COVID–19: Conundrum for Competition Law

The COVID–19 pandemic confronts humankind in various unimaginable aspects. Amongst the diverse challenges that it poses, it creates a conundrum for the current competition law regime.

On the one hand, the competition law enforcement agencies need to enforce the law more strictly and vigilantly. Yet, at the same time, they are forced to provide relaxations and overlook deviant behavior in critical sectors due to the emergent situation.

Strict Enforcement

We are already witnessing shortage of items and price gouging. Essential items disappearing from the shelves has become a global phenomenon. E-commerce websites were accused of selling hand sanitizers and face masks at exponential prices.

The Government of India then declared items as “essential commodities” under the Essential Commodities Act, and further capped their prices prevailing as of February 12, 2020. Subsequent to the lockdown in India, stockpiling and price gouging of ventilators has been rampant.

The lockdown caused various e-commerce websites to offer selective items for delivery. In the United States, Amazon admitted that its recent prioritisation of critical products during the pandemic resulted in an “unintended variation” to its algorithm, causing certain Amazon product offerings to be featured over those from third-party sellers.

Given the competition law regime, as it exists, keeping a check on “anti-competitive practices” and “abuse of dominant position” ought not be a challenge. The authorities need to be extra vigilant and monitor the market behavior closely for potentially anti–competitive conduct.

Several countries have already publicly announced that they will closely scrutinize behavior with respect to the supply of goods in high demand due to COVID-19. Examples include Greece, France, Latvia, Luxembourg, Poland, Portugal, Spain, and the United Kingdom.

The Federal Trade Commission in the US has stressed that those who try to engage in antitrust violation, such as price-fixing, bid-rigging, or market allocation, will be held accountable. On March 9, 2020, the US Department of Justice took note of the shortage of public health products such as face masks, respirators, and diagnostics.

US State Attorneys General from 33 states and territories urged online marketplaces such as Amazon, Facebook, EBay, Walmart, and Craigslist to more rigorously monitor price gouging practices by online sellers using their services.

The dramatic increase in online prices of hygienic masks and sanitizing gels in Italy following the COVID-19 outbreak is already a subject of investigation by the Italian agency. Likewise, the South African Competition authority is currently investigating 11 firms that sell sanitisers, face masks and gloves who were suspected of hiking prices.

The Spanish competition regulator set up a dedicated mailbox hotline encouraging customers to bring to its attention possible abuses. Within the first week, there were 50 complaints, including allegations that

(a) financial entities were forcing the applicants to acquire additional products as a condition of access to the State guaranteed loans as part of Government relief; and

(b) of unfair and anticompetitive prices being applied by funeral service providers.

Flexible approach

At the same time, the current situation requires the authorities to exempt and/or overlook, what would otherwise be illegal under the current legal understanding. The pandemic has forced the agencies to be flexible to allow supply chains for essential items such as groceries, medicines and medical equipment, to function, without disruption even during lockdown in various parts of the world.

The exponential spread of COVID–19 also requires that production of medical gear and equipment is increased, even if it requires companies to share information, cooperate, and work in a manner contrary to competition law.

The Federal Trade Commission and the US Department of Justice Antitrust Division issued guidelines on March 24, 2020 detailing an expedited antitrust procedure and providing guidance for collaborations of businesses working to protect the health and safety of American citizens.

In a subsequent communication, DOJ’s antitrust division stated that a collaboration among five entities to redress the shortfall of personal protective wear such as masks and gloves would not be challenged.

In the UK, on March 19, 2020, it was declared that competition laws would be “relaxed” to allow “supermarkets work together to feed the nation.” Large grocery retailers have reached rationing agreements to counter rapidly depleting stocks due to panic buying.

The European Competition Network, on March 24, 2020 publicly suggested a degree of leniency in its “Joint statement on application of competition law during the Corona crisis.”

Subsequently, on April 8, the European Commission in a rare move issued a communication titled “Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak.”

It has highlighted that cooperation to overcome problems in the health sector, shortages of medicines or critical hospital supplies used to treat COVID-19 patients, would be favorably considered.

Sharing of commercially sensitive information for measures to adapt production, stock management and distribution of resaoursces within the industry as long as they are (i) necessary to actually increase output in most efficient way for essential products, (ii) temporary and (iii) limited in their scope and breadth, have been permitted.

A letter has been issued to "Medicines for Europe", formerly the "European Generics Medicines Association" (EGA). The comfort letter addresses a specific voluntary cooperation project among generic pharmaceutical producers – both members and non-members of the association – regarding shortage of critical hospital medicines for the treatment of coronavirus patients.

The Competition Bureau of Canada, in a release dated March 20, stated that it would accommodate pro-competitive collaborations between companies to support the delivery of affordable goods and services to meet the needs of Canadians.

Subsequently, on April 8, it was announced that a team has been created to assess the proposed collaborations and advise the Commissioner on what informal guidance the Commissioner might provide. The aim of the team will be to facilitate rapid decisions to enable businesses to support the crisis response efforts.

In Norway, the government granted the country’s air, land and sea transportation sector a conditional three-month exception from antitrust enforcement. Subject to conditions, the exemption allows companies temporarily to coordinate to maintain “the transportation of passengers and goods in Norway in order to secure the population access to necessary goods and services.”

Advisory by the Competition Commission of India

After the rapid action globally, the Competition Commission of India (CCI) finally has came out with an advisory on April 19. Prior to the same, the only information available publicly was regarding its internal functioning.

The CCI has categorically cautioned businesses “not to take advantage of COVID-19 to contravene any of the provisions of the Act.” Thus, any behavior in the form of information sharing on prices, output volumes, customers or delineation of markets or price fixation would be under strict vigilance.

However, after almost a month of lockdown in India, complete disruption of supply chains and shortage of medical equipment and protective gear, the CCI advisory is vague regarding a flexible approach to Competition Law.

The CCI merely reiterates Section 3(3) and 19(3) of the Competition Act, 2002 and concludes that the Act has “in built safeguards.” It ought to have identified specific sectors and services that need exemption and the terms of such exemption.

Conclusion

The competition law enforcement agencies are faced with a paradox. As seen above, statements have been issued so as to allow collaboration between competitors to boost manufacturing and supplies. Yet at the same time, the agencies have been categorical in issuing warnings against anti-competitive behaviour.

Admittedly, the task of providing exemptions to tailor them narrowly to meet the current crisis, is more challenging. Considering the grave urgency, no country has ventured into changing the legal regime per se. The exemptions are being worked out from within the existing statutory provisions. There is no coherence in approaches taken globally and the measures adopted are varied.

For example, the European Commission has noted that there could be a reduction in non-critical goods, while production lines would need to be increased for medicines. The output would be more efficient if a certain site produces only one medicine rather than different products. However, other agencies have not stated anything.

We are yet to envisage the full magnitude of the complex issues that would emerge for Competition Law due to COVID-19 and need be pragmatic and innovative to deal with the same.

Amit Gupta is a graduate from Oxford and Columbia Universities and a litigator based in New Delhi. He can be reached at aguptalaw@gmail.com