By Vikrant Rana and Vibhuti Vasisth
The COVID-19 crisis is the type of economic shock that is bound to increase companies’ risk of civil class action antitrust litigation for years, in some cases even decades, to come. Companies across the globe are still defending themselves from the onslaught of civil conspiracy antitrust claims that followed right after the Great Recession. During the Great Recession, companies often had to change business strategies in order to respond to a changed economy, for example, by reducing output so as to respond effectively to the decreased consumer demands. The business reasons for such decisions seemed obvious at the time of the Recession — so obvious that the companies did not always document those. However, not surprisingly, companies that made similar products also reacted to the Great Recession similarly, just as we all humans decide independently to use umbrellas while walking through the rain.
Later, various industries around the world — particularly those with commodity-like products — faced class action, antitrust litigations claiming that such companies’ decisions to reduce output during the Great Recession were not made unilaterally, but instead, were the product of illegal conspiracies so as to reduce competition. Long story short, it was alleged that companies agreed to use umbrellas while walking in the rain. Despite the obvious underlying and fundamental dis-logic of such cases, many courts typically did not immediately dismiss them, which has resulted in years of costs and disruption for companies that were simply trying to run their businesses as profitably as possible in the wake of an economic disruption and turmoil.
COVID-19 is likely to be no different. Companies across countless industries would be required to modify their businesses and its strategies as they navigate the economic effects of the present pandemic. For a few, it would/may mean reducing output and employee compensation. For others, it may just mean and require focusing on retail rather than the distributor channels.
Considering the present circumstances, the Governments around the globe have released various Support Schemes to protect the citizens generally, as also various industries, the economy, the employers and the employees. Please read here our detailed article on various Government Support Schemes announced in the wake of COVID-19 pandemic.
Additionally, most of the Nations globally, have announced various exemptions and guidelines under the Antitrust law
Exemptions and Guidelines Issued under Antitrust Law- Across the Globe
European Commission (EC) in April 08, 2020, published a Temporary Framework Communication that provides for antitrust guidance to enable companies to cooperate in responding to the urgent situations related to the current coronavirus outbreak including the concerns of supply of “essential products and services”, notably medicines and medical equipment. The European Commissioner for Health and Food Safety, Stella Kyriakides, has also put forward certain Guidelines to optimise the supply and availability of medicines during the coronavirus outbreak.
In the context of the EC Temporary Framework Communication, the Commission also published a “comfort letter” dated April 29, 2020, to Medicines for Europe concerning a specific cooperation project that aimed at avoiding situations of shortages of COVID-19 medicines.
Furthermore, the European Commission also published a Joint European Roadmap towards lifting COVID-19 containment measures. The Commission envisages that competitor cooperation related to supply of equipment and medicines may and would be necessary to lift confinement measures. It stated: “Ensuring sufficient supplies of equipment and medicines for enabling the lifting of confinement measures may require a higher than normally allowed degree of cooperation between firms, including competitors, in some ecosystems. The Commission is and will be providing, as necessary, antitrust guidance and comfort for cooperation between firms in ecosystems to overcome shortages on goods and services required to enable the gradual de-escalation from containment measures. The Commission and the National Competition Authorities will, via the European Competition Network (“ECN”), also ensure a coherent application of this guidance in their respective enforcement actions”.
On April 22, 2020, the European Commission announced that it intended to adopt an exceptional derogation from the general EU competition rules for the milk, flowers, potato sectors, as part of a package of measures to support the agrifood sector during the COVID-19 outbreak. The Commission considers that it would be appropriate to allow milk, flower, and potato sectors to collectively adopt measures that could/would stabilise the market, stating that the milk sector would be allowed to collectively plan milk production and the flower and potato sectors would be allowed to withdraw products from the market. Storage by private operators would also be allowed. It was specified that such exceptional agreements and decisions would only be valid for a maximum period of six (6) months.
On March 19, 2020, the UK government announced that it would be adopting legislation to temporarily relax elements of the UK competition law to the extent that applied to retailers. This legislation was published on March 27, 2020, being the Competition Act 1998 (Groceries) (Coronavirus) (Public Policy Exclusion) Order, 2020.
