Author: Molly Donovan
Crises that disrupt distribution chains and cause supply shortages tend to prompt discussions among competitors about how to survive. Discussions may begin as relatively innocuous information exchanges but become risky when they turn to coping strategies. This topic can sometimes lead to conversations amongst competitors such as, “We’re all in the same boat, so joint efforts ought to be made to stabilize prices,” or “We, as an industry, should stay on the same page and base future price increases on the rising costs of material costs and/or distribution downstream.” As we know from history (earthquakes, tsunamic, floods), those sorts of discussions are real and prompt DOJ investigations. As difficult as it has been for some businesses, the COVID-19 pandemic will not be a defense to cartel conduct.
So now that at least some aspects of business have returned to normal, it’s an excellent time for in-house counsel to survey the relevant business units to assess whether any potentially anticompetitive conduct occurred over the last couple of years. Counsel can do this inquiry with minimal cost and minimal disruption to business: a few key interviews, a high-level but strategic sweep of emails, and a big picture look at pricing and production figures. Top leadership can deliver messages that make it clear that whistleblowers will be protected (consistent with federal law). Companies can set up a message box so employees can self-report anonymously.
An antitrust check-up is a good idea not just for companies operating in the United States, but also for non-U.S. companies whose products have made their way into the United States, even as component parts of downstream finished goods. This is a function of a U.S. statute called the FTAIA that is used to prosecute non-U.S. companies whose conduct allegedly affected U.S. trade, even in a way that’s arguably “trickle down.”
Why undertake an antitrust and competition check-up now? If the pandemic did prompt risky conduct, you must make sure it stops and mitigate the effects as much as possible. With the help of an antitrust attorney, you can consider self-reporting, and leniency may or may not be available, as the requirements and analysis are becoming more laborious and complex.
In any event, to the extent undesirable conduct did occur, the company will benefit if you can help root it out as early as possible. And you should understand the practical options for mitigation sooner rather than later. It’s a low-cost undertaking that could reap big savings in the end.