Governments seeking to mitigate the economic crisis caused by the Covid-19 pandemic are facing pressures from industries to relax competition laws, allowing new freedoms to keep them afloat. At the same time, the need to protect consumers from corporate collusion and overpricing is urgent. Competition authorities in Africa have shown great flexibility towards this challenge.
Developed economies and developing economies alike face disruptions from the Covid-19 pandemic to global supply chain and consumer demand, looking to result in a global supply crisis and a systemic economic collapse. The rapid spread of the virus has impacted more than 200 countries according to World Health Organisation, with a recent proliferation in the African continent by April 2020, presenting challenges for business competition law and policy as governments seek to deal with the crisis within their borders. Testing the resilience of their competition authorities, African countries have taken far reaching steps to implement safeguards against the potential harm from anti-competitive practices, namely in Kenya, Nigeria and South Africa.
In both developed and developing countries, companies and businesses have attempted to respond to countries’ total economic shutdown by finding alternative means to stay afloat. Governments face a strong lobby from affected industries like the airline industry and supermarkets to relax ‘restrictive’ competition policies to preserve economic stability. However, such action is not without serious consequences for industries, business and consumers because it might result in anti-competitive practices such as price fixing, excessive pricing and collusion between competitors.
National competition authorities have responded to the crisis in different ways. On the one hand the European Commission promptly established a temporary framework in response to the exceptional circumstance of the Covid-19 crisis under Article 107 (2) (b) TFEU by re-activating Article 107 (3) (b) used during the 2008 financial crisis. On the other hand, the US Department of Justice and Federal Trade Commission only recently allowed exemptions from health sector companies to collaborate on vaccines. It reaffirmed its commitment to hold accountable violations of anti-trust rules even in the health sector. The UK granted temporary exemptions from anti-trust rules to supermarkets to coordinate food supply, and Norway to the airline industry to collaborate on route offerings. South Africa has granted an overall sector wide block exemption for the health sector. Some countries like France and China have toughened up their price regulations.
Sanctioning of excessive pricing: Kenya
Competition authorities are currently facing a worldwide surge in excessive pricing behaviours from retailers, especially in the health care sector. Investigations into excessive pricing of products like hand sanitisers and masks are currently being carried out in the UK, France, Brazil, Russia and Italy.
In Africa, Kenya’s competition authority (CAK) has actively engaged in proving alleged excessive pricing by Cleanshelf supermarket, and ordered refunds to customers due to their ‘unconscionably’ increased prices of hand sanitiser. Similarly, the China Competition Authority is also conducting strict monitoring and sanctioning.
Monitoring of online fraudulent conducts: Nigeria
In Nigeria, the competition authority (FCCPC) warned that anti-competitive behaviours in this time of crisis would have implications including criminal prosecution. It has already flagged the conduct of certain pharmacies gouging the prices of latex gloves. Such a measure had a positive ripple effect since the main online marketplace platform (Jumia) decided to delist products from 168 sellers of hand sanitisers and face masks who engaged in excessive pricing and fraudulent sales, and other price manipulations.
In a similar vein France took the initiative to regulate the price of hand sanitisers in an effort to prevent retailers and pharmacists from engaging in abusive price increases, taking advantage of consumers’ fear and excessive purchases of the product. It also suspended the sale of paracetamol by online platforms in order to prevent fraudulent sales and to keep control on stock management of paracetamol at a national level.
Enacting a sector-wide block exemption: South Africa
Some governments have granted business sector-specific exemptions from anti-collusion rules to mitigate the pandemic’s economic impact. The most important sector during this crisis, where the most far reaching steps have been taken in terms of exemptions, is the health sector, and so South Africa has granted a block exemption with a specific list to allow in the sector cooperation (COVID-19 Block Exemption for the Healthcare Sector, 2020). The list exempts hospitals, medical suppliers, laboratories and pathologists, pharmacies and healthcare funders from engaging in anti-competitive collaboration. It also enacted emergency price control measures on everyday goods (namely toilet rolls, disinfectants and pasta).
Overall, competition authorities’ response to the crisis has been piecemeal. Active responses from certain competition authorities in the African continent proves how dynamic those young agencies are. At the international level, no official guidelines or recommendations from multilateral organisations like the UNCTAD and the OECD have yet been published on how to go about competition strategy at the domestic and international level.
This crisis creates an opportunity to engage in international cooperation amongst agencies across the world to share best practices. It remains to be seen how competition authorities handle the monitoring of anti-competitive conducts throughout the crisis, but it definitely creates an efficient stress test for young authorities internationally. So far, the quick emergency response strategies demonstrated by some African agencies will hopefully be emulated by others.
Photo by Jay Zhang on Unsplash.