Fishy Price Fixing Leads to 40-month Jail Stint

On June 16, following a monthlong trial, Christopher Lischewski, former CEO and president of Bumble Bee Foods LLC, was sentenced by Judge Edward Chen of the Northern District of California to 40 months in prison plus a $100,000 fine for orchestrating a canned tuna price-fixing conspiracy. Lischewski’s sentence demonstrates the punishment individuals should be prepared to face if involved in price fixing and that such criminal behavior cannot be shielded by any corporate protections. Assistant Attorney General Makan Delrahim, head of the Department of Justice’s Antitrust Division, remarked that “[t]he sentence imposed … will serve as a significant deterrent in the C-suite and the boardroom.”[1] Indeed, Chen himself stated that Lischewski’s sentence was intended to send a message of general deterrence, particularly where a basic food staple relied upon by many households is concerned. Continue Reading

Limits of State Action Protection for Colleges and Universities

A recently filed antitrust complaint against Duke University (Duke) provides a fresh reminder for colleges and universities that the state action immunity doctrine is unlikely to be a complete shield from antitrust liability even if a public university is involved. On May 29, a professor at the University of North Carolina (UNC) filed a complaint against Duke alleging that UNC and Duke had an agreement not to recruit each other’s faculty.[1]

The alleged conduct came to light during discovery in a similar lawsuit, Seaman v. Duke University, brought in 2015 against Duke’s and UNC’s medical schools related to a no-poach agreement regarding medical faculty.[2] Continue Reading

1-800 Contacts Settles Class Action Lawsuit With Roots in FTC Action

Back in 2016, the Federal Trade Commission (FTC) sued 1-800 Contacts, claiming the online retailer devised an anticompetitive scheme with other online lens retailers to restrict search terms.  The FTC charged that 1-800 Contacts and its competitors entered into agreements which prevented the other online contact lens retailers from bidding for search engine keywords in advertising auctions conducted by internet search engines, such as Google and Yahoo.

Last week, in a separate but related consumer class action, 1-800 Contacts settled with consumer-plaintiffs who brought suit in the Central District of Utah alleging similar facts.  The consumer complaint alleged that 1-800 Contacts forced some of its competitors to implement negative keyword lists so that when a potential consumer typed “1-800 Contacts,” no links to other retailers would appear in the search results and instead would only se links directing to 1-800 Contacts’ website. Continue Reading

The Failing Firm Defense in Times of Economic Uncertainty

As many businesses look for solutions to weather the economic impact of the COVID-19 pandemic, one potential avenue for distressed companies is to seek to be acquired by a more stable firm looking to expand. The antitrust regulators have made clear that all types of mergers – even during a global crisis – will be subject to ordinary antitrust scrutiny. As those principles are applied, merging companies may look more frequently to the “failing firm” defense to convince regulators that their deal should pass regulatory hurdles when it otherwise might not. However, the requirements for meeting the failing firm standard are high, and merging parties should not assume that financial struggles during the pandemic will provide a free pass through merger review. Continue Reading

DOJ Declines to Challenge New Bidding Platform for Commercial Advertisement Producers

On April 16, the Department of Justice (DOJ) announced that it would not challenge a proposal by the Association of Independent Commercial Producers (AICP) to operate an online platform for advertisers and advertising agencies to solicit bids from companies that produce commercials for television, the internet and other media platforms. The DOJ stated its position in a business review letter from Assistant Attorney General Makan Delrahim of the Antitrust Division to counsel for the AICP. Under the DOJ’s business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement on whether the division currently intends to challenge the action under the antitrust laws based on the information provided.

