Within the first week of the confinement measures in Europe, the Hellenic Competition Commission (HCC) was one of the first EU competition authorities to announce a more lenient approach towards certain vertical agreements, as a way to address severe shortages caused in the market by the COVID-19 outbreak. This action taken by the HCC seems to have triggered equivalent initiatives by its co-enforcers in the European Competition Network (ECN). Last week, in a joint statement, ECN members announced a more lenient and flexible application of competition rules to help the markets remain competitive and overcome this crisis. The joint statement expressly provides that they “will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply”.
The COVID-19 outbreak led to an unprecedented demand for key medical supplies and other healthcare essentials. Companies found themselves in great distress trying to meet consumers’ high demand. The Greek Authority announced that during this time of crisis and in order to avoid supply shortages, it “will not take action against practices which relate to the imposition of maximum resale prices or recommended prices on supply contracts and distribution agreements”, provided that certain conditions are fulfilled.
The ECN joint statement is along the same lines. In particular, it introduced the possibility for manufacturers to set maximum prices for their products as a way to prevent unjustified price increases at the distribution level, by reference to the exceptional circumstances which require that undisrupted supply and distribution of essential goods is maintained.
However, market players should keep in mind that there is no “carte blanche” for hard-core vertical restraints, such as resale price maintenance agreements, or indeed any other anti-competitive agreement. The HCC stressed that given the circumstances, it will monitor market conduct even closer to ensure that companies are not taking advantage of the current situation. Again, the ECN joint statement follows the direction of the HCC announcement, noting that scrutiny of the behaviour of market players will remain unchanged and focus on identifying anti-competitive behaviour in sectors critical during these times.
In fact, at the end of last week, the HCC initiated an investigation in the markets for healthcare products, in particular surgical masks and disposable gloves, as well as other products such as antiseptic wipes and antiseptic solutions. The HCC sent requests for information to players at all levels of the supply chain, i.e. manufacturers, wholesalers and distributors. The investigation was the result of numerous consumer complaints and media reports regarding significant price increases and shortcomings of the products in question. The questions focus on prices (of purchase and further sale), profit margin and the rationale of any significant price increases. The scope of the investigation covers November 2019 to March 2020.
In light of the above, companies should be cautious when deciding to rely on the more lenient approach announced by the various EU competition authorities, as this is just an exceptional measure designed to address a crisis and not an open invitation to forget about competition rules. Following the ECN joint statement, and the concrete action taken by HCC, we expect to see more competition authorities launching investigations in sectors relating to the broader medical and healthcare industries as well as other industries that show signs of possibly unjustified price hikes and output restrictions as a result of the COVID-19 outbreak.
For a version of this blog post in Greek, please click here.