The Antitrust Attorney Blog

My Company Is Under Investigation: Do I Need Separate Counsel?

April 21, 2020 | Bona Law PC

When a law enforcement or regulatory agency—such as the Department of Justice (DOJ) or the Securities and Exchange Commission (SEC)—investigates potentially illegal business conduct, it may not be targeting just the company under investigation. Oftentimes, authorities are also targeting the company’s employees who engaged in the illegal conduct, and corporate officers and other employees are frequently indicted alongside their employers in antitrust and other cases. See, e.g., United States v. Hsiung, 778 F.3d 738 (9th Cir. 2014). Indeed, in 2015, U.S. Attorney General Sally Yates issued the so-called “Yates Memo” that reaffirmed DOJ’s commitment to seek “accountability from the individuals who perpetrated the wrongdoing.”

While the company typically hires outside counsel with experience defending the potential claims, one area that is sometimes overlooked is whether the employees involved in the investigation need their own lawyers. Employees may think the company’s lawyer represents them as well, but that is rarely the case and employees should be quickly disabused of the notion. Both the Supreme Court in Upjohn v. United States, 449 U.S. 383 (1981), and legal ethics rules compel corporate lawyers to clarify when they do not represent individual employees when conducting internal investigations. See, e.g., Model Rules of Prof’l Conduct R. 1.13(f).

So when does an employee need her own lawyer?

While there is no bright-line rule, considering some key questions can help you make the right decision.

First, is the employee a target of the investigation, or merely a witness? During an investigation, investigators will talk to many potential witnesses in addition to the individuals whom they suspect of illegal conduct. When confident that investigators believe an employee is only a witness to the potentially illegal conduct, the need for separate counsel is significantly reduced.

Second, does the employee face personal consequences as a result of her conduct? Consequences may include criminal penalties such as imprisonment or fines, suspension or loss of professional licenses, personal liability for civil damages awards, or employment consequences such as demotion or termination. While even a small chance of criminal penalties merits separate counsel, as the likelihood of any of these consequences grows, so too does the importance for an employee to have her own lawyer. Keep in mind, too, that individuals involved in some illegal conduct—such as an antitrust conspiracy—can be jointly and severally liable for all the harm caused by the conspiracy, so could face an enormous civil damages award even if their role was minimal. See Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 646 (1981).

Third, was the investigation initiated by a law enforcement or regulatory agency, or is it purely an internal investigation by the company itself? In general, separate counsel is less important in internal investigations. On the other hand, when the government is investigating, separate counsel can benefit both the employee and the company. Not only will the employee’s interests be better protected, separate counsel will also help insulate the company’s lawyers from potential disqualification and allegations of obstruction. Separate counsel is particularly important when an employee will be interviewed directly by law enforcement agents, who are more likely to trust a witness’s independent attorney.

Fourth, and most importantly, does the employee have any actual or potential conflicts of interest with the company and, if so, how severe are they? When both the company and the employee are targets of a government investigation, there will almost always be at least a potential conflict between them. A company usually has substantial incentives to cooperate with a government investigation, such as the potential for amnesty under the DOJ’s Leniency Program and credit for cooperating under the Sentencing Guidelines. To fully cooperate, however, the Yates Memo requires companies to “completely disclose . . . all relevant facts about individual misconduct.” Meanwhile, an employee involved in the conduct may want to seek immunity in exchange for testifying against the company or other individuals. Even less severe conflicts, however, can warrant separate counsel. If an employee disagrees with the company’s view of the facts or feels pressure to testify in a certain way, separate counsel may be needed to protect the employee’s interests.

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My Competitor-Supplier Just Decided to Stop Dealing with Me: Do the Federal Antitrust Laws Help Me?

April 18, 2020 | Bona Law PC

Author: Luis Blanquez

Good news––the answer is yes. The bad news, however, is that antitrust laws only help you in very limited scenarios.

As a general rule, “Businesses are free to choose the parties with whom they deal, as well as the prices, terms, and conditions of that dealing” Pacific Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 448 (2009). This means that firms, even those enjoying market power, are not typically required to cooperate with rivals by selling them products that would help them compete. Indeed, antitrust laws do not generally impose limitations on a competitor’s ability to “exercise his own independent discretion as to parties with whom he will deal.” Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 411 (2004).

