As the coronavirus (COVID-19) outbreak continues to unfold, antitrust enforcement agencies worldwide continue to adapt their policies and enforcement, balancing the need to be more permissive about corporations collaborating to combat the effects of COVID-19, with preventing corporations from taking advantage of the situation.
U.S. antitrust agencies continue serving their missions, adapting their operations as the circumstances dictate. The Federal Trade Commission (FTC) and Department of Justice Antitrust Division (DOJ) are operating by making adjustments like the rest of the legal industry. FTC and DOJ staff are working remotely, including conducting meetings and depositions via video or teleconference. Staff continue to review mergers and prosecute anticompetitive conduct, including conduct by those who seek illicit gains from this unprecedented situation. Nonetheless, timelines may stretch due to the limitations of remote working and as third-party resources prioritize other pressing matters and courthouses temporarily close. The FTC and DOJ also released guidance for companies considering collaborative responses to COVID-19 and warned that they will continue to closely monitor businesses conduct for compliance with antitrust and consumer protection laws during this time.
Merger review continues, more or less, uninterrupted. The agencies are accepting filings and granting early terminations, with some minor changes. Parties must file with a temporary e‑filing system because the agencies are not accepting hard copies or DVDs. The FTC Premerger Notification Office published COVID-19 Guidance for Filing Parties, summarizing the temporary changes. Ian Conner, Director of the FTC’s Bureau of Competition, cautioned merging parties that early termination, while available, will be granted on a more limited basis due to resource constraints. Investigations will also take longer in many cases. Both the FTC and DOJ announced that they may need additional time to review filed transactions – DOJ is requesting a 30-day extension to all current and future timing agreements, while the FTC will review on a case-by-case basis. Though parties are not required to agree to these extensions, the agencies have been clear that parties should expect a challenge rather than a reluctant close. And, if parties propose divestitures to allay the agencies’ concerns, the FTC has been clear that the vetting process for evaluating the divestiture package and potential buyer will be no less rigorous.
The agencies continue to monitor and prosecute anticompetitive conduct but also have taken additional measures to promote lawful collaborations to combat the spread of COVID-19. The FTC and DOJ encouraged companies to undertake collaborative efforts issuing a statement that promises an expedited review of all such proposals and that they would consider exigent circumstances in their evaluation of these arrangements. DOJ has already issued multiple business-review letters stating that it would not challenge collaborations among medical supplies distributors providing personal protective equipment (PPE) and other efforts to distribute products for COVID-19 treatment. But these announcements do not indicate that the agencies have suspended antitrust enforcement. The FTC and DOJ recently issued a joint statement promising to protect workers on the front lines of the fight against COVID-19, including healthcare, grocery store, and warehouse workers from anticompetitive conduct in the labor market. Specifically, the DOJ can criminally prosecute companies and individuals who enter into naked wage-fixing or no-poach agreements, and the FTC can pursue civil enforcement against companies and individuals who invite others to collude, even absent a collusive agreement. DOJ also issued a statement cautioning individuals and companies about committing antitrust violations, especially relating to public health products, during this pandemic. To combat hoarding and price gouging, DOJ formed the COVID-19 Hoarding and Price Gouging Task Force, which has already worked with the U.S. Department of Health and Human Services to order hoarders of PPE to furnish the supplies to the United States so they can be distributed appropriately.
Canada’s Competition Bureau remains active, but it is experiencing operational challenges and delays as it adapts to the pandemic. Staff are working remotely where possible. The Bureau will issue emails instead of hard copy letters. The Bureau shut down phone lines for its information center, whistleblower hotline, and merger unit and asked those who wish to communicate with the agency to do so through email and online forums. Investigations may suffer delays as the Bureau curtails in-person interviews, and the agency may need to prioritize urgent marketplace issues over ongoing enforcement matters.
Merger review may also be delayed. It will be difficult for staff to make market contacts in a timely manner since many businesspeople are teleworking. Parties may experience challenges preparing and delivering information to the agency. The Bureau encouraged parties to contact merger case teams as early as possible on complex matters and continue close contact throughout the review.
