Author: Lavanya Gupta Symbiosis Law School, Pune
Nothing is the same as it was a year ago. Roads are deserted, malls are empty, educational institutions are shut and the economy has come to a standstill. With practically all countries grappling with the deadly COVID-19 (“COVID crisis”), there are numerous aspects of life, economy, law and society which have been challenged in recent times. One of the numerous impacted components of the world is the regime of competition law (or antitrust law). In this article, we shall be exploring how countries across the globe have tackled the COVID crisis with respect to the enforcement of competition law, with a special focus on India.
IMPACT OF COVID CRISIS ON REGULATION OF ANTITRUST PRACTISES ACROSS THE GLOBE
During such times as the present, firms may take numerous predictable actions such as 1) fixing the price of essential food supplies and medical equipment; 2) collaborating with other firms and dividing geographical areas for distribution; and/or 3) collaborating with other similar businesses for production and delivery. These actions may be done in good faith or in bad faith and that is exactly where antitrust law comes into play.
Before looking at the various actions and exemptions given by different antitrust law enforcement agencies, it is imperative to note that despite some relaxations given by the watchdogs, it has been re-iterated and repeatedly emphasized that the respective antitrust rules and regulations will continue to be in force and govern all businesses. Thus, it is not to be understood that businesses are free to price their goods or merge with other companies at their whims and fancies.
The antitrust law enforcement agencies of the United States of America (“USA”), the Department of Justice (“DOJ”) and the Federal Trade Commission have allowed collaboration between entities to support and boost production and distribution of medical emergency supplies like kits and personal protective equipment (“PPE”).[1]
On the other hand, the Competition Bureau (“Bureau”) of Canada has pre-emptively given a green signal to business alliances to ensure a continued supply of goods and services, provided the alliance is “acting in good faith”.[2] Since there is no straitjacket formula to enlist actions taken in good faith, it will be upon the Bureau to check every individual alliance for any ill intentions. While releasing the said exemption, the Bureau has re-iterated its zero tolerance against anti-competitive practices and abuse of exemption.
Their European Union counterpart, i.e., the European Commission (“EC”) has recognized the possible need for companies to collaborate during the present global pandemic for the supply of medical as well as non-medical essential goods and services. The EC, via its Temporary Framework,[3] has allowed co-operation among goods and services providers. The first such allowance was given to Medicines for Europe in order to enable the organization to secure the supply of hospital medicines from various pharmaceutical distribution and manufacturing companies, for the treatment of the virus.[4]
In addition to giving relaxations to pharmaceutical companies and superstores, the Nordic countries of Iceland and Norway have given similar exemption from antitrust regulation to the transport industry, travel and tourism sector, etc.
On similar lines, United Kingdom’s (“UK”) Competition and Markets Authority (“CMA”) has relaxed the nation’s antitrust law for grocery chains, supermarkets, logistic service providers, healthcare service providers and ferry operators.[5]
ANTITRUST ISSUES THAT HAVE ARISEN DURING THE COVID CRISIS
As has been mentioned earlier in the article, the actions of businesses during this time have been expectable. Numerous issues have arisen which have presented a big hurdle in the competition law enforcement regime. With the pandemic situation worsening at an exponential rate at the global level, the demand for PPE and various other essential supplies also saw a multifold increase. This was seen as a profit-making opportunity by many businesses and it led to the problem of price gouging. Price gouging is the practice undertaken by sellers to excessively price the essential goods and services required during an emergency, like the ongoing COVID crisis. The news is filled with excessive prices being charged for commodities like hand sanitizers, face masks, PPEs, etc.
This practice of price gouging has different consequences in different countries. For instance, any person indulging in price gouging in the USA is criminally charged under the Defense Production Act of 1950 and the if convicted, s/he may be sentenced to imprisonment for up to one year.[6] The USA has also set up a COVID-19 Hoarding and Price Gouging Task Force to tackle and detect any unscrupulous activities undertaken by businessmen. Similarly, UK’s CMA has established a taskforce to regulate the prices of supplies.
