Coronavirus – Competition authorities announce they will not intervene against companies co-operating to avoid supply shortages - Europe

• United Kingdom

• Coronavirus - Competition issues
• Coronavirus - Country overview

24-03-2020

Executive summary

On 23 March 2020 members of the European Competition Network (“the ECN”, being the European Commission and all EU member state competition authorities) issued a joint statement confirming that they will not actively intervene against “necessary and temporary” measures put in place in order to avoid shortages of supply. This follows announcements by various EU member states that they will allow competing retailers to work together to deal with the challenges posed by the pandemic (see here for our briefing on announcements by the UK government and others).

Co-operation between companies

The joint statement acknowledges that the COVID-19 outbreak has resulted in individual companies, and the economy as a whole, suffering “crisis conditions”.  In particular, the ECN accepts that this extraordinary situation may mean that companies need to cooperate in order to ensure the supply and fair distribution of “scarce products” to all consumers.

Under normal EU competition rules (in particular, the rule against anticompetitive agreements) cooperation between competitors has to be very carefully managed.  For example, it would be very difficult for competitors to share information about current and future stock levels, or which geographic territories they may be able to currently supply to, without contravening EU (and equivalent member state) competition law.  Indeed, sharing information about future or current volumes of supply, and/or agreeing to divide geographic markets between competitors, are normally described as hardcore infringements of competition law potentially subject to the highest level of fines (which in the EU could be as high as 10% of group global turnover). 

It is however possible under EU competition law for agreements that would ordinarily breach the rule against anticompetitive agreements to be exempt from the application of the rule, where those agreements would generate efficiencies that outweigh the restrictive effects. The ECN has specifically referred to this in today’s joint statement, commenting that “necessary and temporary measures to avoid shortages of supply” would most likely fall under this category in any event and therefore be unlikely to be problematic.  The use of the words “necessary and temporary” is likely intended to make clear to companies that these measures must not go further than is necessary to achieve the legitimate aim of ensuring security of supply.

Whilst it is correct that companies can seek to rely on the general exemption from the rule against anticompetitive agreements at any time, in reality they are often unwilling to do so as it is not currently possible (save in very limited circumstances) to obtain confirmation from the European competition authorities that agreements do not breach the rule against anticompetitive agreements – instead companies are invited to conduct a “self-assessment” exercise, where they must analyse themselves whether the rule would likely be breached by their proposed conduct and proceed on that basis alone.

Today’s statement removes some of that uncertainty by inviting companies with doubts about the compatibility of their cooperation initiatives with EU competition law to reach out to the relevant competition authority for informal guidance.

The ECN has also issued a reminder to suppliers that it is possible for them under current EU competition law to set maximum prices for the resale of their products. This reminder is presumably included in view of the fact that countries across the EU are seeing products such as hand gel and face masks being re-sold at prices far above normal competitive levels.

Concluding Note

The ECN has taken an unusual step in jointly confirming that they will not take enforcement action in these circumstances, and by proactively offering to give informal guidance. However, companies need to be mindful that the joint statement also delivered a very clear statement of intent that the ECN will actively pursue companies taking advantage of the current situation by entering into a cartel or abusing their position of dominance in the market. 

Additionally the careful language adopted by the ECN when referring to “necessary and temporary” measures should act as a warning to companies that they must not use the current situation to exchange more information, or coordinate activities, with their competitors than is strictly necessary in the circumstances to achieve security of supply.