Competition law: still singin’ in the pandemic. Part IV. 13/4 - 26/4 2020.

We bring you part four of our information service covering important developments in competition law. This time we summarize the two weeks from 13 April to 26 April 2020.

State aid

The European Commission (EC) continues to be active in particular. Since our last issue, it has approved a total of 37 State aid schemes. From the beginning of the coronavirus crisis to 26 April 2020, the EC approved as many as 88 State aid schemes (see the overview published by the EC).

We have also seen the approval of the first Czech and Slovak State aids. The EC gave the green light to a Czech aid scheme that is to support investments by small and medium-sized enterprises in production relevant to the fight against the coronavirus outbreak. The scheme is to cover 50% of the costs companies have to bear to create production capacities to manufacture coronavirus-relevant products (medicinal products such as vaccines, hospital and medical equipment including ventilators, protective clothing and equipment as well as diagnostic tools). The Slovak authorities may now finance a part of the wage costs (including employers’ social security contributions) of undertakings that would otherwise have laid off personnel due to the current pandemic. The Slovak authorities may also compensate self-employed persons and employers affected by lower revenues due to the pandemic or by the imposed restrictions of their operations.

The EC has also positively responded to several Member States’ requirements and will soon allow them to grant subordinated debt to undertakings affected by COVID-19 impacts.

We might expect that the massive influx of money into some sectors will also face criticism. Ryanair is threatening to challenge subsidies provided by some Member States to airlines on the grounds that they discriminate against companies without a registered office in the given jurisdiction. This may delay the subsidy payments that are designed to help in particular big airlines such as Air France-KLM, Lufthansa, SAS and Alitalia. Carles Puigdemont, a Catalan MEP, is requesting the EC to review the State aid provided by the Spanish government to audio-visual service providers of digital terrestrial broadcasting, which allegedly gives preferential treatment to state-wide providers as opposed to regional ones.

Permitted cooperation between competitors in the times of COVID-19

Since our last issue, further examples of cooperation have been approved or tolerated by the competition authorities with reference to the current situation.

The Italian competition authority published guidelines for temporary cooperation between competitors wanting to address the challenges of the current crisis and provided an email address for raising questions. The goal of the aid scheme is to support cooperation related in particular to the lack of basic products, services and their transportation, especially in the pharmaceutical, medical and food industries.

The German competition authority approved cooperation between two travel agencies (TUI and DER Touristik) establishing a joint insurance fund as TUI would not be able to operate on the market without sufficient coverage. In response to the pandemic and the agencies’ related loss of customers, their current providers have stopped offering their coverage plans. 

In addition, insurance companies have been allowed to enter into mutual agreements during the pandemic in the Netherlands to secure financial support (payments) to providers of healthcare, which is not directly connected with COVID-19 (e.g. midwives and physiotherapists). These healthcare professions have less work due to the pandemic. The financial support may in particular take the form of advance payments.

In our view, the most interesting substantive implication of COVID-19 pandemic in the application of competition law is the provisional clearance of Amazon’s investment into Deliveroo in the United Kingdom. The assessment of the merger, which originally aimed at the competition authority’s intervention (phase II was initiated), resulted in a provisional clearance as the situation changed amidst the pandemic and Deliveroo, otherwise a successful online restaurant platform, allegedly got into difficulty.

However, Margarethe Vestager, Commissioner for Competition, warned undertakings not to jump to conclusions that otherwise problematic mergers will be cleared during the crisis: “Crises pass but mergers remain.” Even in these times of uncertainty, she does not think that standard rules should be loosened up. This is a predictable statement as we mentioned last week.

Investigations into anti-competitive conduct related to COVID-19

Many competition authorities keep watching out for abuses of the current situation.

The Greek competition authority focused on any possible anti-competitive practices in vital sectors of the economy, such as health products and food. As part of its monitoring, it carried out several on-site inspections at food producers active particularly in the field of citrus products.

