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Avoid Antitrust and Price Gouging Pitfalls In Your Coronavirus Response

March 12, 2020

Coronavirus

The coronavirus disease continues to cause headaches for businesses all over the globe. Travel restrictions are leading to cancellations of small meetings and large-scale conferences; factory shutdowns are causing massive supply shortages; employees are being told to stay home from work. Whatever challenges you face in these uncertain times, it is important to remember that your business is not immune from government scrutiny.

Here are a few key points to keep in mind as you strategize to keep your business running smoothly:

(1) Take Steps To Mitigate Higher Compliance Risks Caused By Potential Disruption. Time and time again, major civil and criminal antitrust cases have arisen from periods of business disruption where companies were scrambling to deal with fallout and uncertainty. You should do your best to help history avoid repeating itself. Coordination with competitors in response to a business disruption, just as at any other time, can create significant antitrust risk. The DOJ has even issued a press release emphasizing that it intends to hold individuals and companies accountable for antitrust law violations related to the current coronavirus outbreak.  So consider having antitrust training and compliance sessions to emphasize employees’ antitrust obligations and your company’s compliance policies, sending around updated and topical “Do’s and Don’ts” lists that can be customized for stressors your business may face, and even bolstering any internal compliance mechanisms you may have in place (e.g., increased monitoring of email communications). Be proactive!

(2) Avoid Predatory Behavior. Businesses are often given wide latitude in how they conduct their business, including who they do business with, and how or at what price they purchase inputs or sell finished goods. However, there are certain types of unilateral conduct that also create antitrust risks. One such omnipresent risk is predatory behavior, including below-cost sales, or intentional overbuying of inputs. The latter could be of particular concern given current or future coronavirus-caused supply shortages. Businesses can generally purchase as many inputs as they can rationally justify for their own needs, but if they overbuy to intentionally limit the supply for other competitors to drive them out of business, that conduct may raise antitrust concerns. It may be easier to cause that type of input shortage because of the coronavirus, but it could be no less problematic from an antitrust perspective.

(3) Be Mindful of State Price Gouging Laws. While the federal antitrust laws generally permit companies to impose high prices in times of short supply, the vast majority of U.S. states have laws that prohibit, and in some cases criminalize, “price gouging.” Most such laws apply when declarations of emergency or disaster are issued and apply to only consumer products or household necessities or essentials (such as food, fuel, pharmaceutical products, medical supplies, heating oil and other products related to health and safety of citizens). However, a handful of state laws potentially apply to a broader range of goods and services and/or apply even in the absence of declarations of emergency or disaster. If you intend to impose a significant price increase, you should review applicable state laws to make sure you are compliant.

For information about antitrust compliance programs, antitrust risks and applicable state laws, or other services provided by Dykema’s Antitrust and Trade Regulation Group, please 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.

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2020 Dykema Gossett PLLC.