Introduction

Life in a time of COVID-19 has seen the unprecedented closure of international borders, massive societal and trade disruptions and heightened market turmoil and uncertainty. To control the spread of the COVID-19 virus and mitigate against risks of infection, we are continuously reminded to practice good personal hygiene and observe social responsibility including adopting social distancing measures. From a competition compliance perspective, the same advice should apply to businesses. Despite the challenges arising from COVID-19, businesses should keep their social distance from competitors to ensure competition remains ‘clean’ and ‘hygienic’.

“Unhygienic” Conduct

A key step to keeping competition “hygienic” lies in the ability to identify the types of “unhygienic” conduct:

Crisis Cartels

Pronounced downturns in the economy have been known to foster the formation of cartels as businesses strive to find ways to survive the crisis. More often than not, accepted business norms and regulations are neglected if not forgotten entirely as businesses struggle with their very own survival amidst adverse economic conditions.

An illustration of such cartel tendencies was seen amongst the fresh chicken distributors in Singapore following the outbreak of the Avian Flu in 2007. There agreements to coordinate price increments and agreements not to compete for each other’s customer were implemented and had lasted until 2014 when the Competition and Consumer Commission of Singapore (CCCS) intervened. Similarly, following the mad cow disease outbreak in October 2006, six French federations were found to have violated competition law arising from agreements to fix minimum purchase price for certain categories of cattle and the suspension of importation of beef into France.

Notwithstanding the underlying intentions, objectives and rationale for such conduct (which could well lie in the basic quest for survival and not driven by profiteering), it is evident that in times of crisis, competitors may be attracted to work together and this in turn, could give rise to antitrust violations. The oft-quoted position therefore remains, businesses must maintain sufficient distance from their competitors and continue to act independently during times of crisis.

Admittedly, there are exceptions, for example, in respect of the supply of essential goods and services where such exceptions (as elaborated below) are sanctioned by the relevant authorities and not implemented unilaterally.

Collaborations

Under competition laws, businesses are required to act independently so as to compete effectively in the market. Cooperation, particularly those relating to the sharing of commercially sensitive information (such as pricing and capacity) and coordination of pricing, supply, marketing and business strategies, would generally give rise to a violation of competition laws and consequently lead to the prospect of significant financial penalties (and criminal sanctions in certain countries). Such financial penalties in an already challenging market condition could indeed be the death keel for the businesses in question.

Given the unprecedented crisis arising from COVID-19, competition authorities have intervened to respond to the evolving crisis and for the public benefit. For example, the following competition authorities have provided guidance on “excepted” and specific collaborations to ensure that essential facilities and products (such as food, medical equipment, and personal protection equipment and sanitation products/equipment) remain available to the public.

Whilst such exemptions remain in place, businesses must take care to remain within the scope of applicable exemptions/guidance and not to exploit the crisis as a ‘cover’ for non-essential collusion, such as the exchange of commercially sensitive information or denying rivals access to supplies or services, amongst other anti-competitive behaviour. It is important to note that there has not been any blanket exemptions on any industries or business sectors notwithstanding COVID-19, including for the healthcare sector.

In lieu of applicable exemptions or guidance, businesses and trade associations are reminded that competition law continues to apply. Whilst trade association meetings may deal with topics like technological difficulties, cybersecurity issues, insurance, customer needs, and other issues faced in the wake of the current COVID-19 crisis, parties should be alive to the permitted boundaries required by competition compliance and take necessary precautions when meeting or discussing implications arising from the crisis at an industry-wide level.

Exploitative Conduct

Like cartels, exploitative and abusive conduct such as excessive pricing / “price gouging” or deceptive and misleading practices such as false and misleading claims, may come under the scrutiny of competition regulators and/or consumer protection bodies. To that extent, several regulators (for example, Italy, Poland, Thailand, Brazil and Romania) have already commenced investigations into alleged excessive pricing practices and misleading marketing practices in respect of sanitation products and personal protective equipment.

