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Given the extraordinary measures necessary to address the COVID-19 crisis, many businesses find themselves with opportunities to collaborate with competitors in a joint effort to meet global demand for essential products and services, including medical supplies and equipment. The Department of Justice, the Federal Trade Commission and State Attorney Generals have provided public guidance as they have modified their positions, to some extent, on antitrust enforcement. However, it is essential that businesses remain aware of the continued enforcement of antitrust laws in the United States, despite the current pandemic. While government agencies are encouraging cooperation on limited issues directly related to fighting the pandemic, longstanding prohibitions on anticompetitive practices largely remain in full force and effect with limited exceptions.
On March 24, 2020, the Antitrust Division of the Department of Justice and the Federal Trade Commission’s Bureau of Competition (collectively “the Agencies”) provided guidance on antitrust enforcement during the pandemic through a joint statement. This statement clarified mechanisms for pro-competitive collaboration and instituted an expedited review process for COVID-19 related requests. The accelerated review of such requests includes applications under the National Cooperative Research and Production Act, which allows for flexible treatment of certain organizations and joint ventures under antitrust laws, as well as the ability to obtain antitrust guidance from the Bureau of Competition by submitting written requests via email to FTCCOVID19@ftc.gov.
Although the joint statement does not include express exceptions to existing antitrust laws, it does state that the Agencies will consider “exigent circumstances” when reviewing efforts by businesses to respond to the COVID-19 pandemic. For example, the Agencies indicate that leeway may be provided where businesses “temporarily combine production, distribution, or service networks to facilitate production and distribution of COVID-19 related supplies they may not have traditionally manufactured or distributed.” Similarly, in an effort to provide immediate guidance to businesses, the joint statement lists a variety of arrangements and coordination considered unlikely to trigger antitrust violations, including:
- Collaboration between businesses on research and development in accordance with the Guidelines for Collaborations Among Competitors;
- Exchanging technical know-how while excluding company-specific data regarding prices, wages, outputs, or costs;
- The development of “suggested practice parameters” for patient management that may be helpful for patients, providers, and purchasers;
- Joint purchasing arrangements among healthcare providers; and
- Private lobbying intended to solicit government action.
Given the trillions of dollars to be injected into the United States economy through the CARES Act and other stimulus legislation, the overwhelming need for products and services to address the impact of the pandemic, and the uncertain treatment of potentially anticompetitive activities necessary to address that need, it is likely that substantial antitrust and other regulatory enforcement action will be taken in the coming months.
Nonetheless, early signs are encouraging that necessary collaborative efforts will be viewed favorably by federal agencies. On April 4, 2020, the Department of Justice announced it would not challenge the cooperative efforts of several medical supply distributers to increase manufacturing, sourcing, and distribution of personal protective equipment (“PPE”) and COVID-19 related medications. Although these efforts are in cooperation with the United States government, it provides an indication that the expedited review process is underway and that there may be less stringent enforcement against traditionally anti-competitive activities in limited circumstances related to fighting the COVID-19 pandemic.
Further, there remains significant potential for increased use of the Defense Production Act (“DPA”), which provides the President authority to approve “associations of private interests” in support of national defense and exempt those associations from antitrust liability. While use of that authority has been somewhat limited, recent actions indicate it may be increasingly relied upon to address shortages of COVID-19 related supplies. For example, on April 2, 2020, President Trump invoked the DPA directing 3M and six major medical device companies to produce PPE and ventilators. The federal government is likely to continue utilizing this authority in the coming months, particularly as the CARES Act amended the DPA to remove certain funding limitations.
While the COVID-19 pandemic has thrust both businesses and governments into uncharted territory, the long standing antitrust statutes in the United States remain unchanged. Businesses must remain vigilant in ensuring they avoid crossing the line from appropriate cooperation into anticompetitive behaviors that may ultimately result in civil or criminal penalties. To that end, prospective joint ventures and collaborative activities should be submitted to the Department of Justice and Federal Trade Commission whenever possible. While there are indications of somewhat relaxed restrictions, the ambiguity of that shift necessitates continued careful attention to antitrust statutes and enforcement.
If you have any questions regarding the above antitrust issues, please feel free to reach out to Jeffrey S. Jacobovitz at 202-677-4056.
Jeffrey Jacobovitz is a former FTC Attorney and Chair of Arnall Golden Gregory’s Antitrust and Competition Group. Micah Kanters is an associate attorney at AGG.