Antitrust Counseling

Resale Price Maintenance, Horizontal Conspiracies, and Antitrust Law

June 30, 2022 | Bona Law PC

If you are looking for controversy, you came to the right place. Today, we discuss resale price maintenance, one of the most contentious issues in all of antitrust. If you look around and see a bunch of antitrust economists, hide your screen so they don’t start arguing with each other. Trust me; you don’t want to be stuck in the crossfire of that.

Let’s start with some background: A resale price maintenance agreement is a deal between, for example, a supplier and a retailer that the retailer will not sell the supplier’s product to an end user (or anyone, for that matter) for less than a certain amount. It is a straight vertical price-fixing agreement.

That type of agreement has a storied—and controversial—past. Over a hundred years ago, the Supreme Court in a case called Dr. Miles declared that this type of vertical price fixing is per se illegal under the federal antitrust laws. This is a designation that is now almost exclusively limited to horizontal agreements.

During the ensuing hundred years or so, economists and lawyers debated whether resale price maintenance (RPM) should be a per se antitrust violation. After all, there are procompetitive reasons for certain RPM agreements and the per se label is only supposed to apply to activity that is universally anticompetitive.

After a trail of similar issues over the years, the question again landed in the Supreme Court’s lap in a case called Leegin in 2007. In a highly controversial decision that led to backlash in certain states, the Supreme Court lifted the per se veil from these controversial vertical agreements and declared that, at least as far as federal antitrust law is concerned, courts should analyze resale price maintenance under the rule of reason (mostly).

You can read more about Leegin and how courts analyze these agreements here. And if you want to learn more about how certain states, like California, handle resale price maintenance agreements, you can read this article. Finally, if you are looking for a loophole to resale price maintenance agreements, read our article about Colgate policies and related issues.

Minimum advertised pricing policies (MAP) are related to resale price maintenance: you can read our article on MAP pricing and antitrust here. You might also want to read Steven Cernak’s article about the four questions you should ask before worrying about the antitrust risks of new distributor restraints. And you can listen to a podcast with Molly Donovan and Steve Cernak about MAP Pricing here.

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If I Were You…I’d Listen to this Podcast about Minimum Advertised Pricing Programs (Episode 2)

June 15, 2022 | Bona Law PC

Author: Molly Donovan

We recently released episode 2 of our “If I Were You” podcast. You can listen to this episode about minimum advertised prices here. Featuring Bona Law partner Steve Cernak. Or read our blog version now:

This Episode Is About: Minimum Advertised Pricing (MAP) Programs

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Is it Time for Antitrust Lawyers to Pay Attention to Interlocking Directorates and Section 8 of the Clayton Act?

June 6, 2022 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

Section 8 of the Clayton Act prohibits certain interlocking directorates between competing corporations. But while the prohibition has been around since 1914, most antitrust lawyers pay little attention to it, partly because companies can quickly resolve any issues voluntarily. Recent comments by the new AAG Jonathan Kanter, however, hint that litigation might play a larger role in future Section 8 issues.

Clayton Act, Section 8 Basics

The prohibitions of Section 8, in its most recent form, can be simply stated: No person can simultaneously serve as an officer or director of competing corporations, subject to certain jurisdictional thresholds and de minimis exceptions. Truly understanding the prohibition, however, requires understanding all those italicized terms.

First, Section 8’s prohibition applies only if each corporation has “capital, surplus, and undivided profits,” or net worth, of $10M or more, as adjusted. The FTC is responsible for annually adjusting that threshold for inflation and usually announces the change early in the calendar year along with changes to the Hart-Scott-Rodino thresholds. Currently, the threshold is just over $41M.

Section 8 provides an exception where the competitive sales of either or each of the corporations is de minimis. Specifically, no interlocks are prohibited if the competitive sales of 1) either corporation are less than $1M, as adjusted (currently about $4.1M); 2) either corporation are less than 2% of that corporation’s total sales; or 3) each corporation are less than 4% of that corporation’s total sales.