On March 19, 2020, the Competition and Markets Authority (“CMA”) welcomed the announcement from the government, making the following reassurance: “the CMA has no intention of taking competition law enforcement against cooperation between businesses or rationing of products to the extent that this is necessary to protect consumers – for example, by ensuring security of supplies”. However, the Authority further added that it would not tolerate unscrupulous businesses exploiting the present crisis as a “cover” for non-essential collusion and, to this end, it has also announced the launch of a COVID-19 taskforce which would primarily watch out for such unwarranted collusions.
Furthermore, on March 20, 2020, the Authority published an open letter addressing the businesses in the pharmaceutical and food and drink industry. The letter warned companies that they should not capitalise on the current situation by charging unjustifiably high prices for essential goods or make any misleading claims around the goods’ efficacy.
On 27 March 2020, the Financial Conduct Authority and the Payment Services Regulator issued a short press release supporting the Authority’s guidance, and saying that it would take a consistent approach with the CMA. The UK government also announced that it will suspend competition law and allow competitors to secure essential ferry transport between the mainland and the Isle of Wight. By way pf another legislation, being the Competition Act 1998 (Health Services for Patients in England) (Coronavirus) (Public Policy Exclusion) Order 2020 was announced, temporarily relaxing the application of UK competition law to National Health Service (“NHS”) bodies and other independent providers of health services to the NHS.
Additionally, the UK government on April 17, 2020, has announced that it would temporarily relax UK competition rules to allow the dairy industry to address the current market challenges, thereby avoiding waste and maintaining productive capacity to meet the future demands. This could include sharing labour and facilities, cooperating to reduce production temporarily, or identification of hidden capacity in the supply chain for processing milk and/into other dairy products such as cheese and butter. A Legislation by the Dairy UK and the Agriculture and Horticulture Development Board (“AHDB”) is expected shortly.
The France Competition Authority (“FCA”) issued a press release dated April 22, 2020, outlining the informal advice that it has provided to a professional association representing opticians (ROF) which was seeking to aid its members (opticians whose business has been brought to a standstill by the health emergency) in their dealings with lessors concerning commercial rents. The FCA concluded that the ROF’s proposed initiative would not raise competition law issues as it would still remain within the legitimate scope of the association’s mission. It noted that ROF had indicated that it is offering only general recommendations and legal and factual arguments in support of its members’ requests, and that it does not determine the behaviour that its members adopt, and the action is aimed at preventing the risk of business failure due to the prolonged closure of various sales outlets, and it in no manner enables any appreciable coordination of the costs of the stakeholders concerned.
On April 24, 2020, the Italian Competition Authority (“AGCM”) issued a note containing guidelines on business cooperation agreements during the COVID-19 pandemic that would relate to the scarcity, distribution, and transport of essential goods and services — particularly in the pharmaceutical and the agrifood sector. The authority stated that it does not intend to intervene against necessary, temporary, and/or proportionate measures adopted to avert the shortage of supplies, in line with the provisions of the European Commission’s Temporary Framework Communication dated 8 April 2020 (referred in the preceding paragraphs).
The authority considered that competition law issues should not arise in the health and agri-food sectors in case the trade associations or independent third parties coordinated the transport and distribution of raw materials; identify shortages of drugs, medical devices, and/or food; or provide for aggregate information on production and on the available capacity. The authority further stated that it would also be prepared to evaluate the cooperation agreements between competitors more flexibly where they are needed to facilitate the production of drugs or medical devices that help in tackling COVID-19, or production of essential services or goods (such as food). The authority emphasised that the competition law rules allow companies to set maximum prices, which could/would help limit unjustified price increases at the distribution level. Effective from April 24, 2020, the authority set up a dedicated procedure to offer informal guidance to companies that were willing to enter into cooperative arrangements with competitors to tackle and grapple the COVID-19 pandemic, including through comfort letters where the authority would provide promptly with its prior assessment concerning the antitrust compatibility of specific cooperation agreements. The authority stressed that the guidance received does not set a precedent in any manner.
