Trade Groups Face Antitrust Questions In Pandemic Response
By Steven Fellman and Richard Bar, Law360
Jun 30, 2020
Steven John Fellman is of counsel and Richard B. Bar is a principal at GKG Law PC. The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates.
For most trade associations and professional societies, the coronavirus pandemic has resulted in major reductions in members' revenues. With retail stores closed and professional practices dependent on virtual meetings between professionals and clients/patients, nonessential industries and professions experienced devastating decreases in revenues.
Now that the economy is reopening, members of trade associations and professional societies are asking how they can, individually and collectively, maximize opportunities to regenerate revenue. Trade associations and professional societies are being asked to provide information on raw materials availability, government support programs, coronavirus-related safety issues, insurance questions, employee relations, telecommuting as a way of life, and more.
The issues raised are mostly unique to the profession or industry. Some of the discussions are private, while others — such as debates involving if and when to open professional sports leagues — are reported on a daily basis by the media. These information exchanges and discussions are of great assistance in propelling our economy forward but also pose an antitrust risk.
If the information exchanges or discussions result in an agreement, direct or indirect, which unreasonably restrains trade, you have a potential antitrust violation. If the agreement involves price-fixing, customer allocation, bid-rigging, territorial allocation or certain types of boycotts, all potential per se antitrust violations, those who participate in the agreement — including trade association executives who facilitate the discussions — may be charged with a felony, which carries a statutory maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million.
Trade associations and professional societies should have counsel review the agendas of all meetings that involve discussions of sensitive antitrust issues. The Federal Trade Commission and the U.S. Department of Justice have offered to provided trade associations and professional societies with expedited advisory opinions or business review letters as to whether contemplated action will be challenged by the government as an antitrust violation.
The Antitrust Division of the DOJ and the FTC recognized that the unique challenges created by the coronavirus pandemic would require significant collaboration by competitors. In March, the DOJ and the FTC published a joint antitrust statement on COVID-19. In this statement, which was revised on May 1, the agencies agreed to respond to coronavirus-related requests for advisory opinions (FTC) and business review letters (DOJ) on an expedited basis. The agencies stated that they would "aim" to respond to COVID-19-related requests within seven calendar days of receiving all necessary information.
The statement recognizes that the agencies have historically accepted that collaboration among competitors may be pro-competitive and sharing technical know-how, rather than company-specific data about prices, wages, outputs or costs, may be necessary to achieve the pro-competitive benefits of certain collaborations.
At the same time, the statement cautioned that both the FTC and the DOJ will continue to challenge civil violations of the antitrust laws, such as agreements to restrain competition through increased prices, lower wages, decreased output or reduced quality as well as efforts by monopolists to use their market power to engage in exclusionary conduct. Further, the DOJ restated its commitment to prosecute criminal antitrust violations, which typically are agreements or conspiracies between individuals or businesses to fix prices or wages, rig bids, or allocate markets.
The statement specifically referred to the Noerr-Pennington doctrine holding that the antitrust laws generally permit private lobbying addressed to the use of federal emergency authority including private industry meetings with the federal government to discuss strategies for responding to COVID-19 in so far as those activities comprise mere solicitation of government action with respect to the passage and enforcement of laws.
Within several weeks after publication of the statement, the DOJ published three business review letters utilizing the expedited procedures...
... On May 15, the DOJ issued a business review letter to the National Pork Producers Council, a national trade association representing pork producers. According to the facts stated in the letter, farmers raise hogs and sell hogs either by contract or on the spot market to producers of pork products. The market is time-sensitive in that the producers have standardized equipment that can only process hogs of a certain size and weight. Hogs delivered to producers are processed almost immediately.
Due to coronavirus-related issues, many producers had to close or limit production at their facilities. As a result, farmers were left with hundreds of thousands of hogs that could not be processed in a timely manner and grew to a size where they could no longer be processed in the pork producers' facilities.
Since there was no market for these hogs, the U.S. Department of Agriculture developed a program to euthanize the hogs. Since many farmers did not have the capability to euthanize large numbers of hogs, some NPPC members offered to help farmers by euthanizing hogs for them. The NPPC met with the USDA regarding the USDA program and had been asked by USDA to work with the agency so that the hogs could be euthanized in a safe, legal and environmentally acceptable manner.
Again, recognizing that coronavirus-related unique health and safety issues were involved, the DOJ agreed, with specific restrictions, not to oppose the NPPC program. Normally, any agreements among competitors to restrict output would be considered an antitrust violation and viewed as an attempt by producers to maintain higher prices by limiting the amount of product on the market.
This letter presents a situation where, as a direct result of the coronavirus pandemic, the normal supply train was disrupted in a manner that created significant health and environmental issues. The analysis in the letter can be used by associations to support competitor collaboration programs relating to unique output issues that require industrywide action to avoid health and environmental issues.
The statement and the three business review letters establish some parameters within which trade associations and professional societies can work to assist members in dealing with coronavirus-related issues.
It appears that the FTC and the DOJ recognize that, in order to work with government agencies and address these issues, the health and welfare of our nation requires that a broader perspective be applied to historical antitrust analysis. At the same time, the FTC and the DOJ are clear that associations and professional societies cannot hide behind the coronavirus pandemic in an attempt to justify anti-competitive conduct...
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