Antitrust Action: Price Fixing, Monopoly Abuse, and How to Fight It

Section 1 of the Sherman Antitrust Act prohibits contracts, combinations, and conspiracies in restraint of trade. Conduct is evaluated under the per se standard or the rule of reason standard. Per se illegal conduct is conclusively presumed to harm competition without requiring any proof of actual competitive effects. Price fixing, bid rigging, and market allocation are per se illegal. The agreement itself is the violation, regardless of whether it actually raised prices or harmed consumers. Criminal price-fixing conspiracies are prosecuted by the DOJ Antitrust Division. Corporate defendants face fines of up to $100 million per count. Individual defendants face fines of up to $1 million per count and imprisonment of up to 10 years. Companies or individuals under investigation for potential Section 1 violations should immediately seek antitrust and competition law legal counsel to assess exposure and develop a response strategy.

Section 2 of the Sherman Act prohibits monopolization, attempted monopolization, and conspiracy to monopolize a relevant market. The government or plaintiff must define the relevant market and establish that the defendant possesses monopoly power. The defendant must have willfully acquired or maintained that power through exclusionary conduct rather than through superior products or business acumen. Exclusionary conduct includes predatory pricing, refusals to deal, exclusive dealing arrangements, and tying arrangements that coerce buyers into purchasing unwanted products. Mere possession of monopoly power is not illegal. What is prohibited is the use of anti-competitive means to acquire or maintain it. Companies facing monopolization claims should seek antitrust practice legal counsel to evaluate the market definition, assess the competitive effects of the challenged conduct, and develop the appropriate legal and economic arguments.

The Clayton Act supplements the Sherman Act by prohibiting specific categories of conduct whose effect may substantially lessen competition or tend to create a monopoly. Section 7 of the Clayton Act prohibits mergers and acquisitions whose effect may substantially lessen competition in any relevant market. Transactions above the Hart-Scott-Rodino thresholds must be reported to the FTC and DOJ before closing and are subject to federal premerger review. Sections 3 and 14 of the Clayton Act prohibit tying arrangements and exclusive dealing contracts that substantially foreclose competition. A tying arrangement conditions the sale of one product on the purchase of a separate product. An exclusive dealing contract requires a buyer to purchase exclusively from one seller for a defined period. Companies evaluating mergers, tying arrangements, or exclusive dealing contracts should seek Hart-Scott-Rodino filing legal counsel to assess antitrust risk before execution.

The FTC has authority to investigate and challenge unfair methods of competition under Section 5 of the FTC Act. The FTC can challenge conduct that falls short of a Sherman Act violation but nevertheless harms the competitive process. The FTC issues civil investigative demands requiring the production of documents and interrogatory responses from companies under investigation. An FTC investigation may result in a consent order requiring the company to cease the challenged conduct, divest certain assets, and implement compliance monitoring. Consent order negotiations are complex, and the terms can impose significant operational constraints on the company's future business conduct. Companies under FTC investigation or facing a proposed consent order should seek unfair trade practices legal counsel to evaluate the scope of the investigation and negotiate the terms of any resolution.

The DOJ Antitrust Division prosecutes cartels through criminal indictments and guilty pleas. A corporation convicted of criminal antitrust violations faces fines calculated under the Sherman Act and the federal sentencing guidelines, which allow fines up to twice the gain or loss from the conspiracy. The DOJ's corporate leniency program allows the first company to report a cartel to the DOJ and cooperate fully to avoid criminal prosecution entirely. Leniency is available only to the first applicant. The decision to apply for leniency is among the most consequential decisions a company can make. It must be made quickly and with full knowledge of the legal consequences. Companies that believe they may have participated in conduct that could qualify for the DOJ leniency program should immediately seek DOJ seizure legal counsel to evaluate eligibility.

Section 4 of the Clayton Act creates a private right of action for any person injured in their business or property by reason of anything forbidden in the antitrust laws. The plaintiff must prove antitrust injury, meaning an injury of the type the antitrust laws were designed to prevent that flows from the defendant's anti-competitive conduct. Once actual damages are established, they are automatically trebled. This creates potential liability of three times the overcharge paid across the entire affected market. In large cartel cases, the damages exposure can reach hundreds of millions or billions of dollars. Companies and individuals who believe they have been harmed by anti-competitive conduct should seek class action litigation legal counsel to evaluate the antitrust injury and assess the merits of a private action.

Many private antitrust actions are brought as class actions on behalf of all purchasers who paid inflated prices as a result of a price-fixing conspiracy or other anti-competitive scheme. The class action mechanism allows plaintiffs' counsel to aggregate claims that would be individually uneconomical to pursue. Antitrust class action certification requires proof that the class members suffered a common injury capable of common proof. Defendants frequently challenge class certification by arguing that damages cannot be calculated on a class-wide basis. The battle over class certification is often as important as the merits of the underlying antitrust claim. Companies facing antitrust class action complaints should seek class action fairness act (CAFA) legal counsel to evaluate class certification vulnerabilities and develop a litigation strategy.

An effective antitrust compliance program identifies business practices that create antitrust risk, trains employees to recognize and avoid prohibited conduct, and ensures that communications among competitors are reviewed before they occur. Trade association participation is a common source of antitrust risk. Competitor meetings at industry events, information sharing agreements, and joint purchasing arrangements all require careful antitrust analysis before implementation. A robust compliance program is also a mitigating factor in DOJ charging decisions and sentencing. Companies with demonstrated compliance programs may receive credit at sentencing that reduces the criminal fine or penalty. Companies seeking to implement or audit their antitrust compliance programs should seek supply chain disruption legal counsel to identify areas of elevated antitrust risk and implement appropriate controls.