Articles Posted in Antitrust Counseling

Articles about antitrust counseling and training.

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Author: Luis Blanquez

If you read our articles regularly, you know an antitrust compliance policy is a strong tool to educate directors and employees to avoid risks of anticompetitive conduct. Companies articulating such programs are in a better position to detect and report the existence of unlawful anticompetitive activities, and if necessary, be the first ones to secure corporate leniency from antitrust authorities.

Antitrust Compliance Programs in the US and the European Union

But make no mistake––not any antitrust compliance policy is sufficient to convince the Antitrust Division of the Department of Justice (DOJ) that you are a good corporate citizen. You must show the authorities how your compliance program is truly effective and meets the purpose of preventing and detecting antitrust violations.

And how do you do that? As a start, you should get familiar with the following key documents.

Make sure you read them carefully because they have significantly changed the way DOJ credits compliance programs at the charging stage; and how it evaluates them at the sentencing stage. But that’s not all. For the first time, they also provide public guidance on how DOJ analyzes compliance programs in criminal antitrust investigations.

In this article, we focus on the new DOJ Policy for incentivizing antitrust compliance, as well as the 2019 and 2020 Guidance Documents. We also provide an overview of the most recent Deferred Prosecution Agreements (DPAs) and indictments from DOJ.

If you also want to review the new changes to the Justice Manual, you can see them here. In a nutshell, the new revisions impact the evaluation of compliance programs at the charging and sentencing stage. In the past the Justice Manual stated that “credit should not be given at the charging stage for a compliance program.” That text has now been deleted. The new additions also impact DOJ processes for recommending indictments, plea agreements, and the selection of monitors.

If you discover or suspect your company is under investigation for antitrust violations, you should, of course, consider hiring your own antitrust attorney.

The 2019 DOJ New Policy for Incentivizing Antitrust Compliance

In the past, if a company did not win the race for leniency, the DOJ’s approach was to insist that it plead guilty to a criminal charge with the opportunity to be an early-in cooperator, and potentially receive a substantial penalty reduction for timely, significant, and useful cooperation. This all-or-nothing philosophy highlighted the value of winning the race for leniency. The new Policy departs from this approach.

In July 2019, the DOJ announced the new policy to incentivize antitrust compliance.

Antitrust News: The Department of Justice Wants You to Have a Strong Antitrust Compliance Policy

The new policy was presented by AAG Makan Delrahim on July 11, 2019, at the Program on Corporate Compliance and Enforcement at the New York University School of Law: Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs. Delrahim explained that, unlike in the past, corporate antitrust compliance programs will now factor into prosecutors’ charging and sentencing decisions and may allow companies to qualify for deferred prosecution agreements (DPAs) or otherwise mitigate exposure, even when they are not the first to self-report criminal conduct.

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Author: Jarod Bona

We see many antitrust issues in the distribution world—and from all business perspectives: supplier, wholesale distributor, authorized retailer, and unauthorized retailer, among others. And at the retail level, we hear from both internet and brick-and-mortar stores.

The most common distribution issues that come up are resale-price-maintenance (both as an agreement and as a Colgate policy), terminated distributors/retailers, and Minimum Advertised Pricing Policies or MAP.

Today, we will talk about MAP Policies and how they relate to the antitrust laws.

What is a Minimum Advertised Price Policy (more commonly known as a MAP policy)?

A MAP policy is one in which a supplier or manufacturer limits the ability of their distributors to advertise prices below a certain level. Unlike a resale-price-maintenance agreement, a MAP policy does not stop a retailer from actually selling below any minimum price.

In a resale price maintenance policy or agreement, by contrast, the manufacturer doesn’t allow distributors to sell the products below a certain price.

As part of a “carrot” for following MAP policies, manufacturers often pair the policy with cooperative advertising funds for the retailer.

Typical targets of MAP policies are online retailers and straight price competition. These policies also do not typically restrict in-store advertising. The manufacturers that employ MAP policies often emphasize branding in their corporate strategy or have luxury products and fear that low listed prices for those products will make them seem less luxurious. But these policies exist in many different industries.

