Articles Posted in Department of Justice

This article is cross-posted in both English and French at Thibault Schrepel’s outstanding competition blog Le Concurrentialiste. Like most antitrust issues today, questions about loyalty discounts are relevant across the globe as competition regimes and courts grapple with the best way to address them.

Companies like to reward their best customers with discounts. It happens everywhere from the local sandwich shop to markets for medical devices, pharmaceutical products, airline tickets, computers, consumer products, and many other products and services.

Customers like loyalty-discount programs (or rebates) because they get more for less. And the reason so many companies offer them is because they are successful.

Everyone wins, right?

Usually. But the program could very well violate antitrust and competition laws in the United States, the European Commission, or other jurisdictions.

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For SaleWhen you think about a government antitrust investigation, you probably picture monopoly accusations against large companies like Microsoft in the 90’s and early 2000’s or AT&T in the 70’s and 80’s. Or perhaps you imagine a global price-fixing cartel like that depicted in the movie The Informant.

In any event, the target in your mind is a big company, along with their officers and executives, and perhaps some sales people.

The Department of Justice actions against individual real-estate investors in Northern California should shatter those preconceptions. Over the last few weeks, the Antitrust Division of the DOJ has announced a series of plea agreements arising out of its antitrust investigations into bid rigging at real-estate-foreclosure auctions for certain Northern California counties.

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Let’s pretend that you are starting the new year with an exciting opportunity: You were just named general counsel of a multi-national corporation with several market-leading products.

You received lots of congratulations, high-fives, and kudos during holiday parties and family get-togethers, but you can’t help but start to think about the arduous task ahead.

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The Internet didn’t fall down after my first post, so I thought I’d try another.

In the US, certain conduct is so obviously anticompetitive that antitrust law labels it per se illegal. These restraints lack redeeming pro-competitive value in almost all instances, so the law allows plaintiffs an important short-cut to pleading and proving such a claim.

The short-cut is that a plaintiff asserting a per-se-antitrust claim need not demonstrate anticompetitive harm. The law presumes such harm. This is huge because this element is one of the most difficult and expensive to prove.

Proving anticompetitive harm is often tough. Plaintiffs usually start by defining the relevant product and geographic markets. This is obvious is some cases; difficult and disputed in others.

Within that defined market, the plaintiff will then usually have to show market or monopoly power, then actual competitive harm in that market that exceeds any competitive benefits from the challenged restraint. It doesn’t always go like this, but that is the typical journey.

Proving all of this almost always requires expert economic testimony, which is—again—almost always disputed by defendants’ economic expert.

So this anticompetitive harm element can become quite burdensome and expensive. That is why fitting a case into a per-se-antitrust package is so valuable for a plaintiff, and risky for a defendant.

Price-fixing agreements usually come to mind as the prototypical per se antitrust violation (keep in mind that antitrust views agreements to limit volume as effectively the same thing). Other examples are market-allocation agreements and certain boycotts.

Let’s talk about market-allocation agreements—as price-fixing is a bit too obvious—so we can see how dangerously easy it is for this per-se-antitrust violation to develop.

Market allocation is an antitrust problem because competitors are agreeing not to compete. The most simple market-allocation agreement is geographic—“you take customers West of the Mississippi, and we will take the ones to the East.”

But sometimes it develops more subtly.

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