Antitrust Law and Merger Control07.04.2020 Newsletter

Antitrust law requirements for cooperations and distribution during the corona crisis

(Status: 14 April 2020)

The COVID 19 crisis is currently dominating the everyday life of companies and defining the legal issues of current relevance. For example, many companies are asking themselves whether the strict antitrust rules are actually still applicable during the crisis and whether they are allowed to cooperate with competitors, for example in order to ensure the secure supply of products. In view of the sometimes drastic price increases for products in high demand, many buyers will have wondered whether this price hike is still permissible.

Because of this situation, antitrust authorities around the world have taken action and published more or less detailed guidelines on the application of antitrust law during the corona crisis (see, for example, the comments of the European Competition Network - ECN, the Temporary framework of the EU Commission, or of the two American authorities Department of Justice and Federal Trade Commission - DoJ and FTC). An overview with links to the information pages of important antitrust authorities worldwide can be found here.

Antitrust law fundamentally continues to apply

The basic rule is: antitrust law also fundamentally continues to apply without restriction in the corona crisis. Price cartels or market-sharing cartels are still illegal and are prosecuted by the authorities. Compliance departments need to be particularly vigilant now and in the period immediately after the crisis, as exceptional economic situations often provide the ideal breeding ground for cartel agreements. Representatives of the authorities view crisis cartels just as unfavourably as they do price cartels. Companies therefore should not speculate on receiving any leniency from the authorities.

Cooperation with competitors to ensure the supply of necessary products

However, antitrust law does also provide enough leeway to allow antitrust authorities to react appropriately to exceptional situations such as the current one. At the very beginning of the crisis, Federal Minister of Economics Peter Altmaier had already made it clear that cooperations in the food industry and in the food retail trade in particular were to be permitted under cartel law if this would counteract supply bottlenecks (see here). This view is also shared by the President of the German Federal Cartel Office [Bundeskartellamt] Andreas Mundt (see here). The European competition authorities and the EU Commission have made it clear in their statements that they will not intervene if a cooperative project between competitors is aimed at and limited to ensuring that the population is supplied with necessary products or services (especially in the medical sector).

On this basis, retailers and manufacturers, for example, can be permitted to exchange information on their warehouse and transport stocks as well as production capacities, in order to exploit synergies and counteract supply bottlenecks. Besides purchasing and production cooperations, the joint transport or joint storage of goods also comes into consideration. In exceptional cases, even a temporary allocation of the market or customers may be permissible, if companies are otherwise not in a position to supply certain areas or customers sufficiently. This "working group concept" is not alien to antitrust law, but also has to be treated with particular caution. A case-by-case consideration is essential here.

Other forms of cooperation are also possible, as has been demonstrated by the temporary provision of McDonald's employees to Aldi. R&D collaborations, e.g. for the joint development of a vaccine by competing pharmaceutical companies, are permitted under antitrust law if this increases the chances of the research project’s success. Another important factor for the admissibility under antitrust law is that all of the parties involved are granted access to the research results.

In principle, however, the privileged cooperation between competitors must be limited to what is absolutely necessary in terms of time and substance and it must be in the context of overcoming the corona crisis. Hence, a sales cooperation between two competing car dealerships, for example - possibly born out of economic necessity - will have to be assessed according to the stricter standard rules of antitrust law. Furthermore, the exchange of competition-sensitive data that is not required for cooperations as well as agreements on prices and volumes remain prohibited. 

At any rate, in the case of cooperation projects between close competitors, coordination with the competent antitrust authorities is recommended. Most of the European competition authorities, including the German Federal Cartel Office, have already publicly signalled their willingness to enter into talks and promised solutions that are adapted to the exceptional situation. For this purpose, the EU Commission has set up a special e-mail address for informal consultations (see here).

Scope for pricing

Companies are basically free to set their own prices - even during the corona crisis. Companies can therefore charge higher prices in times of high demand and reduced stocks. The boundary is the abuse of price levels. Cartel authorities only have limited possibilities to take action against abusively excessive prices, however. This is because the prohibition presupposes a market-dominating position of the supplier. For this reason, France has already reacted by setting maximum prices for certain products (e.g. disinfectants). In Germany, however, the German Federal Cartel Office can also take action against companies which do not have market-dominating positions if they offer products upon which small or medium-sized enterprises are dependent as customers. Particularly in the case of goods that are in severe shortage, such dependency relationships are not excluded. Moreover, the European competition authorities have made it clear in their comments that, by setting their dealers maximum sales prices, manufacturers could help to prevent abusive price increases.

 

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Dr. Daniel Dohrn

Dr. Daniel Dohrn

PartnerAttorney

Konrad-Adenauer-Ufer 23
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