In any event, MAP policies are accelerating in the marketplace. Indeed, brick and mortar retailers that fear “showrooming,” will often pressure manufacturers to implement either vertical pricing restrictions or MAP policies. Not surprisingly, the impetus to implement and enforce MAP policies often come from established retailers.

We receive a lot of calls and emails with questions about MAP policies, from both those that want to implement them and those that are subject to them.

Do MAP Policies Violate the Antitrust Laws?

MAP policies don’t—absent further context—violate the antitrust laws by themselves. But, depending upon how a manufacturer structures and implements them, MAP policies could violate either state or federal antitrust law. So the answer is the unsatisfying maybe.

But we can add further context to better understand the level of risk for particular MAP policies.

There is some case law analyzing MAP policies, but it is limited, so if you play in this sandbox, you can’t prepare for any one approach. I had considered going through the cases here, but I think that has limited utility.  The fact is that there isn’t a strong consensus on how courts should treat MAP policies themselves. So the best tactic is to understand the core competition issues and make your risk assessments from that.

Because of the limited case law, you should consider, as we do, that there will be a greater variance in expected court decisions about MAP policies, which creates additional risk. This may particularly be the case at the state level because state judges have little experience with antitrust.

In any event, you will need an antitrust attorney to help you through this, so the best I can do here for you to is to help you spot the issues and understand if you are moving in the right direction.

If you are familiar with resale price maintenance or Colgate policies, you will notice a lot of overlap with MAP policy issues. But there are important differences.

A minimum advertised price policy is not strictly a limit on pricing. From a competitive standpoint, that helps, but not necessarily a lot. The reality is that a MAP policy can be—for practical reasons—a significant hurdle for online distributors to compete on price for the restricted product. That is, for online retailers, sometimes the MAP policy price is the effective minimum price.

Resale Price Maintenance

Before we go further, let’s review a little bit. A resale price maintenance agreement is a deal between a manufacturer and some sort of distributor (including a retailer that sells to the end user) that the distributor will not sell the product for less than a set price. Up until the US Supreme Court decided Leegin in 2007, these types of agreements were per se illegal under the federal antitrust laws.

Resale price maintenance agreements are no longer per se federal antitrust violations, but several states, including California, New York, and Maryland may consider them per se antitrust violations under state law, so most national manufacturers avoid the risk and implement a unilateral Colgate policy instead.

Under federal law, courts now usually analyze resale-price-maintenance agreements under the antitrust rule of reason.

Colgate Policies

Colgate policies are named after a 1919 Supreme Court decision that held that it is not a federal antitrust violation for a manufacturer to unilaterally announce in advance the prices at which it will allow its product to be resold, then refuse to deal with any distributors that violate that policy. You can read our article about Colgate policies here.

The bottom line with Colgate is that in most situations the federal antitrust laws do not forbid one company from unilaterally refusing to deal with another. There are, of course, exceptions, so don’t rely on this point without consulting an antitrust lawyer.

Back to MAP Policies and Antitrust

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Author: Jon Cieslak

The United States Department of Justice Antitrust Division recently announced changes to its Civil Investigative Demand (CID) forms and deposition process.  While these changes are cosmetic—the Antitrust Division acknowledges that the changes “are consistent with long-standing division policies”—they serve as a good reminder of risks that always exist when communicating with the government.

Background on Civil Investigative Demands

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Author: Jarod Bona

In an earlier article, we discussed Leegin and the controversial issue of resale-price maintenance agreements under the federal antitrust laws. We’ve also written about these agreements here. And these issues often come up when discussing Minimum Advertised Price (MAP) Policies, which you can read about here.

As you might recall, in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (Kay’s Closet), the US Supreme Court reversed a nearly 100-year-old precedent and held that resale-price maintenance agreements are no longer per se illegal. They are instead subject to the rule of reason.

But what many people don’t consider is that there is another layer of antitrust laws that govern market behavior—state antitrust law. Many years ago during my DLA Piper days, I co-authored an article with Jeffrey Shohet about this topic. In many instances, state antitrust law directly follows federal antitrust law, so state antitrust law doesn’t come into play. (Of course, it will matter for indirect purchaser class actions, but that’s an entirely different topic).

