COVID‑19 has caused a public health crisis and extreme disruption to economic markets. As communities, governments, and businesses come together to combat these challenges, questions are naturally arising about how to comply with the antitrust laws under such extraordinary circumstances.
The United States antitrust agencies have advised that, with limited exception, companies should rely on a traditional application of the antitrust rules and guidelines. Even well-intentioned collaborations can run afoul of the antitrust rules, so it is important to seek legal counsel prior to entering into new collaborations or expanding the scope of existing ones, especially with competitors. Importantly, companies must continue to be mindful that:
- Antitrust laws apply—there is no blanket exemption in a public health or economic crisis;
- While pro-competitive competitor collaborations, including information exchanges, can be lawful, and the needs of responding to a crisis are relevant to that determination, such collaborations continue to pose legal risk;
- Information related to pricing, costs, and outputs remain competitively sensitive and sharing such information carries additional antitrust risk;
- Companies with market power, even temporarily, often face increased scrutiny and should expect even closer examination of conduct related to products and services in high demand during the crisis;
- Increasing prices of essential goods may raise concerns under anti-price-gouging laws; and
- Emergency pandemic and other crisis statutes that may be invoked in response to COVID-19 may contain antitrust exemptions that are limited and narrow.
Illegal Conduct is Still Illegal
The Antitrust Division of the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) have made clear that even in the midst of the ongoing crisis, each will continue to vigorously enforce the antitrust laws. The DOJ will “hold accountable anyone who violates the antitrust laws of the United States in connection with the manufacturing, distribution, or sale of public health products such as face masks, respirators, and diagnostics.” Similarly, the FTC has “stressed that [it] will not hesitate to hold accountable those who try to use the pandemic to engage in antitrust violations.”
In particular, the Joint Antitrust Statement Regarding COVID-19 (“Joint Statement”), released on March 24, 2020, reiterates that efforts to fix prices or wages, rig bids, or allocate markets remain subject to potential criminal prosecution. In this area, there is no broad exception for exigent circumstances. Companies must remain vigilant in their actions and in communicating these prohibitions to their employees. The mere accusation of engaging in this per se illegal conduct during the crisis could result in significant costs and lasting reputational harm.
Collaborating in Times of Crisis
Application of antitrust laws in the United States generally recognizes that collaborative efforts can be pro-competitive. As a result, even in normal times, companies—including those that are competitors—can engage in limited joint activities, albeit within carefully constructed boundaries.
In the context of COVID-19, there may be joint research and development efforts, or other types of collaborations, that competitor companies would like to pursue collectively to address the pandemic. Such conduct is not inherently at odds with the antitrust laws. Indeed, the Joint Statement describes, for example, the potential need for health care facilities to work together in providing resources and services to communities that do not have access to personal protective equipment, medical supplies, or health care. In another example, the agencies recognized the potential necessity of temporarily combining production, distribution, or service networks to facilitate production and distribution of COVID-19-related supplies.
The impact of COVID-19 stretches well beyond the health care system. As a result, there may be many more pro-competitive collaborations that companies are evaluating. The DOJ and FTC have several publications that provide guidelines for collaborative conduct, including the Antitrust Guidelines for Collaborations Among Competitors (2000), the Statement of Antitrust Enforcement Policy in Health Care (1996), and a blog posted by the FTC, “Information Exchange, Be Reasonable” (2014). In their Joint Statement on March 24, 2020, the agencies reiterated that this guidance continues to apply.
Further, in certain instances, companies may wish to request guidance from the DOJ or FTC prior to engaging in collaborative activities. Each of the agencies has a process in place to receive these requests: the Antitrust Division offers a Business Review process and the FTC issues Advisory Opinions. While these processes generally take several months, the agencies have announced that they aim to respond expeditiously to all COVID-19-related requests and to resolve those addressing public health and safety within seven calendar days of receiving all necessary information.
As companies navigate their business interactions with others, it is important to remember that, as the crisis passes, internal discussions regarding collaborations and other activities could be discoverable in either a government investigation or enforcement action, or private litigation. Therefore, companies should be mindful not just of their conduct, but also avoiding the appearances of any unlawful conduct. For example, it is still important to structure arrangements appropriately, including implementation of measures such as firewalls for exchanging competitively sensitive information or agreements defining the scope and purpose of the collaboration, among others. The crisis is ever-present today, but months from now, actions may be viewed under a different light, whether by the federal or state government agencies, private parties, or judges and juries.
Limited Statutory Exemptions to Antitrust Rules May Apply
In the United States, certain wartime and other crisis statutes contain limited exemptions to the antitrust rules. While some of these provisions may be available during the COVID-19 response, companies should be mindful that these exemptions are often narrow and do not create blanket exemptions for all conduct related to COVID-19. Potential limited exemptions can be found in the following:
- Pandemic and All Hazards Preparedness and Advancing Innovation Act 2019, amending, among other provisions, 42 U.S.C. § 247d-7f (“PAHPAIA”): Passed last year, PAHPAIA enhances existing authorities vested in the Secretary for Health and Human Services (“HHS”) to respond to national public health emergencies, including through advanced funding for buying needed medical countermeasures. Such countermeasures include drugs, biological products, or devices that the Secretary of HHS determines to be a priority to diagnose, mitigate, prevent, or treat conditions that may result in adverse health consequences or death. PAHPAIA includes a limited exemption from certain antitrust laws for meetings and conduct directly supervised by the HHS Secretary in consultation with the DOJ and FTC.
- Defense Production Act of 1950, 50 U.S.C. §§ 4501, et seq. (“DPA”): The DPA provides the President (and department and agency heads, as his designees) with various authorities to regulate private industry in order to facilitate national defense, including emergency preparedness activities. While the statute does not provide general immunity from the antitrust laws, it does create a limited defense in situations where “the President or the President’s designee has authorized and actively supervised the voluntary agreement or plan of action.”
- National Cooperative Research and Production Act of 1993, 15 U.S.C. §§ 4301-4306 (“NCRPA”): Among other provisions, the NCRPA limits antitrust remedies to single (rather than treble) damages for certain joint ventures and standard setting organizations that file with the DOJ and FTC. The application of the statute is not limited to COVID-19-response activities, but the Agencies have announced that they will work to expeditiously process these filings. The DOJ offers an explanation of the statute and instructions for making filings.
Even in normal times, collaborations between companies, including competitors, can create efficient, pro-competitive effects that are consistent with the application of antitrust laws. In times of crisis, collaborative efforts can become critical components of effective responses. The antitrust laws are not intended to thwart these well-intentioned efforts. However, companies must be aware that the rules still apply to their interactions and conduct. As a result, it is important to structure collaborations carefully and seek pragmatic and practical antitrust advice.
The Covington competition team will continue to monitor the situation and will provide regular updates on new developments. For more information on the application of European competition law to collaborations in response to COVID-19, please refer to this blogpost.