The Icelandic competition authority has stated that it would be willing to process applications for exemptions concerning COVID-19 in less than (48) forty-eight hours from the receipt of such an application. Furthermore, it has issued the following exemptions, among others:
- Cooperation between travel agencies that aims to facilitate and enable the safe return of tourists abroad and in Iceland, as well as respond to the economic damage caused by COVID-19;
- Exchange of dialogues between travel services in any area to assess further responses to the economic damage caused by COVID-19;
- Cooperation within The Icelandic Association of Travel Services (“SAF”), aimed at facilitating and enabling the COVID-19 response among different travel services, such as offering more flexible terms for the customers.
On April 21, 2020, the Authority for Consumers & Markets (“ACM”) announced – health insurers would be permitted to make collective arrangements to provide financial support to/for healthcare providers during the COVID-19 outbreak. More specifically, such arrangements concern the continuity contributions and advances on payments to healthcare providers that are not directly involved in helping COVID-19 patients. With such arrangements, the providers that currently have less work or no work due to the crisis — such as physical therapists, maternity support workers, district-nursing providers, etc., — would be able to receive financial support.
The Spanish competition authority (“CNMC”) on March 31, 2020, addressed the launch of a dedicated mailbox that would be made available to companies that wish to consult the authorities to discuss the compatibility with the competition rules of possible transitional agreements that they are contemplating and evaluation to face the effects of the COVID-19 pandemic. The authority stated that “it will be assessed whether the measures are adopted with the sole purpose of solving the difficulties that have arisen from the current health crisis in the public interest, without going beyond what is strictly necessary for this purpose, in line with what was agreed among all the competition authorities that are part of the European Competition Network (“ECN”)”. The authority also warned that “CNMC will pursue any behaviour that seeks to take advantage of the current crisis to the detriment of consumers and, for this reason, it is closely following the evolution of the affected markets and, in particular, the formation of prices”. The dedicated mailbox could also be used to address any complaints arising thereof.
On March 26, 2020, the Swiss Competition Commission issued a press release on how antitrust law applies and would apply during the COVID-19 crisis. The authority stated that it was “looking for a discussion with associations, companies and other authorities on the design of measures to combat the corona crisis in accordance with antitrust law”. However, it warned that “private companies still have to observe antitrust law, even if the crisis could (potentially) lead to an increased need for cooperation”, and that “the overall economic situation must not be misused to form cartels and to agree/fix prices”.
On March 24, 2020, the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) issued a joint statement detailing and providing for an expedited antitrust procedure, including guidance for collaborations of businesses working to protect the health and safety of Americans during the present pandemic. The agencies would respond expeditiously to all COVID-19 related requests, and have committed themselves to resolving requests addressing public health and safety within seven (7) calendar days on receipt of all necessary information required to vet a proposal. At the same time, the agencies stressed that they would not hesitate to hold accountable those who would attempt to misuse the pandemic and engage in antitrust violations.
Furthermore, the DOJ announced on April 04, 2020, that it would not challenge collaborative efforts of McKesson Corporation, Owens & Minor Inc., Cardinal Health Inc., Medline Industries Inc., and Henry Schein Inc. to expedite and increase manufacturing, sourcing, and distribution of personal-protective equipment (“PPE”) and other COVID-19-treatment-related medication. Such collaborative efforts are part of the emergency response developed and led by the Federal Emergency Management Agency (“FEMA”) and the US Department of Health and Human Services (“HHS”) to address the rising supply needs arising from the COVID-19 pandemic.
The DOJ and FTC issued another joint statement dated April 13, 2020, announcing that they would seek to protect workers on the front lines of COVID-19 (including doctors, nurses, first responders, and those who work in grocery stores, pharmacies, among other essential providers) by using various antitrust laws against those who seek to exploit the current circumstances to engage in anticompetitive conduct in the labour market. The agencies further added that they are on alert for employers, staffing companies, recruiters, among others, who might engage in collusion or other anticompetitive conduct in the labour markets, such as agreements to lower wages or to reduce salaries or/for hours worked.
