Coronavirus round-up: CMA clarifies approach to cooperation

Charley Connor and Ciaran Willis

27 March 2020

Coronavirus round-up: CMA clarifies approach to cooperation

Credit: Shutterstock/Lightspring

Competition authorities worldwide continue to mobilise in the face of the novel coronavirus pandemic, with enforcers in the UK and Poland establishing dedicated taskforces to tackle harmful conduct.

Elsewhere, Colombia’s chief prosecutor has threatened criminal sanctions for businesses found hoarding supplies, and authorities in Canada, Greece and South Africa have warned that investigations may be delayed.

UK

The UK’s Competition and Markets Authority gave further guidance to businesses on how it will approach cooperation agreements during the coronavirus pandemic.

Last week, the CMA said it was relaxing competition rules to help businesses. This week, the authority clarified that it will not enforce competition rules against cooperation agreements that help to supply essential goods to consumers or enable key workers to carry out “their important tasks in getting the country through the crisis”.

It said it wants to provide “reassurance” that as long as businesses’ coordination is to address the covid-19 crisis – and does not go further or last longer than it needs to – the CMA will not take action.

In this “extraordinary situation”, there may be a need for companies to cooperate to ensure the supply and fair distribution of scarce products or services to consumers.

Such coordination will be permitted if it prevents a shortage of goods; clearly in the public interest; benefits or helps the wellbeing of consumers; or helps deal critical issues caused by the coronavirus pandemic.

The authority added that this does not give a "free pass" to businesses for other activities that harm consumers, and “it will not tolerate unscrupulous businesses exploiting the crisis” as a cover for collusion.

A “key factor” for the authority will be whether the coordination causes harm to consumers or to the wider economy, it said.

It is of “utmost importance” that businesses do not artificially inflate the prices of products or services considered essential to protect the health of consumers, such as face masks and sanitising gel, the authority added.

It also advised that manufacturers can combat ‘price gouging’ or excessive pricing by, for instance, setting maximum prices for goods, which is not illegal.

CMA creates covid-19 taskforce

The CMA has set up a taskforce to investigate and advise on competition and consumer issues related to the coronavirus pandemic.

In a statement last Friday, the CMA said the taskforce will monitor markets for price increases and advise the government on necessary emergency legislation; it will also advise the government to ensure competition law does not impede measures to protect public health.  

Will Hayter, CMA senior director of policy, and Daniel Gordon, senior director of markets, will lead the taskforce. The rest of the team includes investigators, data scientists, lawyers and competition and consumer policy advisors.

“We will do whatever is required to stop a small minority of businesses that may seek to exploit the present situation,” it added.

The CMA said the taskforce will warn companies against conduct that exploits consumer vulnerability by charging unjustifiably high prices, and take enforcement action against companies that continue the conduct after the warning.

The taskforce will enable the CMA to advise the government around emergency legislation, if necessary, the authority said. 

Susan Black, a partner at Herbert Smith Freehills in London, said it’s good that the authority has moved quickly. The taskforce is “welcome” and shows an understanding of the commercial imperatives of the problems that businesses are facing, she added.

The measures are “pragmatic” and are also a “reassurance for business” she said. Black also noted that the measures are in line with European Competition Network’s statement earlier this week. 

The authority has asked that written representations about any competition or consumer issues are sent to: covid.monitoring@cma.gov.uk

CMA postpones state of competition report

Meanwhile, Andrea Coscelli, CMA chief executive, has postponed a report looking into the state of competition in the UK, as he moves staff to deal with more “critical” issues following the coronavirus outbreak.  

In a letter addressed to the Department for Business, Energy and Industrial Strategy (BEIS), and the  UK Treasury, he said “in light of the coronavirus outbreak and its implications for the CMA’s priorities we have taken the decision to postpone this work until later in the year.”

The “current plan is to reconvene the state of competition project in the autumn” and to publish the initial report early next year, Coscelli added.

In February, BEIS, in conjunction with the Treasury, wrote to the CMA to commission a broad investigation into competition across the UK economy. 

The CMA is “reallocating resources” to the most urgent work, Coscelli said in his letter. 

This includes cases with binding statutory deadlines, such as mergers, as well as the advisory and monitoring work the authority is doing to help the government in responding to the coronavirus.

He added that the CMA “remains committed” to measuring and monitoring how well competition is working across the UK. “Given the unprecedented challenges now faced by many parts of the economy, this analysis will be every bit as important in the future,” he said. 

Colombia

Colombia’s Superintendence of Industry and Commerce plans to increase investigations into alleged price-fixing of essential goods and will report violations to the national prosecutor’s office, Colombia’s chief prosecutor Francisco Barbosa announced at a press conference last week.

Barbosa said his office would prosecute under criminal hoarding and speculation laws any producer or wholesaler found withholding products to increase their value in retail stores. 

“We will not allow any producer, manufacturer or wholesale distributor to abuse its position within the market,” the prosecutor said.

