Competition and COVID-19: Compliance for businesses

By Deeksha Manchanda and Shruthi Rao, Chandhiok & Mahajan
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Competition authorities worldwide including in the UK, the US, Australia and the EU have responded swiftly to the unprecedented situation created by the COVID-19 pandemic. In India, the Competition Commission of India (CCI) has issued an advisory for businesses on the applicability of the Competition Act, 2002 (act), to conduct arising from COVID-19 (advisory). The CCI and the National Company Law Appellate Tribunal (NCLAT) have also taken stringent measures to reduce footfall in their premises. The CCI halted all filings and submissions (except notifications of combinations and information under section 3 and 4 of the act), and hearings and visits to the CCI. Similarly, all hearings, filings and submissions before the NCLAT have been suspended until 03 May 2020.

competition
Deeksha Manchanda
Counsel
Chandhiok & Mahajan

Impact on merger review: After initially suspending the filing of all notices, the CCI on 30 March 2020 permitted electronic filing of notifications under the green channel mechanism. On 14 April it permitted electronic filing of all combination notices. The CCI on 30 March also announced that it will endeavour to process notices filed before 20 March 2020 subject to the availability of sufficient information from the parties. Despite the closure of its offices, as at the writing of this article, the CCI has approved five combinations that were filed before 20 March 2020.

Under the Competition Commission of India (Procedure in Regard to the Transaction of Business relating to Combinations) Regulations, 2011, the CCI imposed on itself a 30-working day deadline to arrive at a prima facie determination of whether or not the combination is likely to have an appreciable adverse effect on competition (AAEC). As the CCI ceased functioning from 25 March (on account of the lockdown) to 30 March, this period may be excluded from this 30-working day period. However, for combinations filed before the CCI suspended filings, the statutory period of 210 days under the act, after which notified combinations are deemed to be approved, is likely to continue.

competition
Shruthi Rao
Associate
Chandhiok & Mahajan

Antitrust compliance: As recognized in the advisory, the pandemic may require some businesses to collaborate or cooperate with their competitors to address the challenges posed by COVID-19. The advisory recognizes that there are existing safeguards in the act, namely that the cooperation does not result in AAEC, or is an efficiency enhancing joint venture. These safeguards will apply to any collaboration or co-operation between competitors because of COVID-19. In addition to these safeguards, the advisory also provides for a two-pronged test of necessity and proportionality to be applied to check whether the conduct is in contravention of the act. The CCI also warns businesses against taking advantage of the COVID-19 situation.

The advisory does not deal with analysis of COVID-19 related conduct under section 3(4) or section 4 of the act. The defences currently provided for these sections will still be available to a business for practices adopted in response to the pandemic. For example, if a practice falls under section 3(4) of the act, it may be argued that it caused no AAEC and in fact, led to accrual of benefits to the consumers, or to improvement in production or distribution thereby being pro-competitive effects under section 19(3). In addition, the advisory suggests that the two-pronged test of necessity and proportionality may apply to conduct under sections 3(4) and 4 of the act as well. The CCI has issued guidance notes and advisories in the past, such as a guidance note on non-compete restrictions. While these are not binding, they provide parties with helpful insights into the interpretation of the act by the CCI.

The way ahead: Competition regulators across the globe have established different procedures to provide greater clarity to businesses on the applicability of competition law in the pandemic. This includes sector specific exemptions and the issuing of comfort letters. The act at present does not permit the CCI to exempt an enterprise or a sector from its provisions of the act. Such power can only be exercised by the government under section 54 of the act. The CCI may, however, consider providing the government with its assessment of the impact of the pandemic, on the basis of which temporary, sector specific exemptions may be granted.

The CCI may also consider creating a process to address complaints and clarifications regarding antitrust implications of COVID-19. This may include a telephone helpline or a procedure that is similar to pre-merger consultations. The CCI may also consider developing a temporary framework to enable electronic filings for all submissions and hearings through video-conferencing during the pandemic which will, among other things, allow for continued functioning of the CCI in what appears to be a long lasting lockdown.

Deeksha Manchanda is a counsel and Shruthi Rao is an associate at Chandhiok & Mahajan.

guidelines

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