Anisha Chand and Soham Banerjee
The COVID-19 outbreak has caused unprecedented social and economic challenges across the globe, and the jury is still out on whether it indeed qualifies as a black swan event. Governments worldwide have adopted innovative measures with varying degrees of success to combat the spread of COVID-19 and attendant economic and social challenges.
Businesses have risen to this extraordinary occasion by embracing creative and collaborative practices. For instance, Apple and Google, arch-rivals in the tech space, have teamed up to develop a software for health authorities to trace carriers of the infection. Similarly, pharmaceutical giants Pfizer and BioNtech have joined forces to co-develop a vaccine.
This sharp surge in coordination within the industry has been largely prompted by a series of short-term reliefs granted by antitrust enforcement agencies worldwide. These temporary exemptions seek to permit specified cooperation amongst businesses, which would otherwise fall foul of antitrust laws.
For instance, the European Commission has published a framework for co-operation between enterprises in the healthcare sector to overcome critical supply shortages of medicines and medical equipment, subject to them being necessary and proportionate. Regulators in the United States, the United Kingdom, etc., have also issued similar comfort communications to facilitate necessary pro-competitive tie-ups.
Even the International Competition Network has recommended that antitrust authorities accommodate competitor collaborations to the extent permitted and engage in a transparent communication with the stakeholders.
Besides these, some jurisdictions also recognise the concept of ‘crisis cartels’, where industry players collectively find a solution to common difficulties in times of crisis. However, this is not a get-out-of-jail-free card and has been allowed sparingly.
While India’s Competition Act, 2002 does not grant any such leeway, it does immunise competitor collaborations which result in production, supply, distribution, or technological efficiencies from antitrust scrutiny under the Act.
As such, the Act is more relaxed when contrasted with legislation in other jurisdictions, and is equipped to accommodate situations where the business community or consumers face tough waters.
Arrangements between competitors (such as price fixing, market allocation, etc.) are not per se illegal under the Act — they only raise a rebuttable presumption of adverse effect on competition. Similarly, vertical agreements between enterprises operating at different levels of the supply chain and abuse of a dominance are assessed against the ‘rule of reason’ test by evaluating anti-competitive and pro-competitive effects of the conduct.
In light of the pandemic, the Competition Commission of India (CCI) too has released an advisory on April 19 acknowledging the challenges posed by the virus. The advisory recognises the necessity for certain business collaboration, and data sharing relating to stock levels, timings of operations, details of distribution network, etc. to ensure seamless supply of medical products/supplies and other essential services.
Despite the acknowledgement, the CCI, unlike its counterparts, has not outlined any clear dispensations around competitor co-ordination. Put otherwise, the advisory merely reiterates the flexible nature of the Act allowing the CCI to consider extraordinary circumstances such as COVID-19 while determining contraventions. Separately, the advisory has also cautioned the industry to not exploit the situation to contravene the Act.
It is noteworthy that despite the flexibility in the Act, the Union government in the past has not shied away from immunising classes of enterprises (like banking), or agreements (like vessel-sharing agreements) from the applicability of competition laws.
Given that the effects of the pandemic are poised to have a long-lasting impact, it may be appropriate for the CCI to formulate an extensive playbook enabling the industry to self-assess its practices and test compatibility with the Act. This roadmap could prove to be an effective advocacy tool while accomplishing multiple objectives.
For instance, it will signal the CCI’s commitment towards supporting the industry and will also empower it to set clear boundaries on what would constitute a proportionate and legitimate response to the crisis. Legal clarity will render certainty to businesses without having to wonder whether a proposed collaboration will be consistent with the scheme of the Act.
Alternatively, the CCI can design a consultation process to allow market players to pre-consult the CCI before engaging in coordinated conducts.Anisha Chand, is Partner, and Soham Banerjee, is Senior Associate, Khaitan & Co. Views are personal.