Randy Gordon, partner at Barnes & Thornburg, discusses various ways that the coronavirus pandemic is affecting antitrust laws and government enforcements, especially in the health care space.
How is the coronavirus affecting the practice of antitrust law in the United States?
Randy Gordon: One of the effects of this crisis is that those of us who counsel clients in the antitrust space are taking a step back from business as usual, and clients who may be be considering antitrust laws on their own are doing the same. What I mean by that is that the internal compliance officers, and those of us in private practice who counsel clients, often scare employees away from communicating with competitors. Because usually what we’re counseling clients against are hardcore violations of the antitrust laws, like price-fixing and so forth. Right now, those kinds of enforcements are still happening, but there is also collaboration happening between competitors that is perfectly fine. One of the things that we’re trying to impress upon clients, particularly those in the health care space, is that because of the extraordinary situation we’re in right now, certain kinds of collaboration are allowed to go forward. The government has acknowledged that, and the Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division have issued a joint antitrust statement about COVID-19, which is designed to give some comfort to competitors. Collaboration is necessary to help fight this pandemic.
You mentioned the new Joint Antitrust Statement Regarding COVID-19. What is the statement trying to achieve?
It is communicating to the market that the FTC and DOJ recognize that we’re in unusual circumstances, and that they’re promising to do two things. First, they want market participants to know that competitor collaborations are going to be reviewed speedily. They have essentially promised that when they’re presented with a proposed collaboration that is related to COVID-19 – someone seeking a business review, for instance – they will do it on an expedited basis. Second, they want to give some comfort to market participants by letting them know that not all competitor collaborations are suspect. Since 2000, there have been guidelines in place that emphasize the pro-competitive aspects of certain kinds of of collaboration. Research and development, for instance, and some joint purchasing arrangements are necessary during this crisis – and need to be achieved quickly. So those are the two things I would emphasize: speed and comfort to the market.
What would you say the Joint Statement’s impact will be on mergers and acquisitions (M&A)?
It may be that M&A activity, as a business matter, is going to be on hold for a bit, while we’re in this locked down economy. So there may not be a lot of activity in the space anyway. But one of the things that has been top of mind lately, for the last couple of years, is that the DOJ and FTC have been relatively aggressive in challenging mergers and acquisitions in general. The challenge to the AT&T and Time Warner merger was in the news a lot, for instance, since it was one of the first challenges to a vertical merger in the last 50 years, and it’s certainly the largest deal that has been challenged. So people are understandably speculating about how these transactions will be affected by the COVID-19 crisis. I think the short answer is simply that there is not going to be a lot of activity. The Joint Statement has underscored that sentiment – unless the transaction falls within the Hart-Scott-Rodino Antitrust Improvements Act. In other words, unless something hits the reportable threshold, which is typically a dollar amount, the review is not mandatory. So what we’re counseling clients to do is to simply fall back to the competitor collaboration guidelines, as opposed to the merger guidelines.
What will the Joint Statement’s impact be on joint ventures and other competitor collaborations?
This is where the rubber is really going to meet the road. The FTC and DOJ are encouraging certain types of competitor collaborations, for the time being. For instance, purchasing arrangements, as I mentioned, research and development, those sorts of things, are areas where collaboration is being actively encouraged. The agencies have even said that they will facilitate collaborations that are sponsored or encouraged by certain other agencies – Health and Human Services, for instance. There may be some military collaborations, as well. But I think the one that’s going to be the most important is the joint purchasing arrangement for companies in the health care arena, which the FTC and DOJ have reiterated that they’re not going to challenge. As long as those purchasing arrangements aren’t impacting more than, say, a third of the purchases in the market, I think they’re going to be fine.
Can a company still run afoul of the antitrust laws during this period of relaxed enforcement?
The short answer is yes. This Joint Statement emphasizes that a crisis like this can encourage good behavior, but it can also provide fertile ground for bad actors to do things that are anticompetitive and anti-consumer. The agencies have reiterated that they’re still going to be actively going after competitor arrangements that fix prices, reduce output, or lead to price gouging, all of those sorts of things. We can safely say that they’re still going to be looking for that sort of bad market behavior. Even though there are things that competitors can do jointly, like lobby the government, there are other things that they can’t do. So although the government is encouraging certain collaborations, especially in health care, they’ve also made it clear that this is not an opportunity to commit hardcore antitrust violations.
This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
Published May 4, 2020.
