Businesses have been straining under supply chain challenges to deal with the broader implications of COVID-19 and have been turning to the Australian Competition and Consumer Commission (ACCC) for permission to work together with their competitors to address these issues.
This alert aims to provide practical guidance on when and how competitors can work together during this time of crisis.
What types of collaborative behaviour carry competition risks?
No matter how well intentioned your response, you should keep in mind that the usual rules of competition law, including the prohibitions against cartel conduct and anticompetitive concerted practices, still apply in these uncertain times. Businesses looking to alleviate supply chain issues should bear in mind that the following types of behaviour could raise competition concerns:
- agreeing with competitors to allocate customers, markets or geographic areas with competitors so to avoid shortages;
- agreeing with competitors how to allocate available supplies between customers (e.g., prioritising certain customers, setting maximum quantities for orders, agreed pro-rating of customer orders to deal with shortfalls);
- sharing or discussing competitively sensitive information, such as around pricing or capacity / supply levels and forecasts; and
- otherwise coordinating on commercial strategy.
The ACCC is able to grant authorisations for conduct that would otherwise breach the Competition and Consumer Act 2010 (Cth), and has demonstrated that it is willing to quickly grant interim authorisations where the proposed coordinated conduct would result in a public benefit relating to efforts to deal with the COVID-19 crisis.
What types of coordination has the ACCC authorised?
Over the course of the last week, the ACCC has granted (within one to two business days) a number of urgent interim authorisations.
- Major supermarket retailers. On 23 March 2020, the ACCC granted authorisation to allow Coles, Woolworths, Aldi and Metcash to coordinate with each other during the COVID-19 pandemic when working with manufacturers, suppliers, and transport and logistics providers to “ensure the supply and the fair and equitable distribution of fresh food, groceries, and other household items to consumers”. The ACCC granted interim authorisation within two business days.
- Australian Banking Association and member banks. On 20 March 2020, the ACCC granted authorisation to allow the Australian Banking Association and banks to work together to agree and implement a support package for small business customers experiencing financial difficulties as a result of COVID-19. The ACCC granted interim authorisation in one day.
- Medical Technology Association of Australia and its members. On 25 March 2020, the ACCC granted authorisation to the Medical Technology Association and its members and businesses to allow them to implement a coordinated strategy in relation to the supply of medical equipment and supplies in response to the COVID-19 pandemic. The ACCC granted interim authorisation in one day.
- Regional Express (Rex), Virgin Australia and Qantas Airways. On 26 March 2020, the ACCC granted authorisation to allow Rex, Virgin Australia and Qantas Airways (via QuantasLink) to coordinate flight schedules on ten regional flight routes during the COVID-19 pandemic. The ACCC granted interim authorisation in three days.
Even if coordination between competitors is for the public benefit, this can contravene competition law. Without seeking ACCC authorisation, any coordination that leads to (any element of) price, output, customer or market alignment, as well as the sharing of competitively sensitive information, is high risk.
Accordingly, if you need to engage in direct coordination with one or more of your competitors to address supply issues in this time of crisis, seeking ACCC authorisation is likely to be the best option to avoid allegations of cartel conduct.
Please contact us if you would like advice on the competition risks of coordinating with your competitors or for guidance on approaching the ACCC for authorisation.
This alert was prepared with the assistance of Jeremy Hardy, Associate.