So, most of the time, once your distribution contract expires, your supplier is free to either renew your contract or stop dealing with you. After all, this is what the free market is about: you are free to decide your own commercial strategy in order to make profits and beat your competitors. But this is not always the case, and the recent case from the Seventh Circuit, Viamedia, Inc. v. Comcast Corp., is a very good example of it.

The willingness to forsake short-term profits

Courts have been cautious to recognize an antitrust exception to the general rule that businesses are free to choose the parties with whom they deal, as well as the prices, terms, and conditions of that dealing. The cases below provide a road map to better understand what you would need to succeed.

Aspen Skiing Co. v. Aspen Highlands Skiing Co., 472 U.S. 585 (1985)

The U.S. Supreme Court has stated in the past that even an actual monopolist has no duty to deal with its competitors. A narrow exception to this rule, however, was established in Aspen Skiing. The Court provided some guidance to explain when a monopolist’s refusal to deal becomes contrary to antitrust rules.

In this case, the defendant monopolized the market for downhill skiing services in Aspen (Colorado). Defendant originally agreed to offer a joint lift ticket with plaintiff because it helped attract skiers. But defendant later decided to discontinue the successful joint-ticket program. By doing so, it rejected, for example, selling lift tickets to the plaintiff at full retail price. Defendant’s justifications included several administrative issues such as splitting revenues, suffering brand image injury, and others.

The Court concluded that defendant’s unilateral termination of a voluntary––and thus presumably profitable––course of dealing suggested a willingness to forsake short-term profits to achieve an anticompetitive end: to push plaintiff out of the market and achieve monopoly power to avoid any sort of competition.

Novell, Inc. v. Microsoft Corp 731 F.3d 1064 (10th Cir. 2013)

Microsoft provided independent software vendors access to a pre-release version of Windows 95––the so called “beta” version of the operating system available to all independent software vendors, including Novell––to facilitate their ability to write software for Windows 95. The reasoning behind this was to develop compatible programs while increasing both the utility of the operating system for users and the sales for Microsoft. Later on, however, Microsoft changed its strategy and revoked such access. It decided to give its proprietary applications the “competitive advantage” of “being the first applications useable on Windows 95.” Novell alleged that Microsoft intentionally altered its existing business practice of providing competitors with Windows technical information in order to monopolize the market for operation systems.

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Both During and After COVID-19 Crisis, Antitrust Law Won’t Block Pro-Competitive Joint Ventures

March 26, 2020 | Bona Law PC

Author: Steven Cernak

On March 24, 2020, the FTC and DOJ Antitrust Division issued a joint statement regarding their approach to coordination among competitors during the current health crisis. The agencies announced a streamlining of the usual lengthy Advisory Opinion or Business Review Letter processes for potentially problematic joint efforts of competitors. The statement also confirmed that the antitrust laws had not been suspended and, for instance, price fixing would still be prosecuted.

More importantly, however, the agencies reminded businesses that many kinds of joint ventures of competitors have long been allowed, even encouraged, under the antitrust laws. That message might have been lost in the blizzard of reports and client alerts focusing on the changes to the processes to judge only the riskiest joint efforts. Especially in economic crises, businesses should consider if certain joint ventures with others in their industry, including competitors, might be good for both the businesses and their customers. As explained below, the U.S. auto industry has been using such joint ventures for decades.

Joint Ventures

The term “joint venture” can cover any collaborative activity where separate firms pool resources to advance some common objective. When that joint activity among competitors is likely to lead to faster introduction of a new product, lower costs, or some other benefits to be passed on to customers, antitrust law will balance those benefits with any loss of competition. Two specific types of joint ventures—research & development and production—have received particular antitrust encouragement. Below, lessons from both types are explored using examples from the auto industry.

Research & Development Joint Ventures

The FTC and DOJ have described joint R&D as “efficiency-enhancing integration of economic activity” and, generally, pro-competitive. Getting scientists and engineers from competing firms to share data, test results, and best practices on basic areas that each company can then build on to create or improve competitive products can save money and reduce time to market.