Originally, Section 8 applied only to directors of corporations; however, the 1990 amendments extended the coverage to officers, defined as those elected or chosen by the corporation’s Board. Despite the clear wording of the statute limiting it to officers and directors, courts have considered the possibility that Section 8 might apply when a corporation’s non-officer employee was to be appointed a director of a competitor corporation.

The language of Section 8 clearly applies to interlocks between competing corporations. An interlock between a corporation and a competing LLC would not be covered by the statutory language or the legislative history of the original statute or amendment. The FTC and DOJ have not explicitly weighed in on application to non-corporations, although the FTC’s implementing regulations for Hart-Scott-Rodino cover LLC explicitly as “non-corporate interests” different from corporations. Still, the spirit of Section 8 would seem to cover any such non-corporate interlock. Also, any corporate director who also serves a similar role for a competing LLC would face an increased risk of violating Sherman Act Section 1.

Section 8 clearly applies if the same natural person sits on the boards of the competing corporations. It might also apply if the same legal entity has the right to appoint a natural person to both Boards, even if that entity appoints two different natural persons to the two Boards. That interpretation is consistent with the Clayton Act’s broad definition of “person” and has been supported by both the FTC and DOJ and the one lower court to consider the question.

As with other parts of the antitrust laws, the question of competition between the two corporations requires some analysis. The few courts to look at the question have found that corporations that could be found to violate Sherman Act Section 1 through an agreement would be considered competitors. On the other hand, these same courts did not define competitors more narrowly to be those corporations that would not be allowed to merge under the more extensive analysis of Clayton Act Section 7.

Kanter’s Speech

On April 4, 2022, at the ABA Antitrust Spring Meeting, Jonathan Kanter, the assistant attorney general in charge of the Antitrust Division at the DOJ, made during his speech some significant remarks about Section 8. First, he highlighted the fact that the Division is committed to litigating cases using the whole legislative toolbox that Congress has given them to promote competition, including Section 8 of the Clayton Act. Second, he reminded everyone that Section 8 helps prevent collusion before it can occur by imposing a bright-line rule against interlocking directorates. Third, that for too long, Section 8 enforcement has essentially been limited to their merger review process. And last but not least, that the Division will start ramping up efforts to identify violations across the broader economy and will not hesitate to bring Section 8 cases to break up interlocking directorates. The former head from the FTC made a similar statement back in 2019, indicating how Section 8 of the Clayton Act protects against potential information sharing and coordination by prohibiting an individual from serving as an officer or director of two competing companies.

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If I Were You…I’d Listen to this Antitrust Podcast

May 13, 2022 | Bona Law PC

Author: Molly Donovan

If I Were You is a new Bona Law podcast that gives in-house lawyers the essential 5 bullets they need to explain real-world antitrust and competition risks to their business teams. This podcast is a quick 10 minutes or less, easily digestible during a commute or errand, and we hope it becomes a practical resource for in-house lawyers.

I’ll be the regular host of the podcast, which was inspired by one of my favorite in-house friends who said, “A good way to talk to the business side is to say something like, ‘I’m not saying don’t do it, but if I were you, I would do x, y, and z to mitigate the risk.’” And—tah dah—this podcast was born.

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Antitrust for Kids: The Temptations of Trade Groups

May 4, 2022 | Bona Law PC

Author: Molly Donovan

Every spring, the Trooper Girls sell cookies in their town. Although they’re all members of the same group, the girls compete against each other to be the top cookie seller of the season. The girls hold regular meetings with rules set by the troop leader based on an antitrust course she took in law school:

Discussions should stay focused on personal safety guidelines for selling cookies, and how cookie sales are going generally.
No agreements to fix cookie prices—each girl is supposed to price her own cookies individually. That’s part of the fun of competing.
No agreements to divide markets—deals along the lines of “you take this street and I’ll take that street” are prohibited. Members should vigorously compete in all relevant locations.
Any applicant under the age of 15 can be a member of Trooper Girls upon completing the online forms and having them signed by a parent or guardian.

