COVID-19 crisis: guidelines for dealing with antitrust risk

Background
Guidelines for cooperation
Guidelines for dominant companies

Background

Companies in a wide range of industries are facing major challenges due to the COVID-19 crisis. Such challenges include strongly increased or decreased demand, possible supply chain bottlenecks and even supply shortages.

Although the situation is exceptional, antitrust rules still apply. The only exceptions are if the government and authorities order measures to combat the COVID-19 crisis that restrict competition.

This means that companies must continue to comply with antitrust law requirements regarding agreements between competitors, suppliers, dealers and customers.

However, this can be particularly challenging during the COVID-19 crisis, as there is a need for companies to cooperate more closely with other market participants and change their market behaviour.

To mitigate the risk under antitrust law, cooperating and dominant companies should comply with the following guidelines.

Guidelines for cooperation

During the COVID-19 crisis, various types of cooperation may raise antitrust concerns – in particular:

• cooperation to develop a vaccine;
• an agreement among competitors to jointly coordinate supplies;
• joint capacity planning to meet increased demand; and
• exchange of internal communication regarding the management of the crisis.

Whether a form of cooperation is permissible under antitrust law must be assessed on a case-by-case basis; however, the following basic guidelines apply.

Cooperation between competitors that leads to so-called 'hardcore agreements' and cannot be justified by economic efficiency reasons can still be penalised, including:

• price fixing agreements (direct or indirect);
• agreements on the allocation of markets (by territory or business partner); and
• agreements on the limitation of quantities (production, delivery or purchase).

Cooperation between companies at different market levels, such as between manufacturers and distributors, which leads to resale price maintenance or absolute territorial protection can also be penalised as 'hardcore agreements'. This can be the case when, for example, manufacturers and their distribution partners control and coordinate supplies for certain countries.

Other types of agreement concluded in conjunction with cooperation agreements can also be problematic from an antitrust law perspective if they "significantly restrict competition". A possible example is an agreement on the coordination of supplies.

In addition, the exchange of non-public information, while not necessarily subject to penalties in every case, is problematic from an antitrust law perspective. This applies in particular to information on prices, territories, products or quantities.

The exchange of strategic data is more problematic than the exchange of other data. This includes, for example, prices (eg, actual prices, discounts, increases, decreases, reductions and rebates), customer lists, production costs, quantities, turnovers, sales, capacities, qualities, marketing plans, risks, investments, technologies or R&D programmes and their results.

Individualised data is more sensitive than aggregated data, where the recognition of individualised company level information is sufficiently difficult.

Further criteria that are considered in the assessment are the age of the data, the frequency of exchange and the market coverage of the companies involved.

These assessment criteria must be considered prior to any information exchange. If an exchange of strategic information is absolutely necessary to overcome the crisis, it must be clarified on a case-by-case basis whether such an exchange is exceptionally justified. For example, an exchange of information on capacities would be conceivable if the increased demand can no longer be met by the company alone. Justification is also conceivable in the case of an exchange of research results for the faster development of a vaccine.

Guidelines for dominant companies

Dominant companies have a special responsibility not to further weaken competition that is already weakened by their market position. This is especially true during the COVID-19 crisis.

Even if the extraordinary situation forces dominant companies to unilaterally change their market behaviour, they should first check the conformity of such changes with antitrust laws.

This applies in particular in the following cases:

• the enforcement of price increases;
• applying different prices or terms of business to comparable customers;
• a refusal to supply; and
• the extraordinary termination of existing supply contracts.

Further, the COVID-19 crisis could lead to a concentration of the markets, from which market dominance could result. In this case, the market behaviour's compliance with antitrust law must also be carefully examined.

Despite the COVID-19 crisis, if dominant companies contravene the rules of conduct under the Cartel Act, they may be threatened with penalties.

For more information please contact Marcel Meinhardt, Sinem Süslü or Désirée Stebler at Lenz & Staehelin by telephone (+41 58 450 80 00) or email (marcel.meinhardt@lenzstaehelin.com, sinem.sueslue@lenzstaehelin.com or desiree.stebler@lenzstaehelin.com). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.