The Corona crisis does not stop at antitrust law. In a joint statement dated 23 March 2020, the European Competition Network (“ECN”), which encompasses the national competition authorities in the EU member states and the European Commission, has acknowledged “that this extraordinary situation may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers.” In some countries such as Norway, temporary exemptions from competition law rules have already been put in place for certain sectors while in most countries the existing rules still apply. In Austria, the Federal Act on Accompanying Measures for COVID-19 in the Judiciary (as part of the 2nd COVID-19 Act) that entered into force on 23 March 2020 will impact the deadlines in merger filing procedures (see below).
In view of the Corona crisis, companies must ask themselves what freedoms the antitrust law gives them to improve their supply and reduce costs. In the following, we summarise the opportunities and risks under competition law arising from the crisis:
1. Ban on cartels
Under the current rules, restrictions of competition which are necessary to achieve cost reductions or an improvement in supply can be exempted from the ban on cartels. An exchange of information in order to reduce costs and improve supply can equally be exempted. Additionally, the Corona crisis could also lead to increased supply relationships between competitors in order to avoid short-term supply bottlenecks.
Whether restrictions of competition to mitigate the effects of the Corona crisis are exempted from the ban on cartels due to the efficiencies generated has to be decided independently by each company, if necessary after obtaining legal advice and/or coordination with the responsible antitrust authorities. In this regard, the Austrian Federal Competition Authority (“FCA”) emphasizes in its latest statement its availability for inquiries regarding the interpretation of competition law.
Furthermore, the ECN has clarified in its joint statement that it will not actively intervene against necessary and temporary measures put in place by companies cooperating in order to avoid a shortage of supply. In the view of the ECN, such measures are unlikely to be problematic under antitrust rules considering the current circumstances as they either do not restrict competition or may be exempt as they generate efficiencies (allowing consumers a fair share of the resulting benefit) that most likely outweigh any such restrictions of competition. In the view of the FCA, this in particular applies for temporary measures until 13 April 2020 (i.e. the time until which the curfew is currently in place in Austria).
Classic restrictions of competition, such as price fixing, territorial and customer allocation and agreements to artificially limit supplies will of course remain prohibited. In the current situation, the FCA has highlighted that it will prioritize complaints about health products such as face masks, sanitizing gels, protective clothing, etc., as it is of utmost importance to ensure that such products remain available at competitive prices. The ECN has stressed that its members will not hesitate to take action against companies taking advantage of the current situation by cartelising or abusing their dominant position. In this context, the ECN has also emphasized in its joint statement that producers are entitled to set maximum prices to limit unjustified price increases at the distribution level.
2. Abuse of market power
In the case of supply shortages in times of crisis, a dominant supplier must supply the affected customers in a fair and non-discriminatory basis. In the event of unjustified delivery stops, affected customers can defend themselves by seeking an interim injunction against the dominant supplier. However, it should be noted that the requirements for a successful injunction are high.
Furthermore, dominant suppliers are not allowed to demand unreasonably high prices or other disadvantageous conditions from their customers if these prices/conditions deviate from those that would likely prevail in case of effective competition.
In the long run, the Corona crisis may increase the market shares of the surviving companies, bringing them within the scope of the prohibition of abuse. Moreover, short-term shifts in supply and demand as a result of the crisis may also lead to a situation where companies temporarily gain a dominant market position due to the changed market conditions. In this regard, it should be noted that limited transport capacity, higher transport costs and border closures temporarily might lead to the definition of narrower geographic markets, at least for the limited period of time where such extraordinary conditions prevail.
3. Merger control
The Corona crisis also impacts the timeframe for transactions requiring merger control clearance in Austria: Pursuant to Section 6 of the 2nd COVID-19 Act, the four-week review period for the submission of a request for the initiation of an in-depth examination of the merger by the Cartel Court (phase II) by the FCA and the Federal Cartel Prosecutor (together the “Official Parties”) for all merger notifications received by the FCA between 23 March 2020 and 30 April 2020 will uniformly start running from 1 May 2020. The same applies to the five / six-month period for rendering a decision under Section 14 Cartel Act for all applications for in-depth examination that are currently pending before the Cartel Court or made until (and including) 30 April 2020.
The amendment could potentially lead to considerable delays for all Austrian mergers that are notified between 23 March 2020 and 30 April 2020 and thus should be taken into account when establishing timetables for transactions.
However, we would expect that the Official Parties will increasingly make use of the possibility to waive their right to initiate an in-depth examination of a merger before the expiry of the prolonged review period under Section 11 (4) Cartel Act in case of unproblematic transactions caught by the new provisions in order to still allow a timely and efficient clearance of such matters. The FCA has also emphasized in its latest statement that the option to request a waiver remains possible for mergers notified after 23 March 2020. It should be noted that the earliest such a waiver will normally be granted is after the expiry of the two weeks period for third-party comments after submission of a filing.
Due to the closure of the offices of the FCA to the public, also the personal submission of Austrian merger filings is currently not possible until further notice and the FCA does not recommend the submission of documents by postal services. However, after the successful completion of a trial run, the FCA now allows the electronic submission of merger notifications via the WEB-ERV system.
Please note that similar rules suspending/prolonging the deadlines for merger control reviews have been put in place in a number of other jurisdictions. In some jurisdictions, while the review deadlines have not formally been suspended or prolonged, competition authorities such as the European Commission have “encouraged” companies to delay merger notifications originally planned until further notice, where possible.