Ukraine and its impact on anti-trust policy
22 Apr 2022
Last month we published our piece on the competition law and reputational risks that can emerge when firms work together on sustainability. In that blog, we warned that the CMA and the Government have not made it straightforward enough for companies to take advantage of sustainable business practices. Here, we consider the consequences of the Ukraine war on competition law and possible policy responses that governments could deploy.
The political consequences and financial fallout of the sustained attack on Ukraine by Russia continue to mount. Oil and gas supplies were immediately hit – and prices rose. Reliance on Russian gas was a concern before Russia started the war and has become a crisis for Europe – particularly for Germany, who abandoned nuclear power in favour of gas.
Food supplies to Europe are being hit. Production of food will be impacted by a shortage of fertilisers from Russia. Food price inflation is going to rise exponentially. The price of wheat is expected to soar and is already having an impact in some of the poorest countries in the world who rely on Ukrainian wheat.
This dreadful combination of rising prices of oil and gas and shortages of wheat are a double whammy. Where does competition law come in?
State aid in crisis
Let’s recall what happened during the two most recent crises in Europe: the financial crisis and the Covid crisis.
During the financial crisis, EU state aid rules were relaxed to save banks from failing, and this meant that the UK banking sector was rescued. The UK still does not have a subsidy control regime in place. If it did, and a similar approach were to be adopted by the CMA, decisions on subsidies for farming businesses could be taken in real time, perhaps overseen by the CMA’s Subsidy Advice Unit. This Unit will be set up under the Subsidy Control Bill, which is now awaiting Royal Assent, and looks set to enter into law imminently.
On Covid, the European Commission swiftly introduced a Communication on a Temporary Framework in relation to cooperation by firms involved in the manufacture and supply of medicines and medical equipment used to test and treat patients. It covered arrangements involving companies already active in the relevant sector and others that might switch over to producing scarce products.
"What is clear is that a lack of flexibility and innovative thinking might give way to an inertia in the CMA’s approach and leave it lagging behind the EU."
Claire Harris - DRD Senior Advisor and competition expert
In response to the invasion of Ukraine a joint statement was issued on 21 March, 2022 by the European Commission, the European Competition Network and the EFTA surveillance authority. European firms will be able to benefit from relaxed state aid rules so that governments can provide temporary liquidity support to all companies affected by the crisis. There is also potential for firms to receive a grant to cover increased energy prices. We’ve yet to see the CMA’s intervention: with state aid legislation not quite yet on the statute book, it’s hard to speculate on what steps could be taken to protect farming and food supplies in the short to medium term. Without the necessary powers it is difficult to see what concrete steps the CMA should be taking in light of this crisis. But what is clear is that a lack of flexibility and innovative thinking might give way to an inertia in the CMA’s approach and leave it lagging behind the EU. Putting the protection of competition above feeding the nation would be a perfect storm.