The State Administration for Market Regulation (“SAMR”) on April 04, 2020, declared that it will, in accordance with the Anti-Monopoly Law, exempt certain types of cooperation agreements that would be beneficial to technological progress, improvements in efficiency, and in the pursuit of public interest and consumer interests. Companies that would apply for such exemption must file applications to SAMR, and the SAMR would reply within two working days from the receipt of such an application. Examples of such agreements include the following:
Agreements improving technologies and developing new products in the field of medicines, vaccine testing, medical devices and protective equipment(s);
Agreements to unify and provide for product specifications and standards, implementing specialised division of labour with the aim of improving the quality of antivirus products, reduced costs and increased efficiency;
Agreements relating to public benefits such as the disaster relief, and improving the operating efficiency as well as the competitiveness of SMEs
The Canada’s Competition Bureau on April 08, 2020, dispensed a statement on competitor collaborations during the COVID-19 pandemic for critical goods. The Bureau noted that “where firms are acting in good faith, and motivated by a desire to contribute to the crisis response rather than achieve competitive advantage, the Bureau does not wish to see specific elements of competition law enforcement potentially chill what may be required to help Canadians”. The Bureau further signalled “in circumstances where there is a clear imperative for companies to be collaborating in the short-term to respond to the crisis, where those collaborations are undertaken and executed in good faith and do not go further than what is needed, it will generally refrain from exercising scrutiny”. However, the Bureau also warned that it would have zero tolerance for any attempts to abuse this flexibility as cover for unnecessary conduct. The Bureau has created a dedicated team which would deal with the requests of the companies for guidance on proposed collaborations to support the crisis-response efforts.
The Chilean antitrust agency (“FNE”) has released a short press release on April 03, 2020, stating that “in circumstances like this current pandemic, the production and distribution of goods, as well as the provision of services, may no longer be possible without a certain degree of collaboration between competitors. In these cases, collaboration agreements between competitors would in principle be efficient because they would allow the supply of products or services to consumers, without such objectives being fully or partially fulfilled by each economic agent acting individually during the current crisis”. However, the FNE also noted the above competitor collaboration needs to be “analyzed, evaluated, and designed with caution”, and that it would still continue to investigate and prosecute cartel and anti-competitive allegations during the crisis.
On March 26, 2020, a Decree being Decree 482 of 2020 was published by the President of the Republic and the Ministry of Transport. The said Decree provides for an exemption from the competition rules for agreements between competitors in the transport of cargo, which, despite limiting competition, aims to defend the stability of production of essential goods or provision for/of services of benefit to/of the general economy.
On 9 April 2020, the Egyptian Competition Authority issued a press release declaring that it is “fully aware of the importance of facilitating and enabling innovation and necessary technologies. This can be via collaborating innovative efforts by and between competitors and fostering the necessary coordination among them to reach more efficient production of scarce or fundamental products necessary to combat the spread of the virus, especially in the medical supplies sector or the pharmaceutical and health care sectors”. The authority has launched a new initiative through which it will be providing free and informal advice to the companies and their legal advisors concerning whether proposed cooperation initiatives could/would benefit from an exemption.
The Hong Kong Competition Commission issued a statement on March 27, 2020 suggesting that it would take a “pragmatic approach” to the enforcement of competition law “in respect of the temporary measures which are genuinely necessitated by the COVID-19 outbreak.” However, it further emphasized that it would still remain vigilant against companies seeking to “take advantage” of the present situation.
On April 19, 2020, the Competition Commission of India published an advisory-note, according to which a collaboration that is necessary and proportionate to address concerns arising from the present pandemic may be exempted from antitrust scrutiny. For e.g., coordination of certain activities, for instance, sharing data on stock levels sharing of distribution network and infrastructure and transport logistics to ensure continued supply and fair distribution of the product(s) (e.g., medical and healthcare products namely, ventilators, face masks, gloves, vaccines, etc., and other essential commodities) and services (for e.g., logistics, testing, etc.) may not fall foul of the existing competition laws.
On April 23 2020, the Japanese Fair Trade Commission had posted on its website the Commission’s view on face masks and personal sanitation products retail pricing ceilings during the COVID-19 pandemic, in response to questions from various consumers. The Commission stated that face mask, personal sanitation product manufacturers that are placing a ceiling on the retail price of these products during the present pandemic are not violative of the Japanese Competition Law. Later on April 28 2020, the Commission issued a press release stating that “necessary and temporary” coordination between competitors would “not pose a problem under the Antimonopoly Act” if such coordination is deemed necessary to ensure the smooth and fair distribution of the products whose supply is presently insufficient. The authority advised businesses to refer to a compilation of potential initiatives during the times of emergencies (including earthquakes) that was published in March 2012. The said statement explained how it may be appropriate for competition agencies to accommodate temporary collaboration between competitors to ensure the supply and distribution of scarce products and services that protect the health and safety of consumers. The authority states that it would remain available to respond to consultation questions from businesses relating to the compatibility of proposed cooperation initiatives with antitrust law.
