German lawmakers adopt temporary amendments to the German Competition Act to mitigate consequences of the COVID-19 pandemic in competition law

On 14 May 2020, the German Parliament adopted temporary amendments to the Act against Restraints of Competition (ARC) to mitigate consequences resulting from COVID-19 in the field of competition law. See BT-Drucksache 19/18963.

In order to enable the Federal Cartel Office (FCO) to continue investigating mergers and their impact on the market concerned under the special conditions resulting from COVID-19 (in particular, contact bans as well as disruption to workforce), merger review periods will be temporarily prolonged as follows:

  • The phase I review period is extended from one month to two months, and phase II will be extended from four months to six months. The new rules will apply to all mergers notified between 1 March 2020 and 31 May 2020.

In addition, the amended law provides that the obligation to pay interest on fines for which payment arrangements have been granted – such as deferment or payment by instalments – is suspended until 30 June 2021.

The Federal Council has decided not to convene the mediation committee. Therefore, the law will enter into force on the day following its promulgation by the federal president in the federal law gazette. The temporary amendments to the ARC are expected to enter into force in June 2020.

Temporary extension of review periods in the field of merger control

Transactions subject to German merger control must be notified to and cleared by the FCO before they can be implemented.

1. Status quo
According to the provisions of the ARC, the FCO has one month to examine whether the transaction impedes effective competition, in particular whether it creates or strengthens a market dominant position (phase I). If the FCO considers that further investigation is necessary, it initiates an in-depth investigation (phase II). The review period in phase II is four months from receipt of the complete notification.

2. Temporary amendments to the ARC
The two review periods are now extended as follows: phase I is extended from one month to two months, and phase II from four months to six months. The new rules will apply to all mergers notified between 1 March 2020 and 31 May 2020.

According to the draft legislation, in the situation caused by the current pandemic, the necessary merger control investigations either cannot be carried out or cannot be carried out within the required time frames because third-party market participants are currently not responding to the FCO’s requests or are delayed in responding.

The draft legislation states that this is particularly true in the retail food sector, where regular market surveys in numerous regional markets are necessary. In these and other sectors, it cannot be ruled out that due to constraints caused by the pandemic, feedback from third parties is difficult to obtain, and competition investigations in these markets cannot be conducted.

The temporary amendments to the ARC apply to ongoing proceedings as well as to cases referred to the FCO by the European Commission.

However, the extended examination periods do not apply if, on the date of entry into force of the amended laws, the FCO has already cleared the transaction or the applicable waiting periods have elapsed with the consequence that the transaction is deemed to be cleared.

There is no retroactive effect on proceedings already concluded.

Suspension of the obligation to pay interest on fines for which payment arrangements have been granted

Against the background of the measures to combat the COVID-19 pandemic, the suspension of the obligation to pay interest on fines for which payment arrangements have already been granted pursuant to section 18 or section 93 of the Act on Regulatory Offences will be suspended until 30 June 2021. The main goal is to reduce additional economic pressure from those companies that have already proven to the competition authority that the conditions for granting payment arrangements have been met.

German lawmakers stated that as a result of the COVID-19 pandemic, the financial situation of companies can deteriorate quickly so that payment plans are required. It was reported that the FCO had informed the Federal Ministry for Economic Affairs and Energy that it had received notifications from companies that were unable to pay their fines due to liquidity shortfalls caused by the pandemic.

Payment arrangements do not have to be in place at the time the law enters into force. The obligation to pay interest is waived if payment plans are granted at a later date. However, the suspension of the obligation to pay interest is limited to the period for which the payment plans are granted. It is not sufficient if payment arrangements were granted in the past and no longer exist.

Due to the temporary suspension of the obligation to pay interest on fines for which payment arrangements have been granted, a loss of interest in the federal budget amounting to approximately €120,000.00 is expected. If the safeguard measures are maintained over a longer period of time, further applications for payment plans are likely. This may further increase the loss of interest.

Meat industry faces new antitrust threats while working through COVID-19 challenges

As U.S. meat packaging and processing companies persevere to supply the nation’s grocery shelves during the COVID-19 pandemic, the industry finds itself once again under the regulatory spotlight. On May 6, 2020, President Donald Trump asked the Department of Justice (DOJ) to investigate allegations that U.S. beef and pork producers violated federal antitrust laws. Just one week prior, the president signed an executive order classifying meat plants as essential infrastructure that must remain open under the Defense Production Act.

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Competition law during the COVID-19 pandemic: several shades freed?

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

(non-exhaustive list)

Practices that remain prohibited

(non-exhaustive list)

  • Pooling resources to ensure the supply of essential goods or the continuation of the distribution chain, including:

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

  • Exchange of essential information that is limited to what is strictly necessary, for example, information concerning:

o Business ventures or suppliers that might help to balance supply and demand

o Health and safety standards and practices

  • Joint procurement where this concerns issues such as restrictions on production capacity or the stock management of essential products.
  • Setting maximum resale prices for resale to consumers.
  • Sharing technology and/or know-how for the purpose of an R&D agreement for the development of products necessary for the rapid resolution of the health crisis.
  • Coordinating in areas and to meet needs that are non-essential or do not relate to the crisis
  • Exchanging sensitive information between competitors, in particular on company prices
  • Any exchange of information and coordination that do not contribute to the alleviation or resolution of the health crisis or are unrelated to the crisis
  • Agreements to apply abnormally high prices or adopt similar market behaviour
  • Agreements between suppliers and distributors on margins or minimum pricing
  • Any conduct that would amount to taking undue advantage of the health crisis

 

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.

