In view of the current and imminent economic challenges, many companies are asking to what extent cooperation and concerted practices with competitors are able to ensure the supply of goods, thus cushioning the threat of an economic downturn. While the antitrust authorities have been keeping quiet on this issue for some time, several official statements have now been issued which we would like to comment on briefly below.
Unsurprisingly, there is a basic consensus among the authorities that the current crisis does not give a free pass for cartel behavior. The European Commissioner for Competition Margarethe Vestager recently stressed this in a statement on March 27, 2020. According to Vestager, agreements leading to an increase in the price of essential goods in particular will be strictly sanctioned.
Otherwise, the European authorities agree that the general conditions for exemption (Article 101(3) TFEU and, for example, Section 2 German Act against Restraints of Competition) still form a sufficient basis for the individual assessment of cooperation and concerted practices under competition law.
A joint statement of the European competition authorities (ECN, European Competition Network) first addressed this exemption possibility on March 23, 2020. The statement is, however, limited in its wording to outlining that antitrust law should not stand in the way of an effective supply chain and the distribution of scarce goods. The antitrust authorities would not intervene against “necessary and temporary measures put in place in order to avoid a shortage of supply.” This is because the resulting efficiencies would likely outweigh competitive restrictions.
Given the wide scope for interpretation of the general conditions for exemption, however, the lack of precedents and the very reluctant recognition of efficiency gains by the authorities to date, more clarity and depth of detail in the ECN statement would have been desirable.
Agreements between competitors relating to essential goods and ensuring the time-critical supply of such goods to the population, whether through supply chain or distribution cooperation, should in any event be generously exempted under this provision. They must be limited to the period of crisis and may not go beyond what is necessary.
It remains unclear, however, what is meant by “essential goods” in the sense of the ECN statement. Are these only products that people need (to survive), or also those that are essential for the other functioning of the economy? What is essential is often in the eye of the beholder and may change quickly, especially in these times. In any event, food is one of the essential products (as expressly stated by the UK Competition & Markets Authority (CMA) in a statement dated March 19, 2020). The same applies to medical and hygiene articles. According to the view taken here, however, other products should also be included, which represent critical building blocks in our interdependent economy.
By contrast, agreements with price-relevant or price-increasing effects are not likely to be exempted according to the authorities. Nonetheless, there is a gray area here as well. For example, the question arises as to whether industry-wide agreements on payment terms should be permitted during the crisis because they create a level playing field between financially strong and financially weak competitors. Obviously, not only the strongest companies should survive the crisis; the survival of smaller but otherwise healthy providers in the market is also essential for the continued existence of effective competitive structures.
The authorities offered to be available for these and other doubtful issues as part of the informal guidance and will respond quickly and unbureaucratically. It remains to be seen whether this will overburden the authorities in the short term.
In any event, the Federal Cartel Office reports full functionality. It “asks,” however, that pending (“non-essential”) merger control notifications be formally submitted at a later date, if possible. The European Commission has reacted similarly. In other words, it is possible to file notifications now, but it should not be done. The Austrian Federal Competition Authority, on the other hand, is uncompromising: Irrespective of the date of notification, the legal deadlines there will only run from May 1, 2020. It can only be hoped, therefore, that sufficient capacity will be available at the authorities to be able to respond promptly to a large number of informal inquiries as well.