Competition Law Guidance for coordination amongst businesses in the age of COVID 19 disruptions
Escalating disruptions in the market and distress caused by COVID-19has necessitatedcoordination amongst businesses.Such coordination may be required to ensure continued supply and fair distribution of goods and services including critical healthcare products(viz. hand sanitizers, personal protective equipment (PPE), face masks) and essential services. Amongst other activities, businesses are likely to coordinate on activities such as: sharing information on stock and/or capacity levels; sharing of production facilities, distribution network and infrastructure, transport logistics, research and development (R&D) to develop COVID vaccine etc.
Though coordination amongst businesses appears to be the pragmatic response to current challenges posed by COVID-19 pandemic, businesses must remember that the Competition Act, 2002 (“the Act”) continues to apply during these extraordinary times unless it’sapplication is exempted specifically by the Government.
Like other competition law regimes,Competition Commission of India (“CCI”)has issued an “Advisory to Businesses in Time of COVID-19” (“Advisory”)on 19th April 2020 with an aim to provide guidance to businesses in the time of COVID-19 pandemic.
At the outset, it may be noted that Advisory is meant to provide guidance to businesses intending to coordinate their activities during COVID-19 in order to increase production, optimise supply and ensure availability of goods and services particularly in relation to critical healthcare, medical products and essential services like ventilators, face masks, gloves, hand sanitizers, vaccines, logistics, testing etc.
In particular, Advisory explains the criteria that the CCI will follow in assessing coordinated activities by businesses from the lens of competition rules as contained in the Act. Advisory also provides guidance that businesses need to ensure that coordinated conduct or arrangement result in increasing efficiencies which may be in terms of efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. That said, Advisory also cautions businesses not to take advantage of COVID-19 to contravene any of the provisions of the Act. Last but not the least, Advisory provides guidance to businesses by stating that “…. the Act has in-built safeguards to protect businesses from sanctions for certain coordinated conduct,provided such arrangements, as mentioned above, result in increasing efficiencies. These provisions will inform the decisions of the Commission.” In- built safeguards and provisions of the Act that will inform the decisions of CCI for assessing the coordinated activities of businesses will be discussedhereinafter in detail below.