EU and Irish Competition Law - it continues to apply during COVID-19 (subject to limited exceptions)

In Ireland, under the combined EU and Irish competition law rules, it is an offence to enter into an anti-competitive agreement or to abuse a dominant position. A breach of these two key principles can lead to fines (up to the greater of €5 million or 10% of worldwide turnover) and imprisonment (up to 10 years where the offence is a cartel) and other consequences such as the invalidity of agreements and damages for harm caused by such infringements. In addition, consumer protection law prohibits conduct such as misleading advertising and unfair contracts – a breach of these requirements is also an offence with significant sanctions.

The COVID-19 pandemic has not affected or altered the continued application of these competition (or consumer protection law) rules in Ireland. Businesses engaging in anti-competitive or abusive conduct (or unfair trading practices) can expect ongoing (and, in the case of certain sectors of high importance, potentially amplified) regulatory scrutiny, as well as the risk of financial penalties, personal implications (e.g., the disqualification of directors) and reputational harm.

Anti-Competitive Agreements and Concerted Practices – Impact of COVID-19

The economic and social uncertainty caused by COVID-19 may increase the temptation for businesses and their employees to find ways to co-operate with their competitors or third parties to restrict competition (e.g. by agreeing prices with others in the industry). There may also be opportunities for businesses and their employees to coordinate their behaviour through trade associations. While the European Competition Network (of which the CCPC is a member) has indicated that it will not actively intervene in the case of necessary and temporary measures (e.g., cooperation initiatives) which are put in place in order to avoid a shortage of supply of products (view here), Irish competiton legislation remains unaltered and ongoing vigilance by businesses and employees is needed to avoid future enforcement action by the CCPC or the European Commission.

• Parties should not enter into any agreement with competitors involving the fixing of prices, the limitation of sales/output, the sharing of markets/sources of supply or other actions which have as their object or effect the restriction of competition. Equally, other forms of collusive conduct with competitors (falling short of formal agreements) should be avoided
• Notwithstanding the desire to respond promptly to rapidly evolving market circumstances, businesses should note that exchanges of competitively sensitive information with competitors on issues such as price, quantities, marketing plans etc. raise competition concerns, even where these exchanges occur via third parties or through trade associations. Industry-wide discussions/conference calls on COVID-19 at trade association forums are particularly relevant (always have a written agenda, avoid competitively sensitive information (such as prices, costs, suppliers and customers), take minutes, walk-away if it strays into anti-competitive behaviour and take advice
• There are only very limited exceptions from the prohibition on anti-competitive agreements, decisions and concerted practices. While positive effects may be claimed from cooperation, the thresholds necessary to rely on these exceptions are high (requiring, for example, that consumers receive a fair share of the resulting benefit and that undertakings are not afforded the possibility of eliminating competition in respect of a substantial part of the products or services concerned). Prior advice should always be sought from legal counsel if any such claims are made
• The CCPC can declare certain categories of agreement to be exempt from the prohibition in certain circumstances but there have been none so far. For example, Iceland's Competition Authority (but not Ireland's CCPC) has already acted to grant a trade association representing members of the tourism industry a temporary exemption from anti-collusion rules to enable members to collaborate on ways to reduce customer cancellations and increase demand (albeit without permitting the discussion of pricing or business terms)
• In court proceedings for cartel activity, Irish competition law provides that it is a good defence to prove that the acts concerned were done as a result of a direction given by a statutory body. This is only a defence to court proceedings and is, at this stage, of very limited application
• The CCPC has a dual competition and consumer protection mandate. The CCPC may pursue businesses for breaches of consumer protection law (e.g., misleading advertising) if it proves to be a better enforcement tool. This would be similar to other jurisdictions, including in Italy, where the Competition Authority has already taken action to suspend the online sale of an anti-viral drug which was falsely marketing itself as the sole remedy to combat COVID-19
• The Government may decide to legislate to deal with specific competition and consumer protection issues arising from the COVID-19 outbreak (e.g. for competition in grocery goods trade and to the merger control regime in 2008 in response to the global Financial Crisis). Although this power has not yet been invoked, the Government retains the ability under Irish consumer protection legislation to declare a state of emergency in respect of the supply of a particular product and to fix the maximum price at which that product may be supplied to consumers. While unusual, it would be consistent with recent actions which have been taken in France to cap the wholesale and retail price of hand gels

Abuse of Dominance – Impact of COVID-19

Any attempts by businesses to unfairly exploit their market power in the currently volatile market conditions are likely to meet with vigorous resistance from competition regulators. In this regard:

• Businesses in a dominant position should avoid excessive pricing, in particular in relation to products experiencing high levels of consumer demand. This has already become an area of focus for national competition agencies, with the Italian Competition Authority having launched investigations into "unjustified and substantial" increases in the price of hand sanitizers and masks on parties in Italy. Equally, the UK's Competition and Markets Authority has signalled its intention to adopt an activist approach where businesses engage in excessive pricing, including by taking direct enforcement action and by advising Government on the potential for price regulation;
• Businesses should bear in mind that attempts to leverage their dominant position in relation to high demand products, for example by making supply conditional on the purchase of other products in respect of which they enjoy a less favourable competitive position (i.e. "tying" or "bundling") are likely to face heightened scrutiny by competition regulators. The willingness of regulators to pursue abusive conduct can be seen in dawn raids by the Korean Fair Trade Commission on businesses suspected of engaging in the illegal product bundling of face masks;
• A refusal by a dominant undertaking to supply a product without objective justification is likely to entail material competition risk. In this regard, the Polish Competition Authority has already indicated its intention to invoke competition provisions in response to the termination by wholesalers of hospital contracts for the supply of personal protective equipment, with a view to obtaining higher prices elsewhere.

Competition proceedings in the European Courts and the Irish Courts – response to COVID-19

Hearings listed before the Court of Justice of the European Union until 3 April 2020 have been adjourned and prescribed time limits in ongoing proceedings before the Court of Justice (as well as time limits to be fixed by the registry) have been extended by one month with effect from 19 March 2020.  The Court has noted that while judicial activity continues, priority will be given to urgent, expedited and interim proceedings. The General Court has also indicated that it will prioritise urgent cases and that time limits to be fixed by the registry will be adapted in order to reflect legitimate difficulties that are being faced by parties to proceedings. The Irish Courts are encouraging adjournments of non-essential proceedings.

Summary for businesses – competition (and consumer protection) law continues to apply in full to conduct irrespective of COVID-19 so maintain compliance with those rules (even if Government and the European Commission may look at wider measures to respond to the emergency and which may have some effect on aspects of those rules).

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

Date published: 20 March 2020