By Federico Ghezzi and Laura Zoboli
As is well known, the Covid-19 pandemic is causing not only a severe health emergency for citizens and countries around the world, but also an unprecedented shock to the global economy. Sudden changes in the demand and supply of certain products, interruptions in production, restrictions on imports, transport and distribution, uncertainty about the duration of lockdowns… all of this has challenged the ability of companies to react. Antitrust policy can play a role in this and, depending on the economic context and on the occurrence of a new crisis, it may be required to evolve – in particular with regard to the possible cooperation between competitors.
A glance at the past and the present
Looking back, the New Deal policies launched by Roosvelt in 1933 resulted in a de facto suspension of antitrust law, allowing collusion through codes of conduct.1 Many scholars nowadays consider that such a suspension has contributed to keeping the US economy depressed long after 1933.2
The European Commission reacted to the financial crisis of 2007/2008 differently: it did not modify competition rules, but only enhanced the procedure’s efficiency and prioritized the sectors with the greatest impact on household spending, where possible.
Similarly, in 2009 the Assistant Attorney General of the Antitrust Division of the United States’ Department of Justice, Christine Varney, stated “there is no adequate substitute for a competitive market, particularly during times of economic distress. Second, vigorous antitrust enforcement must play a significant role in the Government’s response to economic crises to ensure that markets remain competitive”.
The crisis caused by the pandemic is partly different from the economic ones that antitrust policy faced in the past, chiefly for its cause – which is not of an economic nature, but rather it stems from public health concerns, which in turn brought governments to adopt restrictive measures.
In particular, firms are at the mercy of the decisions of public authorities and cannot control the factors that determine these decisions, mainly public health. In this context, most competition authorities have published communications aimed at clarifying the framework of competition law, with the primary purpose of guiding firms in their actions. Moreover, the focus of these temporary responses is linked to the nature of the crisis, having as a central point the cooperation between competitors for the supply of products and services that are essential in the fight against Covid-19, for which there is a public interest.
The response of the antitrust policy at the European level
At the European level there are two central milestones in the antitrust policy reaction, with specific regard to the possible cooperation between competitors during the pandemic.
First, the declaration adopted by the European Competition Network (ECN)3 brings together the main competition authorities in Europe. The ECN recognized the need for companies to cooperate to make up for shortages in the supply of scarce products and to ensure their fair distribution. For those firms with concerns about the compatibility of their initiatives with competition law, moreover, the ECN authorities expressed their availability to provide further guidance, through informal advice. Nevertheless, the ECN statement strongly condemned those firms that take advantage of the crisis by creating cartels or by abusing their dominant position.
Secondly, at EU level, the European Commission adopted a temporary framework,4 where it clarified the parameters and priorities that will guide its enforcement action – with a focus on the cooperation between competitors aimed at resolving the shortage of essential products and services. Moreover, the Commission introduced a temporary procedure to provide comfort letters to firms in relation to specific cooperation projects on a case-by-case basis. In addition, the Commission reiterated its condemnation of opportunistic conducts of exploitation of the crisis to cover anti-competitive collusion or abuse of dominant position, such as, for example, applying prices above ordinary competitive levels or limiting production to the detriment of consumers.
What happens next?
The actions taken by European authorities in response to the pandemic are consistent in safeguarding competition. More broadly, we are convinced that maintaining a sound antitrust policy is essential to increase the resilience of the markets and to promote a faster recovery of the economy from the crisis.
In that respect, it will also be essential to carefully monitor the cooperation activities that have been (or will be) authorized during the pandemic through comfort letters or for which the authorities have established that the enforcement was not a priority. The risk, otherwise, is that once cooperation and exchange of information between firms are allowed, such relations may turn into real collusive activities. To this end, it is necessary that the authorities provide for sunset clauses, i.e. conditions for ending cooperation activities when/where they are no longer essential, because the market failures that were justifying them have been surpassed.
In addition, while the authorities can certainly intervene ex post, by initiating investigations and condemning colluding companies, in times of crisis these interventions risk being ineffective. During a crisis, in fact, firms could have great difficulty in paying sanctions (and damages), which would result in a distortion of the market, for example in the form of a reduction in the offer or an increase in prices, which would persist. In this sense, we think it is essential that authorities invest in awareness campaigns to prevent anti-competitive conducts, even more so in times of crisis.5 In other words, we believe that it is essential to legitimize antitrust action in times of crisis, as an intervention that, while not against companies, is for the protection of consumers and citizens.
For an in-depth analysis of antitrust policy in times of Covid-19, see: L. Zoboli, F. Ghezzi, L’antitrust ai tempi del Coronavirus: riflessioni sulle esperienze internazionali e sulle iniziative italiane, in Rivista delle società, 2020 (in Italian). For a focus on the reaction of antitrust policy in circumstances of cooperation, see: L. Zoboli, Covid-19 e regole antitrust: tra incentivi alla cooperazione e rischi collusivi, Concorrenza e Mercato, 2020 (in Italian).
[1] National Industrial Recovery Act 1933, Chapter 90, Title I, § 3, 48 Stat. 195 (15 U.S.C. §§ 703–12 (1934)).
[2] R. Lucas jr., L.A. Rapping, Unemployment in the Great Depression: Is There a Full Explanation?”, in 80 J.P.E., 1972, 186–91; A.A. Alchian, Information Costs, Pricing, and Resource Unemployment, in Microeconomic Foundations of Employment and Inflation Theory, ed. E.S. Phelps et al. Norton, 1970; M.Friedman, A. Jacobson Schwart, A Monetary History of the United States, Princeton, N.J., 1963, 1867–1960. S.W. Wallace, The Antitrust Legacy of Thurman Arnold, St. Johns Law Review, vol. 78 n. 3, 2004.
[3] ECN, Joint statement by the European Competition Network (ECN) on application of competition law during the Corona crisis, 23 March 2020, https://ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf
[4] Communication from the Commission, Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak (2020/C 116 I/02), https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020XC0408(04)&from=FR
[5] The UK Competition and Markets Authority stood out for its proactivity.
Federico Ghezzi is Professor of law at the Department of Legal Studies, Bocconi University, and his main research interests are at the intersection between antitrust and corporate governance.
Laura Zoboli is Assistant Professor of European business law at the University of Warsaw and scientific coordinator of the Centre for Antitrust and Regulatory Studies (CARS). Her main research interests focus on the overlaps between competition law and IP within digital markets and the data economy.
Photo by Matteo Vistocco on Unsplash
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