24th March, 2020
Maria DeBono, Associate
As the coronavirus pandemic continues to dominate, businesses and regulators alike will continue to develop measures in response to combat this faceless menace which has waged war on society as we know it. The economy is undoubtedly taking a hit and the EU is identifying measures to cushion the impact and lessen the chaos that the virus has brought in its wake. The question is, will competition law principles be left hung out to dry in these extreme circumstances? On the 23rd of March 2020, the European Competition Network (“ECN”) published a statement which sets out some guidance in this regard.
These turbulent times may tempt some to agree to fix prices or share markets or sources of supply with others in the same industry and such agreements may have as their object or effect, the prevention, restriction or distortion of competition within the internal market, all of which are practices that may affect trade between Member states, and which are prohibited under Article 101 TFEU. We have begun to see the temporary relaxing of competition law rules in this area on a case-by-case basis and in specific industries that might require the enhanced co-operation between businesses in these testing times where security of supply and availability of resources for consumers is of utmost importance. In the UK for example, many supermarkets and retailers have been struggling to keep up with increased demand for products. In response, the British Government has held that it will be temporarily relaxing elements of its competition law to allow supermarkets to “feed the nation” during this crisis. This relaxation shall include measures such as allowing stores to share data regarding stock levels, share distribution vans and even share staff, if need be. Even in Norway, within the transport sector, airlines have been granted a temporary waiver from competition rules to allow them to “coordinate” to be able to maintain critical services. In ordinary circumstances, undertakings conducting such measures could essentially fall foul of Article 101 TFEU. Just yesterday, the ECN, which is made up of the European Commission and the 27 national competition authorities (including the Malta Competition and Consumer Affairs Authority), issued a joint statement on the application of competition law during the coronavirus crisis essentially stating that due to the current circumstances, the ECN will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply. Evidently, this does not mean that the authorities will “close an eye” in every case, but only where the latter conditions subsist. Despite this, it may be important to bear in mind that while providing a more “flexible” approach might seem like the natural next step at the moment, authorities cannot afford to be short-sighted. As held by former European Commissioner for Competition Policy, Neelie Kroes during the 2008 economic crisis, “today’s softness is tomorrow’s nightmare” and therefore, an excessive relaxation of such rules, could sow the seeds of destruction when this crisis eventually becomes a distant memory.
The ECN’s statement to refrain from actively intervening against necessary and temporary measures put in place in order to avoid a shortage of supply, does not mean that the authorities will be lax in other departments of competition law and the ECN made this clear in its statement by stating that it is of utmost importance to ensure that products considered essential to protect the health of consumers (such as hand sanitisers) in the coronavirus crisis, remain available at competitive prices. This is important now more than ever, in this time which is dominated by “panic-buying” which could be an impetus for dominant undertakings to exploit consumers or exclude competitors, which is prohibited under Article 102 TFEU. Businesses might use this pandemic to exploit consumers by increasing the prices of specific products which are in high demand. We have heard about the exorbitant price increases of hand sanitisers and respiratory face masks in the last few weeks around the world in brick and mortar stores and even on e-commerce platforms. Italy’s competition authority for example, is currently considering how to tackle these unjustifiable price increases on e-commerce platforms. Businesses may also begin “tying and bundling” non-essential products together for example by bundling face masks with other products. This would mean that face masks would only be available for purchase as a “bundle” i.e together with the purchase of another product or alternatively, face masks would still be available as a stand-alone product but purchasing the bundle would prove more advantageous to the consumer. Such practice could exclude competitors and harm competition on the market and consequently, may breach competition law in certain circumstances. The illegal bundling of face masks by pharmaceutical companies as well as e-commerce companies was investigated in South Korea by the Korean Fair Trade Commission. Evidently, these practices should attract tougher as opposed to more flexible scrutiny by authorities and the ECN confirmed that it will not hesitate to take action against companies which attempt to take advantage of the precarious situation, especially by companies abusing their dominant position.
Notably, all the above-mentioned competition law violations might also surface in the coronavirus aftermath, when businesses might be struggling to make ends meet and could therefore be more tempted to choose to engage in these anticompetitive practices. It is therefore important that our competition authorities remain vigilant even post COVID-19.
The coronavirus has wreaked havoc, but competition law will not go down without a fight. While the ECN has proposed a flexible approach in terms of specific measures as mentioned above, competition law still applies to you and your business. Businesses are encouraged to follow any further guidance emanating from the ECN or the European Commission as well as the Malta Competition and Consumer Affairs Authority and to seek advice in case of doubt, as the slope remains a slippery one.
©Fenech & Fenech Advocates 2020
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