[“I like these rules,” thinks the antitrust lawyer. The membership criteria are clear and can be fairly and objectively applied, and the meeting discussions seem appropriately restricted to legitimate subjects]

At the first meeting of cookie-selling season, the Trooper Girls were in distress. Practically no cookies had been sold because, unforeseeably, the Ranger Boys had started selling ice cream—a treat much more popular than cookies of late given the unseasonably warm weather.

The de facto ringleader of Trooper Girls—Tina—announced at the meeting, “We all know cookie sales aren’t going well and we all know why. We need to get on the same page, and reconsider cookie prices until the weather returns to normal and this crisis is over.”

The troop leader interrupted, “Tina, I think that’s enough on that. Let’s change the subject.”

[“Uh oh,” thinks the antitrust lawyer. Tina’s comments sound like an invitation to collude. I’m glad the troop leader spoke up, but the damage may be done.]

Tina winked at her Trooper Girl friends and they all basically knew what to do. Meanwhile, the specifics were worked out in whispers during social time after the meeting, and during one-on-one phone calls and text exchanges. Of course, nobody said exactly what price to charge and nobody wrote down any sort of formal agreement—the rules clearly don’t allow that. Instead, the discussions were more along the lines of “let’s think about a 10%-20% discount,” which can’t constitute an “agreement,” right? Specific prices weren’t even discussed.

[“Wrong,” says the antitrust lawyer. “Agreements” don’t have to be explicit at all. A wink and a nod could suffice. Similarly, specific prices need not be discussed—agreements about the general direction of pricing could raise antitrust scrutiny.]

The next day, each member of Trooper Girls cut their cookie prices, all in the 10-20% range, though some a little bit more and some a little bit less.

Suddenly, the weather cooled again and cookie sales took off. The Ranger Boys went out of business completely, unable to compete with the reduced price of the Trooper Girl treats.

Immediately thereafter, the Trooper Girls communicated to one another—in various ways—that it was no longer necessary to keep prices low, each member could do as she pleased, though continued cooperation to return to normal prices was appropriate.

And that’s what happened.

[“Oh no, again.” This could be deemed another anticompetitive agreement, now with indefinite and potentially long-running effects.]

Rick, a member of the Ranger Boys was very sad. For one thing, he was left with a freezer full of ice cream—couldn’t give the stuff away. For another, he had nothing to do on weekends with the Ranger Boys now essentially defunct.

Wisely, Rick did two things. He called an antitrust lawyer, suspicious that something unfair had occurred. And he petitioned the Trooper Girls to join their group.

Although the girls initially refused the application, the antitrust lawyer changed Rick’s life (as antitrust lawyers do) by threatening to sue the Trooper Girls and their individual members for violating the Sherman Act, including by refusing Rick’s application for anticompetitive reasons contrary to the membership criteria.

The Trooper Girls relented—paid Rick not to sue and admitted him in the group. Rick used the settlement money to start his own business making ice cream sandwiches. He used the ice cream leftover in his freezer and Trooper Girl cookies for the sandwich ends (genius!). In the process, Rick sold a lot of ice cream and a lot of cookies—everyone was happy.

THE MORALS OF THE STORY:

*For the Trooper Girl Types and Their Associations: In addition to having clear membership criteria, have a written antitrust compliance policy and train all members to issue spot.

