COVID-19 and Competition Law – Important guidance issued by European and Irish competition agencies

Background

On 25 March 2020, Ireland's Competition and Consumer Protection Commission (CCPC) published on its website the European Competition Network's (ECN) joint statement on the relationship between the COVID-19 crisis and competition law.

CCPC and ECN

The CCPC is a member of the ECN. The ECN is a network of national competition authorities within the European Union along with the Directorate-General for Competition of the European Commission (DG COMP). The ECN is primarily a forum for discussion, the sharing of experience and cooperation among its members.

ECN's view that the competition rules are flexible

On 23 March 2020, the ECN issued a joint statement setting out on how to apply the competition rules during the crisis and, moreover, "explaining how the competition rules are flexible enough to take into account changes in market circumstances such as these". The ECN does not often issue statements so this is a relatively rare occurrence. The Joint Statement does not amount to legislation but it is an important statement of how the competition agencies believe the law should be interpreted and applied so it contains important guidance for not only lawyers, economists and administrators but also businesses and those who manage businesses.

ECN's recognition of the impact of COVID-19

In introducing the Joint Statement, the CCPC said that the "competition authorities across Europe, including the CCPC, are united in their recognition of the social and economic impact of the crisis." This is important because the CCPC is recognising not only the economic impact but also, and this is unusual for competition agencies, the social impact.

ECN aware of the consequences of COVID-19

The ECN's Joint Statement begins by saying that the ECN "is fully aware of the social and economic consequences triggered by the COVID-19 outbreak in the EU/(European Economic Area)." This is an interesting recognition by the ECN not only of the economic consequences but also the social consequences too.

Recognition of the flexibility of competition instruments

The Joint Statement then provides that the "different EU/EEA competition instruments have mechanisms to take into account, where appropriate and necessary, market and economic developments. Competition rules ensure a level playing field between companies. This objective remains relevant also in a period when companies and the economy as a whole suffer from crisis conditions."

Need for cooperation between undertakings

The ECN then states that the Joint Statement "understands that this extraordinary situation may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers. In 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." The ECN recognises that undertakings could have a need to cooperate "to ensure the supply and fair distribution of scarce products to all customers". This is an important qualification and limitation to the types of co-operation which is possible – it is not that the competition rules are disapplied in every case but rather that those rules are disapplied when necessary and temporary measures put in place in order to avoid a shortage of supply.

Key element of the statement

The heart of the Joint Statement provides:

"Considering the current circumstances, such measures are unlikely to be problematic, since they would either not amount to a restriction of competition under Article 101 TFEU/53 EEA or generate efficiencies that would most likely outweigh any such restriction. If companies have doubts about the compatibility of such cooperation initiatives with EU/EEA competition law, they can reach out to the Commission, the EFTA Surveillance Authority or the national competition authority concerned any time for informal guidance."

Given that the heart of the Joint Statement provides that the EU and EEA rules on anti-competitive arrangements (i.e., Articles 101 TFEU and Article 53 AEEA) do not apply, the ECN Statement contains another caveat:

"At the same time, it is of utmost importance to ensure that products considered essential to protect the health of consumers in the current situation (e.g. face masks and sanitising gel) remain available at competitive prices. The ECN will therefore not hesitate to take action against companies taking advantage of the current situation by cartelising or abusing their dominant position.

In this context, the ECN would like to point out that the existing rules allow manufacturers to set maximum prices for their products. The latter could prove useful to limit unjustified price increase at the distribution level."

Commentary

The ECN Joint Statement is extremely welcome. It does not condone wholesale breaches of competition law but it is a practical and pragmatic recognition of the issues presented by the Crisis. 

The ECN is not, by virtue of the Joint Statement, disapplying the rules of competition law – that would have been legally impossible – but the ECN is giving a helpful interpretation of the law.  In essence, the ECN is saying that the members will not intervene where there is (a) a need for companies to cooperate (b) in order to ensure the supply and fair distribution of (c) scarce products to all consumers. So it is not every form of cooperation which is permitted. There must be a need to ensure the supply and "fair distribution" of "scarce products to all consumers".  The three requirements will have to be given a fair and reasonable interpretation.

The ECN Joint Statement sets out a rationale for the non-intervention by the competition agencies. It explains that given "the current circumstances, such measures are unlikely to be problematic, since they would either not amount to a restriction of competition under Article 101 TFEU/53 EEA or generate efficiencies that would most likely outweigh any such restriction".  So it is saying that either there is no prevention, restriction or distortion of competition to begin with or there are "efficiencies" that would outweigh the restriction. The use of the word "efficiencies" is interesting because that is not the terminology contained in Article 101(3) TFEU or Article 53(3) EEA.

There is an interesting gap in the ECN Joint Statement. It does not cover or condone any abuse of dominance.  It refers to Articles 101 of the Treaty on the Functioning of the European Union ("TFEU") and Article 53 of the Agreement on the European Economic Area ("AEEA"). However it does not refer to Article 102 of the TFEU or Article 54 of the AEEA. This means that any co-operation which involves an abuse of dominance is condemned and would not be tolerated under the ECN Joint Statement. This is sensible.

The endorsement by the CCPC of the ECN Joint Statement is very helpful for businesses and their advisors in a time of great difficulty and uncertainty. While the rules of competition law will never be disapplied, the helpful interpretation and approach espoused in the ECN Joint Statement during the crisis will be helpful and pragmatic. Indeed, it would be very damaging to the competition law system in Europe were the European agencies to have taken a doctrinaire approach and not taken into account the exigencies of the COVID-19 crisis.

For more information on this topic please contact Dr Vincent Power, Partner or any member of A&L Goodbody's EU, Competition & Procurement team.

Date published: 26 March 2020