Updated 30 March 2020
The CMA wants to avoid competition law putting the brakes on any cooperation between businesses that may be necessary to ensure the security of supplies of essential foods and services. In order to reassure businesses that it will not take enforcement action in respect of such arrangements it has published ‘Guidance on its approach to business cooperation in response to COVID-19’ (Guidance).
The Guidance clarifies how the CMA will prioritise its cases during the COVID-19 crisis and provides further information on its approach to the exemption criteria of section 9 of the Competition Act 1998 (the equivalent under UK competition law to Article 101(3) TFEU).
Prioritisation of cases
As usual, the CMA’s work will focus on those issues that matter most to consumers. In light of the current crisis the CMA does not intend to take enforcement action where businesses adopt temporary measures to coordinate conduct as long as these measures:
- are appropriate and necessary to avoid shortages or to ensure security of supply
- are clearly in the public interest
- contribute to the benefit or wellbeing of consumers
- deal with critical issues arising as a result of the COVID-19 pandemic
- do not last longer than is necessary to deal with these critical issues
However, the CMA will ensure that this approach is not used as a cover for non-essential coordination that may cause harm to consumers or the wider economy. A particular priority for the CMA is to ensure that the prices for products or services necessary to protect the health of consumers (eg face masks, sanitising gel) are not artificially inflated. To help combat excessive pricing, the CMA has suggested that manufacturers set maximum prices for the retail of their products.
Approach to exemption criteria
The Guidance also provides additional information as to how the CMA will apply the criteria for exemption from the Chapter I prohibition in light of the crisis. As is the case under EU competition law, an agreement may be exempt from the Chapter I prohibition under UK competition law if it can be shown that the agreement contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit. The exemption will only be available if the restrictions on competition are essential to achieve these objectives and as long as they do not allow competition to be substantially eliminated.
- Cooperation aimed at making essential goods and services available to the wider public or to specific categories of consumers (eg key workers, the elderly) will be considered as improving the production or distribution of goods or services.
- Consumers will be deemed to receive a fair share of these benefits if the measures avoid or mitigate any shortages that would have otherwise have arisen.
- The cooperation measures will be considered indispensable if under the circumstances and limited time available to consider alternative measures, the cooperation can reasonably be considered necessary. An important factor will be the temporary nature of the measures.
- Wherever possible there should remain competition (on price, on type of goods, geographical areas etc.).
The FCA and Payment Systems Regulator, who have the power to enforce competition law in the financial services and payment sectors, have issued a statement endorsing the CMA's approach. They recognise the importance for competition law not to impede essential cooperation during the current pandemic, but will not tolerate businesses taking advantage of the current situation.
The ECN, which consists of the European Commission and the competition authorities of the Member States, has also issued a joint statement on the application of competition law during the Corona crisis, indicating that it will not intervene in necessary and temporary cooperation between businesses aimed at ensuring the supply and fair distribution of essential products and services. In case of doubt, businesses can apply to the Commission or the national authority for informal guidance.
The European Commission has set up a dedicated mailbox that can be used to seek informal guidance on specific initiatives. In order to ensure a quick response companies are asked to provide as much detail as possible on the initiative, including:
- Details of the companies and products or services concerned
- Scope and set-up of the cooperation
- Issues that may raise concerns under EU competition law
- Benefits the cooperation seeks to achieve, and why the cooperation is necessary and proportionate to achieve those benefits in the current circumstances
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021