For many states, however, the local antitrust law deviates from federal law—sometimes in important ways. If you are doing business in such a state—and many companies do business nationally, of course—you must understand the content and application of state antitrust law. Two examples of states with unique antitrust laws and precedent are California, with its Cartwright Act, and New York, with its Donnelly Act.

California and the Cartwright Act

This blog post is about California and the Cartwright Act. Although my practice, particularly our antitrust practice, is national, I am located in San Diego, California and concentrate a little extra on California. Bona Law, of course, also has offices in New York office, Minneapolis, and Detroit.

As I’ve mentioned before, the Supreme Court’s decision in Leegin to remove resale-price maintenance from the limited category of per se antitrust violations was quite controversial and created some backlash. There were attempts in Congress to overturn the ruling and many states have reaffirmed that the agreements are still per se illegal under their state antitrust laws, even though federal antitrust law shifted course.

The Supreme Court decided Leegin in 2007. It is 2020, of course. So you’d think by now we would have a good idea whether each state would follow or depart from Leegin with regard to whether to treat resale-price maintenance agreements as per se antitrust violations.

But that is not the case in California, under the Cartwright Act. Indeed, it is an open question.

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Author: Steven J. Cernak

As I prepare again to teach an antitrust survey course, part of the preparation involves rereading some of the classic foundational U.S. antitrust cases.  Many of them make some sweeping statements about how the Sherman Act embodies a national policy to order our entire economy through competition.  “The heart of our national economic policy long has been faith in the value of competition” comes from Standard Oil in 1911.  The Court went even further in 1958 in Northern Pacific Railway:

The Sherman Act … rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions.

Twenty years later in Professional Engineers, the Court described an argument that asserted competition might be unethical as “nothing less than a frontal assault on the basic policy of the Sherman Act.”

Were such broad statements true then?  Do they remain true now?  Is the Sherman Act “the Magna Carta of free enterprise” as the Court asserted in Topco in 1972?  After all, we have had exemptions, both legislative and court-made, for decades.  But even beyond those official exceptions, there are plenty more examples of our frequent desire for experts, not the competitive process, to supersede market outcomes.

One personal anecdote helps illustrate the point.  I have been involved in the ABA Antitrust Law Section for decades.  The ABA, like any good trade association of competitors, has its own counsel to ensure that it does not run afoul of the antitrust laws.  Years ago, however, when my day job was in-house antitrust lawyer at General Motors and my ABA assignment involved antitrust aspects of trade associations, I was asked by the Section to lead a compliance presentation for another ABA group consisting of several law school admission deans.

Our presentation started with the antitrust basics for trade associations:  The antitrust laws want to preserve competition among competitors, Sherman Act Section 1 is suspicious of agreements among competitors, trade associations are gatherings of competitors where such agreements can be reached, and law schools compete with each other in various ways, including to attract students.

After about fifteen minutes, one of the deans raised his hand and posed this hypothetical:  Some students change schools between first and second year.  Such transfers are not good for the student – usually, any issues leading to a transfer go beyond a particular school and the student should try to get help with any underlying concerns.  But the transfers also hurt the law schools – after all, we have spent considerable time, effort, and money to make that student one of ours and transfers destroy that investment.  So, could this ABA group make it unethical for law schools to solicit, or even accept, most transfer students?

My fellow presenters were taken aback and silent for a few seconds.  Had this dean not been listening when we had said a few minutes earlier that agreements not to compete among competing members of a trade association were antitrust violations?  Finally, I broke the silence.  I did a facepalm and said “D’oh!  What a great idea!  Why didn’t we think of that?  We could have gone to Toyota thirty years ago and said ‘you know, we spent considerable time, effort, and money to make those current Chevy owners ours and you selling to them will just destroy that investment.  How about we agree that you will only market to folks who have never purchased a car?’”

It took a few seconds but then the lightbulbs went off over the heads of the audience:  Yes, the competitive processes for legal education might be a little different than those for motor vehicles, but that competition still exists and antitrust law is designed to protect it.  Any agreements to short-circuit that process by having experts at the competitor-suppliers determine the customer’s best interest would be at least suspect.  My GM clients would have understood that my Toyota hypothetical was an antitrust problem.  Why didn’t this law school dean?

