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The importance of competition policy in times of crisis

To handle this situation, companies are implementing solutions that in many cases may impact free-market competition. However, during the time, the competition law is still in effect, as a manner to guarantee markets to continue working under the assumption of free economic competition.

Accordingly, the authorities of countries such as France, Spain, Portugal, the UK, Mexico, and the United States, among others, have announced greater efforts to follow-up on prices and supply of high-demand goods during the crisis.

Listen: “Government aids move with the logic of keep helping large interests” (in Spanish.)

The preceding to avoid, for instance, abuse in the dominant position of certain companies in markets that lead them to charge excessive prices, which do not answer to the resulting temporary scarcity of the emergency. Another practice they are looking to control is the emergence of “crisis cartels” that could be formed if companies seem tempted to establish agreements to produce, for instance, greater earnings by restricting production or artificial price manipulation and impact the structure of the industry.

However, a common practice has been applying temporary exceptions to competition regulations; many of them directed especially for allowing cooperation agreements between economic agents for maintaining or increasing offer, satisfying demand, protecting the supply chain, and avoiding shortages or product hoarding.

In Germany or the UK, this flexibilization was directed specifically to the food supply chain. In Norway, the exception was applied to air, maritime, and land cargo and people transportation for three months which ends this coming June 19. On the other hand, the Australian Competition and Consumer Commission granted a temporary conditional authorization to the European Generic Medicines Association and its members to work together to allow continued supply of essential medicines during the pandemic, to identify and mitigate any shortages in the supply chain that could impact the availability of medicines in the country.

The Colombian case

In Colombia, the current administration adopted a series of competition regulations in regards to COVID-19 through Decree 482 of march of 2020, establishing a logistics and transportation center for analyzing and authorizing cooperation agreements seeking to produce logistical synergies in industries such as essential medicines, foods, and beverages, among others, to avoid national stockouts during the pandemic.

Read more: The pandemic visibilizes the degree of inequality (in Spanish.)

Free competition may also be impacted in the mid and long-term as one of the expected consequences of the economic crisis will be an increase in the concentration level of markets.

Because of this, some companies will have to close-down due to financial issues and in some cases adopt the Bankruptcy Law (Law 1116 of 2006) which was implemented to protect credit and recovery, and preservation of companies as economic units and employment generators through a process of reorganization and legal liquidation, under the criteria of plus value. The reorganization process hopes to preserve viable companies and normalize their commercial and credit relations through and operational, administrative, asset, or liability restructuring agreements.

Furthermore, this law helps the legal liquidation process to be quick and in an orderly fashion looking to make the best use of the equity of the debtor and the insolvency regime, protecting good faith in trade and equity relations in general and penalizes conflicting behaviors.

Others, however, will look to improve their condition by merging with their competitors. Nevertheless, some of these requests may result in pro-competitive as the exit of a company of the market could lead to greater consumer welfare of that produced by increasing the market power of the entity resulting from the merger.

Consequently, the efforts of the authorities will continue to be key as the recommendation of the Organization for Economic Cooperation and Development (OECD) –which Colombia is part since April–  in regards to business concentrations,  is to assess in detail the requests for rescue mergers, based on the bankruptcy of one of the requesting enterprises, avoiding creating benefits on the short-term for the sake of greater costs on the long-term and taking into account considerations of public policy in exceptional circumstances.

Among other mechanisms that result equally important is strengthening advocacy competition, with actions that include the whole territory to promote a sustainable competition culture in the consumer and producer community.

Therefore, the implementation from the authorities of pro-competitive actions to help governments, not only to face immediate challenges of the post-pandemic are essential and will help quick and sustainable recovery in the long-term.



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