Competition law relaxed for supermarkets but opportunists beware

The UK government has announced the temporary relaxation of competition law for supermarkets to allow retailers to collaborate as part of a package of measures to help supermarkets respond to the coronavirus crisis.

Background

The government has confirmed that legislation to amend elements of the Competition Act 1998 (CA98) will shortly be in place to facilitate supermarkets’ operations during the ongoing pandemic. This is intended to be a short-term temporary measure to ensure retailers can co-ordinate operations in these unprecedented challenging times of uncertainty. Currently, competition law prevents certain types of anti-competitive behaviour, including competitors fixing prices, market sharing and exchanging commercially sensitive information. The rules can be relaxed in exceptional circumstances¹ i.e. where the Secretary of State is satisfied that there are exceptional and compelling reasons in the public interest as to why the prohibition on anticompetitive agreements² ought not to apply to an agreement or any agreement of a particular description, they may exclude such agreements from the prohibition.

The temporary relaxation of the rules will allow supermarkets to share data with each other on stock levels, cooperate to keep shops open and to share distribution depots and delivery vans. It also allows retailers to pool staff with one another to help meet demand. Environment Secretary George Eustice said: “By relaxing elements of competition laws temporarily, our retailers can work together on their contingency plans and share the resources they need with each other during these unprecedented circumstances.”

This will be a specific, temporary relaxation to enable retailers to work together for the sole purpose of feeding the nation during these unprecedented times. It will not allow any activity that does not meet this requirement. Business Secretary Alok Sharma has said that “the temporary relaxation of competition law for the food sector will allow supermarkets to cooperate with each other to keep their shops staffed, their shelves stocked, and the nation fed”.

CMA response

The Competition and Markets Authority (CMA) has welcomed the temporary relaxation for supermarkets, issuing an assurance that it has “no intention” of enforcing competition law against cooperation between businesses that is necessary to protect consumers during the pandemic. However, the CMA will not tolerate dishonest businesses exploiting the crises as a disguise for non-essential collusion: information exchanges should be limited to what is necessary and not include longer term pricing or business strategies. The CMA also warned that any assurance it has given cannot protect against competition litigation by private parties.

However, the CMA is adamant that competition law will continue to be enforced as normal in other cases. The CMA has launched a taskforce to tackle the negative impacts on competition and consumers of COVID-19, which will scrutinise markets to identify harmful sales and pricing practices e.g. excessive pricing. The taskforce will work closely with the government to advise on emergency legislation if there are negative impacts for people which cannot be addressed through existing powers and also to help ensure that competition law does not stand in the way of legitimate measures that protect public health and support the supply of essential goods and services.

Andrew Tyrie, chairman of the CMA said: “The intervention in the economy necessitated by public health policy may have a substantial impact on competition, with the risk of an increase in consumer detriment. That is why this taskforce is needed.”

1 Paragraph 7 of Schedule 3, CA98
2 Chapter 1, CA98