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A Pandemic Slow Down Is a Good Time for an Antitrust and Competition Check-Up

May 2, 2022 | Bona Law PC

Author: Molly Donovan

Crises that disrupt distribution chains and cause supply shortages tend to prompt discussions among competitors about how to survive. Discussions may begin as relatively innocuous information exchanges but become risky when they turn to coping strategies. This topic can sometimes lead to conversations amongst competitors such as, “We’re all in the same boat, so joint efforts ought to be made to stabilize prices,” or “We, as an industry, should stay on the same page and base future price increases on the rising costs of material costs and/or distribution downstream.” As we know from history (earthquakes, tsunamic, floods), those sorts of discussions are real and prompt DOJ investigations. As difficult as it has been for some businesses, the COVID-19 pandemic will not be a defense to cartel conduct.

So now that at least some aspects of business have returned to normal, it’s an excellent time for in-house counsel to survey the relevant business units to assess whether any potentially anticompetitive conduct occurred over the last couple of years. Counsel can do this inquiry with minimal cost and minimal disruption to business: a few key interviews, a high-level but strategic sweep of emails, and a big picture look at pricing and production figures. Top leadership can deliver messages that make it clear that whistleblowers will be protected (consistent with federal law). Companies can set up a message box so employees can self-report anonymously.

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Antitrust for Kids—The Spider Web That Is A Hub-and-Spoke Conspiracy

April 14, 2022 | Bona Law PC

Author: Molly Donovan

Antitrust for Kids is a new blog series designed to explain complex principles of U.S. competition law to practitioners and business people in plain English. Meant to be fun, and tongue-in-cheek, the series will serve as a useful primer to help the audience issue spot and better understand antitrust concepts like price discrimination, vertical restraints, tying, tacit agreements, and more.

Max and Margie are next-door neighbors on Lemon Lane. They both operate competing lemonade stands in their front yards all summer. And, both shop at the same grocery stores to purchase the same three ingredients necessary for making their finished drinks: fresh lemons, sugar, ice.

While they’ve been frenemies for years, casually exchanging pleasantries at times, this summer the weather is very hot, and so is competition in the local lemonade market. In fact, Max and Margie barely acknowledge each another, unless it’s to bad mouth the other—each complaining that the other makes inferior lemonade.

One day, Margie announces a breakthrough that she’s made in the lemonade space: STRAWBERRY LEMONADE. It’s a hit. Margie begins charging 2 times over cost for her strawberry drink, and the demand for plain old lemonade (sans strawberries) stops cold.

Max is incensed, naturally, and hatches a scheme to bring Margie down.

Max heads to the largest grocery store in town. There, he tells George (the grocer) that unless George stops selling lemons, sugar and ice to Margie, Max—and more importantly, Max’s dad—will pull all their business from George immediately. EEEK! That would be a real problem for George because Max’s dad buys nearly all his ingredients to operate the town’s most popular restaurant from George, which is a serious portion of George’s business.

George feels he has no choice. He agrees with Max to stop selling lemons, sugar and ice to Margie.

[“Oh no,” thinks the antitrust lawyer, “that’s a vertical agreement, i.e., an agreement between a purchaser and a supplier, to restrain competition for the purchase of lemonade ingredients.”]

“But,” says George, “I don’t want to see all of my business with Margie go to the other grocers in town. Hear what I’m saying?” “Good idea,” thinks Max.

Max promptly visits the two other grocers in town, telling them that they’d better not sell lemonade ingredients to Margie, or else Max will boycott and so will his dad, both of whom provide a steady stream of business to these grocers as well (whenever George faces supply issues). Max takes care to add: George already agreed, so all of you grocers need to get on the same page.”

Not sure what else to do, these two additional grocers respectively agree to Max’s proposal. While the idea seems contrary to their individual interests, they can see Max means business and independently decide it’s easiest to comply.

Max circles back with George, telling him that all the grocers in town are on board. George nods.

[“Oh no,” thinks the antitrust lawyer, “now there’s a potential horizontal agreement, i.e., an agreement among competitors in the same level on the supply chain—in this case, the 3 grocers. Such an agreement could be implied even though the grocers never actually spoke to one another.”]