Was it because the deans saw themselves as “professionals” and so in some way exempt from the need to compete?  Perhaps, although the Court made clear in Professional Engineers that any hint of an antitrust exemption for professionals that some saw in Goldfarb was incorrect.  Professionals might compete in different ways but the antitrust laws still protect that competition to yield the best results for customers.

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Author: Aaron Gott and Nick McNamara

As the effects of the ongoing COVID-19 pandemic continue to ripple across all sectors of the economy, agriculture has been hit especially hard. The widespread closure of restaurants combined with the general hit on most Americans’ wallets has precipitated a massive demand shock, which in turn has sent the prices of agricultural products such as corn, soybeans, milk, and fresh produce tumbling. While this may be good news for consumers (at least in the short run), it does not bode so well for farmers, who in recent months have had to resort to dumping milk and culling herds of livestock—practices which are both wasteful and potentially environmentally harmful.

Can farmers work together to mitigate these issues by agreeing, prior to production, to set production caps so that prices may be stabilized, and waste avoided? The answer depends on whether such controls on output are covered by the Capper-Volstead Act’s antitrust exemption for farm cooperatives.

Under normal circumstances, a concerted agreement among horizontal competitors to restrict output is a per se violation of Section 1 of the Sherman Act. But the Capper-Volstead Act, enacted in 1922 amid populist fervor in the agricultural sector, provides a limited antitrust exemption to “[p]ersons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers.”

You can read a more detailed primer on the Capper-Volstead Act here. But, in brief, the act allows agricultural producers to collectively process, prepare, handle, and market their products. Now, it is important to note again that the exemption applies only to agricultural producers, not processors. This past year, there has been a flurry of antitrust litigation against pork and beef processors who are alleged to have agreed to restrict output, among other things. As discussed in the primer, the Supreme Court has held that a cooperative cannot include processors because they do not fit into the category of “farmers, planters, ranchmen, dairymen, nut or fruit growers.” Thus, only those entities at the most basic level of the food supply chain get to enjoy the exemption.

For producers, the farm cooperative exemption has been interpreted by courts to include a blanket exemption from antitrust liability for price fixing, a practice which also normally incurs per se liability under Section 1 of the Sherman Act. No court has ever directly ruled on the question of whether the exemption applies also to output controls, but there are indications they might find output restrictions outside the narrow confines of the act.

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Author: Steven Cernak

So you have been invited to your first trade association meeting.  Sounds like fun, right?  You get a chance to mix and mingle with others in your industry, maybe swap notes with your counterparts at competitors who face the same pressures you do.  What could go wrong?

A lot, from an antitrust perspective.  While trade associations can provide tremendous benefits to members, by definition, they are meetings among competitors.  Communication with competitors can lead to “agreements,” whether explicit handshakes or implicit winks and nods.  And some of those agreements, like most related to competitive pricing, are automatically illegal and subject to severe penalties for both you and the company.  Here, antitrust law follows Adam Smith’s admonition that

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

So even if you remember your company’s training from when you joined years ago and know enough to spell “antitrust” without a hyphen, you still need to remember these tips.

Learn from others in your company

You might not be the first in your company to attend an association meeting.  Contact your lawyer or boss to see if your company has rules or other guidance for attending them.  Follow that guidance.  Some companies even require such reporting before attending.  Others in your company might know this particular association and have some suggestions on how to make your attendance both safe and productive for you and your company.

Antitrust policy?

If you need to vet the association, start by asking to see its antitrust policy.  All associations of competitors should have one and should be willing and able to share it with you quickly.  Most post it online.  The policy should acknowledge the necessity to follow all applicable antitrust laws and briefly describe how the association does just that.  Frankly, the details are not as important as the fact that the association has one and can quickly provide it.  An association executive who responds to your request with “Anti what?” should set off alarm bells.

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Colgate Doctrine

Author: Jarod Bona

As an antitrust attorney with an antitrust blog, my phone rings with a varied assortment of antitrust-related questions. One of the most common topics involves resale-price maintenance. “Resale price maintenance” is also a common search term for this blog.

