In this article, the author has discussed about the challenges faced by the companies under the Competition Act during the lockdown introduced by the government due to Covid-19.
The outbreak of the COVID-19 has made a dreadful impact all around the world, compelling the Indian Government to issue circulars and guidelines regarding compulsion of wearing face-mask, cleaning and sanitization, being the top priority for everyone.[1] The Ministry of Consumer Affairs under its powers enshrined under Section 2A(2) under the Essential Commodities Act have made amendments under clause 8 of the Essential Commodities Act, 1955, in order to bring to Masks and Hand Sanitizers under the ambit.[2] Furthermore, the Competition Commission of India has suspended all of its functions related to filing new matters through the circular dated 23rd March, 2020.[3] However this suspension would not infer that retrospective complaints will not be filed. This being the case, and the surge in the spread of COVID-19, the impact of predatory pricing of N-95 Masks[4] and not having stocks of sanitizers by the companies is likely tending towards Appreciable Adverse Effect (AAE) on the market. Therefore, an important question which begs the attention is whether the companies benefitting themselves rather than helping the government in the time of crisis?
The Competition Act itself states the pro-competitive factors such as benefiting the consumers; improvements in the production or distribution of goods or the provision of services, and the promotion of technical, scientific and economic development.[5] With these factors another question arises that whether the government policies made are being effectively implemented?
In the time of crisis where humanity calls for, the companies tending towards making profit involves competition law at risk. Abusive behaviour will likely attract action, thus resulting in penalty.[6] Market being the key area throughout and after this pandemic the United States Department of Justice have also issued a statement that “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”.[7] In addition, the European Union Authorities have laid down the notification on 23rd March, 2020[8], stipulating that “companies taking advantage of the crisis to increase prices or mislead consumers should expect no mercy from the authorities.”[9]
When the world is fighting for the discovery of vaccine to cure this ongoing pandemic, the companies are essential to help in the research and should include arrangements 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 any way in a collaborative effort.
It also requires the government to take stringent actions against any such predatory pricing, in order to curb any such unjust profit in such circumstances. Countries like US, UK, China, South Korea have levied heavy penalties with relation to surge in the prices of the commodities which are essential and/or the government have made them essential like in India.[10]
Thus, there is a need for a guideline to be issued by the Competition Commission of India to curb any such activities at the time of the crisis, and shall also attract penalties if any company found to do such activities. In the past, the US Federal Trade Commission during the time of Hurricane Katrina investigated many incidents of price overcharging by refiners, wholesalers, and retailers. Many countries have issued such needed guidelines in these times, for instance, the US Department of Justice has published an advisory guideline stating that companies that fix prices for health-related products and equipment such as sterile gloves and face-masks, could face criminal prosecution in future.[11] Moreover, the South African Competition Authority is investigating a dozen firms that sell sanitizers, gloves and face- masks, who were suspected of hiking the prices of such products.[12]
References:
[1]Ankit Srivasatava, Covid-19 Terror in India: Competition Law Challenges, India Law Journal, https://indialawjournal.org/covid-19-terror-in-india.php. [2] S.O. 1087(E)- In exercise of the powers conferred by sub-section (2) of section 2A, of the Essential Commodities Act, 1955 (10 of 1955), the Central Government, hereby makes the following Order, to regulate the production, quality, distribution, logistics of masks (2ply & 3ply surgical masks, N95 masks) & hand sanitizers (for COVID 19 management) namely :—……… “(8) masks (2ply & 3ply surgical masks, N95 masks) & hand sanitizers”. This Notification shall remain in force for a period up to 30th June, 2020 from the date of its publication in the Official Gazette. [3] https://www.cci.gov.in/sites/default/files/whats_newdocument/scan1.pdf. [4] Coronavirus scare grips India: Price of N95 mask shoots up to Rs 500, sanitiser shortage in stores Available at: https://economictimes.indiatimes.com/magazines/panache/coronavirus-scare-grips-india-price-of-n95-mask-shoots-up-to-rs-500-sanitiser-shortage-in stores/articleshow/74476650.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst. [5] Section 19(3), Competition Act, 2002. [6] Mark Hamer, Luis A Gomez, Creigthon Macy, Maria Carolina, Stephen Crosswell, “COVID-19 and Antitrust Law: Avoiding Legal Risks in a Time of Uncertainty”. [7] https://www.justice.gov/opa/pr/justice-department-cautions-business-community-against-violating-antitrust-laws-manufacturing. [8] https://www.crowell.com/NewsEvents/AlertsNewsletters/all/European-Competition-Authorities-Provide-Guidance-on-Application-of-Competition-Rules-in-Times-of-COVID-19 [9] Ibid. [10] Supra, note 6. [11] https://www.justice.gov/opa/pr/justice-department-cautions-business-community-against-violating-antitrust-laws-manufacturing. [12] https://www.iol.co.za/news/politics/covid-19-fines-will-be-issued-for-price-hiking-citizens-should-not-panic-buy-say-ministers-45455256.
Submitted by
Yash Tandon
Tamil Nadu National Law University
(Images used for representative purpose only)