Hoarding and speculation qualify as criminal offences under Colombian law when the conduct concerns “basic goods”, of which the government keeps track in a dedicated list. The competition authority can monitor if companies are actually hoarding products or if there is speculation, and refer matters to the criminal prosecutor to impose penalties. 

Maria Carolina Pardo Cuéllar, a partner at Baker McKenzie in Bogota, said there will “naturally be abusive practices if there is hoarding and speculation on scarce products”. However, she noted that the enforcer has focused on consumer protection – for the time being, at least.

Mauricio Jamarillo at Gómez-Pinzón Abogados in Bogota said the authority has inspected “multiple commercial establishments” and is closely watching e-commerce and inventory platforms. It has so far not reported opening an investigation into any specific company, he said.

The competition authority’s superintendent, Andrés Barreto González, today said that he is waiting for the government to issue price regulations on face masks, hand sanitiser and essential food items such as eggs and milk. Once the regulations are issued, the enforcer will use its consumer protection powers to impose fines and adopt measures against excessive pricing, he said.

South Africa

As South Africa entered a three-week lockdown period on Thursday night, the Competition Tribunal of South Africa prepared to significantly reduce its workload. Its chairman, Mondo Mazwai, yesterday suspended all operations apart from non-complex merger reviews.

Mazwai said her directive will apply until the lockdown ends on 16 April. South Africa’s president, Cyril Ramaphosa, has prohibited residents from leaving their homes unless it is for “survival”, such as to purchase food or collect medication.

Investigations relating to complaints already before the tribunal are postponed indefinitely and no new matters will be set down. However, “priority complaint referrals” stemming from the Competition Commission of South Africa’s special investigation into conduct related to the pandemic will be heard upon arrangement with the companies involved.

The tribunal will not enter into any consent orders or settlement agreements during the lockdown, although it will consider hearing urgent applications for interim relief.

Phase I and Phase II merger reviews will continue, with hearings held by teleconference if necessary. Phase III probes – which concern “very complex” mergers that the competition authority has asked to be prohibited – are suspended entirely.

Despite the lockdown, the tribunal today blocked Naspers’ acquisition of used car dealer WeBuyCars – indicating that it can and may still issue decisions over the next three weeks.

Canada

Canada’s commissioner for competition, Matthew Boswell, said last Friday that his agency “remains vigilant” against companies that “may seek to take advantage of consumers and businesses during these extraordinary circumstances”. 

Canada’s Competition Bureau will scrutinise any evidence of anticompetitive conduct, Boswell said. He particularly urged people to come forward with information relating to deceptive marketing practices, such as “false or misleading claims about a product’s ability to prevent, treat or cure the virus”, and collusive conduct among competitors.

The commissioner also sent a letter to members of the Canadian Bar Association’s competition section on 17 March that said the bureau is experiencing difficulties in meeting its deadlines, particularly in merger review, as most businesses have closed or moved to remote working. He urged lawyers to contact the enforcer as early as possible regarding complex matters and warned that probes requiring witness interviews or hearings may be delayed.

The bureau “may also need to prioritise urgent marketplace issues that require immediate action to protect Canadians,” Boswell added, noting that such instances will impact the bureau’s ability to address its other ongoing cases. 

Poland

Poland’s Office of Competition and Consumer Protection has established a dedicated team to combat potential anticompetitive conduct in the food and personal hygiene sectors.

The enforcer’s president, Tomasz Chróstny, said last Friday that the authority has received complaints regarding the “gross inflation” of prices for some food and hygiene products. He therefore appointed a special team to monitor prices and will take “further actions to restrict this type of negative behaviour” if necessary.

The enforcer is also considering taking action against companies that have violated their supply agreements with small and medium-sized businesses.

The competition authority’s coronavirus team is working with the Trade Inspection Authority, which is responsible for protecting the interests of consumers and the economic interests of the state. The competition team will monitor online prices, while the trade authority will track prices in brick-and-mortar stores.

The allegations that the enforcer has received thus far indicate that companies may be selling “basic products at margins that violate the principles of social coexistence,” Chróstny said. 

“Many individuals are attempting to exploit the current situation from a business perspective – however they cannot be permitted to profit on the fear of citizens,” he added.

Greece 

Greece’s Competition Commission announced on Monday that its staff will work remotely, as the country goes into lockdown due to the coronavirus pandemic.

To limit the transmission of the coronavirus, the authority said in a press release that “most staff” will work remotely and meetings will be held by teleconference until 30 April.

Legally binding deadlines will still apply and the enforcer will continue to investigate cases, review mergers and issue decisions, the authority said. It added that it may extend deadlines if necessary.

The enforcer will still use its investigative measures to safeguard the public interest and ensure healthy competition in the country.

Documents should only be submitted to the authority by email, not in person or by letter, the authority added. It also provided a list of email contacts on its website.

Last week’s coronavirus round-up can be found here.

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