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Dutch application of competition rules loosened during Coronavirus crisis

31/03/2020

In every country hit by COVID-19, competition and consumer authorities have been confronted with the pandemic's implications. During the first half of March we observed that – like the virus – measures that surfaced in Asia later appeared in Europe and elsewhere. 

In the second half of March 2020, various competition authorities around Europe started to provide much needed guidance. On 23 March 2020, these authorities – united through the European Competition Network (ECN) – issued a clear joint message: while antitrust law should not be ignored during the crisis, we understand the extraordinary situation and are open to discussion.

The Dutch Authority for Consumers & Markets (ACM) explicitly endorses the ECN’s statement, referring to its earlier statement of 18 March (“Competition rules offer many opportunities for working together in times like these in order to prevent people and businesses from getting harmed”), and indicating that it subsequently has endeavoured to have this approach applied throughout the EU. 

The following is an overview of three main aspects of competition law impacted by the COVID-19 crisis in the Netherlands. Opportunities and risks are briefly summarised.

1. Antitrust

Horizontal: cooperation between competitors is allowed, but not more than necessary

The ACM has stated that it will take into account that companies are suffering in the pandemic, but it will not turn a blind eye. In short, the application of competition rules will be loosened, but competition law will continue to apply.

Competing companies may be allowed to cooperate more and exchange more information than usual if it serves the general interest (e.g. competitors in the most affected sectors are allowed to share information on stocks and volumes to continue supplying consumers and healthcare units). 

Each company must determine independently whether a specific form of cooperation between competitors is allowed and if necessary, based on legal advice or coordination with the appropriate competition authorities. The following self-assessment test can be used:

  • Is the pandemic the real driver behind the proposed cooperation or exchange of information?
  • Does it serve the common interest?
  • If so, it will be more justifiable if the following conditions are met:
    • Is it limited in time?
    • Does it benefit consumers?
    • Does it not go beyond what is strictly necessary? 
  • Does it prevent prices from being artificially raised for particular products or services?

If the answer to each of these questions is affirmative, then the envisaged cooperation or information exchange might well be allowed.

Vertical: manufacturers may limit prices

Existing rules allow manufacturers to set maximum prices for their products. This could be used to limit unjustified price increases at the distribution level.

2. Abuse of market power

Abuse of market power still not permitted

Excessive pricing in relation to face masks and other personal protective equipment (PPE), disinfectants or respirators and similarly scarce products will receive scrutiny. Rumour has it that the ACM has already started a pandemic-related patent abuse investigation in the life sciences sector. 

In the event of unjustified delivery cancellations, affected customers can apply for an interim injunction. The requirements are high for a successful injunction application. 

In the long run, the Coronavirus crisis may increase the market shares of surviving companies, bringing them within the scope of the prohibition of abuse. Moreover, short-term shifts in supply and demand as a result of the crisis may also lead to a situation where companies temporarily gain a dominant market position due to changing market conditions. In this regard, it should be noted that limited transport capacity, higher transport costs and border closures could temporarily lead to narrower geographic markets, at least for the limited period of time that these extraordinary conditions prevail.

The ACM is an integrated competition and consumer law authority. This allows the ACM to choose the instrument of consumer protection law rather than competition law if it is more opportune. Investigations involving abuse of market power are often complex and time consuming. Consumer protection law may facilitate more effective and faster enforcement.

3. Merger control

Gun jumping allowed if necessary

In case of severe financial distress, companies can ask for a quick merger control procedure and even obtain dispensation from the stand-still period that would normally apply under merger control rules. This will allow purchasers of companies on the verge of bankruptcy to initially jump the gun. Dispensation could come with strict conditions.

If an intended transaction involves a merger with a competitor that normally would not be allowed, it still might be cleared under certain strict conditions. The following elements could play a role: 

  • There is no alternative that is less harmful to competition;
  • The market position of the acquired company would essentially fall to the acquiring company even without the merger.

For more information on competition rules in the Netherlands during the current crisis, contact your regular CMS advisor or local CMS expert Roderick Nieuwmeyer.

Authors

Roderick-Nieuwmeyer-CMS-NL
Roderick Nieuwmeyer
Advocaat
Amsterdam