As outlined in the AICP’s request letter, bidding on commercial productions is primarily conducted in one of two ways: (1) Agencies solicit bids on behalf of advertisers, or (2) advertisers solicit bids directly, without engaging an agency. Production companies then directly submit responsive bids to the agencies or advertisers, as the case may be. However, the AICP noted that, increasingly, advertisers and agencies are requiring AICP members (the production and post-production companies) to use third-party bidding portals designed to aggregate the input data and provide bidding exchange services. In some cases, advertisers and agencies have formed affiliated entities that offer bidding platform services to the industry as well. Continue Reading

COVID-19 and the DPA: First Criminal Complaint Filed by the Justice Department in New York

On Friday, April 24, 2020, the Justice Department announced the filing of a criminal complaint against a New York man, Amardeep “Bobby” Singh, for the hoarding and subsequent price gouging of personal protective equipment (PPE) under the Defense Production Act (DPA) – the first of its kind since the beginning of the COVID-19 outbreak in the United States. Singh faces up to one year in prison or a fine of up to $10,000 if convicted of violating the DPA. In addition to the Eastern District of New York and the United States Postal Inspection Service, this case is being handled with assistance from the Department of Justice’s nationwide COVID-19 Hoarding and Price Gouging Task Force.

According to the complaint, Singh operates a retail store selling apparel and shoes. However, beginning in mid-March, Singh began to accumulate merchandise he called “COVID-19 Essentials,” including but not limited to N-95 filtering face piece respirators, PPE face shields, PPE gloves, and clinical-grade sanitizing and disinfecting products. According to the charges, this merchandise was sold at inflated prices to the public. For example, according to the complaint, Singh purchased three-ply disposable face masks for a per-unit price of $0.07. He resold those same masks at a per-unit price of $1.00 – a markup of approximately 1,328%. Among the entities allegedly price gouged were particularly vulnerable organizations, such as the Association to Benefit Children, the New York Foundation for Senior Citizens and Rewarding Environments for Adult Living Inc. Overall, investigators seized a total of more than 100,000 face masks, 10,000 surgical gowns, nearly 2,500 full-body isolation suits and more than 500,000 pairs of disposable gloves. Continue Reading

Fuel Supply Bid-Rigging Prosecution Highlights Interplay of Whistleblower Statute and Antitrust Division’s Leniency Program

On April 8, the Department of Justice (DOJ) Antitrust Division (Division), the DOJ Civil Division and the U.S. Attorney’s Office for the Southern District of Ohio (collectively, the Government) announced a civil antitrust and False Claims Act (FCA) complaint and concurrent settlement regarding a bid-rigging conspiracy that targeted fuel supply contracts for U.S. military installations in South Korea.[1] A continuation of the larger line of cases involving South Korean fuel contract bid-rigging,[2] this final settlement with Jier Shin Korea Co. Ltd (Jier Shin) and its president, Sang Joo Lee (Lee) (together, the Defendants), demonstrates the DOJ’s commitment to using Section 4A of the Clayton Act[3] and the FCA to regulate anticompetitive conduct in which the U.S. is the victim.

Case Background and Defendants’ Conduct

Jier Shin is a small Korean logistics company privately held by Lee and his family as majority owners. As mentioned above, the DOJ alleged that Jier Shin agreed with five Korean transportation and oil refinery companies to fix prices and rig bids for U.S. military fuel supply contracts. Interestingly, this case arose out of a FCA qui tam whistleblower claim alleging the Defendants made false claims regarding their involvement in the conspiracy. This indicates that someone either inside the company or with significant knowledge of the company’s operations possessed the evidence necessary to convince the Government to initiate an enforcement action. Continue Reading

COVID-19 Update: Pricing During COVID-19 Without Gouging or Fixing

As antitrust counsel, we have done our best to keep up to date with the latest news coming from the federal and state governments on price gouging and efforts to combat shortages and hoarding of PPE. Today, we write to provide a few more details on price gouging and how you can set prices in these difficult times while avoiding exposure for price gouging, price fixing or other antitrust violations.

