The Covington US and EU Competition/Antitrust teams will be updating you regularly, through the Covington Competition blog, on the competition/antitrust law implications – both procedural and substantive – of the COVID-19 crisis in the US and the EU.  This is our update for Wednesday 1 April. Today’s new updates as compared to the previous update are highlighted:  EU / State Aid (clearances).

United States

1. Mergers / Filings

  • Early Termination Resumes:  On Friday, March 27, 2020, the Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ) announced that they will resume processing requests for early termination of the 30-day waiting period under the Hart-Scott-Rodino (HSR) Act.  The agencies have cautioned that early termination will be granted in fewer cases, and more slowly, than under normal circumstances.  The announcement also emphasized that the agencies will continue to monitor circumstances, and may need to further modify the early termination policy.
  • Electronic HSR Filings: The FTC and DOJ are continuing to accept HSR merger filings through a temporary electronic filing system that was launched on March 17th.  Hard-copy filings will not be accepted during this period.
  • Extended Timing Agreements:  For mergers currently pending or that may be proposed, the DOJ is requesting, as part of any timing agreement, that merging parties afford it an additional 30 days to complete its review of transactions after the parties have complied with document requests.  (Although the DOJ has not stated it expressly, this likely means 30 days in addition to whatever period of time the parties have agreed to delay their closing beyond the 30-day post-compliance period already provided for by the HSR Act itself.  Thus, for example, if the parties have committed not to close for 60 days after compliance, the DOJ will request that they extend that commitment to 90 days.) The DOJ has cautioned that it may revisit its timing agreements with merging parties in light of further developments.
  • No In-Person Meetings & Depositions:  Meetings at both agencies will be conducted by phone or video conference (where possible).  The FTC has announced that Bureau of Competition meetings, including Front Office meetings, will be held remotely until further notice.  And, the DOJ has postponed all scheduled depositions, and they will be rescheduled using secure videoconferencing capabilities.
  • DOJ Proposal to Extend Merger Timelines and Pause the Statute of Limitations for Price-Fixing Cases: According to a press report, the DOJ hopes to have included in the next round of pandemic legislation, a proposal that would let it and the FTC add 15 days onto merger timelines during emergencies, such as disease outbreaks, natural disasters, or government shutdowns.  The proposal also seeks to toll the statute of limitations for price-fixing and bid-rigging cases for at least six months because of the pandemic.

2. Government Investigations / Compliance Considerations

  • Antitrust Laws During Public Health Emergencies:  The tremendous uncertainty created by the current public health crisis may increase the opportunity and temptation to coordinate with others in the industry or substantially increase prices – but the antitrust laws still apply in full.  There is no collusion exemption for public health emergencies.  For example, DOJ recently announced its intention to “hold accountable anyone who violates the antitrust laws of the United States in connection with the manufacturing, distribution, or sale of public health products.”
  • Antitrust Counseling:  The antitrust laws allow for beneficial, pro-competitive collaborations and exchanges of information between competitors, and the needs of responding to a health crisis or other public emergencies are relevant to that determination.  Nevertheless, the antitrust laws apply, and it remains prudent to obtain antitrust counsel regarding communications with competitors and other competitively sensitive activities.
  • Justice Department and Federal Trade Commission Announce Expedited Antitrust Procedure and Guidance for  Coronavirus Public Health Efforts: In a joint statement issued on March 24th, the DOJ and FTC announced that they will aim to respond expeditiously to all COVID-19-related DOJ Business Review Process and Federal Trade Commission Advisory Opinion Process requests, and resolve those addressing public health and safety within seven (7) calendar days of receiving all necessary information.  The expedited procedure requires, among other things, that an applicant provide the agency an explanation of how the arrangement is related to COVID-19 and a description of the nature and rationale of the proposal.  This expedited procedure is for use solely for coronavirus-related public health efforts and may be invoked at the option of the requestor, in lieu of the agencies’ standard procedures for handling requests for advice.  The agencies will also work quickly to process joint venture filings under the National Cooperative Research and Production Act (as amended by the Standards Development Organization Advancement Act).
  • Ongoing Investigations:  Both DOJ and FTC are conducting a matter-by-matter review of investigations to consider appropriate modifications of statutory or agreed-to timing.  Parties and their counsel should expect the agencies to be in touch to discuss proposed modifications.
  • Price Gouging: Several states have moved to limit price gouging during the COVID-19 pandemic.  For example, the Massachusetts Attorney General issued an emergency regulation banning price-gouging in certain products necessary to public health and safety in light of the corona virus pandemic.

