Monday, October 29 2007
 Recent Indictments Serve as Reminder That Communication and
Collaboration Among Competitors Can Still Lead to Significant Antitrust Risks
Since its inception, one of the
primary functions of the Sherman Act is to prohibit unlawful restraints of
trade between competitors. Although the
number of civil antitrust actions has declined in recent years, executives and
in-house counsel must remain aware of the significant antitrust risks associated
with communicating and collaborating with one’s competition. Indeed, antitrust enforcement is alive and
well and the need to monitor your business relationships with competitors has never
been more important. A recent
investigation in the marine hose industry, a key ancillary business in the Gulf Coast
region, serves as a sobering reminder of the consequences associated with
unlawful activity among competitors.
Relationships with Competitors
Certain concerted activity between
competitors is so likely to harm competition through increased pricing or
reduced output that enforcement agencies condemn such activity as per se
illegal and often prosecute the parties to such agreements criminally. Types of agreements that have been deemed to
be per se illegal include agreements to fix prices, share or divide
territories, rig bids, and allocate customers or product lines. The business justification for entering into
such an agreement – even pro-competitive justification – becomes irrelevant for
per se violations.
Even if the activity has not been
condemned as per se illegal, companies often find themselves engaged in costly
civil antitrust actions involving activity that is analyzed under a rule of
reason approach. This approach analyzes
the overall competitive effect of the restraint to determine if the activity is
reasonably necessary to ultimately achieve pro-competitive benefits. Of course, businesses must weigh the potential
benefits gained by engaging in activity with another competitor against the
time and costs of a potential lawsuit or enforcement agency investigation, even
if it is confident that the activity would survive rule of reason
scrutiny.
Conspiracy in the Marine Hose Industry
Just last month, a federal grand
jury in Fort Lauderdale, Florida, returned an indictment charging two industry executives
with several per se violations, including participation in a conspiracy to rig
bids, fix prices, and allocate market shares for sales of marine hose used for
offshore extraction and/or transportation of petroleum products. The indictment, which stemmed from a joint
investigation by several federal agencies, charges executives with Manuli
Rubber Industries of conspiring with representatives from its world-wide
competitors, including Dunlop Oil and Marine, Trelleborg Industries,
Bridgestone Corporation, and Parker Oil and Marine, to suppress and eliminate
competition in the marine hose industry from as early as 1999 through
2007.
If convicted of the bid-rigging,
price fixing, and market allocation charges, they will face a maximum penalty
of ten (10) years imprisonment and a $1 million fine. In addition, multiple civil actions have been
filed against the manufacturers as is common in the wake of such criminal
investigations.
Pitfalls in Communicating with Competitors
Certainly, the marine hose
indictments, if proven, represent egregious examples of unlawful collaboration
between competitors. However, businesses
should understand that the Sherman Act does not require a sophisticated,
elaborate conspiracy or even a formal oral or written agreement. Unlawful agreements can be express, formal
contracts, such as in the case of cartels, or they can be implied and informal,
such as a handshake or a “knowing wink.”
As a result, it is critical that a business take precautions to
eliminate even the appearance of an unlawful agreement when communicating with
competitors.
- Carefully consider or avoid altogether the exchange
of price-related information with competitors.
- Obtain information on competitor pricing and other
sales data from information available to the public or from your own customers.
- Consult with antitrust counsel prior to non-routine
communication or collaboration with competitors.
- If a meeting among competitors is necessary,
discussions should take place in carefully structured meetings, such as
trade association meetings or other industry events.
- Identify an agenda, the participants and the
parameters of the discussions in advance of such meetings.
Finally, recognizing that certain
competitor collaborations serve to foster innovative and efficiency-enhancing
endeavors that ultimately benefit the consumer, the FTC and DOJ jointly issued
its Antitrust Guidelines for Collaborations Among Competitors to provide
guidance to business people in explaining how the agencies will analyze certain
issues raised by the concerted activity between competitors. The guidelines are available on each agency’s
website and can serve as a useful tool in preventing antitrust violations.
Of course, this brief commentary
is intended only to alert persons receiving this message to the situation and the
dangers described and is not intended to be legal advice on a particular
factual scenario. The factual
circumstances are of utmost importance in analyzing antitrust issues, and we
could not counsel a recipient of this message on a company’s specific conduct
or contemplated conduct without a particularized understanding of the facts and
circumstances of your questions.
If you believe that you may be a
victim of the alleged conspiracy in the marine hose antitrust investigation or
if you require additional information on antitrust compliance, please contact
K. Todd Wallace at ktwallace@liskow.com,
or Leta A. Seletzky at laseletzky@liskow.com or go to www.liskow.com.
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