Competition Commission of India issues an advisory to businesses in times of COVID-19

In a welcome move, on 19 April 2020 the Competition Commission of India (CCI), issued an Advisory to businesses operating in the times of COVID-19 (Advisory). Taking cognizance of the disruption in supply chains caused by the pandemic, especially in healthcare and essential products/ services, the CCI acknowledged that there is a legitimate reason for businesses to collaborate and coordinate to ensure supply and fair distribution of products/ services including medical and healthcare products such as ventilators, face masks, gloves, vaccines, etc. and essential commodities. Such collaboration includes sharing data on stock levels, timings of operations, sharing distribution networks, transport logistics, research and development, production, etc.

Without committing to any specific relaxations or providing additional safe harbour, the CCI has stressed upon the fact that the Competition Act, 2002 (Act) already has in-built safeguards to protect businesses from sanctions for certain types of collaborations, such as:

  • Joint ventures resulting in increased efficiencies in the production and distribution of products/ services in the market[1].

  • While doing the competition assessment, the CCI would consider whether a particular conduct/ collaboration leads to (i) an increase in efficiencies in production and distribution of products/ services in the market (ii) benefits the consumer and/ or (iii) promotes technical, scientific and economic development[2].

The CCI, however, noted that it would consider the constraints of the current prevailing circumstances while assessing anti-competitive behaviour, as long as the measures taken by businesses are restricted to only what is necessary and proportionate to cope with the crisis. Further, it warned businesses that crisis should not become a “cover” for non-essential collaborations to obtain economic benefits.

Given that the Advisory lacks specifics, we set out some practical considerations for businesses in order to avoid violating competition law:

Do’s

  1. Collaborations: Ensure that the joint ventures/ collaborations are in fact efficiency-enhancing and that the benefits outweigh the harm to customers. For example, R&D collaborations with the objective of treating COVID-19 patients.
  2. Necessary and proportionate conduct: Be careful to limit the collaboration in terms of time and / or scope only to what is required to cope with COVID-19 pandemic.
  3. Documentation: Ensure that all collaboration activities are properly recorded and documented to safeguard the interest of the businesses as well as decision-makers if the conduct is flagged for assessment by the CCI.
  4. Sound justifications Ensure that all activities that may be viewed as “anti-competitive” by the CCI are backed by sound economic justifications and social motives during the current crisis.
  5. Call from Government: Companies to specifically consider competition law when being asked by the Government to collaborate with competitors or when approached by competitors to collaborate – even if these are to meet public health objectives or for providing essential services.
  6. Legal advice: Take legal advice if any kind of collaboration with competitors is contemplated or in case of any deviation from existing business practices.

Don’ts

  1. Anti-competitive behaviour: Avoiding any activities with competitors which may lead to (i) fixing prices, (ii) restricting output or technical development, (iii) sharing markets or customers, or (iv) rigging bids.
  2. Dominant businesses: Companies in a position of market power or dominance, even if temporary, need to be alert to their special responsibilities while dealing with customers and suppliers. For example, price gouging, illegal tying/ bundling and refusal to deal, etc.
  3. Benefit from the pandemic: Refrain from exploiting the current situation for unscrupulous economic benefits.

(Source: CCI Advisory dated 19 April 2020)

[1] Proviso to Section 3(3) of the Act.
[2] Factors mentioned under Section 19(3) of the Act.

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