 3. Antitrust Litigation

  • Courts Slowing Cases:  Courts around the country are reacting to the public health crisis by closing facilities and postponing court activities. The Northern District of California, for example, stopped the high-profile Capacitors antitrust case in the middle of trial out of concerns for the health of the jurors and other participants. That court, like many others, is also postponing new trials until May 1st at the earliest, and it also announced that all pending civil motions—including those in antitrust cases—will be decided without in-person hearings. The Chief Judge of the New York State Courts entered an order on March 22 that puts a stop to all non-essential filings effectively immediately.  Additionally, the deadline for commencement, filing, service of any legal action, notice, motion or other process or proceeding prescribed by any procedural law of NY State, is tolled until April 19, 2020.

European Union

 1. State Aid  

  • Process: As Member States are putting financial support measures in place to support their economies, a wave of state aid notifications has started.    DG COMP opened a 24/7 hotline for public authorities to raise questions or request advice.
  • Substantive appraisal:
    • On 19 March 2020, the Commission has adopted its Temporary State aid Framework to support the economy in the current COVID-19 framework.  It will provisionally be in place until the end of December 2020.   It provides for five types of aid:
      • Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to EUR 0.8 million (which is higher than the initially proposed EUR 0.5 million) to a company to address its urgent liquidity needs.
      • State guarantees for loans taken by companies from banks: Member States will be able to provide state guarantees to ensure banks keep providing loans to the customers who need them.
      • Subsidised public loans to companies: Member States will be able to grant loans with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.
      • Safeguards for banks that channel state aid to the real economy: Some Member States plan to build on banks’ existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The framework makes clear that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.
      • Short-term export credit insurance (which was not provided for in the draft proposals): The framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the state where needed.
    • On 27 March 2020, the Commission consulted Member States on a draft proposal to extend the state aid temporary framework by adding five types of aid measures:
      • Three measures that are specific to the COVID-19 crisis : aid for COVID-19 related research and development; aid for the construction and upgrading of testing facilities for products relevant to tackle the COVID-19 outbreak, such as vaccines, medical equipment or devices, protective material and disinfectants; aid for the production of products relevant to tackle to coronavirus outbreak. Member States can also grant no-loss guarantees to provide incentives for companies to invest. The EC added that even more aid can be granted if Member States cooperate across borders;>
      • Deferral of tax payments;
      • Suspension of employers’ social security contributions and wage subsidies for employees.
    • On 27 March 2020, the Commission has temporarily removed all countries from the list of “marketable risk” countries under the short-term export-credit Communication. This enables Member States to make available public short-term export credit insurance in light of the increasing insufficiency of private insurance capacity for exports to all countries in the current coronavirus crisis.
    • The Commission will be using a number of provisions of the Treaty to assess State aid measures:
      • The decisions will mainly be based on 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.   The State aid decisions adopted in the last 24 hours have been based on this provision;
      • The Commission also refers to Article 107 (3) (b) TFEU which allows rescue and restructuring aid.  There is already a framework in place for this aid.  However, very importantly, the principle of ‘one time last time’ of these guidelines does not need to apply;
      • In the new Framework, the Commission also refers to the less used 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.
  • State aid clearances : Since early last week, the Commission has cleared a variety of schemes, including:
    • Denmark: a scheme to compensate organisers for the damage suffered due to the cancellation of large events with more than 1,000 participants; a EUR 1.3 billion scheme to partially compensate self-employed workers; and a EUR 130 million guarantee scheme for small and medium-sized enterprises;
    • Portugal: four guarantee schemes for small and medium-sized enterprises and mid-caps with a total budget of EUR 3 billion;
    • Italy: a EUR 50 million aid scheme to support the production and supply of medical devices and personal protection equipment and; a guarantee scheme to support SMEs;
    • Germany: two aid schemes to support the German economy; and a direct grant scheme not exceeding EUR 800.000 per company;
    • France: three aid schemes for a total amount of EUR 300 billion to support the French economy, a EUR 1.2 billion French “Fonds de solidarité” scheme to support small and micro-enterprises as well as self-employed, and a scheme deferring the payment by airlines of certain aeronautical taxes, to temporarily reduce the pressure on their cash flows;
    • Latvia: a EUR 250 million loan guarantee scheme and subsidised loan scheme;
    • Luxembourg: a EUR 300 million support scheme, and a support measure in the form of guarantees on loans;
    • Spain: a EUR 20 billion guarantee scheme for companies and self-employed;
    • UK: two aid schemes providing direct grants and guarantees for SMEs;
    • Ireland: a EUR 200 million support scheme in the form of repayable advances, to support companies;
    • Estonia: EUR 1.75 billion schemes to support the economy in the form of public guarantees on loans and granting of loans on favourable terms.

