Coronavirus crisis : Keeping up with the competition (Indian Express)

Mains Paper 3:Economy
Prelims level: Competition law
Mains level: Significance and relaxations of the Competition law

Context:

• Amidst this pandemic, businesses are being forced to either adjust or realign their response. 
• While it is natural for companies to explore innovative means, they must remain cautious of abiding by the competition laws.

Significance of the Competition law:

• Competition law prohibits collaboration between competitors to fix prices, restrict output, allocate markets/customers and rig bids, also called ‘cartel agreements’. 
• These are often ascribed debasing sobriquets such as the ‘ultimate evil of antitrust’. 
• The law prohibits an abuse of position via unfair prices or conditions for sale of goods and services.

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Conditions of the suspension of competition rules: 

• Historically, adverse economic or social conditions have not resulted in a suspension of competition rules. 
• Competition authorities have explicitly stated that they will continue to monitor business behaviour. 
• However, there is also a realisation that businesses, especially competitors, amidst lockdown, may come together, communicate, and collaborate for production, distribution, transportation, and supply of essential commodities, FMCGs, and healthcare products.
• Pharmacies, for instance, may wish to pool their stock. 
• Supermarkets may wish to cooperate on home delivery of groceries, logistics companies may wish to ensure continuity of supplies and airlines may wish to allocate geographies. 
• Recently, Pfizer and BioNTech entered an unprecedented collaboration to co-develop and distribute a coronavirus vaccine. Such collaborations, otherwise, may have been subject to antitrust scrutiny.

Not to increase the cost of essential supplies: 

• Competition authorities have also made it clear that the crisis should not become a “cover” for non-essential collaborations to obtain economic benefits by restricting or increasing the cost of essential supplies. 
• In a free market, when demand outstrips supply, prices go up, and companies tend to resort to various forms of anti-competitive practices. 
• Many competition authorities across the globe were quick to investigate such practices. 

Shortage of essential supplies to India: 

• India is grappling with a massive shortage of foodstuff, FMCG products, and PPEs, coupled with widespread disruption in online and offline retail supply chains. 
• India’s retail trade has incurred an estimated $30 billion in losses, and approximately 13.6 crore jobs may be affected. 
• The government has rolled out various interim relaxations of statutory and regulatory compliance for individuals and companies under the Companies Act, IBC, Tax, Electricity Act, SEBI, and others. 
• No exemption to any sector/class/company has yet been announced under the (Indian) Competition Act, 2002. 

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Not neglect in compliance:

• India companies must not neglect compliance, especially those active in the FMCG, healthcare, pharmaceutical, and PPE sectors. 
• Legal advice must be sought before making a deviation from existing practices. 
• Another aspect, calls for companies to specifically consider competition law when asked by the government to collaborate with competitors or when approached by competitors, even if the objective is to meet public health or provide essential services.
• Companies considering Mergers and Acquisitions deals should not be tempted to circumvent merger filings during the crisis. Commendably, the CCI has partially resumed its operations by permitting Mergers and Acquisitions filings electronically. 
• However, deal approvals may be delayed as the CCI officers are working remotely till May 3 (which may be extended). 
• Hence, companies should strategise how to deal with timing risk: ensure that long-stop dates are sufficient and factor in that merger control approvals may take longer than expected.

Way forward:

• It remains to be seen if CCI takes a cue from other jurisdictions and waives certain collaborations/compliances from the purview of the Competition Act, while ensuring, at the same time that any such regulatory relaxation is not misused. 
• The companies and related industry associations may approach the government where they feel that collaborations in their sector warrant exemption. 
• The government will likely consult the CCI for any temporary suspension since it is already under pressure to minimise the resulting damage to health and economy.

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General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1)With reference to the European Commission, consider the following statements:
1. The euro zone jointly issues debt through its bailout fund, the European Stability Mechanism, which borrows on the market against the security of its paid-in and callable capital provided by euro zone governments.
2. The European Investment Bank (EIB), the investment arm of the EU, is owned by EU governments and issues around 60 billion euros of debt every year to lend for various projects in the bloc.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) None of the above

Answer......................

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Mains Questions:
Q.1) Describe the significance of the Competition law. On what circumstances Government can provide the relaxations of competition rules. Elaborate.