Shared & Halved – IHL series Competition Law

As part of our series of webinars to support in-house lawyers during the current pandemic, on 22 May we hosted a webinar looking at recent developments and current challenges with regard to competition law.

Introduction

The IHL series of our COVID-19 webinar programme covers bite-size topics designed for a half hour coffee break and focuses on practical tips for in-house lawyers. This brings together interest groups to share thoughts and answer questions.

This session covered how competition law applies in the context of the current pandemic, including identifying potential risk areas that IHLs need to be alert to.

Does competition law continue to apply in this emergency situation?

• Yes – most definitely! For the most part, competition law continues to apply in the usual way. For IHLs, the usual watch outs remain relevant: contacts with competitors, discussions between supplier and reselllers regarding resale prices, internet sales restrictions, managing selective distribution systems, abuse of dominance and so on all remain on the radar.
• The CMA is alive to realities, they have been quick off the mark in this pandemic to date and in March issued a new guidance document on how they will apply competition law. This offers some comfort to businesses that the CMA will not enforce competition law in relation to conduct that is genuinely intended to address COVID-19 related supply disruption issues.
• However, the CMA has been clear: COVID-19 does not create a free pass to act unlawfully. The CMA will not tolerate opportunistic activity and it has set up a taskforce to look out for, for example, businesses colluding to keep prices high or abusing a dominant position by charging excessive prices).

What should IHLs look to do? Some common points and tips on approach

• Given the severe competition penalties (including prison sentences and significant fines), cooperating with competitors should not be done without first taking specialist legal advice. Clearly, we can support this.
• It is sensible to ensure employees, legal teams and managers are kept informed of competition law issues throughout the pandemic, so competition law training and refresher programmes should continue or be set up.
• We have come across and advised upon a number of mini-crises / near misses in recent weeks, for example situations in which people have contacted their competitors to discuss comercial issues of common concern without giving any prior consideration to managing the associated competition law risk.
• Identify and managing risk in relation to day to day activities and big ticket issues needs to go hand in hand.

Enforcement by the CMA – and new exclusions in certain sectors

• The CMA can exercise discretion on when it enforces the law, but it does not have the power to disapply competition law. Whilst helpful, the CMA’s guidance that it will not enforce competition law in relation to conduct that is genuinely intended to address COVID-19 related supply disruption issues does not provide legal certainty to businesses - for example, they may still be exposed to a risk of damages claims.
• The Government has stepped in using a power under the Competition Act to make a temporary exclusion from competition law certain forms of cooperation between competitors in certain specified sectors (groceries – including supermarkets, groceries suppliers and logistics services providers), healthcare, dairy and Isle of Wight ferries) on public interest grounds. Businesses operating in those sectors should ensure they are aware of the scope of the relevant exclusion. In other sectors, competition law continues to apply.
• Where the CMA is investigating, it continues to operate to its usual statutory deadlines, IHLs should be alert to tight deadlines on requests for information, etc.
• The risk of dawn raids is, we think, minimised in the foreseeable future due to the pandemic. However, there may well be future investigations into how businesses have conducted themselves in the current circumstances.

Mergers

• Is now a good time to acquire close competitors? Yes and no. Whilst some might wonder whether the CMA may be less likely to call in mergers for review at the present time, where the CMA does review a merger it will do so in the same way as it would have done.
• The CMA has recently published refreshed guidance on mergers in the context of COVID-19. This makes clear that COVID-19 does not change how the CMA assesses mergers. However, if a target is at risk of leaving the market, there may be increased scope to argue that a given deal is not anti-competitive.
• A clear guiding rule in the context of corporate deals - be very careful about documents you produce in context of those deals, since these are likely to be scrutinised by the CMA. Also, remember that a business you are merging with remains a competitor until the deal is complete, so be careful about interim discussions and disclosures.

Concluding view

• Main watch outs for businesses on competition law issues:
  • The pandemic may create limited opportunities safely to collaborate with competitors, where this is genuinely intended to address COVID-19 related supply challenges – but always take advice.
  • Competition law continues to apply and the pandemic does not create any excuses. In our experience, businesses are sensitive to competition law risks now more than ever.
  • We are all distant but remarkably connected – maintain your awareness of competition law and do your best to ensure that others within your business continue to understand and respect the rules. We are seeing clients taking the opportunity to refresh their competition law competition programmes as people have slightly more time on average – e-learning and training sessions through video conferencing are proving more popular than ever.
  • Recognise that over coming weeks and months there are likely to be opportunities for crises to arise - stay alert to the risks, do your best to keep your colleagues safe and be prepared to step in and manage risks when they arise.

Useful links

• Coronavirus Business Continuity Guide
• Coronavirus Business Support Measures Guide
• Article: Competition law welcome guidance in a time of crisis
• Article: Managing COVID-19 competition law risk in the automotive sector