COVID-19 and the resulting global pandemic have affected the international economy, halted normal business operations and even closed the doors to many courthouses. In these circumstances, it is easy to see why some companies might consider changing the way that they operate in response to this crisis.
While antitrust and consumer protection laws provide flexibility for firms to respond to changing market conditions, such as those created by the COVID-19 pandemic, it is important to remember that certain conduct will remain prohibited by antitrust and consumer protection laws no matter the circumstances, and firms should still carefully evaluate how they interact with competitors even in times of crisis.
Antitrust enforcers at both the federal and state level have recently reinforced these principles and highlighted permissible competitor collaboration in light of COVID-19. Past statements issued by antitrust enforcers in the wake of natural disasters also provide additional guidance about what companies should consider before entering into a collaboration.
On 9 March 2020 the Department of Justice (DOJ) announced its:
intention to hold accountable anyone who violates the antitrust laws of the United States in connection with the manufacturing, distribution, or sale of public health products such as face masks, respirators, and diagnostics.(1)
Such violations could include activities such as price fixing, bid-rigging, market allocation schemes or other "collusive practices".(2) The DOJ's statement reads like a clear warning to "bad actors".(3) Antitrust law still applies and the DOJ is willing to criminally prosecute offenders.
The DOJ's warning should come as no surprise, given that in the past it has similarly warned against companies taking advantage of natural disasters and other crises to engage in anticompetitive conduct.(4) However, changed market conditions do provide some flexibility in pursuing collaborations with competitors. For example, after major hurricanes, the DOJ, while warning against conduct like price fixing, noted that companies may explore "beneficial collaborations that produce net pro[-]competitive benefits for consumers".(5) Then, the DOJ also acknowledged that:
[j]oint ventures and other collaborative arrangements can benefit consumers by enabling businesses to bring goods or services to market faster or at lower cost, or for participants to make products or services available they could not otherwise provide on their own.(6)
The DOJ's permissive stance on pro-competitive collaborations was recently strengthened by a jointly issued statement with the Federal Trade Commission (FTC). In their Joint Antitrust Statement Regarding COVID-19,(7) the agencies stressed that they "will continue… to responsibly enforce the antitrust laws", while seeking to educate companies on the "ways firms, including competitors, can engage in procompetitive collaboration that does not violate the antitrust laws.(8)
Significantly, the two agencies are committed to resolve – within seven days – all "COVID-19-related" guidance requests.(9) This includes the DOJ's Business Review Process and the FTC's Advisory Opinion Process. For FTC Advisory Opinions, the joint antitrust statement provides a walkthrough on how to apply for an advisory opinion and what information companies must submit to the FTC.(10)
The agencies will also expedite the review of joint ventures filed under the National Cooperative Research and Production Act, although it is unclear whether the seven-day timeline also covers these ventures.(11) Any company hesitant to collaborate with competitors on COVID-19-related projects should take advantage of this expedited process – a process that can normally take months.
The joint antitrust statement also highlights several "collaborative activities designed to improve the health and safety response to the pandemic [that] would be consistent with the antitrust laws".(12) These permissible activities are:
- research and development;
- sharing "technical know-how", but not company-specific data like prices, output or wages; and
- private lobbying for the use of "federal emergency authority" on responding to COVID-19.(13)
More specifically for the healthcare industry, the joint antitrust statement states that the agencies will generally not challenge:
- providers' developing and encouraging patient management standards that are used to "assist providers in clinical decision making"; or
- joint purchasing agreements among healthcare providers "such as those designed to increase the efficiency of procurement and reduce transactions costs".(14)
Especially for the healthcare industry, the agencies appear eager to point out competitor collaborations that companies can legally undertake to fight the COVID-19 pandemic.
The joint antitrust statement also offers some leeway to companies ready to "address the spread of COVID-19 and its aftermath".(15) Yet, this leeway is conditional. If competitors work together to "combine production, distribution, or service networks to facilitate production and distribution of COVID-19-related supplies they may not have traditionally manufactured or distributed", the agencies will view such joint efforts as "a necessary response".(16) However, these competitor collaborations must be "limited in duration and necessary to assist patients, consumers, and communities affected by COVID-19 and its aftermath".(17)
Even under normal circumstances, the DOJ and the FTC acknowledge that "a collaboration may facilitate the attainment of scale or scope economies beyond the reach of any single participant".(18) However, the scope of permissible collaborations may be greater in a pandemic than it would be normally, as changed market conditions may enhance the potential procompetitive benefits of a collaboration. Indeed, in its hurricane-related guidance, the DOJ indicated that it would "take into account the changes in market conditions as a result of the hurricanes" when it conducted any antitrust analysis of joint conduct.(19) The same reasoning would likely apply to the COVID-19 crisis.