GM, Ford and then-Chrysler started doing joint R&D on battery technology and other basic building blocks of motor vehicles in 1990. In 1992, all these efforts were put under the umbrella of the United States Council for Automotive Research or USCAR. Through USCAR and other joint efforts, these fierce competitors cooperate on technologies like advanced powertrains, manufacturing and materials, and various types of energy storage and then compete on their applications in their vehicles.

Similarly, GM and Ford shared design responsibilities for advanced 9- and 10-speed transmissions. After the cooperating on design, each company then manufactured the transmissions and competed on the vehicles that used them.

Production Joint Ventures

In 1983, GM and Toyota formed a production-only joint venture, NUMMI, to produce vehicles for each parent that were then marketed separately. In 1984, the FTC barely approved the joint venture and insisted on an Order imposing reporting requirements and limits on communication. By 1993, the FTC had grown comfortable with NUMMI’s operation and so unanimously voted to vacate the Order as no longer necessary given changed conditions.

NUMMI’s success in navigating through antitrust concerns led to other production joint ventures in the industry including a Ford-Mazda one for vehicles, a Chrysler-Mitsubishi-Hyundai joint venture on engines, and a GM-Chrysler joint venture on manual transmissions. None of them were as controversial or received the same level of antitrust scrutiny as NUMMI.

The National Cooperative Research and Production Act

At about that same time as NUMMI’s formation, Congress was clarifying the antitrust laws to ensure that certain cooperative efforts that could benefit consumers were not inappropriately stifled by the antitrust laws. In 1984, the National Cooperative Research Act confirmed that most R&D joint ventures would be judged under the rule of reason. To further encourage such pro-competitive cooperation, the law also allowed the parties to file a very short notice describing the joint venture with the FTC and DOJ. Once such a notice is published in the Federal Register, any antitrust liability for the joint venture and its parents is limited to actual, not treble, damages and attorney fees. In 1993, the law was expanded to cover certain joint production ventures and standard development organizations and retitled the National Cooperative Research and Production Act or NCRPA.

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COVID-19 Exposes Evil of Anticompetitive State Certificate of Need Laws

March 23, 2020 | Bona Law PC

Authors: Aaron Gott and Jarod Bona

The United States is in lockdown to “flatten the curve” of COVID-19 cases because our hospital system has even less capacity to handle a surge of cases than Italy—where overload has led physicians to have to make tough decisions about which patients deserve treatment priority. New York, the U.S. epicenter of the coronavirus, is expected to reach capacity in a matter of days and some hospitals have already exceeded their intensive-care capacity.

Hundreds of thousands of people may die directly as a result of inadequate hospital capacity in the United States, which is at its lowest in decades. In fact, the U.S. had nearly 8 hospital beds per 1,000 people in 1970, a number that has steadily declined to 2.9 per 1000 people today. Our elected officials have issued orders and recommendations that have our economy screeching to a halt, while Congress is considering unprecedented economic relief measures in the trillions of dollars to soften the fallout.

What put us in this position? There are many reasons. But one major culprit that is at least partially to blame for our current predicament has been nearly 50 years in the making: state certificate of public need laws (often called CON laws) that artificially limit the supply of hospital beds and medical equipment.

In 1974, Congress passed the National Health Planning Resources Development Act, which encouraged states to enact certificate-of-need laws for medical capital investment. Nearly every state enacted them. State bureaucrats, rather than the free market, would thereafter determine whether we “need” more ICU capacity, more testing labs, and more equipment like ventilators. The idea behind CON laws, proven wrong long before COVID-19, is that allowing states to control supply would reduce runaway healthcare costs and improve access to care.

Here is how a CON law generally works: it is illegal (often with criminal consequences) to build any kind of medical facility or make a capital medical equipment purchase without first obtaining a certificate allowing you to do so from the state health agency. It can cost millions of dollars and take several years to get one, if you can get one at all. In some states, your competitors have a right to object to the issuance of the certificate. In the worst states, monopolist and oligopolist hospital systems prevent competition because they have such a stranglehold on state bureaucrats and processes that most would-be competitors don’t even bother trying to get a certificate of need.

