Clean Hands Can Stop More than COVID-19: Antitrust Risks in Times of Supply and Demand Shocks

Overview


The potential for government investigation increases during periods of rapid and extreme movement in price. The US Department of Justice (DOJ) recently reiterated its focus on prosecuting violations of antitrust laws, especially in areas affected by the coronavirus outbreak. On March 9, 2020, the DOJ announced that individuals or companies engaging in price fixing, bid-rigging, customer or region allocation, or other antitrust violations could face criminal prosecution. Government scrutiny is likely to be even higher on companies that produce items for sale to federal, state or local governments, as the DOJ’s Procurement Collusion Strike Force acts as a dedicated watchdog over government contractors to prevent bid-rigging in government contracts. More information on the Strike Force is available here.

In Depth


Q. My company produces or sells items such as hand sanitizer, face masks or medical equipment that may be in higher demand or experience supply issues as a result of the COVID-19 pandemic. What issues should we consider when pricing or offering our products for sale going forward?

A. Companies whose products experience supply or demand shocks should keep in mind that the government and private plaintiffs may scrutinize pricing or supply decisions as potential violations of the antitrust laws. While supply and demand shocks often legitimately affect the price at which such goods are sold, or the amount of goods offered for sale, companies should be aware that otherwise legitimate price or supply changes can lead to regulatory scrutiny or litigation.

When responding to a dynamic market situation, companies can minimize the potential risk (and expense) of investigations and litigation by making pricing or supply decisions for bona fide business reasons based on legitimate market conditions and independent of any desire to obtain anticompetitive profits. Companies should also be aware that communications with competitors, even over topics unrelated to the products they sell, such as HR or workplace policies in response to the coronavirus, may still pose antitrust risks if they include competitively sensitive information, such as employee compensation. Companies should consult with counsel if they have concerns about their pricing or supply practices or desire to communicate with competitors about their HR practices.