On 28 March 2020 three Orders excluding certain types of agreements from the Chapter I prohibition (prohibition on anti-competitive agreements) under the Competition Act 1998 came into force:
- The Competition Act 1998 (Groceries) (Coronavirus) (Public Policy Exclusion) Order (“Groceries Exclusion Order”)
- The Competition Act 1998 (Health Services for Patients in England) (Coronavirus) (Public Policy Exclusion) Order (“Health Services Exclusion Order”)
- The Competition Act 1998 (Solent Maritime Crossings) (Coronavirus) (Public Policy Exclusion) Order (“Solent Maritime Crossings Order”)
Under the Competition Act 1998 (Schedule 3 paragraph 7) the Government can exempt certain specified agreements from the Chapter I prohibition if there are exceptional and compelling reasons of public policy to do so. Since the Covid-19 pandemic this process has now been used for three types of agreements, exempting certain types of coordination between competitors in order to address some of the challenges raised by the current crisis.
The Orders are very specific and expressly list the types of agreement that will be permitted as well as those that are not included in the exclusion. Any sharing of information relating to costs or prices, or relating to future business planning (and therefore not related to the current crisis) is not excluded from the Chapter I prohibition under these Orders.
Agreements that are intended to benefit from the Orders must be notified to the Secretary of State, by providing the following information:
- names of undertakings or bodies that are parties to the agreement
- description of the nature of the agreement
- date the agreement was made and date it was implemented
- products or services to which it relates
The Secretary of State will keep and publish a register of agreements.
The Orders came into force on 28 March 2020 and will apply retrospectively to qualifying agreements from 1 March 2020. The Secretary of State must publish a notice once there is no longer a significant disruption or threat to disruption to the supply of the relevant goods or services and the exclusion is therefore no longer justified. The notice will specify the end date for the exclusion, which must be no sooner than 28 days after publication of the notice, in order to allow for the arrangements to be wound down.
The UK Government has acted swiftly to put these Orders in place and it is unlikely to hesitate in adopting further exclusions for other sectors should this prove necessary. But businesses will need to take care to ensure that any coordination does not exceed what is permitted under the Orders and the CMA has made it very clear that it will not tolerate unscrupulous businesses exploiting the crisis as a ‘cover’ for non-essential collusion.
The Groceries Exclusion Order
Earlier this month the UK Government decided it was necessary to relax the application of the UK competition rules to certain types of agreements in the groceries sector, in order to ensure a smooth and efficient supply of food and essential grocery products to the most isolated and vulnerable consumers (see our earlier blog post here).
Agreements between groceries suppliers
The Groceries Exclusion Order includes a list of eight types of agreement (“qualifying activities”) between groceries suppliers that will benefit from the exclusion. These are agreements that relate to:
- coordination on quantities of certain groceries to be supplied
- coordination on the deployment of staff
- coordination on the range of groceries to be supplied
- sharing information about stock levels
- sharing information about the services of logistic service providers
- coordination on supply to particularly critical or vulnerable consumers
- coordination on store opening hours
- coordination on supply to consumers in geographically vulnerable areas
Agreements between logistic service providers
The Groceries Exclusion Order also permits five types of agreement between logistic service providers. These are agreements that relate to:
- sharing information about staff availability
- coordination on the deployment of staff
- sharing information about storage and warehouse capacity
- sharing information about potential storage or warehouse capacity
- sharing information about vehicles
The Health Services Exclusion Order
In order to meet some of the additional capacity requirements created by the current pandemic, the NHS England has commissioned independent healthcare providers to provide extra capacity for treatment of patients. This may require providers to work together, including sharing commercially sensitive information, in order to meet local needs.
The Health Services Exclusion Order permits five types of agreement between independent providers and between independent providers and NHS bodies that are aimed at responding to the crisis and relate to:
- sharing information about capacity to provide certain services
- coordination on deployment of staff
- sharing or loan of facilities
- joint purchasing of goods, facilities or services
- division of activities, including agreement to limit or expand the scale or range of services supplied by one or more providers
The Solent Maritime Crossings Order
As a result of the Covid-19 pandemic demand for ferry services between the Isle of Wight and ports in mainland UK has reduced considerably. Combined with a reduction in staff, there is a significant risk that operators on this route will no longer be able to continue running essential services. In order to address this issue, the Solent Maritime Crossings Order makes it possible for operators to coordinate conduct on a range of activities that would otherwise be in breach of the competition rules. The Order permits three types of agreement, which relate to:
- coordination on the use of timetables
- coordination on the routes operated by any Solent operator
- coordination on the deployment of labour or facilities
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 2020