Collaborations between manufacturers, distributors and suppliers pose another hurdle to the antitrust regime. The need for such collaborations has been recognized by all antitrust regulators; however, the manner of giving a green signal to the collaborations differs from country to country. A case in point is from the USA. A collaboration request by McKesson Corporation, Cardinal Health Inc., Owens & Minor Inc., Medline Industries Inc., and Henry Schlein Inc. was submitted to the DOJ.[7] To assess the temporary alliance, the DOJ looked at the objectives sought to be achieved by the group. Emphasizing on the need to take steps to avoid a “spillover” of the collaboration beyond the COVID crisis, the DOJ approved the request since the objective-specific collaboration minimized the anticompetitive risk. On the other hand, as has been seen earlier, Canada has given a pre-emptive green signal to collaborations.
INDIA’S RESPONSE TO COMPETITION ISSUES POSED BY THE COVID CRISIS
The issue of price gouging of PPEs, medical kits, hand sanitizers and face masks has been rampant in India as well. At one point in time, face masks, which were originally sold for INR 1.00, were being sold for INR 15.00 in view of expansion of demand. Similarly, there have been instances when customers have been charged INR 600.00 for a large bottle of hand sanitizer.[8] Seeing the excessive prices being charged, the government capped the maximum retail price of both, hand sanitizers and masks.[9] However, there is one thing pertinent to note at this juncture: it was not the manufacturing companies that increased the prices of the medical supplies, the individual chemists and store owners were the ones engaged in this practice.
In the light of the present situation, there have been numerous tie-ups and collaborations in India as well to make the process of selling and distribution of goods easier. For instance, Marico Limited tied up with food delivery platforms Swiggy and Zomato to increase the availability and access to essential food supplies.[10]
RESPONSE VIS-À-VIS COMPETITION ACT, 2002 AND CCI DIRECTIONS
The governing competition law in India, the Competition Act of 2002 (“Act”) has some in-built features to protect the consumers and the market from any malpractices that might be undertaken during emergency times. Before looking at the response of the Competition Commission of India (“CCI”) to the competition issues posed, it will be beneficial to look at the provisions of the Act.
The Preamble to Act reads that the CCI is established under the Act with the objective of inter alia protecting the interests of consumers. This objective is enunciated as a duty of CCI under Section 18 of the Act. Furthermore, Section 2(c) defines a cartel as an association of various stakeholders in the selling process who “attempt to control the production or distribution” of goods or services. Section 3 of the Act further goes on to provide that any agreement between market stakeholders that in any way limits or controls supply or the market is an anti-competitive agreement. The Act vide Section 3(3)(d) presumes such agreements to have an appreciable adverse effect on competition. However, by way of a proviso there is an in-built exception. In case, the agreement “increases efficiency in production, supply, distribution, storage, acquisition or control of goods of provision of services”, the agreement would not be deemed to be an anti-competitive agreement. The second exception to the presumption of an agreement having an appreciable adverse effect on competition is provided by way of Section 19. As per the said Section, while determining whether an agreement has an appreciable adverse effect on competition, the CCI must have due regard to numerous factors which include “accrual of benefits to the consumers” and improvement in distribution of goods and provision of services.
In respect of CCI’s response to the issues of price gouging and collaborations, there have not been many directives issued by the authority. CCI took numerous administrative decisions like adjournment of matters,[11] allowing electronic filing,[12] and suspension of certain proceedings.[13] Vide its document dated April 19, 2020,[14] the CCI, like its other international counterparts, took cognizance of the need for businesses in India to coordinate certain activities. While re-iterating the exceptions carved out by the proviso to Section 3(3)(d) and Section 19 of the Act, CCI allowed collaborations subject to scrutiny and checks. However, in the same tone it has been cautioned by the CCI that the conduct of the businesses must be “necessary and proportionate” to address the issues arising out of the COVID crisis and that there must be no contravention of the Act.
