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Competition Policy Amid COVID-19

Shashwat Awasthi & Anushka
2 April 2020 11:16 AM GMT
Competition Policy Amid COVID-19
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Introduction

In light of the COVID-19 outbreak and the consequent impact being felt by the economy, the Finance Ministry recently announced a detailed policy providing number of relaxations to individuals and companies from statutory and regulatory compliance under various legislations ranging from the Income Tax Act to the Insolvency & Bankruptcy Code. Surprisingly, one area was left untouched: Competition Law.

A number of jurisdictions around the world have announced relaxations under their respective Competition policy to combat the effects of COVID-19 outbreak. Such relaxations can prove to be extremely important as they can provide a gateway for certain competing enterprises to share information, cooperate and essentially work together in a manner which is beneficial to customers amidst the outbreak. Such behaviour is otherwise not allowed under Competition law and can result in a heavy penalty.

What have other jurisdictions done?

Amidst the outspread of the pandemic, countries like United Kingdom, France, Norway etc. have taken some remarkable measures to cater to the needs of the people and combat anti-competitive practises at the same time. UK has formally waived the application of UK Competition Law (as contained in Competition Act 1998). This move was backed by the UK anti-trust regulator, the Competitions and Markets Authority ("CMA"). The CMA has permitted supermarket retailers to share data with each other on stock levels, cooperate to keep the shops open, share distractions depots and delivery vans. The waiver of this law includes pooling of staff from one another in order to keep up with the increasing demands in the market. This initiative also ensures the bolster of food production by making retailers agree on common specifications for products. No other activity other than the ones mentioned would be allowed during the waiver. The CMA will also ensure that there is no unnecessary exploitation of the crisis and will not allow any sharing of long-term data or business strategies not necessary to meet the needs of the current situation. CMA would additionally constitute a 'task force' in order to legitimise measures for public health, support the supply of essentials goods and services and guide legislative measures to regulate market functions.

Norway (which is a party to the European Economic Area Agreement- "EEA" agreement) has enacted rules similar to the ones adopted by the European Competition Network ("ECN"). Norwegian government has announced a three-month waiver from the Norwegian Competition Law for the transportation sector to make sure that the transportation of passengers and goods across the country and secure access to necessary goods and services. European Competition Network has encouraged the supply and fair distribution of scare products to all consumers. ECN has also decided not to interfere against the necessary and temporary measures already taken for avoiding the shortage of supply of essential goods and services. These include co-operation and data sharing between enterprises. The ECN has announced that necessary measures do not contravene Article 101 of the TFEU i.e. Treaty on the Functioning of the European Union (which prohibits anti-competitive agreements) and are therefore, not problematic. The ECN has also undertaken to ensure that necessary products at this time such as masks, sanitisers, etc. are available to the consumers at competitive prices in the market and any disadvantage taken out of the situation would invite serious repercussions from the Commission.

The Dutch Competition Authority has stressed on maintaining fair business practises and working together with individuals and enterprises for limiting the harm. Unfair practises like misleading consumers, price fixing agreements, excessive pricing by dominant companies in the market, wrongful claims by seller, etc. are highly disapproved of and will be actively pursued by the Dutch Competition Authority.

France has laid down some extensive preventive measures amidst the outbreak. The French Competition Authority (Autorite de la Concurrence) has announced that usual processing time in case of mergers will be regulated as receiving information from third parties has become extremely difficult under the current circumstances. The terms and conditions for examining transactions already notified or will be notified may be adjusted according to the exceptional circumstances.

What should India do?

  • Understanding the Substantive Framework of the Competition Act 2002

Before looking at the potential measures that the relevant authorities in India can undertake, it is important to understand the substantive framework of the Competition Act, 2002.

There are 4 main sections of the Competition Act which lay down the foundation of an effective Competition policy in India:

Section 3 of the Competition Act prohibits anti-competitive agreements between enterprises or association of enterprises or persons or association of persons. Section 3(3) deals with horizontal anti-competitive agreements such as price-fixing agreements, market sharing agreements, bid rigging etc. Horizontal agreements relating to activities referred to under Section 3 (3) of the Competition Act are presumed to have an Appreciable Adverse Effect on Competition within India ("AAEC"). Joint venture arrangements which increase efficiency in terms of production, supply, distribution, storage, acquisition or control of goods or services are an exception to the per-se rule.

On the other hand, Section 3(4) deals with vertical anti-competitive agreements like exclusive supply agreements, tie-in arrangements etc. These agreements are not per-se anti-competitive and a 'rule of reason' analysis based on Section 19(3) factors is carried out to adjudicate their nature. The connotation of Section 3 is simple, competitors in any market are supposed to compete for the business of their customers, not secretly co-operate to distort market forces and competition.

Section 4 of the Competition Act deals with abuse of dominant position by an enterprise. This abuse can stem from discriminatory pricing, denial of market access, using dominance in one market to enter into or protect another relevant market etc. Finally, Sections 5 and 6 of the Competition Act deals with the regulation of Combinations. Any combination that causes or is likely to cause appreciable adverse effect on competition (AAEC) in markets in India is void.

  • Potential Measures in light of the COVID-19 Outbreak

The Central Government and the Competition Commission of India ("CCI") must replicate the measures that have been employed by the jurisdictions mentioned in the preceding section. The Central Government must exempt certain enterprises from different sectors which are providing essential products and services to combat the outbreak such as supermarkets (as in the UK), drug stores, transportation (as in Norway) etc. from the purview of Sections 3 & 4 of the Act. In times like these, it is only reasonable for such enterprises to act in co-operation to maintain a steady supply of essential goods and services.

Furthermore, combination approval deadlines must also be relaxed. How can this be done?

Section 54(a) of the Competition Act provides that the Central Government has the power to exempt any class of enterprises from the application of the Act, if such exemption is necessary in the interest of security of the State or public interest. A relaxation under the section would surely be in public interest considering the largescale impact of COVID-19. It wouldn't be the first time that the impugned section would be used. In 2017, regional rural banks were given an exemption from the application of provisions of sections 5 and 6 for a period of 5 years in public interest. Another example would be of Vessels Sharing Agreements of Liner Shipping Industry which have been exempted from the provisions of Section 3 of the Act in public interest.

At the same time, the CCI work should closely with the government to ensure that if any such waiver is granted, the ongoing crisis is not used as a cover for non-essential collusion. This should be coupled with an aggressive strategy to ensure that products considered essential to protect the health of consumers in current situation remain available at competitive prices and excessive pricing is not carried out. Apart from the Essential Commodities Act and the Disaster Management Act, competition law can help regulate the prices of such commodities.

CCI should also consider setting up a 'taskforce' like the one in the United Kingdom which will help the Government in ensuring that competition law does not stand in the way of legitimate measures that protect public health and support the supply of essential goods and services.

Concluding Remarks

It is clear from the response of various competition authorities around the world that time has to make competition law flexible enough to respond to the current challenges and give companies the necessary room to manoeuvre. India must follow the suit and take necessary measures to ensure this flexibility. The above-mentioned measures will ensure supply security for essential goods and services, exchange of important data and R&D related to the virus and a reduction in overcapacities.



[1] III Year B.A. LL.B [Hons.] Students at Dr. Ram Manohar Lohiya National Law University, Lucknow

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