On 25 March 2020, the CMA published a guidance on its approach to business cooperation during the COVID-19 pandemic. The UK regulator states that it will take no action against competing businesses that coordinate provided that such coordination is undertaken solely to address issues arising from the current crisis and to ensure security of supplies of essential products and services – in particular such coordination should not go further or last longer than what is necessary.
Similarly, in response to the COVID-19 crisis, the European Commission, the EFTA Surveillance Authority and the National Competition Authorities that together form the European Competition Network (ECN) have issued a joint statement on the application of competition rules during the current coronavirus crisis, explaining how regulators can help businesses deal with these unprecedented times.
The guidance sets out details of the CMA's approach to the prioritisation of this work and the CMA's view of how it will apply the criteria of exemption from competition law prohibition to certain agreements and arrangements between competitors in this unprecedented context of COVID-19.
Prioritisation of Cases
The current unprecedented situation may trigger the need for businesses to cooperate to ensure supply and fair distribution of products and services affected by the crisis to all consumers.
As noted in our Legal Insight dated 20 March the CMA had already reassured businesses that it would not take action against coordination that is necessary to protect consumers during the coronavirus outbreak.
Now, according to the guidance, the CMA confirmed that it will not take enforcement action against any temporary measures taken by companies to coordinate, when these measures: (a) are appropriate and necessary; (b) clearly in the public interest; (c) are for the benefit of consumers; (d) deal with critical issues arising from the COVID 19 outbreak; and (e) do not last longer than necessary.
However, the CMA highlights that this does not give a 'free pass' to companies to engage in conduct that could lead to harm to consumers in other ways. In particular, the CMA will not tolerate any non-essential collusion, including (a) unnecessary exchange of commercially sensitive information on future pricing and strategies; (b) retailers excluding smaller competitors from cooperating in order to achieve security of supply; (c) abuse of dominant position to raise prices significantly; (d) cooperation to artificially keep prices high; and (e) coordination between companies for distribution of good or services that are not affected by the COVID-19 crisis.
The key factor for the CMA, when applying this approach, will be the potential of business cooperating to cause harm to the consumers or the wider economy. The CMA clarifies that where the coordination is necessary for example, to ensure that essential supplies find their way to consumers or that key workers can travel safely to the workplace, it is highly unlikely that it would cause harm to consumers.
The guidance also provides information to businesses on how the CMA will apply the legal criteria of an exemption to competition rules prohibiting coordination between competitors. Any arrangements between businesses that could meet the legal criteria (under section 9 of the Competition Act 1998) will be automatically exempted. However, it is for the businesses to assess for themselves whether all the criteria apply as the CMA does not have the power to take such a decision.
Overall, the CMA guidance states that, when businesses make their own assessment of their cooperation In the specific circumstances of the COVID-19 crisis, the following types of coordination would most likely be unproblematic from a competition law perspective based on the exemption criteria provided they do not go beyond what is reasonably necessary: any coordination to (a) avoid a shortage, or ensure security, of supplies; (b) ensure a fair distribution of scarce products; (c) continue essential services; or (d) provide new services such a food delivery to vulnerable consumers.
The guidance provides some answers to the numerous questions that businesses may have during the COVID-19 crisis. However, as with other exemptions, it is up to companies to satisfy themselves that any proposed cooperation with competitors would benefit from exemption in the circumstances of COVID-19. However, in certain cases of genuine uncertainty and of critical importance, the guidance states that the CMA will offer additional informal guidance about its enforcement priorities.
In any event, this guidance should not be interpreted as applying to any matter other than those relating strictly to, or arising directly out of, the COVID-19 pandemic. Businesses should seek legal advice if they remain uncertain about the legality of their actions and potential cooperation.