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CMA launches first COVID-19 competition law investigations

The CMA has launched its first investigations into alleged anti-competitive conduct by businesses in the context of COVID-19.

The investigations relate to four pharmacies and convenience stores. The CMA suspects that the businesses in question may have charged excessive and unfair prices for hand sanitiser products, in breach of the competition law prohibition of the abuse of a dominant market position.

It comes as no surprise that current circumstances have led to CMA competition law enforcement action. As businesses struggle to respond to market conditions, it is perhaps inevitable that some will, knowingly or otherwise, expose themselves to competition law risk. Indeed, these investigations are unlikely to be the last that the CMA launches in the coming weeks and months.

Since the outbreak of the COVID-19 pandemic, the CMA has been encouragingly proactive in its response. It was quick to issue guidance for businesses on circumstances in which COVID-19 considerations might be relevant to the competition law assessment of business conduct (albeit accompanied by a warning that COVID-19 does not otherwise create a free pass to acting anti-competitively), and it launched an online tool for businesses and consumers to report concerns. At the last count, over 1,000 people a day were contacting the CMA with concerns across competition and consumer protection law.

That the CMA’s first competition investigations relate to a product like hand sanitiser might at first blush also seem relatively unsurprising. Supply shortages and allegations of suppliers and retailers increasing prices in response to sky high demand have been widely reported.

It will however be interesting to see how the CMA tackles its concerns in these investigations within the confines of its competition enforcement powers.

Price gouging (ie increasing prices in response to soaring demand) is not unlawful in itself. Indeed, under competition law, it can be challenged only as an abuse of dominance – but that requires the CMA to demonstrate that the business in question holds a dominant market position and that the price they are charging constitutes an abuse of their dominant market position in the sense of being excessive or unfair (which themselves are concepts that have been the subject of extensive legal arguments in recent cases before the courts). Quite how the CMA seeks to apply an abuse of dominance framework to pricing by four pharmacies and convenience stores remains to be seen.

Regardless of the specificities of these investigations, the underlying message that they send out is clear: the current pandemic does not create any excuses for business to disregard competition law and anti-competitive behaviour exposes businesses to the risk of CMA investigation.

In the expectation that further CMA investigations into businesses’ conduct in the current pandemic will follow in due course, all businesses would do well to ensure that they do not let their guard down with regard to competition law compliance. Experience suggests that times of pressure and crisis can lead to normal safeguards being (perhaps unconsciously) relaxed, compromising an effective compliance culture and making competition infringements more likely to occur. Many businesses are seizing the opportunity to refresh employees’ familiarity with competition law, for example, through webinar refresher sessions or rolling out e-learning. Ensuring an appropriate awareness of competition law remains the key starting point in enabling businesses to identify and manage – and, ultimately, minimise – their potential exposure to competition law risk.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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