Competition and State Aid law (as at 17.5.2020)

In light of the developments related to the SARS-CoV-2 virus (COVID-19), we have prepared an overview of the development in competition law that may be relevant in the current situation.

State aid

To help companies in the current situation, Member States can approve measures within an already existing framework, especially on the basis of Articles 107(2)(b), 107(3)(b) and 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU) and in accordance with the de minimis rules and the General Block Exemption Regulation. Earlier this month, European Commission thus approved a 12 million EUR Danish scheme to compensate damages caused by cancellations of large public events due to COVID-19 outbreak. European Commission decided on the compatibility of the Danish scheme with the State Aid rules within 24 hours and thus sent an important signal to Member States that it intends to actively participate in the management of the current economic situation.

In addition, the European Commission adopted a Temporary Framework, based on Article 107(3)(b) of the TFEU (aid to remedy a serious disturbance in the economy of a Member State). The Temporary framework, as amended on 3 April 2020, contains specific measures intended to mitigate consequences of SARS-CoV-2 (COVID-19). The Framework was further expanded with another amendment, which is intended to address the recapitalisation and subordinated debt measures. Namely, the Temporary Framework permits 11 types of aid: (i) direct grants, equity injections, selective tax advantages and advance payments, intended to address urgent liquidity needs of undertakings, in the amount of up to 800,000 EUR per undertaking; (ii) State guarantees for loans taken by undertakings from bank, which are intended to ensure that banks keep providing loans to the customers who need them; (iii) subsidised public loans to undertakings in the form of subsidised interest rates for loans; (iv) safeguards for banks that channel State aid to the real economy, which is intended as an aid for bank’s customers and not the banks themselves; (v) public short-term export credit insurance; (vi) support for coronavirus related research and development; (vii) support for the construction and upscaling of testing facilities; (viii) support for the production of products relevant to tackle the coronavirus outbreak, (ix) targeted support in the form of deferral of tax payment and/or suspensions of social security contributions; (x) targeted support in the form of wage subsidies for employees; and (xi) targeted recapitalisation aid to non-financial companies if no other appropriate solution is available. In regard to the latter measure, it should be noted that the novel amendment provides several safeguards to avoid undue distortions of competition within the EU. It should be noted that under certain conditions, certain aids from the Framework can be cumulated with each other and also with other existing types of aid. To ensure that the Temporary Framework is not used for taxpayer support unrelated to the COVID-19 outbreak, only the undertakings that entered into difficulty after 31 December 2019 are envisioned to be eligible for aid. The Temporary Framework is intended to be in place until the end of December 2020 but can be extended upon the European Commission’s prior assessment. Due to the nature of solvency issues that the last amendment intends to address, the period for recapitalisation measures has been extended until the end of June 2021. European Commission already issued 108 decisions, whereby it approved State aid schemes under the newly adopted Temporary Framework, with most approvals said to be granted within 24 hours of their notification.

European Commission furthermore prepared an Overview of State aid and Public Service rules applicable to the air transport and maritime sector during the COVID-19, and a Recommendation on vouchers offered to passengers and travellers as a form of an alternative to the reimbursement for cancelled package travel and transport services.

State aid in Slovenia

To provide appropriate measures that would ensure sufficient liquidity to the economy and mitigate the consequences that COVID-19 epidemic has on citizens and economy, the Republic of Slovenia notified three State aid schemes under the Temporary Framework to the European Commission. The latter thus on 24 April 2020 approved the first “umbrella” scheme, with which it found measures as envisioned by the Act Determining the Intervention Measures to Contain the COVID-19 Epidemic and Mitigate its Consequences for Citizens and the Economy (ZIUZEOP) to be compatible with the EU law. Found to be compatible were especially the measures regarding reimbursement of wage compensation, exemption from the payment of social security contributions and state guarantees for performance of borrowers’ payment obligations etc. Moreover, on 30 April 2020, two schemes that concern measures as provided by the Act on Additional Liquidity to the Economy to Mitigate the Effects of the COVID-19 Infectious Disease Epidemic (ZDLGPE) were approved. The ZDLGPE as State aid measures envisions (1) state guarantees for working capital or investment loans and (2) temporary measure of rent rebates and rent exemptions for tenants of commercial estate owned by the Republic of Slovenia or by local communities.

The abovementioned schemes are subject to general rules as per the Temporary Framework; hence they are subordinated to the limitations regarding certain types of aid and rules concerning beneficiaries, cumulation and duration etc. as contained therein. In that regard and on that ground ZIUZEOP and ZDLGPE provide for rules and conditions regarding specific Slovene measures. More information regarding measures from the “umbrella” scheme (ZIUZEOP) and conditions in that regard can be found at Anti-Corona Package 1 – Q & A, while the overview of measures from the guarantee and rent relief schemes and the conditions thereof can be accessed at Anti-Corona Package 2 – Q & A.

Merger Control

Directorate-General for Competition of the European Commission (DG Competition) as a special measure encourages companies to delay merger notifications originally planned until further notice, where possible. Companies that are at the end of their pre-notification stages are thus urged to delay notifications until further notice. If the companies wish their transactions to be reviewed as a priority, they will be required to clearly set out their reasoning (e.g. impending long stop date, significant penalty payments as a consequence of the delay etc.).

The abovementioned measure only relates to the transactions that are in a pre-notification stage. Already notified transactions are, on the contrary, not subject to special measures, hence DG Competition remains bound to strict timelines. DG Competition also notifies companies that it will temporarily also accept and encourage all submission in digital form, either (i) through email to  or (ii) through a platform eTrustEx.

