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COVID-19: Application of competition rules and competition enforcement in crisis

3/22/2020

 

Updated on 30 March
On account of the COVID-19, consumers and businesses are confronted with unprecedented challenges. In response to these challenges, the Icelandic Competition Authority (ICA) has opened an information center where the following issues are addressed.

Exemptions from the ban to cooperate

According to existing Icelandic law, the ICA is responsible for giving exemptions from the ban on collusion in article 10 of the Icelandic Competition Act (equiv. to Art. 53 (EEA) and 101 (EU)). The equirements for such exemptions are stipulated in Art. 15 in the Icelandic Competition Act and are in essence the same as reflected in the Guidelines on the Application of Article 53(3) of the EEA Agreement (1007/C 208/01), safeguarding public interests.

The ICA has granted several exemptions on the account of COVID-19. In granting those exemptions the ICA has emphasised the following:

 

  • That sector regulators on the relevant market are given access to the cooperation between competitors. By that the regulators are able to monitor the cooperation and furthermore given the opportunity to gain overview over COVID-19 response on the market. Hopefully such an overview kan lead to a more coherent and sensible response to the COVID-19 across markets.
  • That applications for exemptions concerning the COVID-19 will be processed by the ICA in less than 48 hours from the receival of the application.

 

These are some of the exemptions which the ICA has granted because of the COVID-19 response (30. March 2020):

 

  1. Cooperation between travel agencies which aims at facilitating the safe return home of tourists abroad and in Iceland, as well as responding to the economic damage caused by COVID-19 (decision No. 12/2020). The exemption is based on the condition that the Icelandic Tourist Board deems the cooperation necessary and has access to and monitors the cooperation.
  2. Dialogue between travel services in every areas, initiated by the Icelandic Tourist Board, to assess further response to the economic damage caused by COVID-19. Furher exemptions are being considered by the Icelandic Tourist Board.
  3. Cooperation within The Icelandic Association of Travel Services, aimed at facilitating COVID-19 response among different travel services, such as offering more flexible terms to their customers (Decision No. 9/2020).
  4. Cooperation between importers and distributors of pharmaceuticals, aimed at securing necessary access to important pharmaceuticals (Decision No. 11/2020). The exemption is subject to the condition that the Icelandic Medicines Agency deems the cooperation necessary and has access to and monitors the cooperation.
  5. Cooperation between smaller pharmacies (1-2 outlets), aimed at preventing the closure of such pharmacies to the detriment of effective competition against larger retailers, in addition to securing consumer access to necessary pharmaceuticals (Decision No. 15/2020). The exemption is subject to the involvement of the Icelandic Medicines Agency.
  6. The Icelandic Directorate of Health given full autonomy in initiating dialogue with undertakings across markets to ensure continuous operations and secure access to supplies.
  7. Cooperation between lenders (mainly banks and pension funds), enabling uniform and temporary standstil on loan/debt payments of undertakings (Decision No. 13/2020.). The exemption is subject to conditions which e.g. ensure that the cooperation does not exclude further remedies for companies.

    Prior to the said exemption, the ICA had approved a limited ooperation between financial undertakings within the Icelandic Financisl Services Association in order to prepare uniform measures, in cooperation with the government, including standstill on loan payments etc. The approval was subject to the monitoring of the Central Bank of Iceland (incl. financial supervision) and an ad hoc expert in competition law.
  8. Cooperation between the two major distributors of fuel (Skeljungur and ODR), enabling the said distributors to assist each other in parts of the country where difficulties arise because of lack of people, sickness or other limitations deriving from COVID-19 (Decision No. 14/2020).
  9. Cooperation in maritime transportation of certain necessary supplies (pharmaceuticals) to Iceland. At the time being limited to one transportation.

 

Hotline to report excessive pricing of goods and services

In the current environment it is extremely important to ensure that products considered essential to protect the health of consumers (e.g. face masks and sanitizing gel) remains available at competitive prices. The ICA invites consumers, undertakings and the public sector to report to the ICA all indications of unreasonable increases in prices. Tips can be sent to a hotline accessible here, or by sending e-mail to samkeppni@samkeppni.is, or by telephone, 585-0700.

The ICA will endeavor to assess the incoming tips and decide if the following measures would be applicable:

 

  1. To encourage suppliers/manufacturers of necessary supplies (e.g. face masks and sanitizing gel) to set maximum prices for their products. The ICA could, if needed, facilitate such measures with exemptions according to Art. 15 of the Icelandic Competition Act.
  2. Investigation into a possible abuse of a dominant position.
  3. Investigation into a possible collusion.
  4. Remedies in accordance with the ICA´s market investigation tool.
  5. Interim decision to stop excessive pricing.
  6. Forwarding of the tip to another public authority better suited to address the issue, such as the Consumer Authority, the Icelandic Medicines Authority, etc.

 

It is also extremely important for consumers and undertakings alike to ensure that the current situation is not exploited by breaching competition rules. Any indications on this should be reported.

How can we use the experience from the banking collapse in 2008 to solve the challenges ahead?

