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Coping with Covid-19 - the Business Response

Competition law and Covid-19: A liberalised or stricter approach?

By Dr Dariusz Aziewicz, attorney-at-law, competition lawyer at Eversheds Sutherland Poland
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The market challenges caused by the Covid-19 pandemic have made companies look for specific solutions to protect them against market disruptions.

These solutions must comply with competition-law provisions, as competition law itself does not provide for exclusion of its application during economic crises. Hence, as a rule, despite the Covid-19 situation, competition law remains applicable. However, it is crucial to understand where the competition authorities will fight market practices even more intensely, and where they will give some leeway for market cooperation, which would be against the law under normal circumstances.

Tomasz Chrzóstny, the president of UOKiK, Poland’s competition and consumer protection office, took an active part in preparing the anti-crisis shield for business implemented by the Polish government. At the same time, the president of UOKiK continues to wield the same powers that were available to UOKiK before the outbreak. This article summarises the most important aspects of UOKiK’s current approach to market practices.    

Taking advantage of market position – stricter approach of competition law authorities

For competition law authorities it is clear that businesses may not unjustifiably use their market positions, particularly by taking advantage of the current crisis of other market players. Such activities are therefore strictly controled, constituting the front line of supervision. ‘Taking advantage of market position’ which falls foul of legal provisions, may take two forms: abuse of dominant position (subject to a fine up to 10% of turnover) and unfair use of contractual advantage (subject to a fine up to 3% of turnover). This also concerns unintended actions.

The president of UOKiK set up a special task force to monitor if there are unjustified price increases or other harmful practices on the markets. Currently UOKiK is verifying commercial practices across the FMCG sector. 

What kind of practices, in particular, should market players be aware of nowadays?

  • Excessive price increases by dominant undertakings. Dominant firms cannot charge excessive prices – that is, an amount of which is grossly detached from its value and is not objectively justified. At the end of February 2020, the president of UOKiK initiated proceedings against two pharmaceutical wholesalers who terminated contracts with hospitals, allegedly to obtain higher prices for products

  • Unjustified price increases - unfair use of contractual advantage. The president of UOKiK may punish firms in the agricultural and food sector for setting higher prices during the pandemic. Such practices may violate the ban of unfair use of the contractual advantage (a dominant position is not required here).

  • Refusal to deal by dominant undertakings. Under certain circumstances, in particular when a product is necessary for a counterparty, when it results in its exclusion from the market and when it is not objectively justified, ‘refusal to deal’ may be considered as abuse of a dominant position. Thus, during the pandemic this issue may be evaluated when a dominant firm refuses to contract with another business

  • Refusal do deal – unfair use of contractual advantage. The president of UOKiK is already conducting proceedings in the area of unfair use of contractual advantage in the food and agricultural sectors, in relation to the performance of contracts with small and medium-sized undertakings.

Relations with competitors – more liberal approach of the competition authorities?

During these times, it may be necessary for businesses to cooperate – even with their competitors – to overcome the effects of the current crisis. The competition authorities have noted this situation. On 23 March, the European Competition Network (ECN) issued a statement regarding the way that competition law would be applied during the coronavirus crisis. The ECN declared that it will not intervene against necessary and temporary measures put in place to avoid shortages (ones that ensure the supply and fair distribution of scarce products to all consumers). Also, on 8 April, the European Commission issued guidance allowing limited cooperation among businesses, for essential scarce products and services during the pandemic. The guidance foresees the possibility of issuing ‘comfort letters’ by the Commission regarding projects of cooperation with competitors and sets out criteria to assess whether temporary cooperation between competitors may be allowed. These criteria are:

  • Cooperation should be designed and objectively necessaryto increase output in the most efficient way to address or avoid a shortage of supply of essential products or services

  • Cooperation is temporary

  • Cooperation does not exceed what is strictly necessary to achieve the objectives

    The president of UOKiK has stated that he intends to accept cooperation between businesses if it ensures continuity of deliveries, providing necessary offers to consumers or counteracting the negative effects of the Covid-19 pandemic. Businesses may consult with UOKiK whether or not their activities are in line with these criteria. However, the president of UOKiK will in such cases issue only ‘positions’ and ‘individual interpretations’ – both of an informal nature - for businesses to ‘obtain a sense of security’. The president of UOKiK is not obliged by any provisions of law to assess all applications or to issue formal decisions. There are also no official proceedings (including deadlines and scope of necessary information to be provided to the authority) for considering applications. This is important as an ‘individual interpretation’ should provide businesses with legal certainty and allow them to act quickly in the current market situation. Therefore, any application must be thought through in detail before being submitted to the president of UOKiK.

Despite all this, one should keep in mind that under certain circumstances, even before the Covid-19, the competition law allowed agreements between competitors such as:

  • specialisation agreements

  • purchasing groupscommercialisation agreements – cooperation in the sale, distribution or promotion of selected products

  • product standardisation agreements

 Given the above, despite the Covid-19 situation and some indications about liberalised approach of competition law authorities to market practices, firms should pay particular attention to avoid actions that may breach competition law provisions

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