COMPETITION IN THE TIMES OF... CORONAVIRUS
Many competition authorities throughout the world have reacted to the new social reality created by the Covid-19 outbreak and to the resulting conditions of how the economy now works. New regulatory regimes adopted in many countries are intended to slow down and diminish the epidemic by various measures aimed at social distancing (including full or partial lock downs, restrictions on consumer trade, public transport and freedom of movement, depending on the country in question). The principles of a free market economy can be viewed as being suspended as are many of the benefits of a common European market. In effect, doing business during this period is much more expensive, demanding and uncertain.
Models of reaction to the Covid-19 outbreak
Emerging from this new market reality are risks for consumers created by the conduct of companies that either intentionally profit unfairly as a result of the Covid-19 outbreak or that choose business solutions which lead to consumers harm.
From a review of the websites of several competition authorities, it appears that there are two models of reaction. One model is to confirm and remind the market that companies are still obligated to observe competition rules. The other model not only reminds the market of compliance obligations but provides specific guidance on how to act in compliance with the competition laws during the current crisis.
The role of UOKiK
The Polish Competition Authority (Urząd Ochrony Konkurencji i Konsumentów) (hereinafter “UOKiK” or the “Authority”) initially followed the first approach. On March 20, 2020, following the Covid-19 outbreak in Poland, the President of UOKiK, Tomasz Chróstny, announced that UOKiK is taking actions to investigate excessive price increases for food and hygiene products. He said that a special team was created in UOKiK and it will be responsible for monitoring the prices of hygiene products as well as of food. The team will focus on identifying on-line vendors selling desired or in-demand products at unfair prices, often at levels far higher than the original prices. Other objectives of the team will include detecting unfair commercial practices infringing collective consumer interests by misleading information on healthcare or hygiene products. According to UOKiK’s press release of March 20th, another team composed of employees of Trade Inspection Authority has been assigned to monitor prices in the stores, including retail chains. The President of UOKiK also announced that as a result of the Authority’s cooperation with one of the largest Polish online shopping platform, „Allegro”, over 50-thousand misleading or unfair offers of products that were supposedly intended to help protect against COVID-19 had been eliminated (https://www.uokik.gov.pl/news.php?news_id=16332).
In connection with these initiatives, new laws were adopted to support the Authority’s competence. The main new law is the Act of 2 March 2020 on specific solutions related to preventing, counteracting and combatting COVID-19, other infectious diseases and the crisis situations caused by such disease (OJ 2020, item 374 with amendments; http://prawo.sejm.gov.pl/isap.nsf/download.xsp/WDU20200000374/U/D20200374Lj.pdf), This law and amendments to it expand the competence of the Authority so that it can impose fines on undertakings for certain acts of increasing prices over the maximum prices set by other competent authorities (as further explained below). Attribution of such competences to the Authority is novel. Until now, UOKiK’s competence as regards prices was rather to safeguard their fairness and not to monitor their conformity with orders of other authorities.
Among many other regulations related to the prevention, counteraction and combating of Covid-19, the Parliament has adopted regulations that creates a network of public authorities with the common task of preventing excessive price increases of certain products (the “anti-profiteering task force”). The Minister of Health is very much at the forefront of the government’s anti-profiteering task forces as an authority that determine the maximum official selling prices, official wholesale margin and official retail margins for medicinal products, medical devices, foodstuffs for particular nutritional uses and biocidal products, which may be used in connection with the recent pandemic or in the event of a threat of their lack of availability in the Territory of Poland. The Minister of Economy (in consultation with the Minister of Health and the Minister of Agriculture) has been designated with competences related to a very wide and rather unclearly explained category of “goods or services of significant importance for health protection or human safety or household maintenance costs.” A number of agencies are authorized to control whether companies have complied with the new laws. The Pharmaceutical Inspection, Office for Registration of Medicinal Products, Medical Devices and Biocidal Products and the Sanitary Inspection may fine those who charge higher prices than those specified by the competent Minister with a fine of up to 5-million PLN (approximately 1.1 million EUR).
