The Danish Competition Council opens up for cooperation in times of crisis
The Danish Competition Council and the European Competition Network (ECN) have as a consequence of the COVID-19 outbreak issued statements about the application and enforcement of competition law in these times of crisis. The statements should be seen in the light of the potential increase in the willingness of competing companies to cooperate as a result of their shared wish to limit the adverse effects of the economic downturn. Although it is stressed that the competition rules will continue to apply, the Competition Council allows to a certain extent companies to join forces to limit their losses and to ensure consumer protection.
On 23 March 2020, the Competition Council issued a statement regarding the enforcement of competition law during the COVID-19 outbreak. The virus outbreak has already led to major challenges for many companies in Denmark, including decreases in demand and revenue, dismissal of employees, etc. In this context, the Competition Council recognises that there may be situations where companies will need to join forces to solve the problems through joint measures, including to ensure security of supply. If this type of cooperation entails efficiencies for consumers that exceed the negative effects arising from the possible restriction of competition, the cooperation may be permitted under the competition rules. It is emphasized, however, that such cooperation is limited to the period in which it is necessary, and that the cooperation must not go beyond what is required to achieve the objective.
The Danish Competition and Consumer Authority will not actively pursue cases of necessary and temporary cooperation
According the same statement, the Competition and Consumer Authority will not actively pursue cases of cooperation between companies if the cooperation is temporary, necessary and does not go beyond what is required to achieve the objective. The Authority notes in this connection that in its prioritisation of cases it will take into account whether there are any such considerations that are worthy of protection, and whether there has in fact been "no other way around".
It appears at the same time, however, that the Authority will continue to have focus on cases of anti-competitive cooperation or abuse of a dominant position, for example in the form of unreasonable price increases, including on critical products.
Informal guidance on the competition rules
The Competition and Consumer Authority also states that companies and other operators are welcome to contact the Authority if they need further information about how to manoeuvre without conflicting with the rules. Thus, to a certain extent, the Authority provides informal guidance on the competition rules, which may be a big advantage for companies venturing into such crisis cooperation to limit the adverse effects of the crisis.
Read also our newsletter on the boundaries of lawful cooperation
Suspension of merger time limits
The Competition and Consumer Authority repeats in its statement the information given in its announcement of 18 March 2020, namely that the statutory time limits for the processing of merger notifications have been extraordinarily suspended for 14 days due to the spread of the COVID-19 virus. The reasons given are, among other things, the difficulties of obtaining information from customers and competitors for the purpose of assessing the mergers, and that such third parties cannot meet the ordinary time limits for submission of answers, which may be decisive for the possibility of making correct and well-founded decisions. The Authority stresses, however, that it will continue its casework in all merger cases and still endeavour to ensure that the ordinary time limits are observed to the extent possible.
Read also our newsletter on the suspension of time limits
State aid and COVID-19
Finally, the Competition Council and the Competition and Consumer Authority point to the state-aid aspects of the COVID-19 outbreak, which have given rise to many questions about the possibility of supporting companies with public funds, both in Denmark and in other countries.
It is emphasized that, if legislation allows for financial support to companies, Danish competition law will generally not prevent such support. The Competition and Consumer Authority does not have powers to enforce the EU state-aid rules; these powers lie with the European Commission only.
Read also our newsletter on the Commission's temporary state-aid framework
Joint statement by the European Competition Network
Also on 23 March 2020, the European Competition Network (ECN) issued a joint statement on the application of competition law during the COVID-19 crisis. The statement is of a general nature but has significant similarities to the statement issued by the Danish Competition Council.
In its statement, the ECN emphasizes the continued applicability of the competition rules to ensure a level playing field between the companies in the market. To some extent, however, the ECN's statement contains an expression of understanding that companies may need to cooperate in order to ensure the supply and fair distribution of products to all consumers in this time of crisis. In those cases, the ECN will not actively intervene against such cooperation agreements, if they are temporary and necessary to avoid a shortage of supply in the EU.
The ECN adds that such measures are unlikely to be problematic from a competition law perspective. Considering the current circumstances, such cooperation agreements will presumably be unproblematic, since they will probably not amount to a restriction of competition, and because the efficiencies generated will most likely outweigh any anti-competitive effects resulting from such agreements.
In this context, the ECN stresses, just like the Danish Competition Council, that it will not hesitate to take action against any attempt to abuse the current situation in the form of cartel behaviour or abuse of a dominant position on the market, including in the form of unreasonable price increases. This is particularly relevant in the case of products that are essential for the protection of public health, including face masks and sanitising gel, where it is imperative that such products remain available at competitive prices. The ECN points out that the competition rules allow manufacturers to set maximum prices, which may prove useful to limit unjustified price increases at the distribution level.
Finally, the ECN states that companies are welcome to reach out to the European Commission, the EFTA Surveillance Authority or the national competition authorities for informal guidance in case of any doubts about the compatibility of any such cooperation initiatives with EU/EEA competition law.
Read the ECN's statement
Update: Competition Commissioner Vestager emphasises that COVID-19 is not a “carte blanche” to circumvent the competition rules
Following the above announcements − and a number of other announcements by competition authorities all over the world − regarding application and enforcement of the competition rules in the light of the COVID-19 outbreak, Margrethe Vestager pointed out on 27 March 2020 (at an online event with “Friends of Europe”) that European businesses should not consider the COVID-19 outbreak as a “carte blanche” to circumvent the competition rules.
In times of crisis, food manufacturers and retailers, in particular, will probably be able to profit from certain exemptions from the competition rules aimed at ensuring security of supplies of necessary goods. But Vestager made it clear that the Commission will continue monitoring cartels, excessive pricing and other abusive practices closely, including the conduct of the tech giants.
Updated 30 March 2020
Update: New EU mailbox for informal guidance on the competition rules in the light of COVID-19
The exceptional circumstances of this time of crisis may trigger the need for companies to cooperate with each other in order to overcome the challenges posed by the COVID-19 outbreak. As a consequence, the Directorate-General for Competition has now decided to offer companies guidance on the compatibility of their business arrangements with the competition rules.
For this purpose, the Directorate has set up a dedicated mailbox to respond to inquiries from companies, associations and their legal advisors and guide them on specific initiatives and the compatibility of such initiatives with the competition rules. Companies can seek guidance by writing to the email address COMP-COVID-ANTITRUST@ec.europa.eu and providing details on the cooperating parties, the proposed initiative, the benefits to be achieved, and any aspects that may give rise to competition law concerns. It must also be explained why the cooperation is necessary and proportionate to ensure that the cooperation continues only as long as is necessary to achieve those benefits.
Updated 1 April 2020