COVID-19 Implications on Competition Law - State Aid Measures and Delay in Merger Notifications in Finland and the EU
17 March 2020
Authors: Meri Vanhanen and Maria Wasastjerna
As the COVID-19 pandemic spreads across Europe and the rest of the world, its impacts are felt in all sectors of the economy and society, competition law being no exception. The current exceptional circumstances will have an effect on, among other things, merger control and state aid matters.
Competition authorities are already struggling with a variety of practical challenges and trying to balance with the need for business continuity, compliance with administrative deadlines and legal certainty. Last week, the European Commission’s Directorate-General for Competition (DG Competition) announced that, due to the complexities and disruptions caused by the pandemic, companies are encouraged to delay merger notifications originally planned until further notice, where possible. This statement may, among others, refer to the authority’s potential difficulties in collecting information from third parties, such as customers, competitors and suppliers, and to possible limitations in terms of access to information and databases following the authority’s remote working measures as of 16 March 2020.
In the same vein, earlier this week, the Finnish Competition and Consumer Authority (FCCA) announced that notifying a transaction should be agreed in advance with the FCCA, and postponing merger notifications is recommended. Also, the FCCA noted that it may take longer than usual to investigate a transaction.
With respect to state aid, European Commission (EC) President Ursula von der Leyen and Executive Vice President and Competition Commissioner Margrethe Vestager announced on 13 March 2020 that the EC stands ready to "use the full flexibility of the state aid rules" to help member states mitigate the consequences of the pandemic. In this context, a Danish state aid package to compensate organisers for damage suffered due to the cancellation of large events was the first to be approved - within 24 hours of receiving the notification. Many other state aid packages are expected to follow, placing DG Competition in an active role in the EC’s economic crisis management.
However, the EC has only just started applying the state aid rules to measures addressing the consequences of the pandemic and it is likely that the legal framework will evolve going forward. The EC just published a draft proposal for a state aid temporary framework to support the economy. The new framework would enable four types of aid; direct grants and selective tax advantages, state guarantees for loans taken by companies from banks, subsidised public loans to companies, and safeguards for banks that channel support to the real economy. The EC proposal has been sent to the member states for consultation of their views. While businesses should be encouraged to use all of possibilities available to overcome the challenges brought upon by the epidemic, at the same time, companies seeking to benefit from COVID-19 support in the EU are advised to carefully assess compliance with applicable state aid rules.