Collaboration Amidst Crisis: Expedited DOJ / FTC Antitrust Review and Competitor Collaboration Pitfalls

While COVID-19 affects every segment of daily life both personal and professional, it is easy to forget antitrust law and the risks associated with competitor contacts in this time of crisis. 

The Department of Justice and the Federal Trade Commission recently unveiled an expedited review process for business collaborations working to protect Americans’ health and safety.¹ The agencies recognize that procompetitive collaboration among businesses providing health and safety-related services will be helpful and even necessary to address the pandemic’s ever-increasing strain on consumers. Procompetitive activity includes research and development, sharing technical—rather than company-specific—information, creating practice parameters to assist providers in clinical decisionmaking, entering into joint purchase agreements among health care providers to gain efficiencies and/or lower prices, and lobbying for the use of federal emergency authority. Further, the agencies will account for the exigent circumstances in evaluating efforts to stop or ameliorate COVID-19’s effects by offering an expedited business review process. A business seeking guidance on its coronavirus-related public health efforts under the expedited process may expect a response within seven days of submitting a written proposal.²

But even during a pandemic, antitrust law remains in full effect. Antitrust risks are present in all industries, across all markets and with businesses of all sizes. The agencies’ statement included a reminder that not all collaboration is well-intended or procompetitive, and all companies, regardless of industry, need to stay alert to avoid antitrust pitfalls. Agreements among competitors to fix prices, allocate markets and rig bids are per se illegal and prosecuted criminally in the United States. And in October 2016, the agencies put companies on notice that they would view no-poach and wage-fixing agreements as problematic and potentially criminal. Agreements that do not rise to the criminal level can still be unlawful if their intended or likely effect will produce anticompetitive effects in the market like output restrictions or higher prices to consumers.

Here are six antitrust pitfalls to avoid that may not be evident during these unprecedented times: 

• Employee Compensation: Agreeing on or even discussing with a competitor employee salary or other terms of compensation, either specifically or within a range; agreeing not to solicit or hire other companies’ employees; and agreeing on terms or benefits of employment can be problematic. For example, discussing with a competitor whether to pay employees during a shutdown or how to reduce employee hours can raise antitrust issues. 
• Information Exchanges: Sharing information to create and implement effective responses to COVID-19 can be procompetitive. Exchanging information, for example, may be helpful in forecasting industrywide needs and shortages. But sharing more information than necessary to respond proficiently to pandemic-related issues can implicate antitrust concern, particularly if a business shares company-specific data. As such, companies should avoid sharing production capabilities or quantities, supplier agreements or other competitively sensitive information.
• Tying and Bundling: Tying is selling one product on the condition that the buyer also purchases a different (the “tied”) product. Similarly, bundling is packaging and selling multiple products together. Generally, what matters is how coercive the tie or bundle is; if a business possesses the power to force an unwilling customer to purchase the tied or bundled product, it is more likely that the conduct is unlawful. But tying or bundling an essential good with nonessential goods during a time of crisis could be particularly problematic.
• Price-Gouging: Price-gouging generally refers to charging higher prices in times of crisis, including disease outbreaks, than would be charged absent those circumstances. Laws governing price-gouging generally apply to necessities like food, housing, fuel and medicine among other products. Antitrust concerns also arise in this area if competitors share pricing information, even in an attempt to satisfy state price-gouging statutes.
• Gun-Jumping: Gun-jumping occurs when merging competitors coordinate their competitive conduct prior to the actual closing of the transaction (substantive) and when merging parties fail to observe the mandatory waiting periods and clearance requirements under relevant merger control laws (procedural). Compliance with merger requirements is essential amidst the pandemic and its concomitant procedural slowdowns.
• Lobbying: Private lobbying promotes helpful collaboration between the private and public sectors. Efforts to guide allocation of public resources and address regulatory issues can expand the workings of private businesses to create health and safety-related solutions. Nonetheless, businesses should be mindful that discussions about lobbying efforts can stray into areas of competitively sensitive information.

Businesses—particularly those providing materials and services related to the health crisis—should remain mindful of antitrust risks in spite of the crisis, and Hunton Andrews Kurth LLP’s antitrust team is poised to answer any compliance-related questions.

Notes

1. Joint Statement, Federal Trade Commission and Department of Justice, “Joint Antitrust Statement Regarding COVID-19” (March 24, 2020).

2. Id. This process mirrors the FTC’s “Staff Advisory Opinion” procedure and DOJ’s “Business Review Letter” procedure and is a quicker form of review.