On March 23, 2020, President Trump signed Executive Order 13910 aimed at preventing price gouging and hoarding of crucial medical and health supplies needed to fight COVID-19.[1] The Executive Order invokes the Defense Production Act and for certain items designated by the U.S. Department of Health and Human Services, such as personal protective equipment (PPE) and ventilators, makes it a misdemeanor for individuals and companies to accumulate these items either (1) in excess of reasonable needs or (2) for the purpose of selling them in excess of prevailing market prices.[2] U.S. Attorney General William Barr has said that the government’s crackdown was aimed at “people hoarding these goods and materials on an industrial scale for the purpose of manipulating the market and ultimately driving windfall profits. If you have a big supply of toilet paper in your house, this is not something you have to worry about. But if you are sitting on a warehouse with masks, surgical masks, you will be hearing a knock on your door.”[3] It remains to be seen what “in excess of prevailing market prices” means in this context. Continue Reading

Combating COVID-19 Through Competitor Collaboration

Join members of the BakerHostetler Antitrust and Competition Team on Monday, April 13, 2020 for a webinar where they will examine criminal and civil antitrust risks and the best practices businesses should follow to protect themselves, including an exploration of the immunities offered by the Defense Production Act, the Pandemic and All-Hazards Preparedness Act and the state action immunity doctrine. The DOJ/FTC expedited review process will also be discussed. Click here to register.

COVID-19 continues to spread exponentially, leading to shortages in medical supplies – from personal protective equipment such as facemasks and respirators to ordinarily ubiquitous cleansers and sanitizers. As attempts to “flatten the curve” (slow the infection rate) show mixed results, and import disruptions contribute to the growing shortage of medical supplies, manufacturers and suppliers are asking: “How can we collaborate with industry stakeholders to expedite production, streamline distribution and get equipment to the neediest healthcare providers?”

Attorney General William Barr warned in March that the federal antitrust laws will be enforced even during national emergencies. There is a risk that seemingly harmless agreements to resolve equipment shortages and supply chain disruptions could be viewed as per se violations of the Sherman Act and result in criminal prosecution. For example, the following collaborations could be risky, depending on companies’ competitive relationships: coordinating sales and distribution of products to the neediest customers and regions, collectively purchasing vital inputs, setting price caps to prevent price gouging, exchanging sales and production figures, and coordinating supply chains. Still, antitrust enforcers have not been tone-deaf to the exigencies created by the pandemic. Nor is the federal government powerless to adjust the application of the antitrust laws should they hinder a robust response. Continue Reading

COVID-19 Antitrust Agency Announcements and Procedural Changes

Over the past several weeks, the U.S. antitrust enforcement agencies – the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) – have made several public announcements regarding changes to antitrust investigations and regulatory processes in response to the COVID-19 pandemic. In addition to changes to filing and meeting processes, the main takeaway from these announcements is that while agency staff continue to work remotely, parties should expect delays of investigations and litigations. This post summarizes the announcements that have been made by the FTC and the DOJ related to COVID-19 and what individuals and businesses should expect going forward:

  • The DOJ warns it will use resources to enforce violations of antitrust laws with respect to public health products. On March 9, the DOJ announced that it would ensure resources were available to enforce antitrust laws against “bad actors” that might take advantage of the current emergency situation.[1] In particular, the announcement warned that individuals engaging in price fixing, bid rigging or market allocation with respect to personal health protection equipment such as face masks, gloves and respirators could face criminal prosecution.[2]
  • The DOJ and the FTC have instituted expedited review procedures for COVID-19-related business collaborations. On March 24, the DOJ and the FTC announced expedited review procedures and provided guidance for collaborations of businesses working to protect the health and safety of Americans during the COVID-19 pandemic.[3] The agencies are aiming to resolve requests to evaluate proposed conduct addressing public health and safety within seven calendar days of receiving all necessary information.[4]
  • The DOJ and the FTC seek additional time for investigations. For current and future investigations, the DOJ is seeking timing agreements from parties that give the DOJ 30 additional days to complete its investigation after compliance with second requests.[5] These 30 days would be in addition to the statutory time period of 30 days or whatever time period the DOJ and the parties had previously agreed to (which is 60 days under the DOJ’s Model Timing Agreement).

Continue Reading