The Firm's antitrust practice focuses on the prosecution of large antitrust class actions alleging price-fixing or monopolization against some of the world's largest corporations.
The Firm also provides counsel to corporations and business owners regarding compliance with antitrust laws.
Antitrust conspiracies are often exposed by whistleblowers or governmental investigations. Criminal fines, however often only fill government coffers - and not the pockets of those who were actually harmed by anticompetitive activity.
Examples of the antitrust litigation that the firm pursues include:
- Price-fixing of commodity products
- Manipulation of exchange rates
- Output reduction and market allocation
Overview of the Antitrust Law Violations
The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize."
Certain acts are considered so harmful to competition that they are almost always illegal. These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids. These acts are "per se" violations of the Sherman Act; in other words, no defense or justification is allowed.
However, the Sherman Act does not prohibit every restraint of trade, only those that are deemed unreasonable. For instance, in some sense, an agreement between two individuals to form a partnership or to set industry standards restrains trade, but may not do so unreasonably, and may actually benefit consumers, and thus may be lawful under the antitrust laws.
Per Se Antitrust Violations- Conduct that is illegal under any circumstance.
Price Fixing - These are agreements among competitors on the price at which they will sell their products or services. Price-fixing may exist even if there is no agreement on a specific price to be charged. Any agreement between or among competitors with the purpose of increasing or affecting the price of a product or service will violate the antitrust laws.
Bid Rigging- Attempting to eliminate or reduce price competition, or to assure that, over time, each competing bidder receives a “fair share” of total business awarded on the basis of sealed bids. Bid-rigging includes the designation by competitors of one company to win a bid with the understanding that the remaining companies will submit higher bids or an agreement among competitors not to bid.
Customer Allocations- Any agreement to divide or allocate customers among competing entities.
Geographic / Product Market Allocations- Agreements among competitors to divide or allocate business on the basis of geographic or product markets are per se unlawful.
Group Boycotts - A group boycott exists when a group of competitors agrees to take some form of joint action to exclude someone from the market. This anti-competitive act is also known as a “concerted refusal to deal” and can be intended to freeze out another competitor, supplier or customer. Done by an individual company not in concert with others, this only becomes actionable if the perpetrator has tremendous market power.
Conduct Subject to Rule of Reason Analysis- Conduct that is illegal only if the impact upon competition too greatly outweighs any benefits the activity provides.
Standard Setting - Identifying and agreeing upon a specific set of criteria to which a particular type of product should conform. Product standards are generally developed by private industry and are often spearheaded by trade associations. Care must be taken to ensure that any such standards can be supported by legitimate business justifications. Examples include rail lines that need to be uniform; compact discs, and so on.
Information Exchanges- Information concerning matters such as prices charged for services rendered, business plans, marketing plans, new product development, costs and profits, that is not already publicly available, and which is competitively sensitive, can raise antitrust questions. Some of the factors that are important to consider are: whether the information is being collected by a trade association or other third party and will be disseminated in such a way that the data providers are anonymous; whether the information contains historical data or contains projected prices or costs; whether the data providers constitute a significant share of the market; and whether the data is already publicly available. The central question under the antitrust laws is whether the information exchanged tends to restrain trade unreasonably.
Best Practices- It is not unusual for trade associations, particularly professional associations, to promulgate standards of conduct or a code of professional responsibility for members of the association. To the extent these standards are designed to protect the public from clearly unethical, fraudulent, unfair or deceptive practices, there are substantial business justifications to support the standards of conduct under the antitrust laws. Care must be taken, however, to ensure that standards of conduct, such as any proposed industry “Best Practices” standards, do not have the purpose or effect of eliminating competition in the pricing of products or services provided by industry members.
Unilateral Acts Triggering Antitrust Issues - Price discrimination by an individual corporation, is subject to a rule or reason-type analysis and is unlawful when done to restrain competition.
To learn more about our antirust practice, contact us today!