The Bureau also signaled that it will not scrutinize business collaborations designed to respond to the crisis, where the companies are acting in good faith and the collaboration is limited in duration and scope. For example, companies may need to form collaborative buying groups or share supply chain resources to provide critical goods and services. The agency also formed a team to rapidly assess proposed collaborations and asked companies seeking guidance to submit specific information in order to facilitate an expedited review. Nevertheless, the Bureau will remain vigilant against potential antitrust violations. Matthew Boswell, Commissioner of Competition, issued a statement warning individuals and companies against taking advantage of the situation, particularly through deceptive marketing practices or collusion by competing businesses.
Despite the circumstances, the European Commission (“Commission”), as well as the National Competition Authorities (NCAs) of the EU Member States, remain operational. Commission officials who ensure critical functions will continue to be present at work, working in shifts, while all other Commission staff are working remotely. Staff at the NCAs are working fully or partly remotely, sometimes at a reduced level, as the NCAs operate under practical limitations, especially regarding personal meetings, hearings, and access to files (e.g., Czech Republic, Netherlands, and Germany). Greece and Poland set up special task forces to address possible distortions of competition due to the COVID-19 pandemic. The Swedish Competition Authority is the only NCA whose activities continue to be conducted as usual.
Whilst COVID-19 will not lead to any alterations to the legal principles underpinning merger control regimes, the Commission and the NCAs announced changes to their procedures that will affect merger control reviews. While the Commission encouraged parties to discuss the timing of notifications with the relevant case team, it remains ready to deal with cases where firms can show compelling reasons (cf. updated notice). Previously, the Commission had encouraged firms to delay planned merger notifications, as, in some cases, it faced practical difficulties, e.g. regarding collecting information from the notifying parties and third parties (cf. previous notice). Complex deals requiring extensive input from the notifying companies and other interested parties could, therefore, still be the hardest to keep on schedule. In any case, parties have been asked to notify their concentrations electronically, if possible. NCAs are taking a similar approach. The NCAs in Belgium, Cyprus, Germany, France, Hungary, Slovenia, and Ireland recommend postponing merger filings for the time being. Austria, Malta, Poland, France, Greece Ireland, and Portugal only allow digital or online filing submissions. Several NCAs including Austria, Bulgaria, Denmark, France, Italy, and Spain announced either the suspension or extension of procedural deadlines.
The Commission has adopted a Temporary Framework in order to facilitate cooperation between undertakings to ensure the supply and adequate distribution of essential scarce products and services during the outbreak. This includes medicines and medical equipment used to mitigate and possibly overcome the outbreak. The Commission set up a dedicated mailbox for companies to seek informal guidance. The European Competition Network (ECN) also recognizes that additional industry cooperation might be needed, for example, to ensure continued supplies. However, it emphasized that the usual exemptions from the cartel ban apply (cf. joint statement). The ECN highlights that essential health products need to remain available at competitive prices and that immediate action will be taken against any antitrust violations like excessive pricing. The NCAs in Croatia, Denmark, Estonia, Malta, Slovakia, Slovenia, and Sweden refer to the guidance of the ECN without issuing additional guidance. Austria, the Czech Republic, and Greece will prioritize the investigation into any allegation of excessive prices, artificially induced scarcity of supply, cartel agreements, or abuse of a dominant position exploiting the COVID-19 situation to the detriment of consumers. Portugal will be particularly vigilant regarding anticompetitive practices. The Polish NCA will monitor prices for essential goods online and in physical stores. Luxembourg stressed corporate responsibility, Romania recommended that companies implement safeguarding measures, and Latvia will contact merchants directly to discourage the use of the existing situation in bad faith. The NCAs in Bulgaria, Finland, and Spain will adopt a more lenient approach to temporary and proportionate coordinated measures taken by market participants to supply essential goods. NCAs in Italy and Hungary will focus on consumer protection against misleading advertisements, whereas NCAs in the Netherlands and Poland have issued voucher schemes guidance and consumer credit regulation respectively.
Japan’s Fair Trade Commission (JFTC) is running as usual and accepting new filings. Parties are encouraged to schedule an appointment by phone but the commission continues to hold in‑person meetings. Some of its staff are working remotely, which might cause a delay in reviewing applications.
In the wake of the COVID-19 pandemic, the JFTC cautioned against tie-in sales whereby consumers are forced to purchase face masks and hygiene products with other items. The JFTC has also released general guidance on emergencies that identifies certain permissible temporary measures, including (i) allocation of goods in short supply among competitors and (ii) information sharing between competitors.