Under competition law, companies which are dominant (this may vary depending on the jurisdiction, for example, having a market share of 60% and above in Singapore would render a company dominant), could infringe competition law if there is no objective justification to charging excessive prices including in times of crisis. Other competition law concepts such as tacit collusion and price signalling may also be considered by competition authorities where a trend of inexplicable high prices is observed in the market.

In a multi-pronged approach, regulators have also sought the assistance of e-commerce platforms in tackling excessive pricing by resellers on their marketplace platforms. To that effect, e-commerce platforms in Singapore have committed to cooperate with the authorities to remove such listings if necessary. Whilst online marketplaces generally do not regulate prices, they have taken steps to ensure that sellers do not hike prices of products used as preventative measures against the COVID-19 crisis to “unreasonable” levels.

E-commerce platforms may also have the additional burden of ensuring that their algorithms do not exploit the crisis. For example, an online retail platform recently announced that it would temporarily prioritise certain high-demand products (e.g. household products and medical supplies) for storage and shipping because of the COVID-19 outbreak. The prioritisation by the platform was reported to have resulted in an “unintended variation” to its algorithm, causing certain of its product offerings to be featured over those from third party sellers and vendors. Whilst unintentional, such pre-COVID-19 algorithms may need to be monitored and tweaked to avoid allegations of exploitation during the crisis.

A more novel form of exploitative conduct may be exemplified in anti-competitive and disparaging public campaigns launched by rival companies with the objective of undermining consumer confidence in a competitor. For example, rumours about a rival’s inability to survive the crisis due to cash flow issues and its ineligibility for a bailout from the government, may be investigated by competition authorities if it is found to be false and aimed at removing a competitor from the market. It is clear from the regulators’ perspective, the need to ensure a thriving and competitive market landscape post-COVID-19 remains even in an unprecedented crisis.

“Health Screening” – Practical Tips For Businesses

In light of the evolving COVID-19 crisis, it is important for businesses to avoid “unhygienic” conduct.

Where in doubt, the following “health” screening toolkit should be remembered:

• Do remember that unless officially and specifically exempted, competition law applies throughout the crisis and businesses are expected to comply with such laws. Do note that competition regulators are not time barred from investigating problematic conduct.
• Do ensure pricing decisions are determined unilaterally and are justifiable in light of the circumstances.
• Do consult competition regulators or seek prior legal advice if any contemplated collaboration/cooperation involves direct competitors of your business and/or involves all of the major suppliers of the product or service, to reduce the risk of antitrust violations.
• Do limit cooperation to what is strictly necessary, permitted and/or justifiable from a regulatory standpoint. If in doubt, seek legal advice.
• Do implement and observe compliance protocols in trade association discussions and meetings (which will likely increase in frequency as businesses try to work together amidst the crisis). This includes: (1) making an antitrust/competition law compliance statement before the meeting begins and requiring all participants to agree to observe and comply with all antitrust/competition laws; (2) having an antitrust/competition law counsel present at the meeting or someone ensure that the conversation never discloses any competitively sensitive information or includes any competitively sensitive topics or subjects; and (3) circulating an agenda in advance of the meeting listing the topics to be discussed (to minimise the risk of having discussions that veer on the anti-competitive angle).
• Do not engage in price coordination, the sharing of commercially sensitive information or coordinated capacity/supply building or marketing strategies with competitors without prior consultation with competition regulators or seeking legal advice.
• Do not engage or attempt to engage in crisis cartels. Any communications relating to such attempts to engage should be met with public distancing measures and accompanied by clear and written objections. Such attempts should also be reported to the relevant competition authority.
• Do not pursue mergers or joint ventures with a direct competitor (even a failing one) without seeking prior legal advice or obtaining clearance from competition regulators.
• Do not engage in exploitative and abusive behaviour unless it is absolutely necessary and economically justifiable.

Conclusion

Just as we are encouraged to maintain our personal hygiene in these challenging times, businesses are equally encouraged to maintain their competition hygiene even as they seek to adapt to these unprecedented challenges. The cost of failing to do so will have potentially severe consequences and in certain instances, could be detrimental to a business’ survival after the crisis.

Dentons Rodyk thanks and acknowledges Senior Associate Nicole Teo for her contributions to this article.