Changes to Hong Kong leniency program align more closely with U.S. program

On April 16, the CEO of the Hong Kong Competition Commission, Brent Snyder, announced extensive changes to the agency’s leniency program, aligning Hong Kong’s program more closely with the U.S.’s. Snyder previously served as Deputy Assistant Attorney General for criminal enforcement at the U.S. Department of Justice, Antitrust Division, so these changes do not come as a complete surprise. Our team compares the most significant changes in this alert. Further updates to come from our team in Hong Kong for the second part of the two-part client alert series.

How are competition law authorities responding to the unfolding COVID-19 crisis?

With COVID-19 sweeping across the globe, competition law authorities and legislative bodies across the world are having to act quickly and flexibly to minimise disruption while ensuring business compliance and consumer protection. In our recent client alert, we take a look at how COVID-19 is shaping the competition landscape from a multi-jurisdictional perspective, honing in on merger control, legislative policies and timeframes, the relaxation of competition rules, and country-specific initiatives from the U.S., UK, France, Germany, Norway and Spain. Take a look at our key highlights to ensure that you are up-to-date with the latest competition decisions being made in response to this ongoing and dynamic world event.

Our Reed Smith Coronavirus team includes multidisciplinary lawyers from Asia, EME and the United States who stand ready to advise you on the issues above or others you may face related to COVID-19. For more information on the legal and business implications of COVID-19, visit the Reed Smith Coronavirus (COVID-19) Resource Center or contact us at COVID-19@reedsmith.com.

1-800 Contacts Sets Sights on Reversal of Judgement in Anticompetitive Advertising Case

On March 5, 2020, contact lens distributor 1-800 Contacts presented arguments to the U.S. Court of Appeals for the Second Circuit appealing to overturn judgment for alleged antitrust violations relating to agreements with competitors on advertising keywords.  Reed Smith attorneys have been following this case closely for years and have provided insights on its developments. Our most recent post examines the commonly occurring linkage between competition and advertising/trademark law. Visit our AdLaw By Request blog to read our full analysis.

What’s faster: the Indy 500 or your next merger review? Assistant Attorney General Makan Delrahim’s recent remarks on the merger landscape explain why the answer might not be what you expected

On February 5, 2020, Assistant Attorney General Makan Delrahim spoke at the Media Institute on the current merger review landscape (see Makan Delrahim, “Getting Better: Progress and Remaining Challenges in Merger Review”). While he celebrated an administrative success, he also forewarned of a formidable obstacle to effective agency enforcement.

Delrahim remarked that since the Antitrust Division of the Department of Justice (the Division) outlined reforms modernizing the merger review process 18 months ago, the average time between filing and notification has decreased substantially. The Division aspired to resolve nearly all merger investigations within six months of filing and published a model timing agreement and model voluntary request letter to encourage merging parties to cooperate with its goal.

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FTC orders unwinding of consummated, non-reportable merger of microprocessor-equipped prosthetic knee companies

On November 1, 2019, the Federal Trade Commission (FTC) upheld the decision of an administrative law judge (ALJ), finding that the non-reportable acquisition of FIH Group Holdings, LLC (Freedom) by Otto Bock HealthCare North America, Inc. (Ottobock) was likely to substantially lessen competition.

Ottobock and Freedom are both manufacturers of prosthetic knees, and they both offer microprocessor-equipped prosthetic knee products. Prior to the acquisition, Ottobock and Freedom competed vigorously and were the first and third largest manufacturers by revenue of microprocessor-equipped prosthetic knees in the United States. In a transaction that was not reportable under the Hart-Scott-Rodino Act, Ottobock acquired Freedom on September 22, 2017, and the merged firm possessed at least an 80 percent share of the relevant market.

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Advent International has proposed an acquisition of Cobham plc, but why is the UK Government getting involved – and what are the implications?

On the grounds of national security, the UK Government made a surprising intervention in the U.S private equity firm Advent International’s proposed acquisition of Cobham plc, a British aerospace and defence company. Since the decision back in September to look into the acquisition, the UK Competition Market Authority has submitted a review to establish if the deal meets certain jurisdictional criteria and if competition issues would be likely from the deal. The Government will then decide if the proposal can go ahead, or not.

In this recent alert our lawyers examine the legal basis for this intervention, the climate in which the intervention emerged and take closer look at what implications the decision could have for the frequency of similar interventions if it is made into legislation.

Ninth Circuit’s decision in hiQ Labs, Inc. v. LinkedIn Corp. has major antitrust implications

In hiQ Labs, Inc. v. LinkedIn Corp., No. 17-16783, 2019 WL 4251889 (9th Cir. Sept. 9, 2019), a Ninth Circuit panel affirmed the district court’s grant of a preliminary injunction in favor of hiQ, which prohibited LinkedIn from denying access to publicly available data on LinkedIn profiles. The Ninth Circuit declares that selectively banning potential competitors from accessing and using public data “may well be considered unfair competition under California law.” This decision that could have broad implications for the role of antitrust laws in the privacy sphere. Our Antitrust and IP, Tech & Data teams explain what you need to know in our recent alert.

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