The Australian Competition and Consumer Commission (ACCC) remains operational, but is transitioning to remote work as health concerns increase. Non-essential meetings and travel plans have been cancelled while in-person meetings have been replaced with conference calls and video conference.
Merger review has not yet been affected, and the ACCC has not formally requested parties to delay their filings. However, it has encouraged deferring non-urgent filings and expects to extend timelines for some applications. If parties anticipate changes in commercial timing of a merger or the likelihood of completing a merger, they should keep the ACCC updated. Given the economic impact of the COVID-19 pandemic, the ACCC expects to receive more merger proposals requiring an assessment of companies’ financial health. The ACCC said that it will evaluate these proposals in light of the current market environment, potential changes in market structure, and the long-term impact on competition.
The ACCC has emphasized that its focus is on maintaining long term competition. To tackle business disruptions and potential harm to consumers, the agency has allowed greater cooperation in several industries, including: grocery retailers, airlines, banks, medical technology companies, telecommunications providers, fuel companies, medicine manufacturers, private health insurers, and energy market participants. More industries are likely to be included.
Hong Kong’s Competition Commission (HKCC) continues to enforce Hong Kong’s Competition Ordinance during the COVID-19 pandemic with all of its staff teleworking as of March 23, 2020.
The HKCC noted in a statement that it recognizes a need for temporary cooperation between businesses in various sectors to ensure continued supply of critical goods and services. Examples include: (i) joint buying between parties that do not possess market power; (ii) joint production agreements for goods that the parties cannot individually produce; (iii) certain joint ventures selling, distributing, or marketing products; and (iv) information sharing on best practices or publicly available information.
The HKCC also stated that it will expedite requests for review and provide informal guidance on the application of the Ordinance to proposed conduct or agreements.
Singapore’s Competition & Consumer Commission (CCCS) remains active with limited on‑site staff. While the Commission intended to operate through its e-services, it transitioned to telecommuting shortly thereafter and may experience some operational delays. As of April 7, 2020, the majority of its staff are working remotely and walk-in services for feedback and complaints have been suspended. Feedback or complaints must now be submitted via email, fax, post, or online.
The CCCS has not issued a statement on how the COVID-19 outbreak has affected its merger review. Parties that wish to file a merger must contact the CCCS by email for further information.
The Korea Fair Trade Commission (KFTC) remains active. The agency has, however, adopted a more flexible attitude toward timelines for investigations and regulatory activities. For example, the KFTC announced that it would temporarily postpone plenary hearings and curtail dawn raids and in-person interviews, except for urgent matters related to COVID-19.
Merger review remains largely uninterrupted, with COVID-19 becoming a significant factor – particularly in expediting reviews in industries that have been severely affected. For example, in light of the airline industry’s free fall, the KFTC quickly approved Hyundai Development’s acquisition of Asiana Airlines at least a month or two earlier than is usual. The agency requested that parties advise if a matter is time-sensitive.
Regarding consumer protection, the KFTC and other Korean government agencies formed a task force to monitor markets for masks, hand sanitizers, and other household essentials. Hoarding and bundling are areas of particular concern, and the KFTC conducted dawn raids on pharmaceutical, consumer good, and e-commerce companies suspected of bundling face masks.
At the epicenter of the outbreak, China’s State Administration of Market Regulation (SAMR) made a formal announcement in February prohibiting in-person meetings and introducing an e‑filing system. Meetings take place over telephone and video conference. Although the SAMR’s Administrative Center is temporarily closed, documents can still be submitted via email, courier, or fax. The SAMR staff rotates so each day one group of case handlers comes into the office while the rest work from home. The SAMR continues to aim to provide a response within two working days to businesses and consumers who approach it for consultation.
With regard to merger review, the SAMR announced on April 3, 2020 that it will expedite review in the pharmaceutical manufacturing, medical equipment and device manufacturing, food production, transportation services, and tourism industries. In particular, the SAMR will refrain from applying the Anti-Monopoly Law strictly if collaborations among competitors serve to help the PRC recover by improving efficiency or protecting the public. As of now, the SAMR appears to be continuing work without discernible delay in its processing time. The SAMR may, however, experience some delays in receiving third-party comments from other stakeholders.
The SAMR has implemented strict pricing rules not only on face masks, but also on component materials. The agency also announced that it will pursue anticompetitive conduct that takes advantage of the pandemic, such as price-fixing, output restriction, market allocation, unilateral price hikes, or tying.
