Competition enforcers tackle coronavirus

Charley Connor

06 March 2020

Competition enforcers tackle coronavirus

Credit: Corona Borealis Studio/Shutterstock

Enforcers in Poland, the UK, Iceland and Armenia are using their powers to aid in their respective governments’ responses to the global coronavirus outbreak.

Poland’s Office of Competition and Consumer Protection is investigating if medical equipment suppliers abused their dominance by cutting off doctors’ access to surgical masks, as the UK’s Competition and Markets Authority warned it is monitoring sales and pricing tactics of products such as hand sanitiser.

Elsewhere, Iceland’s Competition Authority has exempted companies in the tourism sector from rules that prohibit horizontal collusion; and Armenia’s competition authority cleared pharmacies of anticompetitive conduct related to the sale of surgical masks.

Excessive pricing and abuse of dominance

On Wednesday, the Polish enforcer said in a press release that it had launched an investigation last Friday after receiving complaints that two wholesalers of personal protective equipment – including face masks – had terminated their contracts with doctors.

The wholesalers allegedly cancelled their existing contracts to supply doctors with personal protective equipment so they could re-sign the agreements at significantly higher prices, the enforcer said. The investigation will therefore consider if the wholesalers violated competition law by abusing their dominance, or if they effectively fixed prices.

The enforcer’s president, Tomasz Chróstny, appealed to retailers and wholesalers not to use “fear and misinformation” to raise prices of personal protective equipment, including protective masks. The authority will take “firm action” against such conduct using “all mechanisms legally available,” he said.

The chief executive of the UK’s competition authority, Andrea Coscelli, similarly urged retailers to “behave responsibly” throughout the coronavirus outbreak – including by not making misleading claims or charging “vastly inflated prices”.

“We also remind members of the public that these obligations may apply to them too if they resell goods, for example on online marketplaces,” Coscelli added. 

The enforcer is also assessing if it should ask the government to directly regulate prices. CMA chairman Lord Andrew Tyrie said the authority will do whatever it can to act against “rip-offs and misleading claims”, and will “advise government on further steps they could take” if it cannot resolve concerns itself.

While the CMA’s price monitoring is just beginning, the Armenian enforcer has already completed its own probe. 

The State Commission for the Protection of Economic Competition of the Republic of Armenia investigated over 90 pharmacies last week, and found no major concerns over the supply or prices of hand sanitiser and face masks.

Although increased demand has led to a temporary shortage of both medical masks and hand sanitiser in pharmacies, the authority said on Monday that no large companies raised prices in response. The Armenian government is working with its overseas counterparts to import more masks and domestic companies are stepping up their hand sanitiser production, the authority added.

Horizontal cooperation

Iceland’s Competition Authority has also responded to coronavirus, although its focus is on the tourism sector instead of retailers. On Wednesday, it granted the Confederation of Tourism a temporary exemption from anti-collusion rules.

The enforcer said there is an imminent risk that the operating conditions of tourism companies will deteriorate significantly due to the spread of the virus, both in the short and the long term. The trade association’s members – which includes travel agents, hotels and tour operators – can therefore now collaborate on ways to reduce customer cancellations and increase demand for Icelandic tourism. 

However, companies cannot discuss pricing or business terms, and their discussions cannot “reduce the scope” for independent business decisions, the authority said. The exemption expires on 30 April, although it may be extended.

Nicole Kar, a partner at Linklaters in London, said she expects more emergency regulation in sectors such as pharmaceuticals and medical supplies as competition authorities and governments respond to the virus.

“Regulation here will be about the greatest good for the greatest number,” Kar said. This is both to ensure the continuity of supply and to prevent suppliers seeking to exploit the crisis, she said.

Kar added that enforcing against unjustified price hikes “may be difficult in practical terms”, but that the CMA’s announcement “is a clear warning shot”. 

Nigel Parr, a partner at Ashurst in London, said it is “ironic” that crises such as the coronavirus outbreak “require the vigorous enforcement of some laws and the relaxation of others”.

"At the end of the day, competition authorities exist to protect consumers in relation to the core metrics of price, quality range and service, and should be able to intervene expeditiously at times of national crisis,” he said.

White & Case partner Marc Israel said the actions taken by enforcers so far reflect the “wider ramifications on economic activity” that a “sustained period of uncertainty” from the coronavirus situation may bring about. 

Israel suggested that consumer protection law may be the most appropriate course of action for enforcers with dual powers, particularly as the companies concerned may not be dominant. 

Some agencies are already using their consumer protection powers to ensure that retailers do not exploit the virus outbreak, including Italy’s Antitrust Authority. The agency sent requests for information on Wednesday to ecommerce platforms regarding the marketing of hand sanitiser and face masks, which it said was triggered by complaints about misleading advertisements and unjustified price increases.

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