers to the national competition authorities. The Commission is currently monitoring market developments in order to detect possible abusive activities.

  • Bulgaria: The Bulgarian Competition Authority "CPC" supports the ECN's Communication and offers informal consultations on planned initiatives in times of crisis. It also warns not to take advantage of the current situation and points out that manufacturers are allowed to set a maximum price for products in order to counter excessive prices (CPC communication).
  • Denmark: The Danish authority has set a 14-day suspension for merger control deadlines from 18 March. It could then decide whether the deadline has to be further suspended (see press release).
  • France: The health emergency declared in France also has an impact on the time limits and procedures for proceedings before the French Autorité de la concurrence. The authority announced that, amongst others, the deadlines for merger control proceedings, applications under the Leniency Notice and the enforcement of commitments and injunctions (link to the Notice) have been adjusted. Starting on 12 March, current and future deadlines, for example after filing an application, will be suspended until one month after the end of the state of emergency. Leniency applications must be submitted completely electronically.
  • Italy: The Italian AGCM warns that the current "Cura Italia" injunction may jeopardise the recovery and the possibility of growth of the economy once the emergency phase is over. This particularly concerns the telecoms sector, as customers are not able to switch providers of conventional and mobile telephone networks. At the same time, the authority stresses the need to expand the telecommunications infrastructure.

    Previously, the authority had suspended the deadlines for most of the proceedings for the period from 23 February to first 15 April and now 15 May. The deadline for the payment of fines that would have been due between 23 February and 15 May was also extended until 1 October. Investigation proceedings are excluded from suspension in order to prevent irreparable consequences of illegal conduct on competition.

    At the beginning of March, the authority had initiated proceedings against Amazon and others, with regard to the marketing of disinfection products, masks and other hygiene products. The proceedings against Amazon, which should have been concluded on 15 April, were extended until 20 November due to delays caused by the corona crisis.

  • Luxembourg: The Luxembourg competition authority has issued a guide for companies explaining measures to be taken to enforce competition law in times of crisis. The guide includes the setting of current priorities, the interpretation of the criteria for exemption during the pandemic and the extent to which the Authority will act against companies exploiting the current crisis (the guide can be found here).
  • Netherlands: At the end of March, the ACM, together with other European consumer authorities and the European Commission, called on all traders and online platforms to stop exploiting the current coronavirus crisis (COVID-19). In response, the authority sees that the online platforms Marktplaats, Bol.com and Amazon counteract misleading practices and excessive prices charged by providers to consumers.

    The Dutch ACM provides information about the coronavirus on its website (link to the ACM's notification). However, the authority is doing "business as usual" and remains available. Companies that want to cooperate could - as various companies have already done - contact the authority. The ACM also stresses that companies must not take advantage of the crisis.

    An investigation opened against the Swiss company "Roche Diagnostics" concerning Covid-19 test material was closed as the company promised to do everything possible to enable hospitals and laboratories to perform as many tests as possible and to eliminate obstacles (see ACM press release).

  • Norway: The Norwegian Konkurransetilsynet also warns not to take advantage of the current situation after receiving information about disproportionate price increases for certain products. The Authority is considering applying the 'Price Policy Act', which prohibits unreasonable prices and business conditions and allows the Authority to regulate the prices of important goods and services (link to the notification)
  • Austria: The BWB also recognises the need for cooperation and is currently prioritising complaints from the health sector (link to the BWB communication). The deadlines in merger control have been changed by law. For all notifications filed on or after 21 March 2020 and before 30 April 2020, Phase I will end on 29 May 2020. Early releases remain possible upon request. Notifications can now be submitted electronically (more information here).
  • Spain: Following various complaints, the Spanish CNMC has launched investigations into financial services, funeral services and the manufacture of health products (link to the press release, also available in English). The CNMC had previously set up a special e-mail account to deal with complaints and inquiries related to Covid-19.  

    Similarly to France, the Spanish CNMC also refers to Spanish legislation which provides for the suspension of time limits and deadlines for the completion of procedures by public bodies (link to the CNMC's notification). Nevertheless, proceedings may continue if the parties agree or if the public interest so requires. Given the exceptional circumstances, certain anti-competitive practices could be justified (Communication (in Spanish)).

  • Czech Republic: The Czech competition authority has stated that during the pandemic it will allow access to files electronically or via flash drive. The measure is mainly aimed at public procurement cases, but it also covers cartel cases.
  • Turkey: The Turkish authorities have announced "zero tolerance" for abusive prices in the food sector due to the corona outbreak.
  • UK: Since the beginning of April, the authority has set up a special service to report unfair behaviour by companies (the Reporting Service can be found here).
 
After the British CMA issued recommendations for cooperation between companies (see here), the financial authorities FCA (Financial Conduct Authority) and the PSR (Payment Services Regulator) have confirmed their support in the context of the pandemic and a uniform approach in the financial services sector (link to the FCA announcement).
 
  • US: The Antitrust Division of the Department of Justice (DoJ) and the Federal Trade Commission (FTC) issued a joint statement on Covid-19 in March (link to statement). The authorities explain that there are many ways in which competitors can cooperate without violating competition law. For this reason, the authorities will attempt to respond to all COVID-19-related inquiries, and inquiries relating to public health and safety, within seven calendar days of receiving all necessary information.
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Antitrust