RESPONSE OF THE INDIAN GOVERNMENT
Section 54 of the Act empowers the Central Government (“Government”) to exempt any enterprise(s) from the provision(s) of the Act if the exemption is necessary for “public interest”. Though the Government has not yet exercised its power under the Act and given any exemption, it remains to be seen whether it the Government shall allow some flexibility in the application of the Act given the constant news of disruptions of supply and distribution chains, which might possibly exist in the coming future as well.
It is not that the Government has not used any powers given to it under any of the legislations to protect the consumers from business malpractices. Seeing the exorbitant prices of hand sanitizers and face masks, the Government, by an order, brought masks and hand sanitizers under the ambit of Essential Commodities Act, 1955.[15] By way of such an order, the prices of the two commodities, which are essential during the ongoing crisis, were be capped and offenders can now be prosecuted.
CONCLUSION
Even though the ongoing COVID crisis has posed numerous economic, social and legal issues, governments and their agencies across the globe are tackling the issues as and when they arise. Any knee-jerk reaction may prove to be counteractive for every stakeholder involved in the crisis. Governments and antitrust law regulators have two approaches at their disposal: granting exemption to certain sectors from the provisions of the concerned legislation and/or scrutinizing all sectors and their activities and giving clearance on a case to case basis. While it is true that the ongoing situation, which is expected to linger around for another year or so, presents excellent opportunities for businesses in terms of expansion and collaboration, it is imperative that businesses be careful of the boundaries created by the law, including antitrust law, to avoid any nullification of their actions.
[1] Joint Antitrust Statement Regarding COVID-19, March 2020
[2] Competition Bureau Canada, ‘Competition Bureau statement on competitor collaborations during the COVID-19 pandemic’ (Government of Canada, 8 April 2020) <https://www.canada.ca/en/competition-bureau/news/2020/04/competition-bureau-statement-on-competitor-collaborations-during-the-covid-19-pandemic.html> accessed 24 April 2020
[3] Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak, 8 April 2020
[4] ‘Medicines for Europe welcomes European Commission decision to enable secure supply of hospital medicines’ (Medicines for Europe, 8 April 2020) <https://www.medicinesforeurope.com/wp-content/uploads/2020/04/Medicines-for-Europe-Press-release-European-antitrust-guidance-08042020.pdf> accessed 24 April 2020
[5] Daniel Gordon, ‘An open letter to the pharmaceutical and food and drink industries’ (Competition & Markets Authority, 20 March 2020) < https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874240/COVID_19_Open_letter_to_pharmaceutical_and_food_and_drink_industries2.pdf> accessed 24 April 2020
[6] Aaron Katersky and Justin Doom, ‘New York man accused of hoarding COVID-19 materials for price gouging’ abc NEWS (25 April 2020)
[7] Department of Justice, ‘Department of Justice Issues Business Review Letter to Medical Supplies Distributors Supporting Project Airbridge Under Expedited Procedure for COVID-19 Pandemic Response’ (The United States Department of Justice, 4 April 2020) < https://www.justice.gov/opa/pr/department-justice-issues-business-review-letter-medical-supplies-distributors-supporting> accessed 26 April 2020
[8] Writankar Mukherjee, Ratna Bhushan and Teena Thacker, ‘Coronavirus terror in India: Santisers, masks sold out, prices peak’ The Economic Times (5 March 2020)
[9] ‘Coronavirus update: Govt caps MRP for sanitizers, masks amid anxiety buying’ Business Today (21 March 2020)
[10] ‘FMCG major Marico Ltd ties up with Swiggy, Zomato for delivery of essential items’ Money Control (3 April 2020)
[12] Measures in view of threat of CORONAVIRUS/COVID-19 pandemic, 20 April 2020
[13] Measures in view of threat of CORONAVIRUS/COVID-19 pandemic, 30 March 2020
[14] Advisory to Businesses in Time of COVID-19, April 19 2020
[15] Govt. brings masks and hand sanitizers under the Essential Commodities Act, 13 March 2020