What is Antitrust Law
ANTITRUST BASICS
Congress passed the first antitrust law, the Sherman Act, in 1890 with the goal of "preserving free and unfettered competition as the rule of trade." In 1914, Congress passed two additional antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act. With some revisions, these are the three core federal antitrust laws still in effect today.
The antitrust laws set forth unlawful mergers and business practices in general terms, leaving the courts to decide which ones are illegal based on the facts of each case. Since their inception, the antitrust laws have served to benefit consumers by protecting the process of competition. When markets are kept truly competitive, businesses tend operate more efficiently, keeping prices down, and quality of goods and services up.
ENFORCEMENT BASICS
Design of Enforcement - Enforcement of federal (and state) antitrust laws is designed to protect purchasers of commodity products or services. The federal government enforces three major federal antitrust laws (and many states also have their own antitrust laws as well). Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for impacted products and services.
The three major federal antitrust laws are:
(1) The Sherman Antitrust Act;
(2) The Clayton Act; and
(3) The Federal Trade Commission Act
The Sherman Antitrust Act - 15 U.S.C. §§ 1-7
"Section 1" - 15 U.S.C. § 1- This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.
"Section 2" - 15 U.S.C. § 2- The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct.
The Sherman Act, however, is not violated simply when one firm's vigorous competition and lower prices take sales from its less efficient competitors; in that case, competition is working properly.
Nor is the Sherman Act violated by “conscious parallelism.” Yes, it is fine to follow market pricing.
The Clayton Act - 15 U.S.C. §§ 12-27
The Clayton Act is a civil statute (carrying no criminal penalties) that prohibits mergers or acquisitions that are likely to lessen competition. Under this Act, the Government challenges those mergers that are likely to increase prices to consumers. All persons considering a merger or acquisition above a certain size (presently triggers at a transaction size of $80.8 million) must notify both the Antitrust Division and the Federal Trade Commission. The Act also prohibits other business practices that may harm competition under certain circumstances.
The Clayton Act also has a provision that triples damages for violating antitrust laws.
The Federal Trade Commission Act - 15 U.S.C §§ 41-58
This Act prohibits unfair methods of competition in interstate commerce, but carries no criminal penalties. The FTCA also created the Federal Trade Commission to police violations of the Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anti-competitive business practices, such as coercive monopoly.
The Department of Justice also often uses other laws to fight illegal activities, including laws that prohibit false statements to federal agencies, perjury, obstruction of justice, conspiracies to defraud the United States and mail and wire fraud. Each of these crimes carries its own fine and imprisonment term, which may be added to the fines and imprisonment terms for antitrust law violations.
How Are Antitrust Laws Enforced?
There are three main ways in which the federal antitrust laws are enforced:
(1) Criminal and civil enforcement actions brought by the Antitrust Division of the Department of Justice.
(2) Civil enforcement actions brought by the Federal Trade Commission.
(3) Lawsuits brought by private parties (direct purchasers) asserting claims.
The Department of Justice uses a number of tools in investigating and prosecuting criminal antitrust violations. Department of Justice attorneys often work with agents of the Federal Bureau of Investigation (FBI) or other investigative agencies to obtain evidence. In some cases, the Department may use court authorized searches of businesses and secret recordings by informants of telephone calls and meetings.
Corporate leniency/immunity: The Department of Justice may grant immunity from prosecution to co-conspirators (individuals or corporations) who provide timely information that is needed to prosecute others for antitrust violations, such as bid rigging or price fixing. This immunity is typically granted only to the first conspirator who walks in the door to spill the beans. Leniency is also typically granted based on continuing cooperation with respect to all known conspiracies.
This often results in a cascade of conspiracies being exposed within an industry.
A provision in the Clayton Act also permits private parties injured by an antitrust violation to sue in federal court for three times their actual damages plus court costs and attorneys’ fees. State attorneys general may bring civil suits under the Clayton Act on behalf of injured consumers in their States, and groups of consumers often bring suits on their own. Such civil suits following, and sometimes even in advance of or in place of, criminal enforcement actions can be a very effective additional deterrent to criminal activity.
