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DOJ Won’t Challenge Collaborative Efforts of FEMA and Medical Suppliers to Provide Emergency Supplies

April 8, 2020

N95 masks

On Saturday, April 4, 2020, the Antitrust Division of the U.S. Department of Justice (“DOJ”) issued a business review letter to a number of providers of Personal Protective Equipment (“PPE”) and pharmaceutical products, stating that the DOJ “presently does not intend to challenge” their efforts to expedite and increase manufacturing, sourcing, and distribution of PPE and medications in connection with Project Airbridge. The DOJ issued this Business Review Letter pursuant to the expedited review process (discussed in a recent COVID-19 alert) it implemented to evaluate responses to the COVID-19 pandemic.

The business review request came as part of implementing Project Airbridge, a partnership between U.S. healthcare distributors and the federal government to quickly fly large quantities of medical supplies to the areas of the country where it is needed to help fight COVID-19. Attorneys from the DOJ are in regular communications with the federal agencies organizing Project Airbridge, and in many cases directly observe the associated collaborative activity. But the private companies that requested the business review letter will have to communicate directly, without government supervision, and collaborate to carry out certain aspects of the project. So those parties sought guidance from the DOJ on its intended treatment of the collaboration.

Collaborating and Coordinating with Government Agencies

The DOJ concluded that it has no present intent to challenge the portion of the collaboration that is (1) compelled by an agreement with a federal agency and (2) under the supervision of a federal agency. Conduct that satisfies these requirements is subject to the same immunity from antitrust laws that conduct by federal agencies would receive because the private parties' efforts are “directed by FEMA, HHS, or additional government agencies” and the agencies are supervising the private parties’ conduct—specifically noting that “determinations of prices, wages, output, quality, bids, or allocations will only occur if at FEMA’s direction.” Also, in this regard, the private companies ‘efforts are being directed by, and narrowly tailored to meet, the government’s goals and address a unique national emergency.

Necessary Collaboration that Cannot be Supervised by Government Agencies is Protected by Adequate Safeguards

The DOJ also indicated that it has no present intent to challenge direct competitor collaborations that are part of the Project—some which would not be supervised by FEMA because of the time-sensitive nature of the initiative—because it concluded that the collaborations present a low risk of anti-competitive harm and have adequate safeguards. The DOJ wrote that the activities, which do not implicate per se antitrust violations—such as price fixing or market allocation—should be assessed using the rule of reason and that, “[t]he central question is whether the relevant agreement likely harms competition by increasing the ability or incentive profitably to raise price above or reduce output, quality, service, or innovation below what likely would prevail in the absence of the relevant agreement.” Noting that the proposed unsupervised collaborations would be limited and not involve discussions of competitively sensitive information, that the private companies represented that their goal is to expand capacity and bring goods to communities in need, and that the collaboration will be limited in time and scope to address the current emergency, the DOJ decided that the risk of any potential anti-competitive harm was outweighed by the procompetitive aspects of the arrangement, such as offering PPE, lab supplies, and medications more quickly than otherwise would be possible and to address scarcity.

Key Takeaways

The DOJ Project Airbridge Business Review Letter provides some key takeaways for companies considering collaborating with competitors to address emergencies related to COVID-19.

First, the government is far more likely to bless a competitor collaboration related to COVID-19 whose efforts “form an essential part of, and are directed by, a system developed by FEMA and other federal agencies in furtherance of expediting delivery of needed medical supplies, in which the Department’s Antitrust Division is involved.” Therefore, companies that are seeking expedited review of collaborations with competitors related to the national emergency should involve relevant government agencies, if reasonably possible.

Second, the letter stressed that, like with all competitor collaborations, the parties should provide specific safeguards to restrict direct exchange of competitively sensitive information (including information about individual companies’ costs, margins, pricing, output plans, capacity and customers). Here, according to their proposal, the private companies would share such information only bilaterally with the government and its agents, not directly with another private party.

Third, the DOJ is unlikely to bless conduct that would subject to per se treatment, such as price fixing or market allocation, even if the parties perceive a procompetitive justification. If, for example, competitors agree on their own to freeze prices of PPE during the emergency, the agencies will undoubtedly hold those competitors accountable for per se illegal price fixing, even if the collaborators sincerely believe they are aiding in the emergency efforts.

Companies seeking to collaborate with competitors or obtain expedited business reviews from the Agencies, or that have other concerns about the antitrust implications of a proposed course of conduct, should contact Howard Iwrey (hiwrey@dykema.com), Cale Johnson (cjohnson@dykema.com), or Cody Rockey (crockey@dykema.com), or visit us online at www.dykema.com.

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