Romanian Competition Council’s view on the relaxation of competition rules in the context of COVID–19
On 23 March 2020 the Romanian Competition Council (“RCC”) issued new recommendations (“RCC Recommendations”) on how antitrust laws need not restrain collaboration between competitors in order to avoid a shortfall in essential goods on the market and to ensure a balanced distribution of the same.
The RCC Recommendations are meant to establish a common approach at European Competition Network (“ECN”) level on the application of competition law during the COVID-19 pandemic.
The RCC expressly states that companies must ensure their products are available at competitive prices, and the administrators of e-commerce platforms can take measures to limit any unjustified price increases for basic goods and services.
With this in mind, we set out below what this actually means and what companies must consider, competition-wise, under these special circumstances.
1. What are companies allowed to do?
In these extreme circumstances, companies may need to cooperate to ensure both the supply and fair distribution of scarce products to all consumers, particularly when providing goods or services that they would otherwise be unable to provide.
Therefore, the ECN will not actively intervene in respect of necessary and temporary measures put in place in order to avoid a shortage of supply. For example, the competition provisions allow producers to set maximum prices for their products, a practice which could help limit unjustified distribution price increases.
In the current circumstances, these measures are unlikely to be problematic since they would not amount to a restriction of competition and would, in all likelihood, generate efficiencies that are likely to outweigh any such restriction.
Other allowable practices may include the development of common standards (i.e for cleaning, sanitation), exchanging information to the extent necessary for that purpose and coordinating a response to any Government requisition of supplies.
With borders slowly closing, the travel sector is also facing a critical time and providers of accommodation may coordinate cancellation policies and conditions for reimbursement of their customers.
Moreover, companies may also take part in meetings with government officials in order to efficiently battle this crisis. For example, the US enacted the Pandemic and All-Hazards Preparedness Act in 2006 which includes a limited exemption from antitrust laws for public health security, hazard preparedness and emergency response.
In Romania, companies must also ensure that products considered essential for protecting consumer health in the current situation remain available and at competitive prices.
2. Does this mean that the Government is giving companies free rein on how to behave on the market?
The RCC, in line with other European competition authorities and regulators, underline the fact that companies must, at all times, be aware that competition rules are still in place and any measures taken by them must be taken solely for a beneficial outcome in the context of COVID-19. Therefore, companies taking advantage of the crisis to increase prices or mislead consumers should expect no leniency from the authorities.
In the context of COVID-19, competition authorities all over the world have already taken steps to sanction the abusive behaviour of companies, for instance:
- a Beijing drugstore was fined by China’s State Administration for Market Regulation in the amount of USD 434,530 for hiking up the price of face masks by almost six times amid the COVID-19 outbreak;
- in the United States, the Federal Trade Commission and the Food and Drug Administration have jointly issued warnings to companies that are making unauthorized claims relating to the prevention or treatment of COVID-19; and
- in the UK, although the Competition and Markets Authority announced the relaxation of some elements of competition law to help supermarkets work together, it has stated that it will step in to sanction any illegal competition practices.
If companies have any doubts on the compatibility of their cooperation initiatives with competition law, we recommend obtaining legal advice prior to implementing any new measures or initiatives.
The Commission, the European Free Trade Association Surveillance Authority and the RCC are also encouraging companies to obtain, at any time, informal guidance on how to legally behave on the market in this time of crisis.
In conclusion, although businesses have to adapt to these historic times, they should not avoid complying with the competition rules. Companies should balance the need for continuous compliance with competition laws against the increased need of ensuring the adequate supply of essential goods and services.