COMPETITION LAW IN THE TIMES OF CORONA: MAKING A CASE FOR BALANCED LIBERALIZATION
This post has been authored by Pulkit Gera, a B.A. LL.B (Hons.) candidate at the Rajiv Gandhi National University of Law, Patiala.
The current pandemic has brought the whole world to a standstill. It has brought unprecedented challenges to the countries around the world in terms of a resource-crunch in health, transportation and other sectors of the economy. Even some of the first world countries with self-admittedly world class healthcare systems such as the Singapore and Italy[i], are struggling to cope up with the healthcare requirements of the people owing to the scale of this pandemic. To protect the spread of this contagious disease, countries around the globe have resorted to implementing complete or partial lockdowns allowing only essential commodities- businesses to function and meet the daily needs of the people. This has disrupted economic activities of businesses, incurring millions of losses per day. This disruption will inevitably bring about further challenges for businesses around the world, ranging from incurring large amounts of debt and even bankruptcy.
While certain industries such are airlines, entertainment, tourism etc. are struggling to survive, others such as pharmaceuticals and healthcare, essential commodities are struggling to meet the enormous unprecedented demand.[ii] In both these scenario, businesses in order to overcome the economic losses or to meet the demand may be amenable to enter into collaborative agreements, inter alia. Some businesses such as pharmaceuticals and health care may be trying to benefit from this pandemic by monopolising the businesses. [iii] But these businesses while taking in these steps should be mindful of the provisions, against cartel and other unfair practices, of the Competition Act, 2002.
Recently, CCI emphasised on Section 19(3) of the CCI act which allows coordinated conduct between businesses that increase efficiency of industry, improve production and promote technical and scientific development.[iv] Thus, the companies can collaborate till it is within the limit of the above mentioned provision. However, this collaboration is limited for the companies dealing in essential commodities. No liberty is given to other businesses such as entertainment, tourism etc. which are struggling to survive due to complete shutdown of activities.
Collaboration and Exploitative Practices
The businesses which are witnessing a spike in the demand of their goods are resorting to unethical practices to benefit from the pandemic situation. Businesses are forming cartels and increasing prices of the essential commodities (hand sanitizers, masks, medicines etc.) which are much needed in order to fight corona crisis. [v]
Recently, in a report published by ‘India Today’ it was found that the businesses having stock of ventilators are selling it at double the MRP to the rich housing societies who are panic buying and stockpiling.[vi] There are many such incidents where the essential products are being sold at very high prices, the most recent example being of rapid test kits which are sold at massive 145% profiteering.[vii] However, in order to curb these practices, the government are taking stern measures. The Ministry of Consumer Affairs vide an order dated March 13, 2020 under the Essential Commodities Act, 1955 has added hand sanitizers and face masks to the list of essential commodities, restricting the businesses to sell the listed items above the indicated maximum retail price. [viii] Further, the Ministry of health affairs have also fixed the price of testing of corona virus in the private labs to Rs. 4500 per test.[ix] However, as per the Hon’ble Supreme Court direction the Covid-19 test for the poor and needy people across the country will be conducted free of cost.[x]
Role of Competition Commission of India (CCI)
CCI plays a very crucial role in curbing exploitative practices adopted by the businesses. These exploitative practices are generally executed through ‘anti-competitive agreements’, ‘use of dominant position’ and the like. To curb these practices, CCI acts as a redressal body conferring its power from Competition Act, 2002. After a three week suspension of its activities due to nationwide lockdown, CCI through its order dated April 13, 2020 decided to partially open its functioning allowing e-complaints with respect to provisions of Section 3 and 4 of Competition Act.[xi] This measure by CCI was the need of the hour, taking into consideration the collaborations done by competitive businesses to increase the prices of masks, sanitizers, ventilators, ‘hydroxychloroquine’ and other essential commodities required to fight the Corona war.
In order to ensure proper supply of the essential commodities, the coordination between the businesses is a must as there might be situation that some essential commodities could be under stocked in one area and over stocked in others. But in general, the coordinated behaviour between the competitors is restricted and illegal as per the competition laws,[xii] as such might lead to cartel agreements and monopolising of the business which might affect the economy at large.
In countries such as UK, US, Australia etc., the government has decided to liberalise the anti-trust laws and the healthcare sector, grocery retailers and supermarket chains are legally sharing stocking and sale data to efficiently use their resources and prevent shortages.[xiii] Recently, CCI also gave nod to the conducts between the rivals to an extent it is necessary to address concerns arising from COVID-19.[xiv] . However, more liberty of the anti-trust laws is called taking into consideration the post economic effect on companies.
The challenge that the CCI and other commissions around the world are facing is that the competition laws do not envisage circumstances such as virus outbreak, where the collusion and collaboration among the competitors becomes the need for survival and can be justified. However, Section 54, 55, 56 of the Competition Act, 2002[xv] give powers to the Central government to exempt the provisions of the act and to supersede the commission in case of public interest or other circumstances as specified in the act. However, no such exemption of provision is made as per recent advisory issued by CCI. CCI has only given nod for Joint ventures to the extent it is necessary to meet the demand for essential commodities arsing out of Covid-19. It has not taken into consideration other businesses such as fashion, entertainment, automobile etc. which are striving to survive due to shutdown of its activities. Thus, this calls for a need for further liberalising of anti-trust laws to cover the wider range of businesses.
