A version of this article was previously published in French by Le Club des Juristes.
Following the economic shock caused by the COVID-19 pandemic, the French and European competition authorities announced certain changes to competition law. Companies will be able to cooperate in certain sectors, in particular with a view to promoting the supply, production and distribution of essential products, furthering innovation and implementing collaborative research projects, in order to stem the effects of the crisis. At the same time, regulatory authorities are wary of abusive practices. How should companies act in this contradictory environment?
Competition authorities were quick to recognise that the extraordinary situation arising from the COVID-19 pandemic may force some companies to cooperate in order to guarantee the continuity of production and distribution of essential products to all consumers.
How have the competition rules been adapted?
Anti-competitive agreements are still prohibited. Companies must therefore continue to take care that any agreements they may conclude do not unduly restrict competition. Nevertheless, national competition authorities, including the French Competition Authority, and the European Commission have expressed the view that cooperation between companies will be presumed to be lawful, provided that the cooperation meets certain criteria, to be adapted on a case-by-case basis:
- It does not go beyond what is necessary to deal with the crisis.
- It is limited in duration and scope.
- It contributes to improving the production or distribution of products that might otherwise be affected by a shortage.
- It does not lead to the elimination of competition and price differences, a loss of competitors, the homogenisation of supply, or limits on innovation, with respect to all or a substantial number of the products in question.
- It is beneficial to the economy and consumers.
What can companies do to cope with the crisis?
Practices that might be permissible
Practices that remain prohibited
o Storage infrastructure for essential commodities
o Essential equipment necessary to secure the supply chain, such as HGVs, vans and delivery equipment
o Personnel needed to respond to a specific and relevant demand
o Business ventures or suppliers that might help to balance supply and demand
o Health and safety standards and practices
Are there any sector-specific measures?
As early as 8 April, the European Commission paved the way for cooperation in the pharmaceutical sector, authorising a scheme that allows pharmaceutical companies to:
- coordinate and/or pool the transportation of raw materials;
- collaborate to identify essential medicines at risk of shortage and ensure their efficient distribution;
- consolidate data on production and capacity;
- work on a model to forecast demand at the EU Member State level, identifying supply gaps; and
- share aggregated data on supply gaps and ask participating firms to indicate whether they can fill the gaps to meet demand.
On 30 April, the Commission adopted several regulations lifting restrictions on cooperation between producers in the milk, potatoes and flowers sectors respectively. For a period of six months, producers and their trade bodies will be able to adopt temporary measures enabling them to plan production collectively, organise storage and withdraw certain products from the market.
What are the competition authorities doing?
Competition authorities have taken a proactive stance in managing the crisis. In addition to the above initiatives, as well as their individual and collective guidance on the interpretation of market behaviour, they are accepting requests for consultations on individual or sector-specific practices.
With its opinion Rassemblement des Opticiens de France of 22 April 2020, the French Competition Authority even admitted that practices justified by the current situation could go beyond the scope of the direct fight against the pandemic, by allowing the professional association of opticians to intervene in rent renegotiations between landlords and members who have ceased activities due to the crisis.
Do these measures reflect a profound change in competition policy?
The implementation of emergency rules, in particular competition authorities’ softened approach to horizontal cooperation agreements, could last several months.
The impact on state-subsidised companies will be felt for a longer period, especially companies that have benefited from state aid. The French foreign investment policy will also be impacted considering that the French government has announced that it will soon lower the thresholds for triggering state control of non-European investors’ equity stakes in some French companies in sensitive sectors. This measure will remain in force until 31 December 2020.
However, while the authorities are understanding in a time of crisis, this does not mean that the competition rules will no longer apply in other sectors, nor that the health situation can be used to justify abusive behaviour.
Authorities will not hesitate to take legal action against companies that seek to take advantage of the crisis to raise prices or engage in predatory behaviour. In the United Kingdom, for example, the Competition and Markets Authority had written to 187 companies by the end of April following more than 21,000 complaints of predatory behaviour.
For the digital giants, the stakes remain unchanged, with continuing negotiations on the Digital Services Act, which would allow the European competition regulators to take preventive measures to limit their market power and opportunities for external growth. At the French level, the law guaranteeing free consumer choice in cyberspace contains similar provisions.
Competition rules have therefore been adapted and relaxed at a time of crisis, which is welcome. Although they are understanding of the need to cooperate in certain sectors (e.g., the production and distribution of essential products; pharma sector), the authorities warn against abuses, and they remain focused on general policies (in the digital sector in particular). Nevertheless, the impact of all of these measures on national policies (e.g., in the areas of state aid and foreign investment) will continue to be felt at least until the end of 2020.