As a result of Max’s scheming, Margie can’t buy the ingredients she needs, and goes out of business. Max never can figure out how to add strawberries to his classic recipe for straight lemonade, so the town is left without strawberry lemonade indefinitely.

Margie’s very upset until she meets an antitrust lawyer to whom she tells her story. The antitrust lawyer explains to Margie that she’s the victim of a hub-and-spoke conspiracy—with Max at the hub, 3 separate vertical agreements between Max and each of the grocers (the spokes), and the 3 grocers all implicitly agreeing with one another, forming a horizontal agreement to boycott Margie on the “rim.” While courts may analyze the arrangement differently depending on the jurisdiction, it’s certainly an antitrust concern anywhere.

With her lawyer’s help, Margie files an antitrust claim, wins trebled damages, and lives happily ever after selling her strawberry lemonade, now world famous.

Max becomes a white-collar lawyer specializing in the defense of executives who allegedly violate the criminal antitrust laws. He’s still single.

THE MORALS OF THE STORY:

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Updates to the DOJ’s Leniency Policy and Related FAQs: Some Changes are Good, Some Don’t Go Far Enough

April 5, 2022 | Bona Law PC

Author: Molly Donovan

Yesterday the DOJ’s Antitrust Division announced updates to its Leniency Policy and issued nearly 50 new FAQs, and related responses, regarding its leniency practices. One welcome development is that the new FAQs clarify some the DOJ’s positions concerning ACPERA—the statute designed to limit an amnesty company’s potential exposure in civil lawsuits. Previously, guidance on ACPERA was almost non-existent, yet seriously needed to curb the unreasonable demands that plaintiffs were placing on amnesty companies relative to their co-defendants, making ACPERA not particularly incentivizing, at least at times. Even worse, plaintiffs could continually threaten expensive litigation over the satisfaction of ACPERA, undermining its incentive powers even more. Now, the FAQs make the DOJ’s view clear that an applicant who chooses to pursue ACPERA benefits need not be at a plaintiff’s beck and call regardless of plaintiff’s reasonableness, or lack thereof.

While the changes on this front are helpful to potential applicants, the Division could have gone further and some uncertainties for companies contemplating a self-report to the DOJ will remain.

Here are some of the critical bullet points.

Prompt Self-Reporting. To qualify for leniency, a company is required to “promptly” self-report once the relevant conduct is discovered. While there’s no bright-line rule, “promptly” does not appear to mean that an inkling of wrongdoing must be followed immediately by a call to DOJ, as some may have previously thought. Rather, with the new FAQ guidance, the condition of “promptly” appears to be aimed at disqualifying companies whose lawyers or compliance officers investigate and confirm anticompetitive activity, yet purposefully choose not to self-report in hopes that the conduct remains otherwise unearthed.

On the other hand, the DOJ seems to recognize the fact that internal investigations conducted by counsel are typically a necessary step between some indication of wrongdoing and the seeking of a marker, and that cartel investigations in particular often span jurisdictions, and are otherwise complex and take time. This mindset and approach appear to be appropriate to the DOJ in terms of timing.

Relatedly, the FAQs say that an internal failure to appreciate that the activities at issue are illegal (or illegal in the United States) is not a defense to a failure to promptly self-report. Companies (and particularly non-U.S. companies) that are unsure how problematic a particular activity is are wise to seek U.S. counsel as early as practicable.

In any event, the DOJ’s FAQs say that if an organization is too late to obtain leniency, but nevertheless chooses to self-report and cooperate, it may earn credit applicable at sentencing.

Remediation and Compliance. To qualify for leniency, the corporate applicant must now “undertake remedial measures” and improve compliance to prevent recidivism. This requirement, as stated, is new in that “remediation” appears separate and apart from the condition that an applicant make best efforts to pay restitution. While “restitution” is focused on compensating victims, “remediation” appears to be focused mostly on internal efforts to “address the root causes” of the conduct by, for example, recognizing its seriousness, accepting responsibility, implementing measures to prevent similar conduct from reoccurring, and disciplining or firing “culpable, non-cooperating personnel.” What constitutes sufficient remediation will depend on the circumstances, according to the FAQs, but detailed guidance as to compliance can be found in the Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations Guidance (the DOJ’s guidelines regarding effective compliance programs).

