Competition law limits coronavirus cooperation on issues of labour

Out-Law News | 17 Apr 2020 | 4:52 pm | 3 min. read

Businesses must be careful to avoid breaching competition law when discussing how best to address labour supply issues with other companies in their market in light of the Covid-19 pandemic, legal experts have said.

Employment law expert Edward Goodwyn of Pinsent Masons, the law firm behind Out-Law, said it is understandable that businesses would seek to work together to establish industry best practice approaches on issues such as job retention and managing employee welfare as a result of the global pandemic.

"Companies understandably want to maintain their relative status quo especially during the period of lock down and to allow everyone to exit on the same basis as they entered the lock down period," he said.

In certain circumstances, sharing certain information between rival companies may be legitimate where that cooperation is necessary to address the challenges of Covid-19 and to benefit employees, according to competition law expert Alan Davis of Pinsent Masons. Davis said that legislation and guidelines published in the UK and by the European Commission allow more cooperation between competitors to address Covid-19 issues than would otherwise be permitted.

Goodwyn Edward

Edward Goodwyn

Partner

It is understandable that businesses would seek to work together to establish industry best practice approaches on issues such as job retention and managing employee welfare as a result of the global pandemic.

However, Davis warned that businesses must be careful not to over-share commercially sensitive information with rivals and said they should reach their own decisions on how best to manage the labour issues that arise from the Covid-19 crisis.

Goodwyn and Davis were commenting after the Federal Trade Commission’s Bureau of Competition and the Justice Department’s Antitrust Division jointly announced that they will seek to enforce antitrust laws in the US to stop employers seeking to exploit doctors, nurses, grocery store workers, pharmacists, warehouse workers and others "on the front lines of the coronavirus pandemic" through anti-competitive conduct.

"The Covid-19 pandemic may require unprecedented cooperation between federal, state, local, and tribal governments, private businesses, and individuals in order to protect the health and safety of Americans," the agencies said in their statement. However, they said they are "on alert for employers, staffing companies, and recruiters, among others, who might engage in collusion or other anti-competitive conduct in labour markets, such as agreements to lower wages or to reduce salaries or hours worked".

FTC chairman Joe Simons said: "We will not stand for any collusion among employers that would deprive workers of competitive compensation for their hard work."

Assistant attorney general Makan Delrahim of the Department of Justice’s Antitrust Division said: "Even in times of crisis, we choose a policy of competition over collusion. The Division will use its enforcement authority to ensure that companies and individuals who distort the free market for labour are held to account."

Employers that engage in anti-competitive conduct in the US labour market risk criminal prosecution and fines, according to the agencies, which have encouraged the reporting of harmful conduct.

"Both the UK's Competition and Markets Authority (CMA) and the European Commission have made clear that, notwithstanding the challenges of the Covid-19 crisis, competition law still applies to cooperation and the sharing of commercially sensitive information between competitors," said Davis. "In the past, economic crises have sometimes resulted in cartel-type behaviour between firms struggling to survive.

Davis Alan July_2019

Alan Davis

Partner, Head of Competition, EU & Trade

Cooperation – and how it is done – must still be 'appropriate and necessary' and 'competition must remain in place, wherever possible'. Therefore, cross-industry discussions and competitor cooperation needs to be approached with due caution.

"There are now legal exemptions in place for certain types of cooperation between competitors in the groceries, ferries and medicinal supplies sectors. However, the permitted activities are narrowly prescribed and those arrangements have to be notified in writing to the Secretary of State. The orders permit, for example, sharing information and coordination in relation to the availability and deployment or redeployment of workers in those critical service sectors but do not exempt cooperation that is not a response to the Covid-19 crisis, and do not cover the direct sharing of prices or costs information among businesses - such conduct may still infringe competition law."

"For all other sectors, the general guidance from the CMA makes clear that cooperation between competitors may be permitted where the coordination is necessary, for example, to ensure that essential supplies find their way to consumers or that key workers can travel safely to their place of work. However, the cooperation – and how it is done – must still be 'appropriate and necessary' and 'competition must remain in place, wherever possible'. Therefore, cross-industry discussions and competitor cooperation needs to be approached with due caution," Davis said.

"Whilst it may be possible to share best practice across an industry on issues such as furloughing where this would benefit employees, care should be taken not to share specific data on an individual company's approach or rates of pay, or agree with a competitor to pay furloughed workers only the amount recoverable under the Government's Job Retention Scheme or a maximum percentage of their existing salary."

"US regulators have focused on competition law enforcement in relation to labour markets more often than their counterparts in the UK or EU, perhaps since employment rights are stronger here than across the Atlantic. However, it is clear that competition law could also be enforced in the UK and EU on such issues," he said.