Federal law on collaborative efforts
Federal law also expressly recognises that some collaborative efforts that would normally be subject to antitrust scrutiny may be necessary to respond to a pandemic and may be entitled to antitrust immunity.
Recently, President Trump invoked a 70-year-old law called the Defence Production Act (DPA)(20) to increase the production of medical supplies and equipment to address the COVID-19 crisis.(21) The DPA enables the president to:
consult with representatives of industry, business, financing, agriculture, labor, and other interests in order to provide for the making by such persons, with the approval of the President, of voluntary agreements and plans of action to help provide for the national defense.(22)(Emphasis added.)
Although the DPA contemplates some oversight by the attorney general and the FTC, it specifically provides an antitrust defence to participants taking part in these voluntary agreements.(23) However, the defence is unavailable for a person seeking to assert such a defence, if it is shown that "the action was taken for the purpose of violating the antitrust laws".(24)
In addition to the DPA, the Pandemic and All Hazard Preparedness Act specifically grants the secretary of health and human services the authority to convene meetings and consult with persons "engaged in the development of… a qualified pandemic or epidemic product… for the purpose of the development, manufacture, distribution, purchase or storage" of such products.(25) Participation in such meetings cannot be the basis for antitrust liability.(26) However, agreements or conduct that result from such meetings are not immune from antitrust liability, unless it is specifically approved by the attorney general, after consulting with the FTC chair and the secretary of health and human services.(27) Notably, under the statute, an antitrust exemption may apply, even if doing so would result in substantial anticompetitive effects, so long as they are "reasonabl[y] necessary for ensuring the availability of the… product involved".(28) Though certain activities are "covered" by the act, other activities "not reasonably necessary to carry out such covered activities" remain subject to antitrust scrutiny.(29)
Even in times of crisis, antitrust laws still apply. However, in these unprecedented times, federal agencies appear willing to give some leeway to competitor collaborations that are short term, necessary to fight the COVID-19 pandemic and do not violate bedrock antitrust laws such as price fixing, market allocation, bid-rigging or exclusionary conduct. Moreover, for activities that are not covered by the recent Joint Antitrust Statement Regarding COVID-19 or the Pandemic and All Hazard Preparedness Act or any exemptions granted thereunder, companies can seek an expedited business review letter from the DOJ or an advisory opinion from the FTC, before undertaking collaborative efforts. Although changed market conditions may make some (especially short-term) collaborations permissible that would not have been otherwise, firms should take antitrust law into account before deciding to participate in any such activity.
Endnotes
(1) DOJ, Justice Department Cautions Business Community Against Violating Antitrust Laws in the Manufacturing, Distribution and Sale of Public Health Products (6 March 2020).
(4) DOJ, Antitrust Guidance – Hurricanes Harvey And Irma (12 September 2017) and Antitrust Guidance Hurricanes Katrina And Rita (25 June 2015).
(5) DOJ, Antitrust Guidance – Hurricanes Harvey And Irma (12 September 2017).
(7) DOJ, Joint Antitrust Statement Regarding COVID-19 (24 March 2020).
(12) Joint Antitrust Statement Regarding COVID-19 (24 March 2020).
(18) Department of Justice and Federal Trade Commission, Antitrust Guidelines for Collaborations Among Competitors (April 2002),
(19) Department of Justice, Antitrust Guidance – Hurricanes Harvey And Irma (12 September 2017).
(20) The Defence Production Act of 1950, 50 USC Section 4501, as amended. The purpose of the DPA is "to ensure the vitality of the domestic industrial base" in certain times of emergency. 50 USC Section 4502(a)(2).
(21) President Trump invokes Defense Production Act to speed medical supply production, CBS News (18 March 2020, 8:58am).
(22) 50 USC Section 4558(c)(1).
(23) Id, Section 4558(j)(1). However, the scope of the DPA is not unlimited. A DPA participant must demonstrate their "action was specified in, or was within the scope of, an approved voluntary agreement initiated by the President and approved in accordance with this section or a plan of action adopted under any such agreement", Id Section 4558(j)(2).
(25) 42 USC Section 247d-f(a)(1).
(26) Id Section 247d-7f(a)(1)(i).