New York, by the way, is one of those states that still has a draconian certificate of need law on its books. New York requires a certificate of need for the “establishment, construction, renovation and major medical equipment acquisitions of health care facilities.” Any project that would add new hospital and/or ICU beds would require a certificate of need, and it is likely that adding new ICU-grade ventilators would also require a certificate of need because they individually cost tens of thousands of dollars.

New York has just 3,200 ICU beds but expects it will need between 18,600 and 37,200 to handle the expected wave of hospitalizations.

As antitrust and competition lawyers, certificate of need laws long have been on our minds. They are terrible, immoral policies even in the best of times.

We’re not alone in this thinking: even Congress quickly saw the error of its ways. In 1984, recognizing that the program was a failure, Congress repealed the provisions that encouraged certificate of need laws. Some states repealed their CON laws in the years since, but 35 states still have them on the books, largely because monopolist and oligopolist healthcare systems don’t like competition, and they have lobbying strangleholds over many state legislatures.

For years, the U.S. Department of Justice Antitrust Division and the Federal Trade Commission have jointly pleaded for states to repeal their anticompetitive certificate of need laws (and criticism of CONs features prominently in their comprehensive guide on improving competition in healthcare). Yet states still have them, and courts have often refused to strike them down under the U.S. Constitution despite their disastrous effect on interstate commerce.

One example is Colon Health Centers v. Hazel, a case by our friends at the Institute of Justice challenging the constitutionality of Virginia’s parochial certificate-of-need law under the dormant Commerce Clause. The plaintiffs in that case sought to open state-of-the-art clinics with MRI machines and CT scanners that would improve and cheapen certain types of cancer screenings, but they could not do so without first risking millions of dollars in a certificate of need process that was likely to be contested by existing providers, eventually resulting in denial.

We filed an amicus brief on behalf of law and economics scholars in that case to argue that states’ claims of cost-controlling benefits of CON laws are unsupported by empirical evidence. Nevertheless, the Fourth Circuit upheld the law on summary judgment, finding that the putative benefits of the law were not speculative (even in the face of evidence showing no such benefit), and that those benefits outweighed the effect the law has on interstate commerce.

That case may have been decidedly differently if it were heard today.

Now, in the face of an unprecedented pandemic and an economy that has come screeching to a halt as a result of shelter-in-place orders and social distancing recommendations—put in place primarily to “flatten the curve” and avoid the overload our inadequately supply of healthcare facilities—these laws have proven not just ineffective, but completely unconscionable.

More importantly, CON laws could now prevent us from quickly building up temporary medical infrastructure to deal with the surge of cases. We cannot rely on government alone to rise to the occasion with military resources; CON laws must get out of the way so that private enterprise can help fill in the gaps.

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Can a Manufacturer Stop Price Gouging by Its Dealers During a Crisis?

March 11, 2020 | Bona Law PC

Author: Steven Cernak

Like many crisis situations, the Coronavirus Pandemic has created concerns and even outcry about price gouging for certain products.

If your company manufactures one of these products and your dealers and retailers have suddenly jacked up prices for them, what can you do?

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Five Antitrust Concerns for Real-Estate Professionals

March 4, 2020 | Bona Law PC

Author: Jarod Bona

I am an antitrust attorney and CEO of a growing business, but my wife loves real estate and we have been investors over the years. You may have seen our real-estate investing website. So when antitrust and real-estate issues combine, I pay close attention. Not surprisingly, we receive a lot of calls about antitrust violations or issues in the real-estate industry. In fact, the Department of Justice and FTC have recently been studying antitrust/real-estate issues.

Antitrust law is especially relevant to real-estate professionals like brokers and salespeople because (1) competitor brokers both compete and cooperate on a daily basis; (2) prices and commission splits are often announced and well-known; (3) there is a history of tension and battles between a traditional business model and new business models (this can create antitrust litigation in any market); (4) associations and cooperative Multiple-Listing Services (MLS) play large roles in the industry; (5) US antitrust enforcers, like the Department of Justice and FTC, have seriously scrutinized the real-estate industry.

