Economy

Competitor collaborations on Covid response will not attract sanctions, says CCI

KR Srivats New Delhi | Updated on April 20, 2020

The Competition Act, 2002, has in-built safeguards to protect businesses from sanctions for certain coordinated conduct, provided such arrangements result in increasing efficiencies   -  Getty Images/iStockphoto

Law has in-built clauses to allow concerted actions in special circumstances, says regulator

The Competition Commission of India (CCI) has sought to assure businesses that any collaborative arrangements between competitors to handle Covid-19 will not readily attract sanctions under the anti-trust laws.

The Competition Act, 2002, has in-built safeguards to protect businesses from sanctions for certain coordinated conduct, provided such arrangements result in increasing efficiencies, the CCI said in an advisory.

“These provisions will inform the decisions of the Commission. However, only such conduct of businesses which is necessary and proportionate to address concerns arising from Covid-19 will be considered,” the advisory said.

At the same time, the CCI has cautioned businesses not to take advantage of Covid-19 to contravene any of the provisions of the Competition Act.

The Act prohibits conduct that causes, or is likely to cause, an appreciable adverse effect on competition; it presumes concerted action between competitors will lead to such an adverse effect. This presumption is not applicable to joint ventures, or if such agreements increase efficiency in the production, supply, distribution, storage, acquisition or control of goods or provision of services.

Extraordinary situation

Covid-19 has caused disruptions in supply chains, including those of critical healthcare products and other essential commodities/services, the CCI advisory noted. To cope with significant changes in supply and demand patterns arising out of the extraordinary situation, businesses may need to coordinate certain activities to ensure continued supply and fair distribution of products and services (like healthcare products and logistics and testing services), it said.

Rudresh Singh, Partner, L&L Partners, said the CCI advisory is timely. The CCI has categorically clarified that companies will have to continue to comply with the applicable competition law rules and regulations, he added. While the CCI is cognizant of the requirements to coordinate certain business activities, companies will have to satisfy the regulator in the event of a scrutiny that such collaborations eventually increased market efficiencies and led to consumer welfare. “The burden of proof would rest on such party being investigated, failing which penalty provisions of the law may be attracted,” Singh said.

Vivek Agarwal, Partner, DMD Advocates, said that given the hullabaloo over the lack of an announcement by the CCI unlike its Western counterparts, it was expected that the regulator could come out with an advisory on competitor collaborations.

“It is good to see that the CCI did not yield to the pressure to relax the application of competition rules in India and did the right thing by stating the obvious, i.e., the Competition Act is well equipped to consider the positive impact of a collaboration as much as it considers its adverse effect. While doing the balancing of negative and positive effects, the CCI will consider the necessity and proportionality of the coordinated activity in light of the current crisis,” he added.

Published on April 20, 2020

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