On 27 March 2020, the Federal Economic Competition Commission (“COFECE”) issued a press release that stated any collaboration with competitors who in the present health emergency would be necessary to maintain or increase supply, satisfy demand, protect supply chains, avoid shortages or hoarding of goods, and which does not have for its purpose the displacement of other competitors that also supply the market, would not be subject to prosecution. However, the Commission also issued the following enforcement warnings:
- Any price increase must obey individual and independent decisions of the companies and should not be induced, encouraged, or recommended by any Association, Confederation, or Chambers to their participants;
- Any agreement between competitors to manipulate prices or restrict the supply of goods, and/or services, segment markets, as well as place coordinated bids or refrain from making them in tenders, is particularly serious, and would be prosecuted and sanctioned;
- COFECE shall monitor sensitive markets where indiscriminate increase in the prices are observed to evaluate and, if appropriate, rule out the existence of undue barriers or agreements between the competitors as the cause of such increase, which would warrant a formal investigation.
The New Zealand government on March 22, 2020, introduced a policy statement outlining that it would not take enforcement action under the Commerce Act against businesses that are cooperating to ensure that the New Zealanders continue to be supplied with essential goods and services. The New Zealand Competition Commission specifically approved of competitors “shar[ing] staff or distribution networks or tak[ing] other measures to ensure security of supply” but also warned against sharing of information on pricing or business strategies that are unrelated to the current crisis.
On April 17, 2020, the head of the Federal Antimonopoly Service of the Russian Federation (“FAS”) , Igor Artemiev, released a statement which noted that the FAS has “introduced temporary resolution of certain types of agreements between competitors, which would help to prevent a shortage of goods and lead to consumer benefits that outweigh the likely damage to competition”. Artemiev also noted that the FAS is presently following the experiences of other countries in adapting the antimonopoly responses to deal with the present pandemic, and that it would try to “harmonize its activities in accordance with the best international practices”. The statement indicated that the FAS is also closely monitoring prices of essential goods and prices in other markets affected by the pandemic, and is contemplating and undertaking general monitoring of air transport, telecommunications, delivery services, gasoline, construction materials sectors, etc. Furthermore, the FAS has also created a hotline for complaints.
The Minister of Trade, Industry, and Competition, SA, has issued the following temporary exemptions:
- Effective from March 19, 2020, the COVID-19 Block Exemption for the Healthcare Sector Regulations. It is envisaged that the said exemption would assist in ensuring that private and public healthcare services cooperate and provide the necessary care required by the citizens without fear of falling foul of the Competition Act. However, any cooperation should not extend to the communication and agreements in respect of prices charged to the public (i.e., price-fixing), and cooperation would only take place at the request of and in coordination with the Department of Health.
- Effective from March 19, 2020, titled as the Consumer and Customer Protection and National Disaster Management Regulations and Directions. These regulations would apply to excessive pricing by dominant firms. The regulations suggested that there would be a scrutiny of material increase in prices of certain goods and/or services, particularly if such increase in price does not correspond to, or is not equivalent to, the increase in the cost of providing the concerned good and/or service; or in case the increase inflates the net margin or mark-up on that good and/or service above the average margin or mark-up of that good or service in the (3) three-month period prior to 1 March 2020. A variety of products are included in the said list, such as toilet paper, surgical masks, baby formula, and private medical services related to testing and treatment of COVID-19, etc.
- Effective from March 23, 2020, the COVID-19 Block Exemption for the Banking Sector. The exemption has been designed to allow commercial banks to develop common approaches to debt relief and other necessary measures during the crisis. However, it is specified that the cooperation should not extend to communication and agreements in respect of prices (i.e., price-fixing). The exemption covers payment systems and the debtor and credit management.
- Effective from March 27, 2020, the COVID-19 Block Exemption for the Hotel Industry. The said scheme exempts certain agreements, including the ones consisting of cost reductions and price coordination in relation to persons placed under quarantine, as well as the exchange of information in relation to cost and availability.