***UPDATE*** Competition Law in a State of Emergency in times of COVID-19


We have already reported on how antitrust law and practice adapted to the current extraordinary situation over the past weeks. Following these reports, further developments relevant to antitrust law have taken place. Internationally, governments and authorities have so far reacted to the challenges posed by the spread of the coronavirus with diverging signals (see below). The announcements and measures range from the loosening of antitrust regulations in certain areas directly related to supply, transport, and healthcare, via increased financial aids, to a particularly tightened monitoring of the ban on cartels.

New legislation to come in Germany soon

Yesterday, the German government published plans to further react to the crisis with legislative changes shortly and to (i) suspend the obligation to pay interest on fines to mitigate financial burdens for companies and (ii) extend deadlines for the review of merger control notifications.

Besides the proposed ease of the payment obligations for cartelists (interest on antitrust fines are deferred until 30 June 2021), the new rules for M&A transactions are of particular interest.

According to the current draft law of the German government, the review deadlines for merger control proceedings are to be extended for transactions notified in the period from 1 March to 31 May 2020. It is proposed to extend the deadline from currently

  • one month to two months (Phase I, i.e. the regular review period); and
  • by two months to overall six months (Phase II, i.e. the in-depth review period that is initiated after Phase I for more complex or even problematic mergers).

This is in line with similar legislation recently enacted in other countries, such as Austria, Denmark and Norway.

The extension of the review deadline may have a significant impact on existing transactions which are only economically viable within a narrow time frame. Therefore companies should consider whether it is possible and reasonable to notify a planned merger at a later date to avoid extended review periods. On the other hand further legislation might be enacted in the near future.

New developments in Europe

The European Commission issued a temporary framework in order to give companies that provide essential products and services, guidance regarding business cooperation in response to the current COVID-19 outbreak. At the request of companies, the European Commission may provide a “comfort” letter on short notice to essentially allow those companies to form cooperation that would normally be considered a violation of the ban on cartels (Article 101 TFEU).

As of today, the European Commission issued a first “comfort” letter to companies in the healthcare sector.

In addition, an implementing act of the European Commission is due to come into force next week, which should enable companies from certain agricultural sectors to cooperate for a limited time period. Farmers will be allowed to plan production or withdraw and store products from the market to stabilize the market and maintain the supply for consumers.

Loosening of the Ban on Cartels

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.
  • Competition authorities like in Italy and Luxembourg have published guidance papers explaining which conditions need to be fulfilled by companies to benefit from antitrust exemptions.
  • The South African government legislated exceptions from the antitrust prohibition on cooperation in the health sector and issued new regulations to prevent excessive prices by dominant companies.
  • After the Italian competition authority already granted a deferral of certain deadlines for payment of cartel fines due between 23 February and 15 April, it has extended the deferral to fines due up to 15 May. As stated above, a similar measure is currently planned in Germany as well.
Counter Trend: Stricter Enforcement

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) and associations 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 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.
  • First investigations and initial proceedings for excessive pricing against companies were launched in Spain, Italy, South Africa and China.
  • In Germany, after complaints of traders the Bundeskartellamt is seeking answers from Amazon about sales over its platform, in particular regarding supply shortages and Amazon’s decision for granting certain deliveries priority during the crisis.
  • Market regulators in China have already imposed fines for illegal price increases.
  • 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.
Better Access to State Aid

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".

(Possible) Restrictions on Transactions

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, Denmark and Norway, the review period for certain merger control notifications has already been extended by law.
  • German legislature is discussing similar steps for merger control notifications that have been submitted in the time period between 1 March and 31 May (see above). 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.

Dr Sebastian Felix Janka, LL.M. (Stellenbosch)

Dr Sebastian Felix Janka, LL.M. (Stellenbosch)
+49 89 23714 10915

David Wölting

David Wölting
Senior Associate
+49 211 5660 24990