Coronavirus: UK relaxes competition laws for food retailers

Out-Law News | 20 Mar 2020 | 3:56 pm | 2 min. read

Retailers will be allowed to collaborate in ways which might otherwise breach UK competition laws for a temporary period to ensure continuity of food supplies in the country in light of the coronavirus crisis, the UK government has confirmed.

The government confirmed that it would "shortly" seek to "amend elements of the Competition Act 1998, which prevents certain types of anti-competitive behaviour", using powers to relax the rules that can be applied in "exceptional circumstances".

It said: "This will be a specific, temporary relaxation to enable retailers to work together for the sole purpose of feeding the nation during these unprecedented circumstances. It will not allow any activity that does not meet this requirement." It is not immediately clear how long these temporary measures will stay in place.

Schedule 3 of the Act gives the Secretary of State power to exclude agreements from the prohibition against anti-competitive agreements in certain circumstances, including for "exceptional and compelling reasons of public policy".

Davis Alan July_2019

Alan Davis

Partner, Head of Competition, EU & Trade

The CMA's stance provides some measure of reassurance

The Competition and Markets Authority (CMA) welcomed the announcement and said it would relax its approach to enforcement further. However, it has written an open letter to the pharmaceuticals and food and drink industries urging companies to report cases of unjustifiably high price rises and said it will use its powers "to tackle bad behaviour". In a separate statement it issued a warning for businesses that the relaxed rules do not apply to.

"Where agreements are not covered by that legal relaxation, the CMA can offer the following reassurance: the CMA has no intention of taking competition law enforcement action against cooperation between businesses or rationing of products to the extent that this is necessary to protect consumers – for example, by ensuring security of supplies," the CMA said in its statement.

"At the same time, the CMA will not tolerate unscrupulous businesses exploiting the crisis as a ‘cover’ for non-essential collusion. This includes exchanging information on longer-term pricing or business strategies, where this is not necessary to meet the needs of the current situation. More guidance on this will follow from the CMA in due course," it said.

Similar temporary suspensions of antitrust rules are anticipated among various EU Member States. Earlier this week Eurocommerce, a trade body for the European retail and wholesale sector, issued a statement noting "that governments and competition authorities have indicated that, under these very special circumstances, they might waive normal competition rules to allow such exchanges in order to save lives, and keep supplies flowing. We ask that they indeed allow such cooperation to take place while the coronavirus crisis continues."

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law, described the moves taken by the UK government and CMA as "appropriate and pragmatic" and that they "are consistent with steps already taken by the European Commission and several EU member states in light of the current pandemic". 

"Time is of the essence as UK businesses grapple with financial and supply-chain strains arising from the Covid-19 crisis," Davis said. "As we await formal legislative changes permitting certain cooperation between supermarkets the CMA's stance provides some measure of reassurance. The CMA's statement implies that it is prepared to view such cooperation as 'exempt agreements', under Section 9 of the Act, that contribute to improving the production or distribution of goods in a way that benefits consumers and does not restrict competition further than necessary."