Slovenian Competition Protection Agency (Agency) likewise urges companies to delay their merger notifications and notifies them that due to COVID-19 related personnel measure, decisions could be delayed. Moreover, Agency additionally notified the companies that it will accept also the submissions that are in electronic form without a safe electronic signature, which can be sent via email to . Original documents in printed form can be sent via post but can also be delivered subsequently.

Antitrust guidance by the ECN and the European Commission

European Competition Network (ECN), the member of which is also the Agency, issued a joint statement on the application of competition law during the crisis in view of the COVID-19 outbreak. The following conclusions that the companies may take into account can be discerned from the statement:

• cooperation and agreements between undertakings would be permissible and compliant if their intention is to ensure the supply and fair distribution of scarce products to all consumers,
• competition protection agencies would seemingly not take action against temporary and necessary measures that were put in place to avoid a shortage of supply,
• permissibility and compliance of the imposition of maximum prices by the manufacturers is again emphasised, in the present case for the intention of controlling the potentially unjustified price increases at the distribution level.

Regardless of the above, restrictive agreements (i.e. cartel agreements) and abuses of dominant position with which current crisis is exploited, remain under close supervision. Such practices could for example be those that exploit the increased demand for the products considered essential for the protection of consumers’ health in this crisis, for the imposition of unreasonably high (exploitative) prices.

On 8 April 2020  the European Commission provided some further practical guidance on the assessment of cooperation among undertakings during the COVID-19 epidemic in the form of Temporary Framework Communication. The European Commission emphasized the importance of temporary cooperation and coordination intended to bridge the gap between demand and supply of certain products (in particular, the urgently needed hospital medicines). Following are the key takeaways:

• the European Commission is willing to provide to undertakings with ad hoc guidance on specific cooperation projects in the form of written comfort letters, thus temporarily stepping away from principle of self-assessment;
• certain practices of trade associations such as joint purchasing would be deemed unproblematic under antitrust rules, provided they are subject to sufficient safeguards (e.g. no individual information on undertakings is exchanged) all within the framework of existing rules;
• exchange of commercially sensitive information and coordination in connection with organization of production, supply and distribution may be considered unproblematic and would not give rise to enforcement priority, if it“(i) is designed and objectively necessary to actually increase output in the most efficient way to address or avoid a shortage of supply of essential products or services, such as those that are used to treat COVID-19 patients; (ii) is temporary in nature; and (iii) does not exceed, what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply”. All such exchanges are to be documented and made available to the European Commission upon its request;
• the cooperation would be considered allowed if it is based on an imperative request from public authorities to undertakings to temporarily cooperate in response to urgency related to the epidemic.

The European Commission also confirmed its resolve to act against the undertakings taking advantage of current situation, stating it “will not tolerate conduct by undertakings that opportunistically seek to exploit the crisis as a cover for anti-competitive collusion or abuses of their dominant position” by exploiting customers and/or limiting production.

Practice will show what the statements regarding allowed cooperation between undertakings in the crisis means. However, it may be assumed that (at least) the agreements regarding development and production of necessary products, which do not include the provisions regarding too high (exploitative) prices of the end products, will be permissible.

Procedures in Slovenia

Act on temporary measures related to judicial, administrative and other public law matters intended for the management of spread of contagious disease SARS-CoV-2 (COVID-19) (ZZUSUDJZ) was adopted following an urgent deliberation. ZZUSUDJZ came into force on 29 March 2020, the day after being published in the Official Gazette of the Republic of Slovenia. Moreover, as of 1 May 2020, the amendment to ZZUSUDJZ is also in effect.

ZZUSUDJZ envisions temporary measures in both judicial and administrative matters. From the competition law perspective, of particular relevance could be the suspension of deadlines in the administrative matters. ZZUSUDJZ, except for urgent matters, envisions the suspension of running of deadlines for the performance of procedural actions of clients and for fulfilment of their material obligations, performance of procedural actions of administrative bodies and issuing of administrative acts. Deadlines for the exercise of substantive rights in administrative matters which would run out within the time of implementation of temporary measures will be extended, so that they expire on the eighth day from the date of termination of these measures. The above is also applicable to the procedures before the Agency. Deadlines will thus be suspended also in the procedures regarding the notification of concentration and for the submission of responses to the Agency. Moreover, with the exception for urgent matters, the suspension of running of deadlines will also apply for the minor offence proceedings, whereby the Agency decides on the existence of a minor offence due to the violation of competition law rules. Parties to the procedure and the potential perpetrator are required to be notified of the running of deadlines in urgent administrative and minor offence proceedings. ZZUSUDJZ additionally envisions the suspension of limitation period in judicial matters which will also apply in the urgent matters, if the president of the Supreme court decides so. This could also have an influence on the judicial proceedings against the decisions of the Agency as these proceedings are classified as urgent matters, which means that the current framework does not represent a reason for the suspension of limitation period in these proceedings.

To obtain answers regarding novelties that were brought to the Slovene legal system with the said amendment to ZZUSUDJZ, please see the following link: Amendments to the ZZUSUDJZ (judicial, administrative, other public matters) – Q & A.

 

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Our law firm is actively following the latest COVID-19 developments. As always, you can contact us via e-mail ">info@kbp.si or telephone +386 (0)1 2445500, or you can directly contact the lawyer you are generally in contact with.

Law Firm Kavčič, Bračun & Partners, o.p., d.o.o

Ljubljana, 17 May 2020

 

All information contained herein is based on applicable law or obtained from publicly available data or other sources believed to be reliable. This document is for general information purposes only, may be subject to change and may not be used instead of a legal opinion/advice. KBP does not guarantee the accuracy of the information and shall not be liable for any damages or costs in connection with the use of, or reliance on, the information contained herein.