The Department of justice specifically recognizes private civil enforcement as a needed tool in its arsenal.
Some states also have antitrust laws closely paralleling the federal antitrust laws, the state laws generally apply to violations that occur wholly in one state. These laws typically are enforced through the offices of state attorneys general.
To learn more about private antitrust enforcement, contact us today!
Antitrust Violations
What Conduct Violates Antitrust laws?
Antitrust laws are the broad group of federal and state laws that are designed to make sure businesses are competing fairly. Antitrust laws are necessary for an open marketplace. Competition among competitive firms gives consumers lower prices, higher-quality products and services, more choice, and greater innovation.
The most common antitrust violations fall into two categories:
(1) Agreements to restrain competition; and
(2) Efforts to acquire a monopoly.
In the case of a merger, a combination that would likely substantially reduce competition in a market would also violate antitrust laws.
Common examples of antitrust violations include:
• "Price fixing" which includes any agreement by competing vendors that establishes an agreed price or otherwise determines how the price will be set among those vendors. The agreement to fix the price may occur at the wholesale or the retail level. Agreements between competitors that establish boundaries for pricing, such as setting a minimum or maximum price, are also prohibited.
• "Bid rigging" which includes any agreement by independent competitors to not fully compete against each other in responding to a request for bid, including:
o Bid Suppression, such as an agreement to not bid
o Complementary Bidding, such as an agreement to bid “under” a certain amount
o Bid Rotation, such as an agreement to take turns bidding for certain jobs
Bid rigging is viewed as a form of price fixing. It may occur in any situation where a purchaser solicits bids for products or services. Many public entities are required to solicit bids, making them possible targets for bid rigging schemes
• “Market Division or Allocation” includes any agreement between competitors that they will not compete with respect to certain products, certain customers or in certain geographical areas. These types of agreements can constitute bid rigging.
• “Boycotts” are agreements among competitors to not make sales to a particular customer or a market so as to prevent that customer or people in that market from being able to purchase the products or services.
• “Tying” can occur when a seller who has market power over one product (the “tying product”) will only sell that product to buyers who agree to also buy a different product from the seller (the “tied product”) so that the buyers are effectively coerced to purchase that tied product from the seller rather than from any competitor.
• “Monopolization” or attempted monopolization can occur when a dominant seller seeks to maintain or increase its market power through anticompetitive tactics that tend to foreclose the market to competitors and are not justified by pro-competitive benefits for consumers.
How Are The Antitrust Laws Enforced?
There are three main ways in which the Federal antitrust laws are enforced:
• Criminal and civil enforcement actions brought by the Antitrust Division of the Department of
Justice.
• Civil enforcement actions brought by the Federal Trade Commission.
• Lawsuits brought by private parties asserting damage claims.
What Are The Penalties For Violating Antitrust Laws?
There are three main ways in which the federal antitrust laws are enforced: criminal and civil enforcement actions brought by the Antitrust Division of the Department of Justice, civil enforcement actions brought by the Federal Trade Commission and lawsuits brought by private parties asserting damage claims.
The penalties for violating the antitrust laws are severe.
On the criminal side, violating the antitrust laws can be a felony offense. Individuals involved in some antitrust violations can, and do, go to jail. In addition to imprisonment, criminal prosecutions for antitrust violations can result in severe financial penalties for companies and individuals. Specifically, the Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison. Under federal law, the maximum fine may be increased to twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime, if either of those amounts is over $100 million.
On the civil side, the costs of defending a private antitrust class action can run into the millions of dollars, depending on the size of the case, and settlements or trial verdicts, where plaintiffs can seek to recover triple their actual damages as well as their attorneys’ fees, can run into the tens of millions or hundreds of millions of dollars.
Price Fixing
Section 1 Violations
The Sherman Antitrust Act - 15 U.S.C. §§ 1-7 "Section 1" - 15 U.S.C. § 1 - This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.
