How is the United Kingdom Rising to the Competition Challenges of COVID-19?
COVID-19 and Competition Authorities
Since its emergence in late December, COVID-19 has reshaped the world’s markets. Bans on travel and gatherings have hollowed out the transport and tourism sectors, while containment measures of various forms affecting over 40% of the entire global population have caused the widespread closure of establishments and driven an unprecedented shift to home working. Added to this, supply issues, together with stockpiling activity and demand shifts, have caused product shortages around the world.
In this environment, competition authorities globally are being pulled in multiple directions, with traditional competition enforcement taking somewhat of a back seat to newer and fast-moving issues. Such issues include grappling with: (i) the reorganisation of administrative priorities in response to capacity-based or other technical restraints; (ii) the need for collaboration between competing businesses in certain sectors; and (iii) the urgent grant of State support to save private entities at risk of failure – in all cases seeking to avoid the unintended consequences of harmful anti-competitive conduct.
How are the UK Competition Authorities Addressing these Challenges?
Administrative Prioritisation
The stated priority of the lead UK competition authority – the Competition and Markets Authority (“CMA”) – at this time is “to protect UK consumers from the adverse consequences of the COVID-19 pandemic to the greatest extent possible“.
To achieve this, the CMA is focused on ensuring that necessary cooperation between actual or potential competitors is possible and that prices for essential products are not excessive. Indeed, the CMA has established a dedicated Covid-19 Task Force to, inter alia, monitor sales and pricing practices and provide support to the UK Government to ensure the supply of scarce goods and services. Further, press reports suggest that the CMA is encouraging businesses to delay formal merger notifications and the CMA has itself recognised that statutory timetables may be subject to change.
Enabling Horizontal Co-ordination in Certain Sectors
In line with its stated priorities, the CMA has reassured industry that it will not take enforcement action against businesses taking bona fide temporary measures to coordinate activity, if such measures are appropriate and necessary to secure supply; clearly in the public interest; contribute to consumers’ benefit or wellbeing; deal with critical issues that arise as a result of the outbreak; and last no longer than necessary.
Accordingly, businesses will need to self-assess whether their actions meet the CMA’s stated criteria; where businesses are genuinely uncertain about the legality of proposed actions of critical importance, they are invited to refer to the CMA for additional guidance.
Where it is felt that competition law may still impede necessary cooperation in these extraordinary times, the CMA has already shown willingness to support legislation that temporarily relaxes competition law – for example, to enable supermarkets to work together to help manage the COVID-19 crisis. (This has since been formalized.[1])
Facilitating Support for COVID-19 Affected Industries
The United Kingdom is party to the European Commission’s Temporary Framework for State aid, which gives guidance on how State aid may be deployed in the exceptional circumstances created by the COVID-19 outbreak. The Temporary Framework clarifies how EU Member States can support their economies and ensure that companies survive liquidity and demand shortages resulting from the pandemic. Two UK schemes have so far been approved.
We note that the CMA’s more nuanced stance on horizontal cooperation and the expansion in State aid approvals are a result of existing provisions and exemptions in competition law, which are being re-examined and applied in the unprecedented context of COVID-19. It remains the case that non-exempt anti-competitive behaviour will not be tolerated.
Indeed, the CMA has issued multiple statements to businesses – in particular, to those operating in the food and drink and pharmaceutical industries – warning that the prices of products essential to protecting consumer health are not to be artificially inflated, and has reminded manufacturers that they may set maximum resale price levels to help combat price ‘gouging’ by resellers. In fact, the CMA has even gone so far as to suggest that it may advise the Government to consider regulating prices directly should the circumstances so require.
Where do we go from here?
It has been clear for some time that the impact of COVID-19 on markets will be unlike anything we have seen before. In the United Kingdom, the CMA has been at the forefront of urgent and innovative measures to address the crisis, not only establishing a dedicated CMA COVID-19 taskforce, but also releasing extensive communications and guidance for businesses and consumers.
It remains to be seen how these efforts will play out over the coming months, but the CMA’s swift response to COVID-19, and its willingness to find creative solutions to protect consumer welfare, are cause for optimism.
Moreover, the CMA’s rapid and flexible response to COVID-19 has parallels globally – competition authorities around the world have adopted similar measures in respect of internal staff policies, agreements between competitors and unjustified price increases; at the same time, State aid approvals are being granted on an expedited basis within the EEA.[2] Indeed, the recent joint statement by the European Competition Network[3] (“ECN”) expressly addresses the complex balancing act which many competition authorities are having to undertake, recognising that although the ECN “will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply”, the ECN will “not hesitate to take action against companies taking advantage of the current situation by cartelising or abusing their dominant position”.
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[1] http://www.legislation.gov.uk/uksi/2020/369/made
[2] Selected examples include:
Work prioritisation / merger control: please see Mayer Brown’s guide.
EU COVID-19 economic support mechanisms: please see Mayer Brown’s guide.
State aid: examples include Denmark / Norway / Italy / Spain / Germany / Luxembourg / Latvia / Portugal.
Horizontal cooperation: examples include Namibia / ECN / Australia / Finland / USA / New Zealand.
Unjustified price increases: examples include South Africa / Greece / Brazil / Albania / USA / Poland.
[3] The ECN comprises the European Commission, the European Surveillance Authority and the national competition authorities of the EU Member States.
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