Coronavirus round-up: Cooperate to “feed the nation”, UK government tells retailers

Ciaran Willis and Charley Connor

20 March 2020

Coronavirus round-up: Cooperate to “feed the nation”, UK government tells retailers

Credit: Shutterstock/creativeneko

As competition authorities around the world continue to respond to the coronavirus pandemic, the EU has announced a temporary framework to streamline state aid to businesses, while the UK and South Africa have relaxed rules on horizontal cooperation 

Elsewhere, enforcers in Russia, Brazil and Kenya are probing allegedly anticompetitive conduct in the medical protective equipment sector; and Denmark’s government has halted all merger control deadlines.

EU

The European Commission has adopted a temporary state aid framework to help countries cope with the economic disturbance caused by the coronavirus.

In a statement yesterday, EU competition commissioner Margrethe Vestager said the commission has adopted a temporary framework to give countries the “flexibility” to boost their economies. 

The commission “recognises that the entire EU economy is experiencing a serious disturbance” due to the coronavirus, the authority said.

The new measures will enable member states to give up to €800,000 in aid to affected businesses. Member states will also be able to provide guarantees on bank loans, allowing banks to continue providing loans to the customers who need them. The measures will also enable member states to grant companies loans with favourable interest rates.

There will also be safeguards on aid given to banks that lend money to businesses in the “real economy” – sectors outside the financial market – especially banks supporting small and medium-sized businesses. The commission said such loans will be viewed as direct aid for the banks’ customers, rather than for the banks themselves.

The aid should help businesses “to weather the downturn and to prepare a sustainable recovery”, the commission said. 

Member states can already defer taxes or compensate companies damaged by the COVID-19 outbreak.

Massimo Merola, a partner at BonelliErede in Brussels, said the “whole approach of the Commission to State aid rules in the context of the Covid-19 pandemic has been constructive, comprehensive and fast”, including fast-tracking state aid measures.

He said that this framework is a “key-step” in tackling the economic emergency because it provides clear guidelines on the available actions, allowing member states to provide liquidity to companies. 

It also clarifies the role of banks in channelling liquidity towards enterprises, and the conditions to meet to avoid distortions of competition, he added.

The most important aspect is the focus on SMEs, he added, which are “extremely affected” by the pandemic. If the economic situation worsens, the commission will have to amend the provisions, he added.

Ulrich Soltész, a partner at Gleiss Lutz, said that the framework was adopted in “record-breaking time” and he expects member states to adopt their support schemes at a similar speed before submitting them to the commission for approval. 

Aid recipients should bear in mind that member states do not have much flexibility or room for negotiation around the rules, he said. But the “old” temporary state aid framework  – adopted during the financial crisis  – has “served as a helpful and efficient tool to support the liquidity needs of businesses”, he said.

Soltész added that aid can only be granted to companies that were not in difficulty on 31 December 2019, but have struggled as a result of the COVID-19 outbreak.

UK

In response to calls from the nation’s largest supermarkets, the UK government said yesterday that it has “relaxed” competition rules so retailers can temporarily cooperate for the limited goal of “feeding the nation”.

The relaxation of competition law means food retailers can share data on stock levels, cooperate to keep stores open, share distribution depots and delivery vans, and pool staff to help meet demand. Retailers are already struggling to meet consumer demand, with supermarkets including Sainsbury’s and Aldi introducing limits on the number of items customers can purchase.

But cooperating for the best interest of consumers may not be limited to just the supermarket sector: the UK’s Competition and Markets Authority said in a press release that in light of the government’s announcement, it has “no intention of taking competition law enforcement action against cooperation between businesses or rationing of products to the extent that this is necessary to protect consumers”.

The enforcer added that it will not tolerate “unscrupulous businesses exploiting the crisis as a ‘cover’ for non-essential collusion”. So while companies can temporarily cooperate to ensure the security of supplies, for example, the CMA said they still cannot exchange information on longer-term pricing or business strategies.

UK business secretary Alok Sharma said in a statement that it is important to remove barriers to supermarkets working together to serve consumers “in these extraordinary and challenging times”. 

Andrew Opie, the director of food & sustainability at the British Retail Consortium, welcomed this “exceptional step” to help retailers and suppliers “cope with problems that might be caused by widescale absences across the supply chain”.

South Africa

South Africa has approved a block exemption to allow cooperation in the healthcare sector and placed emergency price controls on everyday goods, such as toilet roll, disinfectants and pasta, as the country tackles the threat of coronavirus.

South Africa’s minister of trade and industry, Ebrahim Patel, unveiled the measures yesterday.

As part of the block exemption, the government has exempted hospitals, medical suppliers, laboratories and pathologists, pharmacies, and healthcare funders from competition law.

The aim is to promote “concerted conduct” within the healthcare sector, including in deciding where patients can be treated, allocating nurses and doctors between hospitals, communicating the availability of medical supplies, and sharing data around disease research. 

The exemption only applies to practices with the “sole purpose of responding to the COVID-19 pandemic”, the government said.

South Africa’s Minister of Health, Zweli Mkhize, today said that the number of coronavirus cases had risen to 202. The country’s president, Cyril Ramaphosa, has also declared a “state of disaster”.

Patel also announced emergency measures to stop shops from increasing the price of certain products, including toilet paper, hand sanitiser, facial masks, disinfectant cleaners, nappies, baby formula, bleach, wheat flour and sugar. It also includes other everyday food items.

The new rules, under the country’s Consumer Protection Act, prevent suppliers from engaging in “unconscionable conduct” around supply and from increasing the cost of the everyday products, if it does not correspond to the increased price of providing the product.