Here are five antitrust issues that real-estate professionals should understand: Continue reading →

Forgotten But Not Gone—Antitrust, Price Discrimination, and The Robinson-Patman Act in the 21st Century

February 26, 2020 | Bona Law PC

Author: Steven Cernak

When I first started practicing antitrust law in the “80’s, the Robinson-Patman Act was already an object of derision.¹ With Chicago School thinking riding high in academia and the courts and antitrust law’s focus shifting to effects on consumers, not rivals, RP cases seemed to be dwindling down to nothing. My colleagues and I were convinced that RP would soon be dead and we would never again need to deal with its tortured language² and questionable economics.

But not all my colleagues. One insisted that Robinson-Patman would never be repealed—after all, what member of Congress would vote against protecting small business?—and the private right of action would mean that the threat of litigation would always at least affect negotiations even if the federal agencies stopped bring new cases.³ Despite our constant ridicule of his outdated ways, he insisted that I learn the intricacies of the statute and cases, analyze the latest changes to the Fred Meyer Guides, and otherwise prepare to take over from him the counseling of a client that sold goods “of like grade and quality” in at least three overlapping channels.

I’m glad he did. He was right. To this day, suppliers and retailers negotiate in the shadow of RP and require counseling about its sometimes-obscure details. Every year, new private litigation gets filed and generates opinions and even jury verdicts on Robinson-Patman issues.⁴ Fewer than in the “60’s but still greater than zero. So for all the suppliers and the retailers through whom they sell—along with their respective counselors—here is a summary of what you need to know about RP in the 21^st Century:

The Basics of the Robinson-Patman Act

There are two kinds of discrimination that RP is meant to prevent and where some litigation is still filed today. Section 2(a) prohibits the sale of the same commodity at different prices to two competing buyers by one seller if the result is harm to competition. It has several elements that must be met and potential defenses, all of which narrow the scope of its application. Sections 2(d) and 2(e) are per se prohibitions of the discriminatory provision of or payment for certain promotional aids meant to assist in resale of a seller’s commodity. Again, several elements must be met to prove a violation. In addition, Robinson-Patman applies only to commodities sold for use or resale in the U.S.

Section 2(a) Price Discrimination – Elements

The elements of a Section 2(a) claim are usually summarized as prohibiting (1) a difference in price (2) in reasonably contemporaneous sales to two buyers purchasing from a single seller, (3) involving commodities, (4) of like grade and quality (5) that may injure competition.

While price discrimination is “merely a price difference”, actual net prices must be compared, after taking into account all discounts, rebates and other factors affecting price. If the lower price is “functionally available” to the plaintiff but plaintiff chooses not to accept it, courts have held that such proof “essentially negates the discrimination element” of plaintiff’s price discrimination claim.⁵

The two sales at different prices must be reasonably contemporaneous, a question of fact that depends on the seasonal quality of the sales and overall market conditions. Also, those two contemporaneous transactions must be “sales”, not something else like leases, licenses or an offer to sell. Finally, two completed sales are required and so at least one court has held that this element is not met in competitive bid situations where the commodity is only purchased if the dealer’s bid is successful.⁶

Section 2(a), as well as sections 2(d) and 2(e), apply only to “commodities”, a term left undefined by the statute. Courts have consistently interpreted the term to mean tangible products. Intangible items that have been held not to be commodities include medical services, cable television programming, and advertising, including online advertising.

The two commodities sold at different prices must be “of like grade and quality” for Section 2(a) to apply. When interpreting that statutory language, lower courts have followed the US Supreme Court’s lead in FTC v. Borden Co. and focused on physical differences in the products that affect consumer marketability.⁷ In that case, the Court found two varieties of the defendant’s evaporated milk to be “of like grade and quality” because the products were physically identical, even though the higher-price branded version had gained consumer preference over the lower-priced private label version.⁸

The final element of a Section 2(a) violation is whether “the effect of such discrimination may be substantially … to lessen competition or tend to create a monopoly …”, which has been interpreted to mean that a plaintiff need not show an actual adverse effect on competition, only a “reasonable possibility” of such an effect.