There are some points which must be kept in mind while further liberalising the competition laws-
The liberty in the competition law should be given only for a short period of time with provisions to extend the time as the situation demands taking into consideration the post pandemic economic crunch. However, the exact time cannot be specified and provision for extension is necessary because the end of pandemic is shrouded in mystery.
The collaboration must be within limited geography which is reasonable in order to control the monopoliing of business.
The exchange of competitively sensitive information (such as prices, customers, profit margins etc) between the competitors should not be allowed. But other forms of cooperation such as-
a. Joint Research and development wing.
b. Logistics (transportation, warehousing, workforce etc) for the improvement of distribution channels
c. Setting of the standard of the goods supplied in the market
The above can be allowed to be taken in order to face the economic slump in the country. The cooperation is essential in these hard times for the survival of the companies and to balance the net exports of the country. Moreover, these collusions between companies will help in controlling the increasing unemployment which is inevitable due to post pandemic economic crunch.
Thus, CCI while further relaxing the anti-trust laws should securely ring-fence to ensure that the competitive character of the businesses is not lost.[xvi]
The competition law regime cannot be completely relaxed at this stage as it may lead to lawlessness and cause long-term harm to the society. CCI has allowed companies to make agreements to collectively work to an extent it is done to increase efficiency to meet demands arising out of Covid-19. However, the provisions prohibiting unethical agreements such as cartel agreement and dominant position still continue to apply. Moreover, the nod is given only to the companies dealing with essential commodities such as health, telecom sector etc. Thus, other businesses should be mindful of the provisions of the Competition act and are advised to take appropriate legal advice while entering into collusion and collaboration. Government is taking steps to control the high rising prices of the essential commodities. The businesses should also work in line to fight the war against coronavirus and not resort to unethical practices which may be detrimental to the public interest. Any illegal action by the businesses to take advantage of the crisis may be detrimental to their reputation and expose them to scrutiny and hefty penalty sooner or later.
[i] Best Healthcare in the World 2020, World Population Review (April 27, 2020), https://worldpopulationreview.com/countries/best-healthcare-in-the-world/ [ii] Charanya Lakshmikumaran & Neelambera Sandeepan, Competition Law in the time of COVID-19, LakshmiKumaran & Sridharan attorneys (April 10, 2020), https://www.lakshmisri.com/insights/articles/competition-law-in-the-time-of-covid-19/ [iii] Avaantika Kakkar ET AL., COVID- 19 and Competition Law Concerns, Cyril Amarchand Mangaldas blogs (March 26, 2020), https://competition.cyrilamarchandblogs.com/2020/03/covid-19-and-competition-law-concerns/#more-2152 [iv] Samrat Sharma, Coronavirus brings business competitors on one table; CCI allows firms to work together, Financial Express (April 20, 2020), https://www.financialexpress.com/industry/coronavirus-brings-business-competitors-on-one-table-cci-allows-firms-to-work-together/1933729/ [v] Sachin Dave & Deepshikha Sikarwar, Amid Covid-19 outbreak sudden price hikes under the scanner, The Economic Times (March 24, 2020), https://economictimes.indiatimes.com/news/politics-and-nation/amid-covid-19-outbreak-sudden-price-hikes-under-the-scanner/articleshow/74782650.cms?from=mdr [vi] Nitin Jain, Exposed: Ventilator vultures profiteering from Covid-19 crisis, India Today (March 30, 2020), https://www.indiatoday.in/india/story/exposed-ventilator-vultures-profiteering-from-covid-19-crisis-1661448-2020-03-30 [vii] Rajeev Dubey & Vivek Punj, Massive 145% profiteering exposed in corona virus rapid test kits sold to ICMR, Business Today (April 27, 2020) https://www.businesstoday.in/current/economy-politics/massive-145-percent-profiteering-over-charging-exposed-in-coronavirus-rapid-test-kits-sold-to-icmr/story/402066.html [viii] Anisha Chand & Soham Banerjee, COVID 19 and Competition: India Perspective, Khaitan & Co. (March 25, 2020), https://www.khaitanco.com/covid-19/COVID-19-and-Competition-India-Perspective [ix] ET online, Coronavirus test should not cost more than Rs 4,500: Government to private labs, The Economic Times (March 22, 2020), https://economictimes.indiatimes.com/news/politics-and-nation/covid-19-test-should-not-cost-more-than-rs-4500-government-to-private-labs/articleshow/74753826.cms?from=mdr [x] Anindita Sanyal, Coronavirus - Free Coronavirus Testing Only For Poor, Says Supreme Court, NDTV (April 13, 2020), https://www.ndtv.com/india-news/free-covid-19-testing-only-for-poor-says-supreme-court-gives-option-to-centre-to-add-more-categories-2211061 [xi] Competition Commission of India, Measures in view of threat of CORONAVIRUS/ COVID- 19 pandemic, (April 13, 2020) https://www.cci.gov.in/sites/default/files/whats_newdocument/COVID-19.pdf [xii] Pradeep S. Mehta & Udai S. Mehta, COVID-19: Should Competition Law Enforcement For Some Sectors Be Temporarily Suspended in India?, The Wire (April 15, 2020), https://thewire.in/business/covid-19-competition-law-enforcement-india [xiii] Id. [xiv] supra note iv [xv] Competition Act, 2002, No. 12, Acts of Parliament, 2013 (India). [xvi] supra note vii