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Competition law in Coronavirus times update

18 March 2020
The ongoing COVID-19 pandemic outbreak seems to affect almost every industry and every citizen in Europe. In times of crisis, companies face many challenges, including their survival, so competition law might not seem like a priority. However, it's prudent to stay informed, as in this exceptional situation, competition might play a crucial role as well.

Competition law suspension

In times of crises, some national competition authorities/governments might provide an exemption from antitrust rules or even enact legislation that may force companies to interact with competitors. Such an exemption was applied a few days ago in Norway, where SAS and Norwegian airlines were allowed to coordinate their schedules to maintain minimum services for citizens. Still, any agreement must be efficient and notified to the competition authority. In the UK the government has responded to supermarkets' call and allow them to work together to meet the current food-supply challenges. The move enable retailers to share stock levels data, cooperate to keep shops open, share distribution depots and delivery vans or pool staff with one another to meet demand. As the situation is fluid, such “relaxation” of rules may be allowed in other Member States. 

Also, the same rules might apply to consumer law as at least some companies whose business activity was (or will be) limited by government decisions aimed at a slowdown of the spread of the Coronavirus provide services to the collective consumer. In particular, cinemas, restaurants, fitness clubs, pubs, and other places where people normally congregate were impacted. The approach of the authorities might play a pivotal role in the survival of such businesses where their solvency is dependent on the limitation of some consumer rights.

Excessive pricing

Competition watchdogs across Europe, namely in Poland, Latvia, UK, and Italy have expressed concerns and started probing the rise of prices of essential goods like food and hygiene products. In Italy, for example, the national competition authority has launched an investigation against Amazon and eBay in relation to unjustified price increases of hand sanitisers, respiratory protective masks, and other sanitation products. Further, the French Government has recently announced that it would regulate the price of sanitisers going forward to ensure consumers are protected from unscrupulous retailers seeking to take advantage of the situation. In Poland, UOKiK has decided to create a special team consisting of employees of UOKiK and the Trade Inspection, which will monitor food and hygiene products prices on the Internet and in stationary stores. So far, thanks to the Office's cooperation with Allegro, over 50,000 offers of products allegedly helping to combat Coronavirus have been eliminated from sales. UOKiK also declared a closer monitoring of unfair use of contractual advantage in the agri-food sector against small and medium-sized enterprises whose product supply contracts may not be respected.

Effect on enforcement 

With a fast-evolving situation and the steps taken by Governments, both new and ongoing antitrust investigations will be affected. While some competition authorities have already extended their market investigations (CMA in the UK), others like UOKiK still hold a rather “business as usual” position. The European Commission, with its staff working remotely, has confirmed that companies should expect delays in ongoing merger investigations and should also delay notifying of new mergers. Some delays may be expected in court proceedings as well, as e.g. in Poland a large number of court hearings are being cancelled, the Ministry of Justice has already recommended that courts suspend the sending of court letters and further statutory solutions for the functioning of courts, including the suspension of court deadlines, are being prepared.

Risk of information exchange/gun-jumping

The current economic downturn may tempt competitors to enter into agreements to reduce capacity or  jointly deal with the crisis affecting their sector. However, some competition authorities have reiterated that without a specific exemption, such coordination may lead to severe fines, which would be particularly unwelcome in this period of financial uncertainty. As for merger regulation, companies should avoid closer cooperation during the pre-clearance stage, which might seem like a good idea due to the Commission’s advice not to file mergers, but in turn, may be recognized as “gun jumping.”

State aid

Most EU Member States are considering financial measures to support businesses in distress. This means that companies will have to become familiar with state aid rules. The situation is dynamic and just yesterday on 19 March 2020 European Commission has adopted Temporary Framework based on Article 107(3)(b) TFEU, which enables the Member States to further support the economy in the COVID-19 outbreak. The remedy the economy disturbance the Framework provides for five types of aid:

  1. Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to €800,000 to a company to address its urgent liquidity needs.
  2. State guarantees for loans taken by companies from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to the customers who need them.
  3. Subsidised public loans to companies: Member States will be able to grant loans with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.
  4. Safeguards for banks that channel State aid to the real economy: Some Member States plan to build on banks' existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The Framework makes clear that such aid is considered as direct aid to the banks' customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.
  5. Short-term export credit insurance: the Framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the State where needed.

First scheme notified in relation to Coronavirus has been already approved by the Commission on 12 March 2020. The measure dealt with compensation for event organisers in Denmark, where certain events were cancelled due to new pandemic-related regulations. 

In this fast-changing and challenging situation, it is particularly important not to take the wrong steps or, conversely, to proactively interact with the competition authority to obtain an exemption, if needed. The DWF Poland Competition team is continuously advising Clients on these critical issues providing them with complex as well as “on-the-spot” legal advice regarding essential business decisions forced by the COVID-19 situation. 

We are ready to support you in these challenging times.

Further Reading