Since the crisis began, the UK’s CMA has received some 21,000 complaints related to the COVID-19 pandemic and contacted 187 undertakings in this respect. The authority’s records show that the price of the products affected by the pandemic has rocketed by about 130% on average, and the price of hand disinfectants by a staggering rate of 367%. That is why the CMA recommends that a provisional price regulation should be introduced.

The Spanish competition authority has so far received 300 COVID-19-related complaints and requests to assess cooperation, half of which concern the financial sector.

Bulgaria is looking into possible coordination of retail fuel prices. German traders have complained about the Amazon platform in relation to lacking transportation capacities, saying that some supplies of goods get preferential treatment, while some other supplies take more time to dispatch.

The impacts of COVID-19 on the enforcement of competition law

Within the pending Articles 101 and 102 TFEU investigations, the EC has temporarily suspended the delivery of some more extensive official letters. Unless it is necessary, the EC does not send larger requests for information and does not deliver decisions and statements of objections. One of the reasons provided by the EC is that it reflects the difficulty some undertakings are facing, and does not wish to put yet more burden on them. Under the current circumstances, it must set priorities, and in contrast to approving State aid and mergers, it is not bound by any time limits in this area.

The Slovak anti-monopoly watchdog published a new prioritising policy. The criteria for assessing the severity of inspected practices newly cover abuses of the emergency situation related to the COVID-19 spread. The authority still includes the automotive industry, now under considerable strain, among areas prioritised for enforcing competition law, but now also wants to focus on e-commerce, digital platforms, IT and healthcare.

The CMA issued instructions on merger assessments during the pandemic, addressing mostly procedural matters but also touching on substantive assessment. Above all, the authority stressed that COVID-19 did not mean that assessment standards should be loosened up. Its merger control analyses focus on the assessment of impacts in the long term, i.e. in the post-pandemic time. The CMA also expects that there will be more companies submitting “failing firm” claims, but this fact does not change anything in the application of the rules.

COVID-19 has affected merger control in other countries as well. The Hungarian government took an unprecedented step when it exempted acquisitions of some undertakings by state-owned funds or private equity funds from the notification duty provided that they fall within the COVID-19 capital scheme. Denmark again extended the time limits for merger approvals until 10 May 2020. The Lithuanian competition authority cautioned against delays during merger reviews.

However, COVID-19 has not brought the regular agenda to a halt

The Slovak competition authority initiated administrative proceedings over an alleged abuse of a dominant position by an undertaking that imposes terms and conditions on its customers in an industrial park to buy all of its power supplies, without being allowed to produce power themselves or to buy it from other undertakings.

The German competition authority discontinued proceedings on the distribution of rights to broadcast the Champions League in the 2018-2021 seasons between Sky and DAZN. According to the authority, new players are entering the market, increasing its dynamics, as could be seen in the last auction. Under the current circumstances, the watchdog does not consider the cooperation a concern.

The Portuguese competition authority published a final report on the minimum duration of contracts between telecommunication operators and consumers. It identified cases in which the term of the contract should not be automatically renewed (e.g. pre-paid premium channels, change in free minutes/data, including another service in a package). Such “automatic” renewal of the contracts reduces the number of customers available for competitors, thus foreclosing market entry for them.

You already know from us that some competition authorities asked undertakings to think about the timing of notifying their mergers. The development of notification figures differs from State to State – while France has experienced a sharp decline, the situation remains more or less the same in Germany.

The EC approved the merger of two pharmaceutical companies: Mylan may close the takeover of the Upjohn division from Pfizer. Upjohn produces off-patent branded and generic established medicines. The merger is subject to a condition that Mylan’s business producing some generic medicines be diverted to one or more purchasers.

The Czech competition authority approved in phase II, but without any obligations, the takeover of CK Fischer, a travel agency, by the REWE Group, which is represented in the given market though Exim Tours. The Czech authority also published the full wording of its decision approving the Kofola/Ondrá?ovka merger in soft drinks area.

The CMA gave the green light to the merger of Just Eat, a food delivery firm, with Takeaway.com, a firm active in the same field in other 11 countries (the Netherlands and Germany, among others). The authority reviewed whether Takeaway.com would not enter the UK’s market, becoming a competitor of Just Eat.