The momentum for financial support for undertakings affected by Russia’s sanction policy is mounting. The European Union has already announced a proposed compensation scheme. The funds available are insufficient to adequately compensate the loss, however. Other proposed measures are market withdrawal (the removal of certain goods from the market) and non-harvesting – precisely the measures that are often deemed to be prohibited on the grounds that they conflict with competition law.
In normal situations competition law does indeed prohibit competitors from making agreements with each other on their product volumes. However, the Russian boycott on trade in Dutch agricultural and other products is not a normal situation. That boycott is a response to the sanctions announced by the European Union itself (including the Netherlands) in response to the geopolitical developments in Ukraine. In that context it would appear unreasonable to pass on the consequences of the sanctions to a limited number of undertakings that have been affected (by coincidence, so to speak) by the boycott.
Since 1 January of this year the European Commission can set aside the cartel prohibition, subject to strict conditions. This applies only to agricultural products and for a maximum period of six months. It remains to be seen, however, whether that measure isn’t too little, too late. But even without such a decision of the European Commission, competition law allows temporary crisis cartels, also if they last longer than six months, since competition law provides for an exception from the cartel prohibition. If, briefly stated, the advantages of a cartel agreement outweigh the disadvantages, an exception from the cartel prohibition can be made. Temporary agreements on supply restrictions, for instance, can prevent prices from dropping below a certain minimum level. Undertakings that would otherwise have gone bankrupt can then just about manage to stay in business.
As soon as the Russian trade boycott ends and the crisis cartel ceases to exist, the undertakings involved can (and must!) compete with each other again in all respects. Because the temporary crisis cartel will allow all the undertakings to survive the boycott, that competition will be keener than if some of them hadn’t survived. That keen competition will allow consumers to profit from lower prices. Simply put, a temporary crisis cartel allows consumers to profit in the medium or long term from the fact that the trade boycott has not led to the disappearance of (innovative) undertakings. Crisis cartels can furthermore prevent a situation in which undertakings that, in principle, are operating soundly and efficiently go bankrupt due to overexposure to the Russian sanctions. If an uncontrollable forced rationalisation removes efficient undertakings from the market while certain less efficient undertakings survive, consumers will ultimately suffer the consequences (i.e. higher prices and less choice). In this type of situation a temporary crisis cartel may be justified to safeguard the continuity of efficient undertakings.
Subject to strict conditions, temporary crisis cartels can therefore offer a way out of the current situation – but they are a tricky business. It is therefore advisable to contact the Netherlands Authority for Consumers and Markets (ACM) or possibly the European Commission beforehand.
