It is not surprising to hear from our friends and clients, what about antitrust in a time of national crisis? Do competition laws matter? Are those laws in the way of what needs to be done? Will enforcement agencies be watching? Are the rules regarding competitor collaborations aimed at the crisis different than in less extraordinary times?
In fact, there is a long history of accommodation and practical thinking about the antitrust laws when the times demand it. That pragmatic approach is traceable back to the government’s role in forming a patent pool among major airplane manufacturers in the midst of World War I. The fact that these firms were competitors and that competition in peacetime would be better served by manufacturing without relying on each other’s patents, the national imperative for the U.S. to go to war with the best possible aircraft meant antitrust concerns had to give way.
There are several subsequent examples of balancing traditional enforcement principles and the need to accommodate the public welfare. During the swine flu outbreak in the mid-1970’s the federal government organized a task force, on which officials of the Justice Department Antitrust Division served, to encourage collaboration with respect to the development and testing of an effective vaccine. Thereafter, during the Carter Administration, in an effort to combat rampant inflation, the White House organized meetings of large food and auto companies to discuss the need to moderate price increases. The Antitrust Division monitored those gatherings for compliance purposes but did not try to block what in noninflationary times surely would have been problematic discussions among competitors. The Clinton Administration took a similarly deferential antitrust approach to the Critical Infrastructure Protection Task Force, which was created pursuant to a 1998 Presidential directive.
More recently, Antitrust Division guidance on the aftermaths of Hurricanes Katrina and Rita make the points explicitly: (1) antitrust laws are flexible and will be accommodating toward collaborations to provide for relief efforts while promising (2) vigorous antitrust enforcement against price-fixing and other anti-consumer practices. See https://www.justice.gov/atr/antitrust-guidance-hurricanes-katrina-and-rita.
And that’s the key. What is the purpose of the conduct that may come under antitrust scrutiny? U. S. Federal, State and foreign regulators will be on the lookout for price gouging, bid rigging, or other efforts to gain some unseemly advantage under the guise of (or indifference to) the public threat posed by COVID-19. Even though charging high prices may not, by itself, constitute a federal antitrust violation, there are numerous anti-price gouging State laws, and California and several other States have already announced they will enforce their laws aggressively.
Of course, no reputable company wants to be mentioned in price gouging headlines in the midst of the COVID-19 crisis. But, at the same time, no sensible regulator wants to answer questions from the White House, Congress or other responsible political overseers about why antitrust actions were invoked or threatened when companies were trying in good faith to act to protect the public.
In 2006, Congress passed the Pandemic and All Hazards Preparedness Act. It creates an antitrust exemption for companies collaborating on “the development of . . . a qualified pandemic or epidemic product.” 42 U.S.C 247d-f. There are some cumbersome conditions, e.g., meetings or consultations must be chaired by the Secretary of HHS or his or her designee. And the exemption does not apply to hard core antitrust violations such as price fixing or allocating markets. But clearly the existence of this law (which sunsets in 2023) and the spirit behind it will inform government enforcement decisions as to conduct that might fall outside its precise statutory protections.
Even well intentioned companies which are doing their best in extraordinary circumstances may find themselves caught up in investigations. And this is by no means a concern only in the U.S. Just yesterday the Brazilian competition enforcement agency CADE announced a potentially wide-ranging inquiry into pricing activities of hospitals, laboratories, pharma firms, suppliers of surgical masks and hand sanitizers, and others. We can expect similar investigations in many countries.
Governments and nervous communities are counting on private enterprise to play a critical role in bringing us through this crisis. Antitrust laws should not and we believe, when correctly applied, will not hinder what needs to be done. When Hurricane Rita wreaked havoc on New Jersey fuel supplies, Mayer Brown lawyers then in government helped deliver in less than a day a letter confirming that collaboration among petroleum producers and distributors did not raise antitrust issues. We believe that joint efforts today aimed at better understanding the virus, to develop vaccines or cures, get medicines and other vital supplies to people in need, or any host of other genuine collaborations to protect society, will similarly be welcomed by antitrust regulators.
See also these recent articles on the subject:
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