CCI must consider legitimising agreements for limited collaboration between key market players to ensure there is no shortage in the production or supply of essential services
By Abir Roy & Prerana De
COVID-19 is the greatest health emergency that independent India has faced, and has led to a country-wide lockdown. Despite repeated governmental assurances that essential services shall continue to be provided to citizens across India through the lockdown, there are real concerns regarding the timely availability of these due to massive supply chain disruptions, and panic buying by consumers. The closure of the warehouses of e-commerce entities in several states, for instance, has recently caused e-commerce marketplaces to suspend their operations indefinitely.
While the Essential Commodities Act, 1955, strictly regulates the prices of essential goods and its inputs, there is always a possibility of entities holding a significant amount of market power exploiting the situation to their advantage. In the present economic environment, the ability of dominant, or economically strong enterprises to conclude restrictive and exclusive vertical agreements with their suppliers or distributors to eliminate competitors cannot be ruled out. Such exclusive supply or distribution agreements may have an even worse impact on consumers than usual, and may lead to acute shortages of essential commodities in both B2C, and B2B markets.
Thus, the role of the Competition Commission of India (CCI) as a market regulator is of utmost relevance right now. As such, businesses are not exempt from antitrust scrutiny during these unprecedented times. Considering this, the CCI, in a welcome move on April 13, carved out an exception for e-filings of information under the Competition Act under Section 3 and Section 4 of the Act, which would include anti-competitive practices in relation to essential commodities or services, or the supply chain for these. CCI is well quipped to allow e-filings and remote hearings, which may have an impact on wider public interest, and grant urgent interim orders, if required.
A case in point, global antitrust authorities in the European Union, Italy, Poland, Norway, China, and South Korea have stepped up enforcement to prevent unfair, anti-competitive trade practices during this crisis. The Polish antitrust authorities, for instance, recently initiated proceedings against wholesalers who terminated their contracts for supplying surgical masks to hospitals in order to sell them in the open market at higher prices. The Italian authorities have initiated action against Amazon and Ebay for excessively raising prices of hand sanitisers, and face masks. Relevant Dutch, Spanish, and UK authorities have recently stated that they shall closely monitor the behaviour of traders and suppliers to ensure that they do not exploit the current situation. The US Department of Justice (Antitrust Division), in a similar vein, has cautioned the business community against violating antitrust laws in the manufacture, distribution, and/or sale of public health products. CCI may also consider issuing specific guidelines to ensure that no anti-competitive practices are carried out with respect to essential services.
Another issue that may require CCI’s urgent intervention is that of legitimising collaboration agreements for the distribution, supply, production, or manufacture of essential products and services like medicines, masks, sanitisers, and other essential amenities amongst market players who are traditionally competitors, to meet the national demand during this time of crisis. While production of essential amenities is allowed during the lockdown, this is operating at only 50% capacity, and with supply chain affected, the possibility of these essential services not reaching consumers in time cannot be ruled out. Thus, it may be prudent to allow limited collaboration amongst competitors to pool in financial and operational resources to cope with the crisis. Further, most of the essential goods—masks, ventilators, etc—may be used for government procurement at this time, with players in these segments being allowed, without any fear of antitrust actions of cartel later, to collaborate with government and each other to ensure that public demand is met. Several producers and suppliers are aware of the fact that they cannot claim immunity from the application of competition laws, even during a crisis. However, there is no doubt that in the present situation, allowing collaboration, and the pooling of resources of suppliers, producers, and even those involved in research and development, may ensure that there are no shortages in the supply of essential commodities and services to consumers.
The US Department of Justice, and the US Federal Trade Commission, as well as the European Commission and its member states, have issued joint statements, respectively, to allow such collaborations so long as they are not patently anti-competitive.
While government is regularly monitoring the ground situation, CCI should also monitor the situation and, if required, come up with guidelines like those that other competition authorities have done to allow need-based limited collaborations.
Authors are Advocates, Sarvada Legal Views are personal