As the Covid-19 emergency escalates, governments and businesses are dealing with a host of unprecedented challenges. The key message from competition regulators around the world, including the UK Competition and Markets Authority ("CMA"), is that whilst competition law is very much still in force, it should not act as a barrier to steps which are necessary to alleviate urgent situations relating to Covid-19. In this connection, on 27 March 2020, the UK government made three temporary exclusion orders under the UK Competition Act 1998 ("CA98"), in relation to cooperation agreements between competing groceries providers, health services providers in England, and the Isle of Wight ferry routes, and a further exclusion order regarding health services on Wales on 20 April, and also announced an exclusion in relation to the dairy sector on 17 April.
| what you need to know - key takeaways |
- Competition laws around the world remain in force, and regulators have stated they will be carefully monitoring conduct to prevent businesses taking advantage of the situation to harm customers.
- However, in some jurisdictions, including the UK, temporary exclusions or authorisations can be granted permitting specific types of conduct that would typically be prohibited.
- These exclusions differ from conduct which could potentially be exempt from the CA98 because it improves production or distribution, or promotes technical or economic progress. The CMA has issued separate guidance on exemptions under the CA98, however the guidance does not bind other regulators (including the European Commission) or protect businesses from third party claims for damages if an incorrect self-assessment is carried out.
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As mentioned above, whilst antitrust law is very much still in force, there are some exclusions under UK competition law. In particular, the CA98 provides that the government (specifically, the relevant Secretary of State), can issue an order disapplying prohibitions to specified agreements or conduct if "there are exceptional and compelling reasons of public policy" to do so (Schedule 3(7)).
In this connection, the UK government has issued five exclusions to specific sectors, relating to particular types of conduct. These are summarised in the table below:
| Exclusion order |
conduct excluded from chapter I CA 98 prohibition |
regarding agreements between |
aim/consumer benefit |
|
Health Services for Patients in England Exclusion Order (SI 2020/368)
Health Services for Patients in Wales Exclusion Order 2020 (SI 2020/435)
|
√ Information sharing in relation to capacity
√ Staff sharing and deployment
√ Joint purchasing
√ Sharing facilities
√ Division of activities within particular geographic areas
x But not information sharing on prices and costs
|
Independent healthcare providers and National Health Service bodies |
To assist the NHS in addressing the effects or likely effects of Covid-19 on the provision of health services to patients (i.e. to alleviate excess demand/ shortages) |
Groceries Exclusion Order (SI 2020/369)
|
√ Coordination about quantities of groceries
√ Staff deployment
√ Range of groceries
√ Stock levels
√ Store opening hours
√ To supply vulnerable customers
x But not information sharing on prices and costs
|
Groceries suppliers |
Part of a package of measures to allow supermarkets to work together to feed the nation during the outbreak (i.e. to alleviate excess demand/ shortages)
|
|
√ Sharing information on staff availability
√ Storage capacity and vehicles
√ Coordination of staff deployment
x But not information sharing on prices and costs
|
Logistic service providers
|
| Solent Maritime Crossings Exclusion Order (SI 2020/370) |
√ Co-ordination on timetables
√ Routes
√ Deployment of staff and vessels
√ To supply vulnerable customers
x But not information sharing on prices and costs
|
Ferry companies operating services Isle of Wight and UK mainland |
To ensure security of supply to island residents, who are highly dependent on the ferry services (i.e. to alleviate excess supply/ capacity) |
| Dairy Exclusion Order (SI 2020/481) |
√ Sharing labour
√ Sharing facilities
√ Co-ordination to reduce production
√ Co-ordination regarding processing and storage issues
√ Sharing information on surpluses, stock, capacity, demand, milk disposal best practice
√ Co-ordination to identify hidden capacity for processing milk into other dairy products such as cheese and butter
x But not information sharing on prices and costs
|
Dairy farmers and producers |
To enable collaboration between dairy farmers and producers to avoid surplus milk going to waste (i.e. to alleviate excess supply/ capacity) |
|
√ Sharing labour
√ Sharing facilities
√ Sharing information on vehicle capacity and the size, type or destination of delivery vehicles
x But not information sharing on prices and costs
|
Logistic service providers |
An exclusion of this type is different from a potential exemption (under section 9 CA98) from the prohibition on agreements restrictive of competition. For example:
- Exclusions are granted by the Secretary of State, whereas businesses are required to self-assess whether their conduct falls within the section 9 exemption. Exemptions will only apply if the section 9 cumulative criteria is met. In particular, if conduct / a restriction under Chapter I:
- contributes to improving production or distribution, or promotes technical or economic progress;
- allows consumers a fair share of the resulting benefit;
- is indispensable to attain the objectives; and
- does not result in the possibility of eliminating competition in a substantial part of the products / services in question.
- Exemptions are technically only applicable to the Chapter I prohibition against anticompetitive agreements. Exclusion orders, however, can also be applied to the Chapter II prohibition against abuse of dominance (although the March 2020 orders only disapply Chapter I).
- Whilst UK exclusions are capable of disapplying Chapter I and II of the Competition Act 1998, they do not disapply the EU equivalents of Article 101 and 102 TFEU. As a general rule, there are therefore no parallel exclusions for conduct which has an effect on trade between EU Member States (but see our article on the European Commission's exceptional derogation regarding milk, flowers and potatoes). In such Article 101 cases, individual self-assessment as to the application of the individual exemption criteria under Article 101(3) TFEU is required.
Businesses are required to self-assess whether their conduct falls within the section 9 exemption. To assist this assessment, the CMA issued guidance on 25 March 2020 setting out its approach to business cooperation in response to Covid-19, and in particular how the CMA intends to apply the legal criteria for exemption in the specific circumstances of this crisis. While this guidance is helpful and should provide businesses with some comfort, it is noted that this does not bind other regulators (including the European Commission), or protect parties from third party damages claims if an incorrect self-assessment is carried out.
For further details on exclusions and exemption under UK competition law, and on the CMA's exemption guidance of 25 March 2020, see our briefing on the Impact of Covid-19: UK Competition law, potential exclusions and exemption.
With thanks to Danica Barley, Senior Associate for her contribution.
