Search

LEGAL ARTICLE: THE THREAT OF ANTI-COMPETITVE PRACTICES DURING THE PANDEMIC


INTRODUCTION

The ongoing Covid – 19 Pandemic has led to a health crisis that is unparalleled, without any known cure. In addition to a threat to health and well-being, the pandemic has also drastically impacted businesses and the business practices carried on in the country. Developed countries with an abundant of resources have been struggling to keep their businesses in order. In such circumstances, for developing countries such as India, the situation has worsened further as a number of businesses are being disrupted. An unprecedented imbalance in the demand and supply of goods and services, especially those essential to address the concerns of the pandemic, has given rise to concern among the authorities regarding the legality of the practices adopted by the businesses.


REGIME UNDER COMPETITION LAW

The field of law dealing with the practices, actions and agreements of businesses adopted for their functioning is Competition Law. The chief statute in India dealing with Competition Law and laying down regulations for businesses is the Competition Act, 2002. The Act replaced the Monopolies and Restricted Trade Practices Act which was enacted earlier in 1969. All matters pertaining to Indian Competition Law will fall under the scope of the Competition Act,2002. The Competition Act, 2002 sets up provisions which prohibits any practices which are anti-competitive in nature or lead to anti-competitive effects. The Act seeks to prevent monopolies so as to ensure and encourage fair competition, and the protection of consumer interests. The protection of the right of the businesses of fair trade is to be balanced with the protection of the interests and rights of the consumers by the Act.

In order to enforce the provisions of the Act, the Act also sets up a Commission, namely the Competition Commission of India under section 7 of the Act. The Commission is a statutory body which acts as the competition regulator in the country. The Commission is the main means through which the objectives of the Competition Act can be achieved. The Commission adjudicates upon any matters wherein there is a question regarding the contravention of the Competition Act by businesses. Any party wishing to report any anti-competitive practices, a complaint in the form of ‘information/ application’ has to be filed before the Competition Commission of India. The Commission then decides whether there is a prima facie case.

In addition to the Commission, the Competition Act, 2002 also provides for an Appellate authority. Parties who are aggrieved with any order, direction or decision of the Commission may appeal to the Appellate Tribunal. The Appellate Tribunal is responsible for adjudicating the claims of the aggrieved party and passing an order accordingly.


GLOBAL APPROACH

The current status of businesses because of the Pandemic has forced authorities across the globe to reconsider their competition policies. A number of countries have been making certain relaxations some even extending as far as to provide exemptions, in order to accommodate businesses during the trying times:


European Union

The European Union had already been revisiting their competition policies since before the Pandemic. Acknowledging the hardships brought by the pandemic, the European Commission has allowed the cooperation between businesses in order to ensure the fair supply and distribution of goods and services that are essential in order to help address the concerns caused due to Covid- 19. A number of guidelines were issued by bodies under the European Union in order to address the measures required at this time of financial crisis. The Commission released the ‘Temporary Framework Communication’, wherein it allows businesses to cooperate on projects which look to addressing any shortages in goods and services in light of the pandemic. In addition to the communications released, the Commission also issued comfort letter to undertakings under various industries so as to allow the undertakings in order to allow them to take necessary measures in light of the pandemic.


United States of America

The antitrust agencies in the United States of America have been working together in order to ensure that the businesses are supported during the time of an economic downturn. The agencies are of the opinion that competition policies play a very important role in the economic development of the country, specially during times of economic crisis such as the current pandemic. Under the laws of the United States of America anti-competitive practices are liable for civil liabilities, and certain actions are also treated as crimes. However, certain relaxations were provided through the means of a joint statement by the Department of Justice and the Federal Trade Commission. The authorities through the means of the Statement have provided for measures of protection not only for the businesses but also the consumers and employees of the companies. Thus the authorities have come together to form a coherent unit to regulate business practices in accordance to the needs of the consumer while protecting business interests in the country.


  1. Australia

The chief authority in Australia dealing with competition policies is known as the Australian Competition and Consumer Commission. The Commission has laid down a number of interim measures in order to protect the interests of consumers as well as the undertakings in the country. The Commission has also taken to grant temporary authorisation to undertakings, especially those functioning under the pharmaceutical industry, so as to grant them exemptions from regulations under Competition Law. Through the authorisations the undertakings will be able to coordinate to undertaken measures suitable to fit the needs of the consumers during the pandemic. Thus, certain actions of businesses are being completely exempted from the application of competition laws to ensure appropriate actions.


Canada

The Competition Bureau of Canada is responsible for undertaking measures which benefit consumers and protect them from anti-competitive practices. While the Bureau continues to hold businesses accountable for practices such as price fixing, deceptive marketing, and others, the Bureau has allowed any of the practices of businesses which are necessary in light of the pandemic, but also only continue for a period necessary. While no drastic changes were made in Canadian Laws, the Bureau has had to adapt to the unprecedented circumstances to balance the well-being of the businesses with the interests of the consumers.


South Africa

The Minister of Trade and Industry introduced regulations in response to the economic crisis caused by the Pandemic. Measures were introduced under the African Competition Act no. 89 of 1998. Two separate provisions were introduced with two main objectives, the first one being providing an immediate exemption for undertakings in the healthcare industry so as to ensure the rapid and efficient distribution of medicines to individuals in dire need of the same. The second provision deals with setting up of unreasonable and excessive pricing. The authorities stated that any increase in pricing which is unreasonable or disproportionate to the requirement under the pandemic shall not be tolerated.