Price Fixing
Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that entities establish prices and other terms on their own, without agreeing with a competitor. Thus, consumer prices are determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices for consumers. Accordingly, price fixing is a major concern of government antitrust enforcement as well as private antitrust enforcers.
A plain agreement among competitors to fix prices is almost always illegal, whether prices are fixed at a minimum, maximum, or within some range. Illegal price fixing occurs whenever two or more competitors agree to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification.
Price fixing relates not only to prices, but also to other terms that affect prices to consumers, such as shipping fees, warranties, discount programs, or financing rates. Antitrust scrutiny may occur when competitors discuss the following topics:
- Present or future prices
- Pricing policies
- Promotions
- Bids
- Costs
- Capacity
- Terms or conditions of sale, including credit terms
- Discounts
- Identity of customers
- Allocation of customers or sales areas
- Production quotas
- R&D plans
A defendant is allowed to argue that there was no agreement, but if the government or a private party proves a plain per se price-fixing agreement, there is no defense to it. Defendants may not justify their behavior by arguing that the prices were reasonable to consumers, were necessary to avoid cut-throat competition, or stimulated competition.
Market Division or Customer Allocation
Agreements among competitors to divide sales territories or assign customers amongst themselves are also almost always per se illegal. These arrangements are essentially agreements not to compete: "I won't sell in your market if you don't sell in mine" or “I won’t sell to your customer if you don’t sell to mine.” Illegal market sharing in violation of the antitrust laws may involve allocating a specific percentage of available business to each producer, dividing sales territories on a geographic basis, or assigning certain customers to each seller.
Private parties can and do bring suits to enforce the antitrust laws. In fact, most antitrust suits are brought by businesses and individuals seeking damages for violations of the Sherman or Clayton Act. Private parties can also seek court orders preventing anticompetitive conduct (injunctive relief) or bring suits under certain state antitrust laws.
To learn more about our antitrust practice, contact us today!
Section 1 Violations
The Sherman Antitrust Act - 15 U.S.C. §§ 1-7 "Section 1" - 15 U.S.C. § 1 - This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.
Price Fixing
Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that entities establish prices and other terms on their own, without agreeing with a competitor. Thus, consumer prices are determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices for consumers. Accordingly, price fixing is a major concern of government antitrust enforcement as well as private antitrust enforcers.
A plain agreement among competitors to fix prices is almost always illegal, whether prices are fixed at a minimum, maximum, or within some range. Illegal price fixing occurs whenever two or more competitors agree to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification.
Price fixing relates not only to prices, but also to other terms that affect prices to consumers, such as shipping fees, warranties, discount programs, or financing rates. Antitrust scrutiny may occur when competitors discuss the following topics:
- Present or future prices
- Pricing policies
- Promotions
- Bids
- Costs
- Capacity
- Terms or conditions of sale, including credit terms
- Discounts
- Identity of customers
- Allocation of customers or sales areas
- Production quotas
- R&D plans
A defendant is allowed to argue that there was no agreement, but if the government or a private party proves a plain per se price-fixing agreement, there is no defense to it. Defendants may not justify their behavior by arguing that the prices were reasonable to consumers, were necessary to avoid cut-throat competition, or stimulated competition.
Market Division or Customer Allocation
Agreements among competitors to divide sales territories or assign customers amongst themselves are also almost always per se illegal. These arrangements are essentially agreements not to compete: "I won't sell in your market if you don't sell in mine" or “I won’t sell to your customer if you don’t sell to mine.” Illegal market sharing in violation of the antitrust laws may involve allocating a specific percentage of available business to each producer, dividing sales territories on a geographic basis, or assigning certain customers to each seller.
Private parties can and do bring suits to enforce the antitrust laws. In fact, most antitrust suits are brought by businesses and individuals seeking damages for violations of the Sherman or Clayton Act. Private parties can also seek court orders preventing anticompetitive conduct (injunctive relief) or bring suits under certain state antitrust laws.
To learn more about our antitrust practice, contact us today!