Wholesalers and suppliers should take “reasonable measures” to equally distribute goods between customers and consumers, the government said; this includes limiting the number of items customers can buy, if necessary. Suppliers should also maintain “adequate” stocks.

If a person or company breaks the law, the government can impose a 12-month prison sentence, and a fine of up to 10% of their company’s turnover or a maximum fine of 1 million rand (€53,000).

Marianne Wagener, head of antitrust and competition at Norton Rose Fulbright in South Africa, said the exemption “is of real importance for our country in this time of crises”, as the virus will put South Africa’s healthcare system under immense strain.

She added that as there is a clear split between the already challenged public and private healthcare sectors, it is now “imperative” that they coordinate closely and work together efficiently. She applauded Patel and the competition authority for the “swift manner” in which they are dealing with the crisis.

However, cartel conduct that falls outside the exemption is still prohibited – even if competitors work together with the aim of benefiting public interest, Wagener added. 

John Oxenham, director at Nortons Inc, said that the exemptions are positive, as they allow collaboration between private and state-owned healthcare providers.

This means providers can share technology, intellectual property and resources in an effort to prevent, manage and hopefully cure the virus, he said, without the risk of being subjected to the cartel prohibitions.

Competition Tribunal of South Africa  

South Africa’s specialist antitrust tribunal will stay open for the time being but has put social distancing measures in place to protect against coronavirus.

The Competition Tribunal of South Africa  announced on Tuesday that all matters on the role will be “heard as scheduled”, and any changes will be released as soon as possible.

The tribunal is enforcing social distancing measures and will make sure there is a one-metre distance between people in the courtroom. The court will have a smaller capacity and the tribunal has asked for parties to reduce the number of practitioners in court.

It will also keep a register of all people who have attended hearings, as well as their travel history, the tribunal said. The tribunal encouraged people who are at risk to self-isolate.

If there are further restrictions in the country, the tribunal will consider virtual hearings and “communicate such accordingly”, it added.

Brazil

Brazil’s Administrative Council for Economic Defence yesterday launched a preliminary probe into manufacturers and retailers of medical-pharmaceutical products.

The enforcer received a complaint from the Brazilian Association of Dialysis and Transplant Treatment Centres that said suppliers of face masks and 70% alcohol hand gel had introduced disproportionate and abusive price increases. Suppliers increased the price of hand sanitiser by more than 500%, the association said, and were imposing limitations on the supply of face masks.

CADE has therefore sent requests for information to dozens of suppliers of medical products, asking for invoice receipts related to the sale of hand sanitiser and face masks dating back to November 2019. The enforcer has also requested that healthcare facilities send it monthly invoice receipts from April through July so it can monitor prices.

The decision to open a preliminary investigation was made in light of the high demand for these products brought about by the increase in cases related to COVID-19 in Brazil, CADE confirmed in a press release.

Russia

Meanwhile, Russia’s Federal Antimonopoly Service has launched three cartel probes related to medical protective equipment. 

The first probe began on 11 February in St Petersburg, where the enforcer said it had evidence of a cartel agreement at the wholesale level. Its price monitoring activities revealed that four wholesale suppliers of medical masks had simultaneously increased prices by 150% between January and February 2020.

On 10 March, the authority began investigating allegations that four suppliers of face masks colluded to reduce supply and raise prices of masks supplied to pharmacies in the republics of Tuva and Khakassia. The companies unjustifiably raised their prices between 132% and 408% from December 2019 to February 2020, the enforcer said.

On Wednesday, the authority said it had opened a third probe into two suppliers of face masks to the Udmart Republic. The suppliers allegedly agreed to increase prices by 22 rubles (€0.26) each, the enforcer said.

The FAS added it will continue to monitor the prices of medical protective equipment nationally throughout the coronavirus pandemic.

Denmark

Denmark’s minister of industry, business and financial affairs issued an executive order on Wednesday that, among other provisions, suspended all merger control deadlines for 14 days. 

Denmark’s Competition and Consumer Agency said in a press release that the coronavirus pandemic means companies are unable to supply the authority with the information it needs to complete its merger reviews. If a review is not completed by the statutory deadline, Danish law states that the deal is automatically cleared.

Stopping the clock on merger reviews will, therefore, mitigate the risk of banning a merger that should have been approved, or approving a merger that should have been banned, the enforcer said. It added that it will assess at the end of this initial two-week period if an additional further 14-day pause on statutory deadlines is necessary.

Kenya  

Kenya’s competition authority has ordered a supermarket that “unconscionably” increased prices of hand sanitiser to refund its customers.

The authority ordered Cleanshelf Supermarkets to refund all consumers who bought any of the 960 bottles of its Tropikal brand hand sanitiser that were priced above the usual selling price. It asked Cleanshelf to submit refund evidence by 26 March.

In a press release on Monday, the authority said that Cleanshelf increased the price of its Tropikal brand hand sanitisers by around 200 Kenyan shillings (€1.85), following the first cases of coronavirus in South Africa.

The supermarket normally sells the hand sanitiser for 800 Kenyan shillings (€7), but on 15 March Cleanshelf sold 960 bottles at an increased price of up to 1,000 Kenyan shillings (€8.85).

On the same day, Kenya’s president Uhuru Kenyatta announced that schools would close and also imposed travel restrictions. The government reported the country’s first case of coronavirus on Friday 13 March.

In a statement, a Cleanshelf spokesperson said that one of its staff members had adjusted the price of hand sanitisers in its Ruaka branch without permission.

The Kenyan authority thanked members of the public for providing information regarding the investigation and encouraged anyone with information to reach out.  

Last week, the authority warned against collusive practices and hoarding of products, and said that such conduct would result in a penalty of up to 10% of a company’s turnover

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