Covid-19 Terror in India: Competition Law Challenges

Ankit Srivasatava comments on the competition law challenges that could arise in India due to the global outbreak of the Corona Virus.

Introduction

The outbreak of Corona Virus has had a dreadful impact at a global stage and as per the directions of several governments across the world; the guidelines regarding self-isolation, cleaning and sanitization, covering the face with mask are of top priority. Thus making the essentials related to sanitization, speciallythe use of masks (N-95, N-99 or surgical), hand washing soaps and, sanitizers,priority for everyone. The seriousness of the situation is such that the Ministry of Consumer Affairs has added clause 8 to the schedule of the Essential Commodities Act, 1955¹ , to bring in Hand Sanitizers and Masks as essential commodity till 30^th June 2020,as an effort to boost the supply and prevent the shortage of these items to fight against the virus. The government has the power, under Section 2(A) (2)² , to add any item that it is necessary to be added as an essential commodity in the public interest.

In addition to this, the Competition Commission of India (CCI) vide letter dated 23^rd March 2020³ has suspended all the functions with relation to the filing of new matters and ongoing matters due to the pandemic caused by the novel coronavirus. The CCI has not come up with any guidelines on the application of Competition laws during this period. Many jurisdictions have in this time of crisis eased down the laws applicable generally, so that the daily essentials like the groceries, pharmaceuticals and daily perishable goods are managed. This suspension by the CCI nowhere means that a complaint cannot be filed later for the price surging and collusion against the sellers of these daily essentials.

Is competition law enforcement an issue in the current situation?

Although, the Competition Act does permits extensive cooperation between companies if there are good reasons for this⁴ , but the question here is: Are the companies and the traders cooperating for the benefit of the society or their own? As quoted by the Economic Times on 5^th March, 2020, “As Covid-19 patients continue to rise in India, some retailers and mask manufacturers are cashing in on the virus terror by jacking up prices by 2 to 3 times. Most e-commerce platforms have not had stocks of frontline sanitizer brands at several locations. Chemist shops in several cities in India said they are not getting any fresh supplies of sanitizer.”⁵ After such news started coming from PAN India, the government came into action and added hand sanitizers and masks in the Essential Commodities Act, 1955 on 13^th of March 2020. Still, there was no decrease in prices of these products: especially the N-95 masks, which were originally sold for INR150, are now being sold at a hiked price of INR500 each as late as 19^th March 2020⁶ . Since one cannot surely say that the companiesare indulged in pro-competitive activity therefore on 20^th March 2020 the government fixed the prices of both the products. Although, the question still remains, whether the government policies made are being effectively implemented?

The companies, traders, sellers (players) in the market, at any level,cannot be said to be out of the scope of competition authorities, even though coordinating with competitors may be, or may appear to be, an efficient way to respond to some of those challenges. The government and the authority shall also strictly intervene as to how are these businesses behaving in times of the crisis so that the respective companies are aware of their rights and obligations.

Measures taken by different Jurisdictions

The companies should be aware that in the times of crisis like these, competition law applies to them, any collaboration, however well intended involves competition law risks. As written in an article published by Baker Mckenzie,⁷ “Abusive behaviour will likely attract enforcement action, as well as civil claims and reputational damage, and possibly direct regulation. Companies in a position of market power, even if temporary, need to be alert to their special responsibilities.” Surely, this statement is applicable throughout the world and the focus be should be given by the commissions of different jurisdictions so as the respective companies are aware of the repercussions. Authorities have responded in same ways in previous crises of Hurricane Katrina, the US Federal Trade Commission investigated post-Katrina gasoline price control and gasoline price surges. The FTC’s report on its examination cited many incidents of price overcharging by refiners, wholesalers and retailers.

The US Attorney General has recently said that antitrust enforcements is a key priority during this crisis, “The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time. I am committed to ensuring that the department’s resources are available to combat any wrongdoing and protect the public and hold accountable anyone who violates the antitrust laws of the United States in connection with the manufacturing, distribution, or sale of public health products such as face masks, respirators, and diagnostics” ⁸ . It is essential to keep a check no matter if it is a crisis situation.

The world is praying and awaiting everyday for the discovery of a vaccine that can cure the Covid-19, and for this purpose governments have procured the aid of private companies to collectively organize these activities. Although, such efforts of the companies are essential for advancements in R&D but there is certain extent to it under competition law. These include certain agreements or the arrangements under the competition law, which shall not defeat the possibility for the companies involved, to commercialize the results of the joint research independently or where more innovative production is compromised in anyway in collaborative effort.

Furthermore, the European Union Authorities have provided with guidance on the application of competition rules in time of Covid-19 on 23^rd March 2020⁹ , in which they have eased the competition rules for the crisis but it is also very clearly mentioned that, “companies taking advantage of the crisis to increase prices or mislead consumers should expect no mercy from the authorities.”They have allowed the supermarkets to inform and share the data with respect to stock availability, drug sellers can share the quantity of products sold by them, logistics providers supplying essentials, trade associations can have a lenient approach towards the debtors, manufacturing key medical equipment.

It is therefore significant to consider that even in cases of crises response, safeguards and compliance policies should be in place to help ensure successful efforts and also keeping a check on any anticompetitive scenarios.In addition to this, countries like China, South Korea, Italy, US, UK, the market regulators have levied heavy penalties and conducting strict raids and investigating any issue with relation to surge pricing of products essential during the crisis.¹⁰

Conclusion

In conclusion, the companies providing with the essentials at the time of crisis should not indulge in anti-competitive activities of price surge, stocking among other things, morally and they should also be vigilant of different competition law risks. Since the Competition law of India is relevantly new than few of the other established jurisdictions therefore the companies, businesses have less knowledge about the competition law implications in the market. Therefore, if an advisory from the side of the commission is published, it might help curb such situations at the times of crisis even in the future and shall also give powers to the commission for taking action against the offenders. All the big jurisdictions have published guidelines to let the respective players in the market, so that the respective companies arewell aware of the laws in terms of being relaxed and also to what extent. In the times of crisis, the companies do go for profit maximization which ultimately may cause harm to the consumers and the market. Although there is need for a lenient approach from the commissions across the globe in these tough times but the companies taking advantage shall be penalized as never before.