Injury to competition generally is found at the level of a rival to the discriminating seller (“primary line injury”) or of the disfavored customer (“secondary line injury”). The Supreme Court’s Brooke Group opinion clarified that a successful primary line claim must meet the same difficult test required of predatory pricing plaintiffs.⁹ As a result, secondary line cases now predominate.

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Apple v. Pepper, Indirect Purchaser Antitrust Class Actions, and the Future of Illinois Brick (Part 2)

February 11, 2020 | Bona Law PC

Author: Jarod Bona

This is part two of an article about the Supreme Court’s 2019 decision in Apple v. Pepper, the classic antitrust cases of Illinois Brick and Hanover Shoe, indirect purchaser lawsuits, and state antitrust claims. If you haven’t read that article, you should because it provides the background for this article.

If you read it, but it has been awhile because we published it a long time ago—yes, we’ve been busy opening offices and hiring new attorneys (and attorneys and attorneys)—here is where we left off:

We described how the US Supreme Court decided to deal with the issue of both direct purchasers and indirect purchasers wanting damages for alleged antitrust violations. The Supreme Court first prohibited defendants from raising the defense that direct purchasers “passed-on” any damages to indirect purchasers (Hanover Shoe).

Later, the Supreme Court prohibited indirect purchasers from seeking damages for federal antitrust claims (Illinois Brick).

When the indirect purchasers—represented by a resourceful bunch—then ran to the states and brought actions under state antitrust law, the Supreme Court reviewed whether those claims should be preempted by federal law. They (perhaps surprisingly), let the claims continue to go forward (California v. ARC America Corp.).

So the Supreme Court left a bit of a mess in the antitrust class action world. Defendants can’t argue that direct purchasers passed on any damages, indirect purchasers can only bring injunctive actions under federal antitrust law, and indirect purchasers bring damage actions under state antitrust laws (but only some state antitrust laws because not all of them allow indirect purchaser damage claims). Antitrust class actions are certainly complex.

By the way, before we dig into the issues, just a reminder that we at Bona Law are biased in favor of antitrust class action defendants because we defend class action lawsuits. We don’t represent plaintiff classes in class actions (despite many requests to do so).

The Supreme Court and Apple v. Pepper

The US Supreme Court took up Apple v. Pepper and had to determine whether certain plaintiffs were direct or were indirect purchasers in this antitrust class action. Phrased that way, the case doesn’t look that interesting. But before the decision came out, there was some speculation about whether the Supreme Court would gut the entire indirect/direct purchaser structure. The present structure doesn’t make much sense and isn’t based upon statute anyway (like much of federal antitrust law, I suppose).

Apple v. Pepper involves an antitrust class action lawsuit by consumers purchasing Apps from Apple and App developers (indeed—the actual source of their purchase is part of the controversy). They contend that Apple “has monopolized the retail market for the sale of apps and has unlawfully used its monopolistic power to charge consumers higher-than-competitive prices.” (slip p. 1).

For those of you that recently arrived from 1985, here is how the Apple App Store works: If you own an IPhone and want to add an app to your phone, you have no choice but to purchase it through the Apple App Store, which—according to the US Supreme Court—contains about 2 million apps available for download.

You might think to yourself, “Wow, Apple has been busy; it must be a lot of work to create 2 million separate apps.” But, no, Apple isn’t doing that themselves and they aren’t even hiring out to do it. Instead, independent app developers create the apps and, through contract, the apps are sold in the app store to consumers (my use of passive voice here is purposeful—as telling you who is selling them takes a position in this case; sort of, anyway).

The app developers pay Apple a $99 membership fee and get to pick the price for their app, so long as it ends in $0.99—an old marketers trick. No matter what the sales price, Apple keeps 30 percent of the revenue for each sale.

Apple asserted that the consumers can’t sue for damages under federal antitrust law because they are indirect purchasers under Illinois Brick, and the App developers are the direct purchasers from Apple. Plaintiffs, by contrast, allege that they are—literally—direct purchasers because they purchase Apps from Apple in the Apple App Store.

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When Does Fraudulent Concealment Toll the Antitrust Statute of Limitations?

