Fair Trade and Antitrust Law: Compliance, Enforcement, and Defense

The most serious category of fair trade and antitrust law violations is horizontal price fixing and cartel conduct, which occurs when competing firms agree to set prices, restrict output, allocate customers or territories, or coordinate bids, and courts have classified this conduct as per se illegal under Section 1 of the Sherman Act because no efficiency justification can save it, and the criminal penalties include fines of up to one hundred million dollars per corporate defendant, ten years of imprisonment per individual defendant, and parallel private treble damages. The antitrust and fair trade law practice areas provide the cartel defense analysis and plea negotiation strategy needed.

Section 2 of the Sherman Act prohibits both the willful acquisition or maintenance of monopoly power through exclusionary conduct and the attempt to monopolize a relevant market through predatory pricing, exclusive dealing arrangements, loyalty discount programs, tying arrangements, or refusals to deal with rivals that lack a legitimate procompetitive justification, and the critical legal distinction between illegal monopolization and lawful market dominance is the presence of exclusionary conduct that makes business sense only because it harms competition. The antitrust and competition and unfair competition practice areas provide the market dominance analysis and monopolization defense needed.

The Department of Justice Corporate Leniency Program provides complete immunity from criminal prosecution to the first cartel member who voluntarily discloses the existence of the agreement before an investigation has been opened, while companies that are second or third to report receive leniency discounts rather than full immunity, meaning the strategic decision about when to report is among the most consequential decisions a company can make after discovering employee participation in price fixing. The antitrust practice and fair trade law practice areas provide the leniency program analysis and voluntary disclosure strategy needed.

When the Federal Trade Commission or the Department of Justice concludes that a merger or acquisition will substantially lessen competition in a relevant market, the agencies can seek an injunction blocking the transaction, negotiate a consent decree requiring the merging parties to divest specific assets or business units, or bring a post-consummation challenge to unwind a completed merger, and a company that proactively identifies and offers to divest the specific assets creating competitive concern significantly improves the probability of obtaining regulatory clearance. The merger clearance and mergers and acquisitions practice areas provide the divestiture negotiation and merger remedy strategy needed.

A transaction that receives a second request triggers a substantially extended investigation involving the production of millions of documents, depositions of key executives and customers, and a formal competitive analysis in which the agency uses economic models to predict whether the combined entity will have the ability and incentive to raise prices or reduce output after the merger, and the parties must engage fair trade and antitrust law counsel immediately to develop the economic record needed. The antitrust and antitrust and competition practice areas provide the HSR notification analysis and second request response strategy needed.

Section 5 of the FTC Act prohibits both unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce, and the Federal Trade Commission has used this dual mandate to pursue not only traditional antitrust violations but also practices such as false advertising, failure to disclose material terms, deceptive pricing claims, and unfair subscription cancellation practices, and a company targeted by an FTC Section 5 enforcement action faces a consent decree, civil penalties for subsequent violations, and mandatory consumer redress payments. The consumer protection and unfair trade practices practice areas provide the FTC Section 5 defense analysis and consent decree negotiation needed.

For conduct that is not subject to per se treatment under fair trade and antitrust law, the government must prove under the rule of reason standard that the challenged conduct produces actual anticompetitive effects in a relevant market, and a defendant who can demonstrate that the challenged conduct generated substantial procompetitive efficiencies that could not be achieved through less restrictive means and that these efficiencies were passed through to consumers can defeat the government's claim, and the defendant who invests in a thorough economic analysis at the earliest stage significantly improves the probability of a favorable outcome. The antitrust practice and unfair competition laws practice areas provide the rule of reason economic analysis and procompetitive justification defense needed.

A company that operates in concentrated markets or competes aggressively through pricing, bundling, exclusive dealing, or other potentially exclusionary commercial practices should maintain a fair trade and antitrust law compliance program that includes regular training for sales, marketing, and procurement personnel, a protocol for reporting potential violations to legal counsel, an audit mechanism for reviewing commercial practices that present elevated antitrust risk, and a defined escalation pathway for responding quickly when potential violations are identified, and an effective compliance program demonstrates good faith that supports mitigation at sentencing or in penalty negotiations. The antitrust and responding to an FTC civil investigative demand practice areas provide the antitrust compliance program design and ongoing competition law risk management needed.