Law360 (April 1, 2020, 5:43 PM EDT) -- Antitrust agencies worldwide continue to adapt to enforcement in the time of COVID-19, balancing the need to be more permissive about intercompany collaboration necessary to combat the pandemic with warning others against taking advantage of the situation, all while still reviewing mergers.
Most international enforcers, experts say, are trying to show they're still in business even as they shift to telework. The rapidly evolving nature of the health and economic fallout from the novel coronavirus means, however, that signals and enforcement realities are changing by the day. Individual teleworking and other approaches are also very country-specific.
"To some extent, agencies are reacting ... to the situation in their own jurisdiction and what their local governments have decided. And whether there's a lockdown or not," said Ingrid Vandenborre, the head of Skadden Arps Slate Meagher & Flom LLP's Brussels office.
The strain of working remotely, coupled with a drastic shifting of priorities, has yielded an array of strategies overseas, including the prospect of slowdowns in merger reviews. Those reviews have been seriously hobbled as telework and the economic slowdown make market analysis far more difficult.
"Business is still continuing. But there is a slowness. Things aren't moving quite as quickly," said Steven C. Sunshine, the Washington, D.C.-based head of the global antitrust group at Skadden.
Merger review slowdowns are especially likely in the European Union, where antitrust enforcers have focused most of their energies on rapid-fire approvals of proposed state aid regimes meant to prop up bloc economies.
Europe's antitrust enforcers with the European Commission have been among the most vocal in asking companies to slow down on their merger notifications as the agency prioritizes signing off on several dozen economic stimulus measures under the bloc's state aid rules.
"The EC has been very focused on things that need to be done urgently. State aid decisions, for example," said Alec Burnside, a partner in Dechert LLP's Brussels office, who noted that the commission hasn't shown such "impressive speed" since the financial crisis. "They are alive to the emergency."
Prioritizing urgent issues at the commission may also become necessary in the merger context, Burnside said, if companies start contending transactions are needed to prevent them from going under amid the economic turmoil accompanying the outbreak.
"They will not want to be stampeded into deals that cause long term problems, but they will be astute to things that really need to happen in the short term," Burnside said.
According to Vandenborre, the commission has also been going even further in trying to buy itself time.
"The commission, even though publicly has said it's encouraging people to take their time and not to file, it's clear based on conversations with case managers that they're not accepting notification other than simplified forms. And very straightforward noncomplex transactions essentially," she said. "But for the other matters that are in prenotification pending, they are reluctant to accept notification."
The main reason, she said, is that enforcers are reluctant to conduct market testing under the pressures of the pandemic.
"If they can't conduct a market test and include sufficient third party feedback in their investigative record, they're not able to complete their investigation," Vandenborre said. "Many would be concerned about potential risk of being pushed into a phase 2 [probe], which could be a risk in the more complex cases if they're not able to complete a market test in phase 1 unless parties agree to withdraw their filing."
Phase 2 EU investigations can be put on hold and according to Vandenborre, every such case in the bloc with an upcoming deadline appears to have been paused.
The individual enforcers of Europe's countries have also been active, putting out guidance stating that bloc companies will be able to coordinate on distributing essential products without facing cartel charges. The European Competition Network said in a statement that it would not go after companies that take "necessary and temporary measures" required to get supplies to where they're needed.
Several individual European countries have also asked merger filers to slow down.
The UK's Competition and Markets Authority has actively been trying to facilitate inter-industry coordination. In addition to general guidance encouraging coordination, so long as it ends with the outbreak and is "undertaken solely to address concerns arising from the current crisis," the British government issued a waiver specifically permitting supermarkets to work together.
"That's pretty significant. I mean, you don't see that type of exclusion from competition law very often. And certainly we didn't have anything like that in the financial crisis back in 2008," said London-based Norton Rose Fulbright partner Ian Giles.
At the same time, the CMA has put out its own warnings against anyone trying to take advantage of the pandemic.
Giles also anticipated that the CMA will shift resources to prioritize merger reviews in the weeks and months to come. He also said the agency appears to be getting ready to slow its conduct probes, perhaps based on the difficulty of market investigations.
"I think the kind of general enforcement aspects of the CMA's portfolio will slow down, while they will focus on the specific supports and/or action needed on crisis-related conduct. But on the merger side they are still attempting to keep the review processes going as they need to within the timelines," Giles said.
Marc Waha, a Norton Rose Fulbright partner based in Hong Kong, says most Asian enforcers "are trying to conduct business as usual — with various levels of activity."
Chinese antitrust authorities continue to review mergers, Waha said, while Japanese, Hong Kong and South Korean enforcers continue to take "significant" actions.
And in Singapore, Waha said, enforcers are insisting on three days of in-person interviews for a case he's working.
"This is a clear sign of an authority just going ahead with its business," he said. "With really no changes."
What most Asian antitrust enforcements have not done, according to Waha, is send out many signals that they plan on tackling the competitive implications of the pandemic, either reacting to potential coronavirus-related conduct or in offering guidance on permissible conduct, with most actions taken under consumer protection and other laws instead. "We have seen some jurisdictions saying, 'We are interested to see what others are doing in the world,'" he said.
