Author: Michael Tschudin
Subject Area: Competition Law
Application of competition law during the Corona crisis
In its press release of 26 March 2020, the ComCo warned companies that the Cartel Act should be observed practically without exception even in times of crisis. However, the Cartel Act provides for exceptions where coordination between competitors can be justified on efficiency grounds. This applies in particular to temporary measures to prevent imminent supply bottlenecks.
Statements of Competition Authorities
On 23 March 2020, all competition authorities in the European Competition Network (the European Commission, the European Surveillance Authority, and the national competition authorities of the EU/EEA) published a joint statement on how to apply the European competition rules during the crisis. Jointly, they underlined that competition rules are flexible enough to take into account changes in market circumstances such as these.
In the press release of 26 March 2020 on the subject, the Swiss competition authorities set a sharper tone and warned that even in times of crisis the Cartel Act should be observed practically without exception: Private companies must (...) comply with competition law, even if the crisis may lead to an increased need for cooperation.
Cooperation between competitors
In the current situation, cooperation between competitors may be necessary in order to secure the supply chain and avoid imminent supply bottlenecks of scarce products. This includes joint planning regarding production (e.g. specialisation agreements). Such cooperation requires an exchange of information, which is normally sensitive under competition law.
However, the Cartel Act leaves sufficient room for such cooperation. First of all, agreements between competitors generally do not constitute restrictions of competition if they are made to mitigate a state of emergency. Furthermore, a cooperation is considered justified if it increases economic efficiency, in particular by reducing production costs or using resources more rationally.
In Switzerland, there is no guidance from the competition authorities on admissible cooperation in times of crisis and, in general, there is little case law on the justification of cooperation on grounds of economic efficiency. Cooperation should be admissible if firstly, there are clearly documented efficiency reasons, secondly, the cooperation is limited to the time of crisis and thirdly, the cooperation does not go beyond what is necessary to mitigate the crisis.
The Austrian Federal Competition Authority also stated on 23 March 2020 that in the case of temporary cooperation to ensure security of supply it is assumed that such forms of cooperation in connection with Covid-19, insofar as they are necessary, will take place with the appropriate participation of consumers and contribute to improving the production or distribution of goods.
In order to prevent legal risks, companies may contact the authorities in advance. The Swiss competition authorities have expressly communicated that they will be available for corresponding inquiries. It is also possible to submit a notice of opposition to the ComCo. This notification must be submitted prior to the implementation of a cooperation and in principle protects the notifying companies from financial sanctions until officially revoked.
Abuse of a dominant position
The supervision of dominant undertaking is of particular importance in the current situation. The competition authorities will most probably not hesitate to take actions in the event of price excesses with regard to particularly important products during the crisis.
A dominant position exists if one or more undertakings, which act on the market as suppliers or buyers, are able to behave to a significant extent, independently of other market participants. If, for example, a supplier is able to raise prices significantly without losing market share, this may be taken as an indication of a strong market position.
In this respect, it should be noted that the Swiss Parliament is currently discussing the Fair Price Initiative and an indirect counter-proposal, which aims at lowering the threshold of supervision of undertakings in a dominant position, to such undertakings in a so-called relatively dominant position. Accordingly, greater caution will be required in the future, in particular in cases such as refusal to enter into business relations, discrimination against trading partners and the imposition of unreasonable prices.
Disclaimer: The information contained in this document is intended for general information purposes only and does not constitute legal or tax advice. This content is not meant to replace individual advice from competent professionals in a specific case.