In preparing a proper economic response to the current crisis, the government of Iceland, public authorities and Icelandic businesses can build upon the wast experience drawn from the banking collapse in 2008 and the economic crisis that followed. This concerns also competition policy and competition enforcement. Attention is drawn to the following issues:

 

  1. Wide experience and numerous researches suggest that measures that aim at ensuring effective competition and strengthening competition enforcement is the right response to the economic crisis. Response that limits competition tends to lengthen and deepen economic crises and thereby hinders economic recovery. The ICA addressed this in detail in its policy discussions during the banking collapse.
  2. Experience shows that it is very important, not least in small economies, to monitor closely how banks and public authorities deal with extensive financial difficulties of undertakings across markets. Under such circumstances, the decisions of banks can affect the development of markets and influence the longterm competitive structure of markets. The ICA addressed this issue to a great length in the aftermath of the banking collapse in 2008, both through formal opinions, reports and decisions (see for examble the annual reports to OECD for 2008 and 2009, as well as a joint report of the Nordic NCA´s from 2009)
  3. In discussions on current financial difficulties, the distinction is made between equity and liquidity problems of undertakings. Managers of well-funded companies often warn against measures that are likely to benefit companies which lack a stable financial foundation irrespective of the current crisis. In this respect experience can be drawn from the measures made in the aftermath of the banking collapse in 2008. The ICA addressed several issues in relation to this, see e.g. a report from 2011, Competition after the collapse.
  4. All aid measures on behalf of the government and public authorities should be prepared in such a way that they benefit the greater good and could not be exploited by the owners of companies receiving such aid, for example through the payment of dividends.
  5. Public aid measures should be designed in such a way that they do not hinder effective competition. Aid should for example be equally as available for small and innovative undertakings as for larger companies. Ministries are encouraged to use competition assessment methods (OECD; Competition Assessment Toolkit) in their preparations for such measures. The OECD is now leading a competition assessment project, assessing the regulatory framework of tourism and construction in Iceland. The outcome of this project will benefit a carefully prepared response to the economic difficulties caused by COVID-19.
  6. In the aftermath of the banking collapse in 2008, the ICA granted several exemptions to enable banks to cooperate in order to solve the financial difficulties of consumers and undertakings. Similar measures are now being introduced.

 

What are the ICA´s focus points as regards merger reviews under these circumstances?

Experience shows that competition enforcement is often put under pressure during financial crises. Possible mergers between companies in distress are often contemplated as a remedy. In this respect it is important to acknowledge that merger reviews during a crisis is subject to the same scrutiny and principles as under normal circumstances. A more lenient approach during crisis would often result in a long term damage for consumers.

During crisis, however, the failing firm defense in merger reviews becomes more relevant. This defense was often referred to during the aftermath of the banking collapse in 2008.

The ICA is conscious of the importance of expediting merger investigations during crises and it will endeavor to do so in the current economic climate.

With the aforementioned in mind, the ICA places emphasis on the following as regards merger reviews:

  • The ICA will be flexible as regards procedural matters in merger investigations and will try its utmost to expedite investigations.
  • The ICA will base its assessment on tested principles and is not likely to be more lenient than usual in its findings.

How to prepare state-aid

The EFTA Surveillance Authority (ESA) has set up a dedicated task force to assist the Icelandic, Liechtenstein and Norwegian authorities with any queries they have or measures they would like to discuss. ESA is committed to handling any queries or proposed measures in a swift and efficient manner. More information on this can be accessed here.

The EU Commission and the EFTA Surveillance Authority have already approved several measures in European countries responding to the economic difficulties caused by COVID-19. See also International Monetary Fund policy tracker that summarizes the key economic responses governments are taking to limit the human and economic impact of the COVID-19 pandemic as of end-March 2020. 

The emphasis of competition authorities around us

Several competition authorities have indicated changes in their policy emphasis or issued decisions on account of the COVID-19. Here are a few examples:

 

  • Joint statement by the European Competition Network (ECN) on application of competition law during the Corona crisis
  • UK authorities on pricing practices and how competition laws have been relaxed to allow supermarkets to work together on coronavirus response.
  • US authorities on violations concerning public health products, see here.
  • Italian authorities on interventions in the sale of sanitizing products and masks, see here.
  • Polish authorities on unfair conduct towards hospitals, see here.
  • Greek authorities on the possibility to set maximum prices, see here, and an investigation into price increases in healthcare materials, see here.
  • Norwegian authorities on a temporary exemption for the transportation sector, and a warning to suppliers not to exploit the situation and that the authority may apply the Price Policy Act..
  • EU Commission on state-aid rules and COVID-19, see here.
  • EFTA Surveillance Authority on state-aid rules and COVID-19, see here

 

How are the competition authorities around us changing their day-to-day operations?

For the past few days competition authorities around the world have had to change their way of doing things. Here are a few examples:

 

  • EU Commission on delayed merger notifications see here.
  • Finnish authorities on merger notifications, see here.
  • Danish authorities on delayed deadlines in merger investigations, see here.
  • UK authorities on working arrangements due to COVID-19, see here.
  • US authorities on e-filing systems, see here and here.
  • French authorities on merger notifications and working arrangements, see here.
  • German authorities on working arrangements, see here.
  • Spanish authorities on the suspension of periods and timelines for completing the procedures of public sector entities, see here.
  • Irish authorities on merger notifications, see here.
  • Greek authorities on working arrangements, see here.

 

Order of priorities and revaluation of existing cases

In the coming weeks the ICA will prioritise cases that are relevant to the response to COVID-19. Accordingly, the ICA will have to delay the procedures of some other cases and reconsider their applicability.

Undertakings that are planning to send complaints or merger notifications to the ICA, which need not be expedited because of COVID-19, are asked to delay such notifications for the next three weeks.

Changes of the ICA´s day-to-day operations (contingency)

The ICA has made a few changes to its day-to-day operations in order to protect its employees and customers, as well as securing its continuous operations. The changes are the following:

  • No meetings will be held at the ICA premises, unless absolutely necessary. Online conferences are held instead. Customers are asked to refrain from visiting the premises of the ICA in person.
  • The majority of employees are working from their homes. Customers are invited to contact them through e-mail, see here .
  • The majority of letters and documents are only delivered electronically. Customers are asked to do the same.

 

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