In the wake of the pandemic, Japan's Fair Trade Commission did, however, point companies to its general guidance on emergencies.
In a rapidly changing environment, enforcer operations can also change very quickly, Waha said, pointing to a recent announcement from Hong Kong's Competition Commission, which said that its offices would be closed as of March 23. Days later, on March 27, the commission, too, recognized that companies might need temporary "additional cooperation" to respond to the pandemic.
"The commission intends to take a pragmatic approach in its enforcement and advisory functions in respect of temporary measures which are genuinely necessitated by the COVID-19 outbreak and in the interests of Hong Kong consumers and society," the agency said.
In three Asian countries, Waha said, competition enforcement has mostly or completely ground to a halt.
In the Philippines, Waha said, antitrust enforcement has been shuttered entirely, alongside all other agencies deemed non-essential.
"All procedures are being suspended, all investigations are being suspended. And no longer accepting any new merger filings or any new complaints. So that's the most extreme case where it's just a full shutdown of the agency," Waha said.
Indonesia and Malaysia are "just working with just a skeleton staff," all of whom are working remotely, according to Waha. "So you can imagine that activity levels are very, very limited in these two countries," he said.
The Indonesian and Malaysian slowdowns likely won't have much impact on pending transactions, according to Waha, because most merger filings in Indonesia are made after a deal closes, and Malaysia has no mandatory merger control procedure.
But the Philippines are an open question, a country where Waha said antitrust officials have been active deal enforcers.
"This is a developing situation. We don't know what will happen," Waha said.
The Australian Competition and Consumer Commission has not yet asked companies to delay merger filings, according to Giles. Rather, he said, the ACCC has asked parties for regular updates, with signals of the need down the road to prioritize some enforcement.
"The ACCC will continue to consider proposed mergers but recognizes timelines for some reviews/applications (including those with statutory time frames) may need to be extended if there are challenges in conducting and completing the necessary inquiries with merger parties and market participants due to COVID-19," the agency said in a March 27 update. "Some reviews will need to be conducted on an urgent basis."
In addition, Giles said the ACCC has been canceling nonessential meetings as it shifts to remote work.
"There's obviously disruption both on the side of the businesses they engage with as well as within the ACCC," Giles said.
On the conduct and coordination side, the ACCC has also authorized airlines to work together on regional routes through potential measures like revenue-sharing and route allocation, permitted medical suppliers to coordinate on delivering equipment such as ventilators, and allowed grocers to team up as they deal with suppliers and transportation.
Canada's Competition Bureau, according to Kevin Ackhurst, head of the Canadian antitrust practice at Norton Rose Fulbright, issued the familiar dual message of warnings against taking advantage of the situation, namely through collusion or "deceptive marketing practices," while encouraging "pro-competitive collaborations between companies to support the delivery of affordable goods and services to meet the needs of Canadians."
"They didn't provide a guidance to say that they're changing their normal approach," Ackhurst said. "They just reminded people that there is scope under the act for competitor collaborations as long as they don't touch on price-fixing."
At the same time, the Competition Bureau has also had to severely constrain its responsiveness, shutting down phone lines for its information center, whistleblower hotline and merger notification unit, telling those who wish to communicate with the agency to do so through email. The agency has additionally signaled that its merger reviews could be delayed, according to Ackhurst.
South African enforcers with the Competition Commission have reacted "quite rapidly and quite effectively," according to Rosalind Lake, a Norton Rose Fulbright director based in Durban.
After a national disaster was declared, the agency said it would "significantly scale down" its operations, prioritizing complaints specific to COVID-19. The agency also discouraged any complaints unrelated to the outbreak, in addition to merger deals "except those involving failing firms or those firms in distress." But merger hearings are still moving forward, albeit with limits on who can be in the room, according to Lake.
Like many international enforcers, the commission postponed all in-person meetings, proceeding only with "critical engagements," and only remotely, Lake said.
One area in which South African officials have moved rapidly, according to Lake, is in tackling potential price hikes, with new rules on excessive pricing that apply to dominant firms, a special unit set up within the enforcer to look at price-related complaints, and expedited prosecutions. Price caps for health care services and products may also be coming, according to Lake.
"It's quite a comprehensive suite of responses in a relatively short period of time," Lake said.
Brazil's antitrust enforcer, the Administrative Council for Economic Defense, or CADE, issued a statement March 23 from its president asserting that most of its staff will be teleworking.
Agency president Alexandre Barreto emphasized, however, that CADE continues to function normally, approaching its efforts in a reasonable manner while expressing the need to remain vigilant against potential abuses.
Separately, the agency has said there will be no deadlines changes to its procedures governing mergers, administrative probes and leniency agreements, among others.
The situation for the Competition Commission of India has been changing rapidly as the entire country goes on lockdown. The agency appeared active through mid-March, issuing decisions as recently as March 16. But the next day it abruptly began to pump the brakes. The commission has now shifted to electronic filing, while adjourning pending matters and suspending filings from pending cases.
--Additional reporting by Matthew Perlman. Editing by Peter Rozovsky.
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