The COVID-19 crisis affects the economy, challenges traditional business patterns and alters the flow of goods, services and funds. This exceptional business environment also raises certain issues under antitrust law.
The Swiss Competition Commission ("ComCo") has published a press release addressing antitrust law in times of the COVID-19 crisis on 26 March 2020, pointing out that antitrust law remains fully applicable even in times of crisis. In particular, it clarified that "the ComCo is not tolerating abuse by companies of the COVID-19 crisis for restrictions of competition" and that challenges companies are facing are "generally not a reason or justification for the violation of antitrust law".
Several other antitrust authorities within Europe have also already made policy statements for this exceptional situation. For instance, German Federal Minister of Economics Altmaier wants to "take up the subject of cooperation between the food industry and the retail trade with the cartel authorities"; the President of the Bundeskartellamt Andreas Mundt is "naturally available for any discussion with companies, associations and politicians". Norway has a temporary exemption from the ban on cartels which has been in force for a few days for the entire transport sector. The Austrian competition authority has emphasized that it will prioritise complaints about health products such as face masks, sanitizing gels, protective clothing, etc., as it is of utmost importance to ensure that such products remain available at competitive prices. In a joint statement dated 23 March 2020, the European Competition Network (ECN), which encompasses the national competition authorities in the EU member states and the European Commission and of which Switzerland is not a member, acknowledged “that this extraordinary situation may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers.”.
In view of the COVID-19 crisis, companies must analyse what scope antitrust law provides to face the challenges of the current situation. Below, we summarise the opportunities and risks under Swiss competition law arising from the crisis.
Justification of certain agreements affecting competition during the COVID-19 pandemic
Agreements that do not have a restriction of competition as their object or effect are permitted under Swiss antitrust law. Nevertheless, even agreements leading to restrictions of competition can be justified on the grounds of economic efficiency if they are necessary, for instance, to achieve cost reductions, an improvement in supply or to exploit resources more rationally. This general rule continues to apply in the current COVID-19 pandemic. An exchange of information amongst competitors (e.g. on stock levels) may be justified in times of scarcity of a certain product. Additionally, supply of products to competitors may be considered necessary in order to avoid short-term supply bottlenecks. Possibly, even an allocation of certain products amongst competitors in order to overcome a sudden increase of demand for a certain product or limited production capacity in times of a crisis could be justified. Cooperation as a result of the crisis that is necessary to safeguard the efficient supply of consumers with essential goods or services and thereby avoid short-term supply bottlenecks may be considered justified and lawful.
However, any form of cooperation must be carefully analysed for potential anticompetitive effects. As the ComCo clearly stated in its press release, the crisis does not generally serve as a justification for violations of antitrust law. Only measures imposed by the government and authorities are exempt from the application of antitrust law even if they affect effective competition.
In Switzerland, the risk of a fine for anticompetitive agreements is, in principle, limited to certain hardcore restrictions such as (a) horizontal agreements to fix prices, limit quantities of goods or services to be produced, purchased or supplied, or allocate markets geographically or according to trading partners, and (b) vertical agreements regarding fixed or minimum prices or the allocation of territories in distribution contracts (absolute territorial protection).
Whether restrictions of competition aimed to mitigate the effects of the COVID-19 crisis are justified on grounds of economic efficiency has to be decided independently by each cooperating company and, if necessary, after obtaining legal advice and/or a consultation with the responsible competition authorities (such as the Secretariat of the ComCo). Further, companies may rely on the so-called opposition proceeding (Widerspruchsverfahren) under the Swiss Cartel Act and notify the planned cooperation prior to its implementation. The notifying parties are then protected from a fine until informed by the competition authorities that the conduct may be considered unlawful and, therefore, will be further investigated.
3. Abuse of market power
Abuse of market power still unlawful
It can be expected that the ComCo will look very closely into the behaviour of dominant companies in times of the COVID-19 crisis, such as, in particular, companies controlling essential facilities.
In case of supply shortages, such as in times of crisis, a dominant supplier must supply the affected customers on a non-discriminatory basis. Unjustified delivery stops may be subject to sanctions by the ComCo.
Furthermore, dominant suppliers are not allowed to demand unreasonably high prices or other disadvantageous conditions from their customers and thereby exploit the emergency situation if these prices/conditions deviate from those that would likely prevail in case of effective competition. The ComCo pointed out that it is coordinating its efforts regarding price abuses (e.g. for face masks and disinfectants) with other authorities, but that it could only take action if the requirements to take action (abuse of market power, unlawful agreements) were met.
Exceptional circumstances of the COVID-19 crisis may, in certain cases, justify doing business differently than in the ordinary course of business. Also, dominant companies may, as a result, have legitimate business reasons for their behaviour, e.g. due to scarcity of goods, higher input costs, or the like. In any case, however, companies must be aware that the crisis itself does not suffice as a justification for deviation of antitrust laws.
In addition, market definitions and market shares may change in the exceptional circumstances of the COVID-19 crisis. For instance, short-term shifts in supply and demand as a result of the crisis, or the limitation of transport capacities etc. may lead to a situation where companies temporarily gain a dominant market position due to the changed market conditions or due to narrower market definitions. Also, in the long run, the COVID-19 crisis may increase the market shares of the surviving companies.
4. Merger control
Practical issues regarding Merger Control
The assessment of merger control notifications by the ComCo may currently take longer than usual (yet still within the legal timeframes). Companies intending to notify mergers are advised to contact the authority in advance and discuss the schedule. The ComCo currently accepts the submission of electronic documents in certain cases.