What is unclear is what “recognizing seriousness” and “accepting responsibility” mean in this context. For leniency applicants who can admit to a criminal U.S. antitrust violation, but must litigate certain nuances elsewhere in the world, or in civil lawsuits in the U.S., as to the extent of harm, for example, there is a potential tension.

Restitution. The program has long required an applicant to make best efforts to pay restitution to victims where possible. Previously, “where possible” was unclear, and it’s now been clarified to mean that actual payments of restitution will be excused only in relatively narrow circumstances, e.g., “the applicant is in bankruptcy and prohibited by court order from making payments; where such payments would likely cause the applicant to cease operations or declare bankruptcy; or if the sole victim is defunct.”

Absent such circumstances, to receive a final leniency letter, “applicants must actually pay restitution.” This obviously sounds like a higher burden than merely “making efforts” to pay restitution, and the questions remain who is a “victim,” how that will be decided, and whether 100% of all victims must be compensated before final leniency can be achieved. Assuming a final letter is desired for some practical reason, the situation could be a tough one for applicants who disagree that a particular claimant is an actual victim, or that a particular claimant is owed the full amounts it says it is. In such cases, litigation over these questions could take years, making the quest for a final leniency letter a very long and uncertain one.

The same goes for another new requirement that, to get even a conditional letter, an applicant must “present concrete, reasonably achievable plans about how they will make restitution.” It’s questionable how this would work in practice. At the outset of a cartel investigation, it’s unclear how many claimants will come forward, when they’ll come forward and how much they will claim they are owed. A generic “plan” may be one thing—a prediction about who the bona fide victims are and whether they will claim compensation and how and when they will be paid is another.

As with remediation, there is also tension here for an amnesty applicant that admits to conspiratorial agreements, but will litigate the nuances involved in the complex determination of whether an agreement had full or only partial success. Given all the economic facts, there may be nothing inconsistent with an admission of criminal guilt, on the one hand, and the position that a particular claimant did not suffer. But determining who is a victim and who is not can be an intensive undertaking. If the Division is going to require actual competition to all victims, it’s an inquiry they should be willing to look at closely for fairness, particularly where the civil plaintiffs are alleging a conspiracy much bigger in size and scope (and therefore, in damages) than the conspiracy admitted to for purposes of criminal guilt.

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Is an Anticompetitive Contract Clause an Ancillary Restraint that will survive Antitrust Scrutiny?

February 24, 2022 | Bona Law PC

As a regular reader of The Antitrust Attorney Blog, you understand that coordinating prices or allocating markets with your competitor is a terrible idea. Doing so is likely to lead to civil litigation and perhaps even criminal penalties.

Price fixing and market allocation agreements are per se antitrust violations. That means they are the worst of the worst of anticompetitive conduct.

There is, however, a limited circumstance in which what would normally be a per se antitrust violation is instead treated under the rule of reason by Courts and government antitrust agencies:

An ancillary restraint.

You shouldn’t put ancillary restraints in your agreements without the help of an antitrust lawyer. That would be like juggling knives that are on fire. You might be able to do it, but if you make a mistake, you won’t like the results.

What is an Ancillary Restraint?

This isn’t an easy question to answer and, in fact, if you can answer it, you will often know whether your restraint will survive antitrust scrutiny.

Let’s back up a little bit.

In a typical situation, if two competitors agree to fix prices or to split a market (perhaps they will agree to limit their competition for each other’s customers), they commit what is called a per se antitrust violation. What that means is that this type of restraint is so consistently anticompetitive that courts won’t even examine the circumstances—it is per se illegal.