INDIAN STANCE

India being a developing country has been drastically impacted pandemic. The economy of the country has been hit severely and the businesses have struggled to remain afloat. The major concern in India is regarding formation of cartels as provided under Section 3 of the Competition Act, as well as abuse of dominant positions by undertakings under Section 4 of the Competition Act, 2002. The Competition Commission of India has therefore had to respond to the pandemic almost immediately. In April 2020 itself, the Competition Commission of India published an Advisory with the intention of providing certain relaxations to businesses so as to help them overcome the adversities as a result of the pandemic. The Advisory has provided protection to certain activities which under normal circumstances would be considered as contravention of Competition laws in the country.

These activities include certain horizontal agreements between undertakings, which while under normal circumstances would be held as illegal under section 3(3) of the Competition Act, are now required to provide essential goods and services to the consumers across the country during the pandemic. The Commission had also temporarily suspended filing of applications before the commission so as to avoid overburdening, especially during the time of the lockdown. Despite providing for certain reliefs, the Commission has continued to maintain a stringent stance against any actions which involve taking advantage of the economic downturn or are detrimental to the interest of the consumers, who have also been economically impacted as a result of the Pandemic.

However, the biggest change in the Commission can be witness by taking note of the manner in which cartels are being treated by the Commission. The Commission has always adopted the most stringent actions against cartels and have levied harsh penalties against the undertakings participating in such cartels. The Commission has displayed no tolerance towards any cartelisation by undertakings. However, the recent orders of the Commission have shown the Commission taking a more lenient approach to cartels. The Commission within the last year have found two cartels to be in contravention of the Competition Act:


Chief Materials Manager, South Eastern Railway v. Hindustan Composites Limited and Others (Reference case number 03, 2016)

In the case, the Competition Commission of India found the undertakings liable for cartelisation. The Commission held that by fixing prices in the market and rigging the bids for tenders the undertakings had acted in contravention of Section 3 of the Competition Act, 2002. However, in light of the economic downturn caused by the pandemic and the financial status of the companies, most of which are smaller companies, the Commission instead of penalising the undertakings let them off with a mere cease and desist order.


In re: Cartelisation in Industrial and Automotive Bearings (Suo Moto Case number 05 of 2017)

The Commission in the matter held the undertakings liable for contravening the provisions of the Competition Act by fixing prices. However, due to the economic strain on the companies as a result of the pandemic, the Commission relaxed its stance on cartels and let off the companies without imposing any monetary penalties.

Thus, the Competition Commission of India has had to change its stance in order to accommodate the drastic impact of the pandemic in order to maintain the objectives of competition policies in the country. A number of factors have to be taken into consideration by the Commission, including the financial health of the industry of the undertakings, the necessity of the actions, the detrimental impacts of such actions and the losses suffered by the consumers, competitors and employees of the undertakings while passing an order.



CONCLUSION

While there has been a need for relaxations of competition policies, the companies have to be aware of the difference between actions that are necessary in order to curb the negative impacts of the pandemic and taking advantage of the circumstances to their own benefit and acquiring profits. International Organisations have cautioned countries against relaxing their law, stating that only necessary actions are to be undertaken. In light of the pandemic in addition to the well-being of the companies the individual interests of the consumers are also to be protected, and any action in detriment of the consumers should not be tolerated. Thus, while the pandemic continues to persist, the competition authorities have to keep track of the changes in the economy and adapt to the dynamic nature of development and hardships in their countries.

The Competition Commission of India has to be especially sensitive to the joint measure being undertaken by the Company, as there is a constant threat to the interest of consumers as a result of coordination of competitors, especially those in the healthcare industry. However, Indian being a developing nation, the hardships of businesses, especially those with a smaller scope of operations cannot be ignored, and the economical development also has to be looked after by the Commission. For these reasons, the advisory released by the Commissions needs to be further clarifies as to remove any vagueness from the communication and ensure that strict guidelines are set up to dictate and regulated the functioning of all businesses in the country, irrespective of the industry.






REFERENCES

  1. Statutes:

  • Competition Act, 2002


  1. Advisories/ Notifications

  • Advisory to Business in Time of Covid – 19 (Competition Commission of India)

  • Temporary Framework for State Aid Measures to support the economy in the current emergency of Covid – 19 (European Union Commission)

  • Joint Antitrust Statement regarding Covid -19 (Department of Justice and Federal Trade Commission)


  1. Blogs

  • Competition Law in the time of Covid – 19

  • Covid – 19 and Competition Law concerns

  • Anti-Competitive Tendencies and Business Cooperation in Covid-19 times

  • Covid-19: Implications from an antitrust and competition law perspective

Punya Datar

3rd Year BBA LLB (Hons)

Symbiosis Law School, Pune












7 views0 comments

Recent Posts

See All

A CONCEPT OF DOUBLE JEOPARDY

Introduction Black’s law dictionary defines Double Jeopardy as: – A second prosecution after a first trial for the same offense. In India, protection against double jeopardy could be an elementary rig

FARMS ACTS 2020: FRIEND OR FOE TO FARMERS?

INTRODUCTION Indian Parliament, in the preceding year passed three bills related to agriculture and farming, together known as the Farmers Bill. The Bills include The Farmer’s Produce Trade and Commer

MAINTENANCE OF PARENTS AND SENIOR CITIZENS

Portraying your own self as one day you will be undergoing this stage “Do not regret growing older. It’s a privilege denied to many.” Indian society is proud of its diverse culture and traditions. Com