Competition Rules Relax Amid the Coronavirus Outbreak
30 March 2020
In response to the Coronavirus outbreak (COVID-19), the Government has announced that it is “temporarily relaxing elements of competition law … to allow supermarkets to work together to feed the nation” (https://www.gov.uk/government/news/supermarkets-to-join-forces-to-feed-the-nation). The announcement comes during a time at which supply chains are under pressure to ensure basic necessities are provided to the public after a surge in “panic buying”.
Relaxing competition rules will allow supermarkets to share information in relation to stock levels, communicate to ensure shops stay open and share depots and delivery vans. The move also permits retailers to share staff to ensure demand is met. These measures aim at ensuring that even with staff shortages, as employees self-isolate or become unwell, demand will continue to be met.
In addition to this, drivers’ working hours will be increased to ensure more food can be delivered. This helps the vulnerable as well as preparing for the possibility of drivers becoming unwell. Furthermore, the 5p bag charges for plastic bags has also been waived to ensure deliveries are quicker. The Government has made clear that these are only short term measures, which will ensure retailers can work together to allow common specifications for products to increase food production at this time of significant increased pressure.
There are very limited circumstances in which the Government can suspend competition law on public policy grounds on the basis of exceptional circumstances. A previous example of this was in 2012, when the Government permitted fuel suppliers to cooperate (in a manner which would normally have been prohibited under competition law) to ensure that emergency services providers were supplied in the event of fuel shortages.
In order to achieve these aims, the UK Parliament introduced the Coronavirus Act 2020 (the Act) which became an Act of Parliament on 25 March 2020. Section 25 of the Act contains provisions allowing Government to require supermarkets and suppliers to provide information concerning food supply chains.
Additionally, the UK’s competition regulator, the Competition and Markets Authority (CMA) released guidance (https://www.gov.uk/government/publications/cma-approach-to-business-cooperation-in-response-to-covid-19) on 25 March 2020 stating its main focus in the next few months is to protect consumers from adverse consequences of COVID-19. Additionally, the CMA has said it will “not impede necessary cooperation between businesses to deal with the outbreak and will ensure the security of supplies of essential products and services”.
The CMA outlined relevant circumstances during this crisis where businesses are permitted to cooperate. These are where the cooperation:
- Is necessary to avoid a shortage, or ensure security, of supply;
- Is in the public interest;
- Benefits the wellbeing of consumers; or
- Deals with critical issues that arise as a result of COVID-19.
COVID-19 does not give a ‘free pass’ to businesses to engage in conduct that could that could lead to disadvantage consumers. The CMA highlighted that it will not tolerate businesses “exploiting the crisis as a cover for non-essential collusion”. This could include:
- Businesses exchanging with their competitors commercially sensitive information on future pricing or business strategies which is not related to COVID-19;
- Retailers excluding smaller retailers from any efforts to cooperate or collaborate;
- Businesses abusing a dominant position to increase prices above normal competitive levels;
- Collusion between businesses that seeks to increase prices to the detriment of consumers; or
- Communication between businesses that goes beyond what is actually needed to tackle the COVID-19 crisis.
The CMA has said it will enforce rules providing protection against excessive pricing and misleading practices specifically in relation to price increases and misleading claims as a result of COVID-19. The CMA has made clear that businesses will have breached consumer law if a business makes misleading claims in relation to protective equipment including face masks and hand sanitiser. The CMA confirmed its intention to prioritise enforcement action in these cases. It “will not tolerate unscrupulous businesses exploiting the crisis as a ‘cover’ for non-essential collusion.”
Additionally, the CMA has established a taskforce as a result of COVID-19 which will:
- Scrutinise market developments to identify harmful sales and pricing practices as they emerge;
- Warn firms suspected of exploiting these exceptional circumstances – and people’s vulnerability – through unjustifiable prices or misleading claims;
- Take enforcement action if there is evidence that firms may have breached competition or consumer protection law and they fail to respond to warnings;
- Equip the CMA to advise the Government on emergency legislation if there are negative impacts for people which cannot be addressed through existing powers; and
- Enable the CMA to advise the Government on how to ensure competition law does not stand in the way of legitimate measures that protect public health and support the supply of essential goods and services.
The UK Government and the CMA are sending out a clear message. Whilst they are relaxing competition rules where it is in the public interest to do so, they will continue to monitor supply chain behaviour. Excessive pricing and misleading claims will not be tolerated and enforcement action will be taken where necessary.
For further advice, please contact a member of the EU and Competition team at Carson McDowell.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.