Monopolization
Section 2 Violations
Section 2 of the Sherman Act, 15 U.S.C. § 2, makes it unlawful to monopolize any part of interstate commerce. An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct. Corporations may dominate a given industry to such an extent that they are not subject to natural competition from new market participants. Monopolies are able to set the price on their products and services as high as the market allows. The law is violated only if the company tries to maintain or acquire a monopoly through unreasonable methods. For the courts, a key factor in determining what is unreasonable is whether the practice has a legitimate business justification.
Monopolies are not in and of themselves illegal, but certain actions that are unique to monopolies, and may bring rise to a violation of the antitrust laws include:
- Exclusive Supply or Purchase Contracts within the vertical chain of a monopoly may keep other companies from entering the market. Exclusive contracts can benefit competition in the market by ensuring supply sources or sales outlets, reducing contracting costs, or creating dealer loyalty. Exclusive contracts between manufacturers and suppliers, or between manufacturers and dealers, are generally lawful because they improve competition among the brands of different manufacturers (interbrand competition). However, when the firm using exclusive contracts is a monopolist, the legal focus shifts to whether those contracts halt efforts of new entities to break into the market or of smaller existing entities to expand their presence into the market. A monopolist might try to impede the entry or expansion of new competitors because that competition would erode its market position. The antitrust laws condemn certain actions of a monopolist that keep rivals out of the market or prevent new products from reaching consumers. Exclusive supply contracts prevent a supplier from selling inputs to another buyer. If, under an exclusive supply contract, one buyer has a monopoly position and uses its contracts so that a newcomer may not be able to gain what it needs to compete with the monopolist, the contracts can be seen as being in violation of Section 2 of the Sherman Act. Exclusive purchase agreements, requiring a dealer to sell the products of only one manufacturer, can have similar effects on a new manufacturer, preventing it from getting its products into enough outlets so that consumers can compare its new products to those of the leading manufacturer. Exclusive purchase agreements may violate the antitrust laws if they prevent newcomers from competing for sales. Consumers are harmed by the activities of a monopolist because the monopolist has prevented the market from becoming more competitive, which could result in lower pricing, or better products or services.
- Unlawful Tying which forces customers to purchase a less desirable product as a condition of purchasing the product they want, which has the effect of driving sales in markets the monopolist does not dominate. Offering products together as part of a package deal can benefit consumers who like the convenience of buying several items at the same time. Offering products together can also reduce the manufacturer's costs for packaging, shipping, and promoting the products. Of course, some consumers might prefer to buy products separately, and when they are offered only as part of a package, it can be more difficult for consumers to buy only what they want. For competitive purposes, a monopolist may use forced buying, or "tie-in" sales, to tie the sale of a product in which it is market dominant to the sale of a product in which it is not market dominant to gain greater sales in other markets where it is not dominant and to make it more difficult for rivals in those markets to obtain sales. This has the tendency to limit consumer choice for buyers wanting to purchase one product by forcing them to also buy a second product as well. In certain circumstances, the "tying" of products can violate the antitrust laws.
- Predatory or Below Cost Pricing occurs when the company charges below-cost pricing to drive out competition, which ultimately results in higher prices to consumers. An entity engages in predatory pricing when below-cost pricing allows a dominant competitor to keep its competitors out of the market and then raise prices to above-market levels once the competitors are no longer in business in the market.
- Refusal to Deal. Under certain circumstances, an entity’s refusal to deal with customers or suppliers if the customers or suppliers also do business with a competitor of that entity can violate antitrust laws. There may be limits on this freedom for a firm with market power. The focus of the inquiry here is whether the refusal allows the monopolist to maintain its monopoly or allows the monopolist to use its monopoly in one market to attempt to monopolize another market.
To learn more about our antitrust practice, contact us today!
Documents and Resources
Documents and Resources
To review an antitrust and securities litigation primer, see this link: Antitrust-Securities Class Action Primer
To review a standard form securities litigation monitoring agreement, see this link: Example- Pension Monitoring Agreement
To review a standard form antitrust litigation monitoring agreement, see this link: Example- Claim Filing Agreement