New innovations, measures and rules are propping up left, right and centre to manage the Covid-19 crisis. One such measure appears to be to go easy on cartels in the time of COVID.
Cartels are not just the Pablo Escobar-esque drug cartels. In fact, when business, enterprises or associations form a mutual agreement to shun competition on price, product and customers, it's a cartel. The problem with cartels is that the consumers end up paying more, they don't get the best price or even the best product.
Cartelisation via agreements has been explicitly restricted under the Competition Act, 2002. Any such contract, agreement or deal is considered void. The rationale has been that it will have an appreciable adverse effect on competition.
The Competition Commission of India in an advisory has said that to cope with the changing nature of demand and supply in the time of this pandemic certain deals that could have been considered anti-competitive cartelisation will be allowed.
The advisory says, “To cope with significant changes in supply and demand patterns arising out of this extraordinary situation, businesses may need to coordinate certain activities, by way of sharing data on stock levels, timings of operation, sharing of distribution network and infrastructure, transport logistics, R & D, production etc. to ensure continued supply and fair distribution of product.”
Such cartel-like agreements will be permitted if they pertain to concerns like sharing data on stock levels, timings of operation, sharing of the distribution network and infrastructure, transport logistics, and R&D, to ensure continued supply and fair distribution of products during the COVID crisis.
Letting pro-consumer cartels operate is becoming an interim measure across continents. The European Union Commission has released a ‘Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak’. By virtue of this temporary framework, the European Union Commission has permitted different degrees of cooperation, especially in the health sector.
Australia too has granted interim authorisations to some sectors to ensure both a smooth functioning of the economy and seamless provision of essential goods. The Australian Competition and Consumer Commission clarified, “The following interim authorisations have been granted to enable firms to cooperate during the COVID-19 pandemic.”
With nuanced leeway being granted to cartels that may be pro-people, the question that remains is - will this arrangement will sustain in a post-COVID world? While it is likely that cartelisation for the nation doesn’t remain the norm, for now there certainly is a good cartel, bad cartel distinction.