The Competition Commission of India (CCI) is essentially closed. On March 17, 2020, CCI decided to adjourn matters listed for hearing until March 31. This decision, however, does not apply to urgent matters. In addition, as a precautionary measure, the CCI discouraged non‑essential visits. On March 23, the CCI further suspended (i) filings related to anticompetitive agreements and abuse of dominance, (ii) pre-filing consultations, (iii) merger notifications, and (iv) other filings, submissions, and proceedings under the Competition Act. That shutdown has now been extended until May 3, 2020. The CCI has also introduced e-filing and e-payment systems, as well as video conferencing for pre-filing consultation, for the first time.
The Philippine Competition Commission (PCC) adopted an alternative work arrangement from March 16 to April 14, 2020, or until such time the community quarantine imposed throughout the National Capital Region is lifted. To continue the provision of basic services, the PCC maintains minimally staffed offices and continues to respond to inquiries through e-mail or conference calls. On April 7, the national government extended the community quarantine until the end of April.
During this period, the PCC has suspended key aspects of its merger control regime. The PCC gives companies 30 days to file merger notifications after signing definitive agreements. This 30-day window is frozen. The agency will not accept new notification forms and will not review those already submitted. Notifying parties will have the remainder of the notification period when regular operations resume.
After the Mexican Federal Government recognized coronavirus disease COVID-19 as a “serious disease of priority attention,” the Federal Economic Competition Commission (the “Commission” or “COFECE”) issued an opinion on the application of the Mexican Competition Law and competition policy. COFECE emphasized its awareness of the issues that the COVID-19 crisis raises for companies in the ordinary course of their business and in the regular functioning of markets.
To try to mitigate the effects of COVID-19, COFECE detailed certain guidelines focused on pro-competitive collaboration agreements, thorough investigation of indiscriminate price increases, and speedy review of mergers. Its opinion also stated that it would not prosecute collaboration agreements that are necessary to maintain or increase supply, satisfy demand, protect supply chains, or avoid shortages or hoarding of goods, provided that such measures do not aim to displace competitors.
Under this guidance, firms can lawfully collaborate with competitors to improve their efficiency and satisfy current demand, so long as such collaboration does not have the purpose or effect of limiting competition. COFECE also noted that in the current health emergency, a given collaboration agreement may generate risks of future anticompetitive effects, but be necessary at the moment, provided that it does not have as its main or preponderant purpose to fix or manipulate prices, to reduce supply, or allocate markets.
Finally, the opinion noted that merger control procedures will continue in their ordinary course to ensure that companies can continue to carry out their transactions.
Brazil's Administrative Council for Economic Defense (“CADE”) initiated a formal investigation into whether certain pharmaceutical companies are abusively raising prices as a result of the emergency. CADE stated that it will query several market players "with urgency" on the prices they've been charging clients for laboratory tests, alcohol-based hand sanitizers and surgical masks. To assist in the investigation, CADE gave hospitals, laboratories, drug stores, drug makers and makers and distributors of alcohol-based hand sanitizers and surgical masks 10 days to submit invoices they issued for the products targeted in the probe.
In a recent press release, the agency also said there would be no changes to its procedures governing mergers, administrative probes, and leniency agreements.
Peru’s National Institute for the Defense of Competition and the Protection of Intellectual Property (“Indecopi”) issued a press release in March 2020 stating that even though it has no powers to regulate prices, it can sanction cartels. Indecopi asked Peru’s main food suppliers, transport services, markets and supermarkets and unions to implement policies that ensure sufficient supplies in the case of products, limits on the sale of basic necessities, as well as flexibilities to reschedule transportation services, but also urged transportation companies to comply with government measures and, also, not to take advantage of this situation to raise prices and to demonstrate social responsibility.
In light of COVID-19, Columbian’s Superintendent of Industry and Commerce, Andrés Barreto González, recently urged the business sector to avoid practices that would limit free competition or distort prices. Specifically, the Superintendent wrote a letter to the country’s primary economic unions and encouraged them to “avoid incurring in all those practical procedures and systems that tend to limit free competition or distort prices. Respect the free competition regime, denounce all kinds of practices that could affect competition.”
Morrison & Foerster associate Eric Olson assisted in the preparation of this client alert.