The Covington EU Competition team will be updating you regularly, through the Covington Competition blog, on the competition law implications – both procedural and substantive – of the COVID-19 crisis.  This is our update for Wednesday 18 March.

1. State Aid  

• Process: As Member States are putting financial support measures in place to support their economies, we are expecting a wave of state aid notifications in the next few days/weeks.    DG COMP opened a 24/7 hotline for public authorities to raise questions or request advice.
• Speed of dealing with notifications: The Commission approved the first state aid scheme (Danish compensation mechanism for organisers of major events) within 24 hours of notification.
• Substantive appraisal:
  • The Commission will be using a number of provisions of the Treaty to assess state aid measures:
    • Article 107 (2) (b) TFEU which allows the Commission to clear state aid on the basis of an “exceptional occurrence”.  This provision has been used in the past in the context of the mad cow disease crisis and the financial crisis, and is now front and centre of the state aid analysis in the context of the COVID-19 crisis;
    • Article 107 (3) (b) TFEU which allows the Commission to clear state aid measures that intend to remedy a serious disturbance in a Member State’s economy.  That is what they are considering using to deal with the specific situation in Italy;
    • The Commission also refers to Article 107 (3) (c) TFEU which allows rescue and restructuring aid.  There is already a framework in place for this aid.
  • The Commission has published a summary of the draft temporary legal framework it intends to adopt based on Article 107 (3) (b) TFEU to deal with the state aid issues following COVID-19 and is consulting with Member States.  In summary, four types of aid will be enabled on the basis of the framework:
    • direct grants and tax advantages: Member States would be able to set up schemes to grant up to EUR 0.5 million to companies to address their urgent liquidity needs;
    • granting state guarantees or setting up guarantee schemes supporting bank loans taken out by companies. These would have subsidised premiums, with reductions on the estimated market rate for annual premiums for new guarantees for SMEs and non-SMEs.  There will be some limits on the maximum loan amount, which are based on the operating needs of the companies (established on the basis of the wage bills or liquidity needs). The guarantees may relate to both investment and working capital loans;
    • enabling public and private loans to companies with subsidised interest rates. These loans must be granted at an interest rate which is at least equal to the base rate applicable on 1 January 2020 plus the credit risk premium corresponding to the risk profile of the recipient, with different rates for SMEs and non-SMEs;
    • finally, the temporary framework makes clear that, if Member States decide to channel aid to the real economy via banks, this should be considered to be direct aid to the banks’ customers, not to the banks themselves.  It also gives guidance on how to minimise any undue residual aid to banks and to make sure that the aid is passed on, to the largest extent possible, to the final beneficiaries in the form of higher volumes of financing, riskier portfolios, lower collateral requirements, lower guarantee premiums or lower interest rates.

2. Mergers 

• We understand DG COMP is no longer allocating case teams for new matters and has urged companies to postpone notifications.  This is, in part, driven by the fact that all non-essential DG COMP officials are now working from home, and, on the other hand, the fact that there is a high likelihood that third parties will not respond to RFIs. Case teams are continuing to engage with parties already in pre-notification, albeit at a slower pace.
• There is currently no clear position on on-going merger cases so the timelines on those are running.  We understand the Commission is assessing whether there are ways of pausing timelines on on-going cases (beyond stopping the clock on a case-by-case basis).
• We understand a number of national authorities are taking a similar approach (no new cases, on-going cases as per normal, including pressing ahead with hearings (using multi-party video calls)).  More specifically, over the last 24 hours,
  • the French Competition Authority has announced that it will continue to progress its merger cases.  However, the FCA anticipates that the deadlines and review procedures of deals could be adapted in the near future.  Companies are advised to delay any non-urgent plans to notify;
  • the Danish Competition Authority has suspended deadlines for merger control for an initial – possibly extendable – period of 14 days as of today (18 March);
  • in contrast with other authorities across the EU, the CMA has announced it will continue to progress its cases, subject to the potential extension of statutory deadlines where necessary.

3. Abuse and Cartel Investigations

• The tremendous uncertainty created by the current emergency may increase the temptation for employees to align with others in the industry, or substantially increase prices — but the antitrust laws still apply in full.  A number of national competition authorities have already issued statements to remind companies of the full application of antitrust laws.
• Some industries might be able to benefit from enhanced cooperation and coordination to raise efficiencies when addressing specific COVID-19 scenarios (such as the logistics and health care/life science sectors). This needs to be analysed on a case-by-case basis. In addition, antitrust agencies might be willing to grant comfort for such projects on a temporary basis.
• The cases that are close to finalisation are still being progressed (see the recent 1.1 billion fine on Apple by the French Competition Authority).
• Some on-going cases are on hold.  Others are being progressed but at a substantially lower pace.

4. Private Enforcement

• A number of courts around Europe are postponing hearings and halting the progress of damages cases.

5. General Court and CJEU

• The General Court and CJEU have suspended all hearings.