That is, people want to know when it is okay for suppliers or manufacturers to dictate or participate in price-setting by downstream retailers or distributors.

I think that resale-price maintenance creates so many questions for two reasons: First, it is something that a large number of companies must consider, whether they are customers, suppliers, or retailers. Second, the law is confusing, muddled, and sometimes contradictory (especially between and among state and federal antitrust laws).

If you want background on resale-price maintenance, you might also review:

Here, we will discuss alternatives to resale-price maintenance agreements that may achieve similar objectives for manufacturers or suppliers.

The first and most common alternative utilizes what is called the Colgate doctrine.

The Colgate doctrine arises out of a 1919 Supreme Court decision that held that the Sherman Act does not prevent a manufacturer from announcing in advance the prices at which its goods may be resold and then refusing to deal with distributors and retailers that do not respect those prices.

Businesses (with some exceptions) have no general antitrust-law obligation to do business with any particular company and can thus unilaterally terminate distributors without antitrust consequences. Before you rely on this, however, you should definitely consult an antitrust attorney, as the antitrust laws create several important exceptions, including refusal to deal, refusal to supply, and overall monopolization limitations.

Both federal and state antitrust law focuses on the agreement aspect of resale-price maintenance agreements. So if a company unilaterally announces minimum prices at which resellers must sell its products or face termination, the company is not, strictly speaking, entering an agreement.

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Contrary to the belief of many of today’s businesspeople, antitrust law’s coverage of distribution did not start with Amazon or even the Internet.  For decades, manufacturers have sold their products to resellers of all types to increase the distribution of their products.  Manufacturers always have been interested in how their products, often with their brands, are resold.  They often have tried to dictate or influence the pricing and marketing tactics of their resellers.

Since 1890, US federal antitrust law has been there every step of the way, drawing the line between permissible and impermissible restraints.  The 2020 edition of Cernak’s Antitrust in Distribution and Franchising summarizes where those lines are today.

In just over one hundred pages, the book provides concise, plain English coverage of all the antitrust topics manufacturers and retailers—and their representatives—need to understand.  Businesspeople can quickly get up to speed on potential distribution options.  Libraries can provide their users, especially students, an efficient way to start their research.  Generalist lawyers can review summaries of the key principles and cases necessary to assist their clients.

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Author: Jarod Bona

If you are looking for controversy, you came to the right place. Today, we discuss resale price maintenance, one of the most contentious issues in all of antitrust. If you look around and see a bunch of antitrust economists, hide your screen so they don’t start arguing with each other. Trust me; that is the last thing you want to experience.

Let’s start with some background: A resale price maintenance agreement is a deal between, for example, a supplier and a retailer that the retailer will not sell the supplier’s product to an end user (or anyone, for that matter) for less than a certain amount. It is a straight vertical price-fixing agreement.

That type of agreement has a storied—and controversial—past. Over a hundred years ago, the Supreme Court in a case called Dr. Miles declared that this type of vertical price fixing is per se illegal under the federal antitrust laws. This is a designation that is now almost exclusively limited to horizontal agreements.

During the ensuing hundred years or so, economists and lawyers debated whether resale price maintenance (RPM) really should be a per se antitrust violation. After all, there are procompetitive reasons for certain RPM agreements and the per se label is only supposed to apply to activity that is universally anticompetitive.

After a trail of similar issues over the years, the question again landed in the Supreme Court’s lap in a case called Leegin in 2007. In a highly controversial decision that led to backlash in certain states, the Supreme Court lifted the per se veil from these controversial vertical agreements and declared that, at least as far as federal antitrust law is concerned, courts should analyze resale price maintenance under the rule of reason (mostly).

You can read more about Leegin and how courts analyze these agreements in our prior article. And if you want to learn more about how certain states, like California, handle resale price maintenance agreements, you can read this article. Finally, if you are looking for a loophole to resale price maintenance agreements, read our article about Colgate policies and related issues.

Minimum advertised pricing policies (MAP) are related to resale price maintenance: you can read our article on MAP pricing and antitrust here. You might also want to read Steven Cernak’s article about the four questions you should ask before worrying about the antitrust risks of new distributor restraints.

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