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Antitrust and consumer law in times of pandemic

As the first COVID-19 cases were announced in Colombia, we saw in awe as certain goods (such as masks or hand sanitizer) began to become unavailable in the market, or how their prices rose to excessive levels. Similarly, we saw, as the mandatory preventive isolation measure was established, how thousands of people stock up on food and other products. The current emergency may lead to actions and behaviors that contravene free and healthy competition, and the rights of consumers.

This was recently recognized by the Superintendence of Industry and Commerce (SIC, by its initials in Spanish). Said authority announced that during the emergency period, the vigilance of markets would increase in order to prevent abusive conducts displayed by business owners and establishments selling products, especially essential goods. The SIC, additionally, urged municipal authorities to carry out, within their jurisdiction, the inspection and surveillance actions regarding the activities carried out by producers and suppliers, in order to identify potential infringements of consumer rights through antitrust behaviors such as product hoarding practices, “tied-in” sales, misleading information and advertising. The authority, furthermore, has issued instructions directed at the business sector to prevent the engage of proceedings and systems that tend to affect the free and fair competition.

However, and at the same time, certain countries (such as Norway of the United Kingdom) have established measures that ease antitrust regulations during the ongoing crisis. Which model is the most convenient in these troubled times? Probably, a combination of both is appropriate.

Although it would seem contradictory, in these times of crisis a mixed approach may be necessary. On the one hand, it is necessary to strengthen the enforcement and compliance of antitrust and consumer rights dispositions, as well as the inspection, surveillance, and control faculties of the SIC to avoid unjustified price increments or product hoarding practices. On the other hand, the review of the Superintendence of agreements between competitors and suppliers could be eased to ensure and sustain production, provision, and the preservation of the economy, in order to prevent any further loss of competitiveness. During the crisis, not only is the life and health of Colombians at stake; the economy is as well.

For instance, the European Competition Network (ECN, which gathers the competition authorities and the European Commission) has stated that, given the ongoing emergency, certain conducts are compliant with antitrust law. In particular, the ECN refers to those agreements between competitors that are strictly necessary to ensure the supply and trade of goods, as these may be necessary instruments to overcome the various difficulties that the market is currently experiencing, as well as the normalization process of the economy post-emergency.

Such agreements between competitors, are preceded by the so-called “crisis cartels” that were once authorized by the European Commission in the 1980s, and allowed competitors to establish agreements for limiting production or reducing capacity in situations of sectoral crisis; as they allowed the competitiveness of a market or sector to be restored in the medium or long term, reduced the impact on employment and guaranteed a supply structure for certain products. Once the crisis was overcome, regular competition was restored.

Under the current circumstances, the market by itself will not overcome the economic crisis ahead, and this approach may contribute to reduce the impact and address the market imbalance, while still maintaining a strict surveillance of market behaviors by the SIC.

Authors

Lorenzo-Villegas-CMS-Colombia
Lorenzo Villegas-Carrasquilla
Partner
Bogotá