January 27, 2020 | Bona Law PC

Authors: Aaron Gott and Nick McNamara

Antitrust conspiracies, like most conspiracies, are typically carried out in secret and often actively concealed by their participants for many years. But the statute of limitations for antitrust claims is only four years. So what happens if you discover that you were harmed by an antitrust conspiracy years after the fact? The answer could depend on which of the U.S. Court of Appeals has jurisdiction in your case.

Imagine you’re a retail grocer in the business of selling farm-fresh produce. Your store sources all of its carrots from local farms, many of which belong to a trade association of carrot growers (these carrot growers weren’t organized as a farm cooperative, which could provide them with a limited antitrust exemption you can read about here). Since you opened your grocery store several years ago, the price of carrots sold by these farms has been stable and reasonable. Then, all of a sudden, you notice that the price of locally farmed carrots has increased by 10%—overnight and for no apparent reason. Soon after you learn of the price hike, you receive an explanatory letter from the farm that sold the store its most recent batch of carrots. The letter apologizes for the increased price, which it attributes to a virus which has been harming local carrot crops. According to the letter, the farm hired plant biologists who confirmed the presence of the virus in the area.

You have never heard of a virus affecting carrots, but you have little reason to doubt the explanation provided by the farm. You review the scientific documentation attached to the letter and read up about the virus on Wikipedia; it turns out it is indeed a real virus that does affect carrots. You also hear that other grocers in the area have also received similar letters from other local carrot growers (but you didn’t talk to them directly because your antitrust compliance program forbids it). On top of it all, you have always had very cordial business relations with the sales representatives of the carrot farms. You decide to eat the lost profits, knowing that discontinuing the sale of locally farmed carrots would disappoint many loyal customers.

Five years later, you are tipped off by a former employee of one of the local carrot growers that the presence of the virus in the area was a complete fabrication, as was the supporting documentation submitted by the purported scientists. The ex-employee further informs you that the plan was hatched by the carrot growers’ trade association. Feeling cheated, you search the web for the antitrust statute of limitations, which you learn is four years.

But the good news is that the statute of limitations is not necessarily fatal to a claim involving an antitrust conspiracy. In fact, courts have long recognized that the distinguishing feature of illegal conspiracies is that they are almost always hidden from public view by design—and as a result, they often harm unwitting victims unaware they are being harmed. And, in some cases, courts have applied the equitable doctrine of fraudulent concealment to “toll” the statute of limitations in cases where the statute of limitations otherwise would have barred the claim.

You may have heard of a similar doctrine called the “discovery rule.” Under the discovery rule, a claim does not accrue—and the statute of limitations does not begin to run—until a reasonably diligent plaintiff discovers or should have discovered its injury. But there is a key difference: the discovery rule is a legal doctrine governing the point at which a statute of limitations begins to run, while tolling for fraudulent concealment is an equitable doctrine that assumes that the claim has already accrued and the statute of limitations has already run. In practice, the two doctrines have a nearly identical effect, so an antitrust plaintiff can typically plead both in the alternative. Both doctrines also have a due diligence requirement, so you can’t rely on them if, under the circumstances, a reasonable person would have investigated potential claims (for example, an unexplained, sudden price hike could give rise to a duty to investigate).

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Four Questions to Ask Before Worrying About the Antitrust Risks of New Restraints on Your Distributors

January 26, 2020 | Bona Law PC

Author: Steven Cernak

While I was the in-house antitrust lawyer for General Motors, outside counsel on several occasions suggested to me that GM should “institute a Colgate program” or “a minimum advertised price (MAP) program.” I am confident that all those lawyers could have helped build a fine Colgate program or other method that would restrict how GM dealers and distributors priced and marketed GM products – but the suggestion was still wrong for a few reasons.

First, it vastly overestimated the control that I or any other lawyer had over GM pricing decisions. More importantly, it assumed that the suggested restraint was right for that GM product at that time, an unsafe assumption given the wide variety of products and services that GM sells in different regulatory and competitive environments. Before suggesting a tool to use, the attorney should have helped me determine if it was right for GM’s business situation.

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