The role of UOKiK in the anti-profiteering task force is concentrated on sanctioning vendors who even unintentionally infringe repeatedly or on a large scale the price limits set by the Ministry of Health (with regard to the above-mentioned health-related products) or the Ministry of Economy (with regard to the other above-mentioned products) UOKiK is now entitled to sanction undertakings for such conduct with fines of up to 10% of an undertaking’s annual turnover. As a result of the new law, undertakings should be prepared for unannounced inspections of UOKiK and for the possible imposition of fines for disobeying the rules governing such inspections. UOKiK is entitled to impose fines of up to 5% of an undertaking’s annual turnover (but not more than 5-million PLN) for even an unintentional prevention of or hindering the commencement or the carrying out of inspections as well as for a breach of the obligation to provide requested information to UOKiK.
Antitrust reactions to the pandemic crisis throughout Europe
It is interesting to note that in contrast to UOKiK’s approach, which seems to be focused more on warning undertakings not to profiteer from the corona-crisis, a more complex approach was taken by the European Competition Network (the “ECN”) in its joint statement on the applicability of the competition law during this crisis. Clearly, the ECN’s statement also contains warnings addressed to companies taking advantage of the current situation in unfair ways, by cartelizing or abusing their dominant positions, especially by offering health protective products (face masks, sanitizing gel) at prices exceeding a competitive level. However, the ECN’s statement does not concentrate solely on warnings but also expresses the ECN members’ understanding of the fact that the changed market conditions have created new challenges for companies wishing to maintain good conditions for the provision of their services and distribution of their products. In the current circumstances – as announced in the notice – the ECN will not actively intervene against necessary and temporary measures put in place in cooperation in order to avoid a shortage of supply, if applied on fair terms. Moreover, such measures are being declared as “unlikely to be problematic” during this period of the pandemic crisis. The ECN notice encourages producers of desired and in-demand products to make use of the existing competition rules that allow manufacturers to set maximum prices for their products. Companies are also encouraged to contact authorities for relevant informal guidance (https://ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf).
Following ECN’s approach, the European Commission adopted its “Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak” (the “Communication”) (OJ C 116I, 8.4.2020, p. 7–10), setting out the main criteria for antitrust assessment of business cooperative projects aimed at addressing the shortage of essential products and services during the coronavirus outbreak (section 2 of the Communication) and an exceptional procedure to provide ad hoc guidance in such cases (section 3). Following the adoption of the Communication, a dedicated mailbox was set up (COMP-COVID-ANTITRUST@ec.europa.eu) for those who seek informal guidance on specific initiatives (https://ec.europa.eu/competition/antitrust/coronavirus.html).
The Netherlands Competition Authority (Autoriteit Consument & Markt) announced its readiness to help companies in case of uncertainty as to business measures imposed in order to combat the Covid-19 crisis, while also discouraging undertakings from price-related abuses of dominance and price-fixing agreements (https://www.acm.nl/en/publications/acms-oversight-during-coronavirus-crisis).
Similarly, the Greek Competition Authority (Hellenic Competition Commission) appointed a special taskforce “to address possible distortions of competition due to the Covid-19 pandemic” with a view to “safeguarding a sound competitive market structure, protecting consumer interests and economic growth” (https://www.epant.gr/en/enimerosi/press-releases/item/858-press-release-covid-19-task-force-to-fight-anticompetitive-practices.html) and announced that it will “monitor and prioritise enforcement actions against such practices which exploit the current Covid-19 situation to the detriment of consumers.” (https://www.epant.gr/en/enimerosi/press-releases/item/838-press-release-competition-law-enforcement-and-covid-19-pandemic.html). In addition, the Greek Competition Authority gave examples of conduct not covered by the scope of infringement “in relation to the present social and economic conditions”. The Greek Competition Authority explained that it would permit the imposition of maximum resale prices or recommended resale prices “where this does not amount to a minimum or fixed selling price due, for instance, to pressure exerted or incentives offered by one of the parties” (https://www.epant.gr/en/enimerosi/press-releases/item/837-press-release-application-of-competition-rules.html).
