In two separate speeches given on May 12 and 13, 2009, representatives of the Justice Department announced a renewed emphasis by the federal government on vigorous anti-trust enforcement despite challenging economic conditions. Assistant Attorney General Christine Varney advised the U.S. Chamber of Commerce on May 12, 2009, that “vigorous anti-trust enforcement must play a significant role in the Government’s response to economic crises to ensure that markets remain competitive.” Varney also announced that, effective May 11, 2009, the Justice Department was withdrawing a Bush Administration Report prepared in 2008 that had counseled restraint in challenging monopolies under Section 2 of the Sherman Act.
On the very next day, Deputy Assistant Attorney General for Economics, Carl Shapiro, gave a speech to the American Bar Association entitled “Competition Policy in Distressed Industries”. In his speech, Mr. Shapiro warned that the “Anti-Trust Division will be playing an active role to ensure that government policies do not unnecessarily create or enhance market power and that they harness the beneficial power of competition wherever possible.” Shapiro further stated that “while anti-trust authorities are likely to see more cases involving financially troubled firms during a recession than in better times, the issues raised are not unique to a recession and do not require special rules for financial distress arising during a recession.”
What this means in practical terms for business owners remains to be seen. Some analysts have predicted that this policy change could “chill” the environment for mergers and acquisitions. See: Putting the Anti Back Into Antitrust Enforcement, The Wall Street Journal, May 12, 2009. For the average business owner, however, the message is clear: financial distress, in and of itself, is not an anti-trust defense.
In these distressing economic times, business owners should exercise caution and avoid the temptation to ease competition deemed “ruinous” or “cutthroat” by cooperating with competitors. The most common illegal activities that should be avoided include the following:
- Express or tacit agreements with competitors on price-related matters.
- Express or tacit agreements with competitors to restrict output.
- Express or tacit agreements with other business owners to cease dealing with another person or business. These agreements are commonly referred to as group boycotts.
- Express or tacit agreements with competitors to divide sales territories or allocate customers.
- Cooperative agreements among competitors that eliminate or reduce competition during the bid process. These agreements are commonly referred to as “bid rigging.”
All of these activities are illegal and can create problems that far outweigh any perceived benefit. If you are asked to participate in any such agreements, refuse and document your refusal. If you are the victim of any such illegal activities, give us a call.