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. On 23 March, a number of merger notifications have been formally filed (three simplified and one non-simplified) which indicates DG COMP is again ready to accept notifications.
    • 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,
        • the French Competition Authority has announced that it will continue to progress its merger cases.  However, the timeline for merger reviews has been suspended until up to one month after the end of the current state of emergency (date still to be determined). Legal recourse for parties under investigation will be delayed up to two months after the end of the state of emergency. Companies are advised to delay any non-urgent plans to notify;
        • the Danish Competition Authority has further suspended deadlines for merger control until 13 April 2020;
        • the Belgian and Irish Competition Authority are encouraging companies to delay non-urgent notifications;
        • the CMA has announced it will continue to progress its cases, subject to the potential extension of statutory deadlines where necessary.  Meetings and hearings will be conducted remotely;
        • the Italian Competition Authority has suspended all deadlines (including for mergers) from 23 February until 15 April; the clock will restart on Monday, 16 April;
        • the Austrian Competition Authority has decided that all time limits for merger review will start on 1 May 2020;
        • all deadlines before the Portuguese Competition Authority have been suspended from 13 March 2020 although the Authority is still active and progressing merger cases.

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. For example, the CMA announced it is relaxing some elements of competition law to help supermarkets work together to the extent that this is necessary to protect consumers – for example, by ensuring security of supplies. Read more about this here.
  • The European Competition Network (composed of the European Commission and NCA’s) issued a statement recognising that additional industry cooperation might be needed given the crisis, for example to ensure continued supplies, but warns against price gouging.  Competition authorities will be quick to act against perceived cartels or abuses of dominance. The statement also notes that producers can set maximum prices to reduce the risks of price increases by distributors or retailers.
  • DG COMP has launched a dedicated page on its website aimed at companies cooperating with each other during the COVID-19 crisis. The website brings together the key legal competition instruments that impact on the concrete cooperation initiatives between companies seeking to effectively tackle the COVID-19 crisis. A dedicated mailbox has also been set up for companies to seek informal guidance from DG COMP;
  • The UK’s CMA issued guidance which mirrors some of the points made by the ECN.  The CMA will not take enforcement action in cases where temporary coordination between businesses is appropriate and necessary in order to avoid a shortage, or ensure security of supply.  The CMA will not tolerate businesses exploiting the crisis as a ‘cover’ for non-essential collusion, such as the exchange of commercially sensitive information or denying rivals access to supplies or services.  Manufacturers can also take steps to help combat ‘price gouging’ or excessive pricing, by setting maximum prices at which retailers may sell their products.
  • The cases that are close to finalisation are still being progressed.
  • 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.  In the UK, The Courts remain open but are encouraging the use of remote hearings where possible.
  • The staff at most major arbitral institutions are working remotely but remain operational.

5. General Court and CJEU

  • The General Court and CJEU have suspended all hearings.