Competition law applies to cooperation despite the pandemic. While some rules on competitor cooperation have been eased due to the Covid-19 pandemic, EU and UK competition laws have not been set aside entirely.
Competition lawyer at international law firm, McGuireWoods, Matthew Hall explains.
Authorities worldwide, including those in the EU and UK, have been keen to ensure competition law will not become part of the Covid-19 problem, but that it will be part of the solution. They have made it clear that necessary, short-term cooperation is acceptable. The limitations on competitor coordination and information exchange which are imposed by competition law will not encumber co-operation to ensure, in particular but not exclusively, that essential products and services are available.
In some cases, statutory exemptions have been put in place by governments to reflect this. Otherwise, and this is most instances, companies have had to rely on interpreting Covid-19-specific guidance from regulators and their own self-assessment in order to determine the legality of cooperation arrangements with competitors. This is not an easy task, but it is important.
This is because the risks of getting competition law wrong can be serious, particularly where there is competitor cooperation. Potential penalties include corporate fines, damages awards and even personal consequences for the most serious infringements.
Despite the difficulties and the risks, many companies have put in place new cooperation arrangements – written or unwritten – with their competitors. These include procurement and supply chain businesses which have, for example, coordinated on capacity utilisation, delivery schedules or the stability of the chain generally.
The legality of each of these arrangements depends on the particular facts, including the issue which is being addressed, the depth of the cooperation, whether and to what extent competitively sensitive information (CSI) is exchanged, the market positions of the parties, the impact on other competitors and trading parties and the duration of the arrangement. It’s important to realise that direct or indirect exchange with or provision of CSI to a competitor – even if one-way and on a one-off basis – can on its own give rise to competition law concerns. These issues must be considered not only at the outset, but also on an ongoing basis.
An arrangement must therefore be managed and monitored for as long as it continues. This needs to take into account the arrangement itself, such as volumes of product covered or the parties joining it, as well as the underlying background. The circumstances brought about by the pandemic are fluid and therefore this latter aspect will change much more than was usual in previous times. A situation which justified cooperation early on in the pandemic may no longer exist or may have changed as matters develop.
It’s also possible to become – even inadvertently – involved in competition law infringements by a third party such as a supplier, vendor or customer. For example, suppliers may have put in place an arrangement to ration supplies and be exchanging CSI for that purpose. Their customers should not become involved in this arrangement, even if that is simply being a conduit for information flow. The customers do not know the background to the arrangement and simply passing CSI from one supplier to its competitor – where that flow is not justified – can amount to an infringement.
The main practical point coming from these situations is that the compliance function in a business must be aware of and actively reach out to the individuals involved in any Covid-19-related arrangement with a competitor, as well as monitor new third party arrangements which might give rise to risk. In particular, the individuals involved in competitor cooperation need quite specific advice on how to implement these arrangements and what is allowed.
In many cases, a practice of exchanging CSI with a competitor will have become established to implement an arrangement; it is very easy for this to go too far or to continue once the original arrangement has stopped. Individuals need to be aware that an email from the other party to an arrangement, if it includes CSI going beyond what is legitimately needed to implement that arrangement, or received after it has ended, should not simply be ignored. The appropriate steps need to be taken in response.
The circumstances brought about by the pandemic are unique. Competition law is flexible enough to allow companies to adapt their behaviour in response, including by cooperating. However, there are bounds and these bounds will change as the impact of the pandemic changes. Companies must make sure that their compliance arrangements take into account the background, allow for suitable monitoring of behaviour and provide amended guidance as matters progress.
☛ Matthew Hall is a competition lawyer at international law firm, McGuireWoods.