Recently, the Luxemburg Competition Authority (Conseil de la concurrence) issued guidelines explaining to what extent in the unprecedented context of the Covid-19 pandemic, it intends to interpret the criteria for exemption from anti-competitive practices. The Council announced that it can be contacted at any time to answer questions from the public related to the current Covid-19 crisis (https://concurrence.public.lu/fr/actualites/2020/document-orientation-entreprises-coronavirus.html).
The British Competition Authority (the “CMA”) is dealing with the corona-crisis not only by explicitly warning undertakings against profiteering from the corona-crisis, but also by giving guidance to companies on how to act in accordance with the competition law during the current crisis. Similar to many other jurisdictions, the CMA launched a taskforce to identify harmful sales and pricing practices of companies trying to exploit these exceptional epidemic circumstances to their benefit. The CMA’s Covid-19 team not only monitors market developments but is authorized to intervene if required to do so. In the event that the CMA’s existing powers do not secure the functioning of the market and the protection of the economic interests of individuals, the CMA will advise the government on further policy and legislative measures needed. (https://www.gov.uk/government/news/cma-launches-covid-19-taskforce).The CMA welcomed the British Government’s announcement to relax some aspects of the competition law in order to help supermarkets to work together, and it that it will not take enforcement actions against “cooperation between businesses or rationing of products to the extent that this is necessary to protect consumers – for example, by ensuring security of supplies,” provided that the conduct does not exploit the crisis as an excuse for collusion and does not include an exchange of information that is not necessary to meet the needs of the current state of emergency (https://www.gov.uk/government/news/covid-19-cma-approach-to-essential-business-cooperation).
UOKiK’s evolving approach
On a positive note, we conclude this short review of competition authorities’ reactions on the Covid-19 outbreak with an observation of UOKiK’s evolving and more pragmatic approach in this matter. After being initially concentrated only on warnings against potential attempts to take unfair advantage of the crisis, UOKiK recently also recognized the need to give advice to undertakings that concerning some forms of temporary cooperation during the epidemic period. On its website, UOKiK officially recognized that current exceptional circumstances may induce companies to cooperate and to coordinate their actions in order to overcome the effects of the economic crisis. UOKiK went on to express its readiness to provide undertakings, upon their requests, with an informal opinion on compliance with the competition law (https://konkurencja.uokik.gov.pl/koronawirus-a-prawo-konkurencji-wytyczne-dla-przedsiebiorcow). In connection with its announcement to provide its guidance, UOKiK launched a dedicated email address (COVIDemail@example.com) where requests can be lodged for UOKiK’s informal opinion concerning types of anti-crisis cooperation. Although UOKiK’s approach continues to improve with regard to providing its views, it nevertheless lacks more concrete guidance on how companies should act in compliance with the competition law during the current crisis.
- Competition Authorities are rightly concerned that during the pandemic crisis, undertakings may intensify actions aimed at exploiting the crisis in dishonest ways. Therefore, it is fully appropriate that they have issued communications reminding that a pandemic cannot be treated as a “cover” for any restricted conduct.
- It is a positive development that the ECN, the European Commission and national authorities clearly communicated that certain conduct that normally could raise doubts as to their anticompetitive nature, now could be justified or will not be investigated on a priority basis.
- It is a positive development that the Polish Competition Authority declared its openness to advise undertakings as to legality of actions planned to confront the current crisis. However, it is a pity that no concrete guidance was announced concerning those activities or conduct may or may not be legally justified. Such clear guidance would surely give companies doing business in Poland more legal certainty in these uncertain times.
Key words: Covid-19, pandemic crisis, restriction of competition, anticompetitive conduct, Polish Competition Authority, European Commission, ECN, National Competition Authorities