Competition Law in a State of Emergency in times of COVID-19 (Update)

In response to the current extraordinary situation, many competition authorities and governments – especially in Europe – have increasingly indicated they will loosen the competition rules in cases where the pandemic is of relevance:

• The Norwegian Government and the Australian Competition Authority granted (provisional) exemptions from the ban on cartels to certain enterprises, including insurance companies, pharmaceutical wholesalers and companies in the sectors of telecommunications and transport.
• Both the British and German governments announced that they would allow further cooperation in the food industry and retail trade to secure supplies for the population.
• The European Competition Network (ECN), a network of the European Commission, the EFTA European Surveillance Authority and national competition authorities, announced that the authorities would not block a necessary and temporary cooperation of companies which supply the population with scarce products.
• By now, the European Commission provides information on its website about the compatibility of cooperation agreements under competition law, among other things.
• The competition authority of Luxembourg published a guidance paper in which it gives, inter alia, an interpretation of the criteria for antitrust exemptions.
• The South African government published a draft law including exemptions from the antitrust prohibition on cooperation in the health sector and new regulations to prevent excessive prices by dominant companies.
• Furthermore, the Italian competition authority announced that it would grant a deferral of certain deadlines for payment of cartel fines.

Contrary to the loosening of antitrust regulations described above, however, the exact opposite approach is being taken by some competition authorities, particularly the announcement that they will monitor the ban on cartels in a specifically strict way during the crisis:

• Various competition authorities (e.g. in Portugal, the US, Canada, UK and New Zealand) have strongly urged companies not to engage in anti-competitive behaviour and not to exploit the current situation to the detriment of consumers and the economy (e.g. by price fixing or market sharing).
• The ECN has also warned companies not to take advantage of the current situation by setting up cartels or abusing their dominant position.
• The competition authorities in the United Kingdom and Greece have each built a "task force" to, inter alia, identify harmful selling and pricing practices by companies and to take any required measures.
• Following a complaint, the UK competition authority is also examining whether Expedia and Booking.com have abused their market power by changing their booking conditions to the benefit of consumers and to the detriment of hotels due to the coronavirus. At this point the key question is whether behaviour relieving consumers and not maximising the profit of the portals is abusive (only) because it is at the cost of a third party.
• Finally, Chinese market regulators have already initiated proceedings due to illegal price increases and have imposed the first fines.

In addition to or as an alternative to a more generous (or stricter) application of the ban on cartels, the loosening of the rules on state aid seems to be the currently preferred measure to mitigate the economic impact of the coronavirus:

• On 19 March the European Commission published a temporary framework for State aid measures (e.g. direct grants, tax advantages, bank guarantees, etc.) on the basis of Article 107 (3)(b) TFEU.
• Based on this framework, the Commission has so far approved over 14 aid programmes.
• Taking effect as of 3 April, the Commission extended the framework conditions to include further opportunities for granting aid.

For further details please go to our website article on "State aid and the Corona pandemic".

Moreover, the coronavirus is also having an initial effect on antitrust law related aspects of transactions. Besides the somewhat hesitant investment behaviour of some investment companies that has been observed, there is a particular risk that competition authorities will be unable to smoothly carry out their work in transactions:

• The European Commission and the competition authorities in Germany, France and some other countries have already generally asked companies to consider whether the notification of a merger can be made at a later date. On 7 April, the European Commission repeated its appeal, adding that it “stands ready to deal with cases where firms can show very compelling reasons to proceed with a merger notification without delay”. In Austria, the examination period for certain merger control notifications has already been extended by law. At least for the moment, it can be expected that the authorities will make full use of the statutory review deadlines, or might even be inclined to question the completeness of merger control notifications (which means that the statutory review period may not begin until the requested information has been provided). Now more than ever, companies should take a close look at stipulated rights of withdrawal, contractual penalties or purchase price adjustment clauses that apply in the case that a transaction is (not) completed by a certain date.
• The Spanish government has also adopted a new law which requires that the acquisition of shares in a company be carried out under restrictions for certain sectors (energy, transport, health, communications, etc.). Similar restrictions have been in force in Germany for a few years now (see Sections 55 et seq. of the Foreign Trade and Payments Regulation), which are to be tightened even further according to current plans. Also the European Commission called upon Member States on 25 March to “make full use already now of its foreign direct investment screening mechanisms [or set up a full-fledged screening mechanism respectively] to take fully into account the risks to critical health infrastructures, supply of critical inputs, and other critical sectors as envisaged in the EU legal framework”. Such restrictions to foreign direct investments need to be taken into consideration for proposed transactions.
• The Australian government has tightened its scrutiny of foreign investment in Australia by abolishing the previously applicable monetary screening thresholds so that certain transactions are now subject to notification regardless of such thresholds.
• If the crisis persists, further restrictions must be expected for transactions which could endanger the security of the supply chain (especially in the health sector).

Several governments and authorities have identified antitrust law or the amendment of existing regulations as a measure to deal with the economic consequences of the coronavirus. With the duration of the corona pandemic, antitrust relevant topics in the crisis period and the way of dealing with them are increasing. On the one hand, cartel prohibitions have been loosened (temporarily) in individual cases, on the other hand, existing competition rules will be enforced more strictly. For companies, this leads to both opportunities and risks.

Accordingly, companies should review whether, to what extent and for how long they may benefit from the newly created legal opportunities in antitrust law. In the worst case, an incorrect assessment of the current legal situation could even transform an initially foreseen economic benefit into a disaster (e.g. through fines due to a subsequently identified antitrust infringement). As the example of Expedia and Booking.com shows, companies can be brought directly into the focus of competition authorities – even if their actions initially appear to be quite consumer-friendly. In view of the current special situation, due caution should also be taken with regard to transactions.

Thus, obtaining antitrust law related advice is of particular relevance in times of the coronavirus – and in the event of similar exceptional circumstances in the future.