Obviously you should avoid committing per se antitrust violations, unless, of course, you want to experience an antitrust blizzard.

Without further context, such a restraint is often called a naked restraint of trade. That doesn’t mean that the cartel meets at a nudist colony; it means that it is an anticompetitive agreement with nothing surrounding it. Such agreements are almost always done to gain supracompetitive profits from the restraint itself.

So what does a non-naked restraint of trade look like? Interesting question. I will answer it, but you have to read through most of this article to get it.

Sometimes two or more parties, even competitors, will put together a joint venture or collaboration that creates what antitrust lawyers often call efficiency. You might normally think of increased efficiency as running more smoothly or at the same or better result with fewer resources.

But when antitrust attorneys use the term “efficiency” or “efficiency enhancing,” they often mean that the venture or combination will create economic value for the marketplace as a whole that wouldn’t exist but for the agreement. The term often comes up in the merger context, as an antitrust analysis of a merger will examine whether the benefits through efficiency and more exceed any potential anticompetitive harm.

An Ancillary-Restraint Example

Sometimes it is easier to understand with an example: Let’s say you have a company called Research that is full of people with PhDs that spend all of their days trying to figure out how to make the world a better place. If someone at Research comes up with a good idea, the company will sometimes manufacture and sell the finished product itself.

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Don’t Let Antitrust Stick a Fork in Your Blockchain

January 21, 2022 | Bona Law PC

Author: Pat Pascarella

“The blockchain did it” is unlikely to be a winning defense in an antitrust suit. That, combined with the current enforcement (and legislative) trends targeting digital platforms, counsels that companies choosing to adopt blockchain as, or in, their business, be cognizant of how the antitrust laws may be applied. Perhaps even more so than other technologies since some degree of immutability is a primary feature of blockchain.

Before discussing specific antitrust proscriptions potentially applicable to blockchain, a word about the current rhetoric around the need to amend the antitrust laws to keep up with technology and today’s marketplace. Not the first time this assertion has been made, and certainly not the last. As the use of distributed ledger technologies become more and more prevalent, I am sure we will hear it again directed specifically at blockchain. But the fact is that the current antitrust laws are more than sufficient to deal with anticompetitive conduct involving blockchain or any other new technology.

In the end, antitrust comes down to injury and causation. It is this elegantly simple inquiry that protects the antitrust laws from obsolescence. And while we may debate the appropriate type of harm or injury addressable by the antitrust laws, (see, e.g., the current debate regarding the consumer welfare standard), antitrust asks no more of a court or jury than to determine (1) whether the requisite injury occurred, and (2) how. This may be a tad oversimplistic, but not by much.

Such an analysis can be applied as effectively to matters involving blockchain as it has been to matters involving plastic forks, tuna fish, or search engines. Of course, blockchain will no doubt create some interesting bumps in the road. Courts may need to assess new theories of relevant markets and measures of market power. Issues of control for purposes of imposing liability will be debated ala Copperweld. And there will no doubt be some head scratching over who exactly is liable when a public permissionless blockchain is used to facilitate some anticompetitive outcome, and to who? But these inquiries are only new in the sense that the antitrust laws are being applied to a new set of discernable facts—as they have been countless times already.

Therein lies the first lesson. What makes the application of the antitrust laws to a new technology difficult is not some failing of the antitrust laws, it is the learning curve for attorneys and courts about the new technology itself, the related markets, and the face of future competition to which the laws are being applied—i.e., the facts. (In apparent recognition of this, some Antitrust Division attorneys reportedly have already attended courses regarding blockchain.)

The good news for antitrust practitioners is that blockchain technology and applications are not half as complex as having to learn for the first time how an operating system or search engine works (or perhaps we have just become more tech savvy these past 20 years). And while there have been very few cases to date involving blockchain and antitrust or competition laws, we have decades of cases involving databases, industry organizations, and platforms that we can draw on to identify possible areas of mischief for blockchain.

