Hong Kong Competition Commission Issues Statement on Collaborative Arrangements between Competitors Amidst COVID-19
Amidst the COVID-19 outbreak, competition authorities across the globe are faced with unprecedented pressure to keep markets functioning by allowing a degree of collaboration between businesses, whilst striving to ensure that market players do not exploit the COVID-19 pandemic to justify improper collusion or other anti-competitive acts. It is generally recognised that additional cooperation between businesses in certain industries may be vital in boosting and maintaining critical goods and services, such as the production, supply and distribution of medical supplies and basic commodities, to tackle this virus outbreak.
In response to the humanitarian and economic challenges presented by COVID-19, the Hong Kong Competition Commission (HKCC) has issued a statement on 27 March 2020 regarding the HKCC's approach in applying the Competition Ordinance (Cap. 619) (Competition Ordinance) during the COVID-19 outbreak. Whilst affirming that the Competition Ordinance remains in effect and the HKCC continues its enforcement operations during this period, it acknowledges that there could be necessity for increased cooperation between businesses in certain sectors temporarily, especially to maintain the supply of essential consumer goods and services.1 The HKCC intends to adopt a "pragmatic approach" in its enforcement and advisory functions in respect of these temporary collaborative measures which are "genuinely necessitated" by the COVID-19 outbreak and in the interests of the Hong Kong public. At the same time, the HKCC stresses that it remains alert and will enforce the Competition Ordinance in full against businesses which try to enter into improper collusion or other anti-competitive conduct by exploiting these exceptional circumstances. The HKCC also references its Guideline on the First Conduct Rule2 which provides general guidance on the forms of collaborative activities businesses may undertake without contravening the Competition Ordinance.
The HKCC also invites businesses which intend to adopt interim cooperative measures which arise as a result of the COVID-19 situation and for the benefit of the Hong Kong public to consult with it. The HKCC states it targets expediting these requests, and aims to provide informal, preliminary views within five working days of receipt of all necessary information on the proposed measures (subject to its own resource constraints).
Some regulators and competition authorities in other jurisdictions, such as the United States3, the United Kingdom4 and the European Union5, have also issued similar notices and statements indicating they intend to adopt a more pragmatic, lenient approach in their enforcement against collaborative actions between competitors, whilst other jurisdictions have remained silent or else are yet to provide more guidance on the issue.
Recommendations
To cope with significant changes in supply and demand patterns, businesses in certain sectors may need a coordinated response in order to minimise disruption to supply chains.
When coordinating with competitors, businesses must stay mindful of the competition law parameters defining what is permitted. The recommended practice is to identify legitimate, pro-competitive or competitively neutral objectives and to restrict information exchanges to what is reasonably required to meet those objectives.
Where coordinated actions are permitted, as a general rule, businesses should ensure that any such coordinated actions are limited to critical issues which arise due to COVID-19 only. Such cooperation should be appropriate, proportionate and necessary to achieve the objective of maintaining or preventing a shortage of supply of essential goods and services, and is made in the public interest and to the benefit of consumers.
Businesses should also bear in mind that any relaxation in enforcement will be temporary. As the impact of COVID-19 rapidly evolves, businesses should stay tuned to the latest developments and updates. When in doubt, businesses should engage their lawyers to devise a collaborative framework which is compliant with antitrust laws or consult the relevant competition authorities.
1 Competition Commission, "Statement by the Competition Commission regarding the COVID-19 outbreak" (March 27, 2020) available at https://www.compcomm.hk/en/about/public_notices/files/20200327_Statement_by_CC_regarding_the_COVID19_outbreak_Eng.pdf;
Competition Commission, "Competition Commission issues statement on application of Competition Ordinance during COVID-19 outbreak" (March 27, 2020) available at https://www.compcomm.hk/en/media/press/files/20200327_PR_CC_issues_statement_on_application_of_CO_during_COVID19_outbreak_EN.pdf
2 Competition Commission, "Guideline on the First Conduct Rule" (July 27, 2015) available at https://www.compcomm.hk/en/legislation_guidance/guidance/first_conduct_rule/files/Guideline_The_First_Conduct_Rule_Eng.pdf
3 The U.S. Department of Justice and Federal Trade Commission, "Joint Antitrust Statement regarding COVID-19" (March, 2020) available at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19
4 Competition and Markets Authority, "CMA approach to business cooperation in response to COVID-19" (March 25, 2020) available at https://www.gov.uk/government/publications/cma-approach-to-business-cooperation-in-response-to-covid-19/cma-approach-to-business-cooperation-in-response-to-covid-19
5 European Competition Network, "Antitrust: Joint statement by the European Competition Network (ECN) on application of competition law during the Corona crisis" (March, 2020) available at https://ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf
For more information, see also https://ec.europa.eu/competition/antitrust/coronavirus.html
