Overview
It is important to remember that as businesses struggle in these times to cope with issues like distribution, sourcing ingredients, components and other resources, they may look to collaborate with rivals. In fact, many businesses have been doing exactly that. Collaboration between competitors can be perfectly benign and may no anti-competitive effects (for example, in setting standards, lobbying efforts). However, competition rules do apply and coordination of prices, market sharing, cost allocation, coordinated output reductions or sharing competitive sensitive information, would be prohibited. Some restrictions are regarded as 'hard core' and rarely worthy of exemption (price fixing, customer and market allocations and quantity restrictions). Penalties for infringement could lead to significant fines and possible private damages litigation.
In the EEA, agreements where the pro-competitive benefits outweigh the restrictive effects, are exempt from the prohibition in the competition rules. But collaboration between competitors is not generally subject to individual clearance by the European Commission or by national competition authorities: companies must self-assess their arrangements to see if they meet the criteria for exemption and this carries significant risk.
In these COVID-19 times, what practical steps can a company take to ensure so far as possible that its activities comply with the competition rules? The sorts of issues which we have seen emerging in these times of crisis which are steering rivals towards collaboration with each other include:
- Steeply falling demand and revenues, with escalating costs which threaten the very existence of the business
- Systemic supply chain disruption with access to ingredients and components becoming severely constrained or cut off
- Threats to business continuity, employee issues.
- Guidance from public authorities: there are mechanisms which are not often used, through which guidance may be sought. Reviewing the criteria and circumstances of relaxations in other sectors, can be informative parties. For example:
- The UK's CMA has issued a statement to the effect that it does not intend to take action against cooperation which is necessary to protect consumers (e.g. ensuring security of supplies);
- In the UK, supermarkets have been given permission to work together to share stock data, distribution depots, deliveries. The circumstances were exceptional and compelling in the interests of public policy;
- Norway, Germany, the Netherlands and Iceland, to name a few, have relaxed the competition rules for collaboration in various sectors. Parties may review the rationale for these individual decisions;
- The European Commission has indicated that it will issue guidance.
- Be narrow in focus: concentrate only on those collaborative activities which are
- Focussed only on solving the COVID-19 emergency being faced;
- Narrowly defined and go no further than necessary to deal with the emergency;
- Temporary in nature: such collaboration must come to an end as soon as practicable after the end of the crisis;
- Clear and specific;
- Do not cloud such emergency collaboration with other extraneous items;
- Never include any terms relating to price or markets.
- Document it: record discussions, meetings, and outcomes. Consider having counsel participate in the meetings.
- Be public: do not engage in emergency collaboration activities in secret.
- Consider carefully how you communicate with the market and ensure messaging is in line with competition rules, checked by counsel.