I would suggest potential antitrust risks involving blockchain can be grouped into three baskets:

Blockchain as a facilitating mechanism.
Blockchain as a bad actor.
Antitrust violations within a single blockchain.

Obviously as the use of blockchain evolves from relatively simple transactions and applications such as cryptocurrency trading or running smart contracts, to supporting all manner of social and business interactions, the factual scenarios falling into these baskets will become more complex. But the core analysis should remain the same.

Blockchain as Facilitating Mechanism

Most antitrust attorneys’ radar goes off when they hear the term “distributed ledger”—as it should. They have spent years counseling clients not to share certain competitively sensitive information with certain other market participants (most often rivals). Not because the sharing itself is a violation of the antitrust laws, but because of what the sharing might facilitate – e.g., price fixing, customer allocation, group boycotts, etc.

In a blockchain world, invariably some competitively sensitive data will find their way onto a shared ledger. They may be sufficiently anonymized, or they may not. Perhaps in the future such data milliseconds old will be viewed as sufficiently “historic” to render its sharing of marginal concern—or perhaps not. And there is a good chance that the data will not have been included with the intent of facilitating some conspiracy. Still, the fact that rivals have access to their competitors’ real-time prices, costs, capacity, production levels, or bids poses some risk.

There will, of course, be many blockchain-specific nuances. Is the blockchain public or private? Permissionless or permissioned? But the operative questions remain constant—will the blockchain give rivals access to competitively sensitive information about their competitors that they would not have but for the blockchain? And does it matter? Any such sharing may or may not be defensible and may or may not render the blockchain itself liable under the antitrust laws. Still, access to such information would seem to be a reasonable plus factor for an antitrust plaintiff to allege.

Relatedly, a blockchain also could be a handy mechanism for policing a price-fixing, production-limiting, or customer-allocation conspiracy. Some have suggested that smart contracts (an unfortunately misleading name), or some application or functionality, could be deployed via blockchain to monitor pricing and sales and react to transactions that fall outside the parameters of the illegal agreement—possibly redistributing profits earned via the cheating. I find this scenario somewhat unlikely as it essentially requires the conspirators to commit their agreement to writing—or in this case coding—both equally discoverable. Let us not forget, that no matter how secret (or encrypted) the plan or related communication, the effect will be necessarily visible enabling both detection and prosecution.

Other areas of potential mischief include:

A blockchain could facilitate the inadvertent (or intentional) creation of a standard—although the creation of a standard via a public permissionless blockchain might have some interesting defenses available.

Caution also should be taken to avoid actions that might support an allegation that the exclusion from a private blockchain amounts to a group boycott or refusal to deal.

The Blockchain as an Actor

Can a blockchain itself violate the antitrust laws much like a firm or company today? Say a blockchain influenced by its founders, developers, and users (and in some instances miners), enables some conduct or practice with the purpose and effect to exclude or raise the cost of a rival entity (e.g., a competing blockchain, or perhaps a competitor relying on a centralized control solution). Or the blockchain is used to implement rules that permit an exchange of data among its users that enables collusion to the mutual benefit of the conspirators and blockchain (a hub and spoke conspiracy).

I think it is safe to assume that the answer to that question is yes. This is not to say however that the prosecution of such claims will not pose some interesting questions. For example, is the blockchain a firm or person like a corporation for purposes of antitrust enforcement? Who is “the blockchain?” Is there some control group and what are its bounds? (See, Blockchain + Antitrust, Thibault Schrepel (2021) for an interesting and well-informed discussion of this and other potential antitrust-related issues in a blockchain world.) While questions such as these are today unanswered, I would suggest that they will be relatively simple issues for courts to deal with. Contrary to whimsical theoretic discussions, these issues will be decided in the cold light of facts – i.e., who did what to whom. Nothing courts haven’t been called on to do with every new technology and marketplace. What is the alleged injury? And who caused it?

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