Which laws apply to horizontal agreements, collusion, and monopolization?
Congress passed the Sherman Act in 1980, and in 1914, the Clayton Antitrust Act (“Clayton Act”) (15 U.S.C. §§ 12-27). Section 1 of the Sherman Act outlaws “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.” Section 2 of the Sherman Act outlaws “monopolization, attempted monopolization, or conspiracy or combination to monopolize.”
Some acts are considered so harmful to competition that they are deemed per se illegal by courts. No defenses or justifications are allowed. These “per se” violations include, without limitation, horizontal agreements or understandings between competing businesses or individuals to fix prices or supply, rig bids, divide markets, effectuate group boycotts, share sensitive information, tie products or services, or engage in other types of collusion. Acts that are not deemed per se illegal may still violate antitrust laws under a “quick look” or “rule of reason” analysis.
Violations of the Sherman Act can result in both civil and criminal penalties. On the criminal side, individuals may be fined up to $1 million and face up to 10 years in prison, and corporations can be fined up to $100 million for a felony conviction. For civil cases, victims of antitrust violations may sue for treble damages — three times the amount of the damages suffered. Victims may also have defendants pay their attorneys’ fees because the antitrust laws allow for attorneys’ fee shifting for the benefit of prevailing parties. Attorneys representing plaintiffs often do so on contingency and through class actions.
What is price fixing?
Price fixing is an agreement or understanding among competitors to manipulate prices, discounts, or other terms of sale in ways that subvert free market competition. It is generally considered illegal and harms businesses, consumers, and others that are subject to these artificially fixed prices. Examples of price fixing and other types of horizontal collusion include those actions described below.
- Horizontal price fixing – Competitors within the same industry agree or otherwise collude to set their prices, quantity, or other commercial terms at similar levels to eliminate competition. This can include agreeing on minimum or maximum prices.
- Vertical price fixing – Manufacturers or suppliers collude with retailers to establish a fixed resale price for products, potentially stifling competitive pricing among retailers. Vertical price fixing is often considered under a different lens and standard than horizontal price fixing.
- Market Division – Companies divide territories among themselves and agree not to sell in each other’s regions, allowing each to set prices, quantity, or other commercial terms without competitive pressure.
Price fixing can exist even without an agreement on a specific price. Any agreement, understanding, or meeting of the minds (whether written, verbal, or inferred from conduct) among competitors could violate antitrust laws. Smoking-gun evidence is not required. Such schemes are often demonstrated through circumstantial and economic evidence. Price fixing relates to prices and also other terms that affect prices, including, without limitation, shipping fees, warranties, discount programs, and financing rates. Also, employers who collude to avoid poaching employees or independent contractors from each other could face liability. Price fixing is unlawful when committed by either buyers or sellers.
Antitrust liability can also arise when competitors share—even through an intermediary—sensitive competitive information, including, without limitation, prices, promotions, bids, revenue, costs, margins, or profits. Several factors inform whether information sharing is unlawful.
What is bid rigging?
Bid rigging is another form of anticompetitive behavior where businesses collude to manipulate the outcome of a bidding process. Competitors often pick a company to win a bid with the understanding that other companies will be designated to win subsequent bids. This is to give the appearance of competitive bidding to make the winning bid seem fair and reasonable. Over time, competitors often engage in this unlawful activity to provide each conspirator with a share of the business. Bid rigging compromises market competition and is often illegal. Examples of bid rigging include those actions described below.
- Bid suppression – Companies agree that one or more of them will refrain from bidding to ensure that a certain firm wins the bid.
- Complementary bidding – Competitors submit bids that are intentionally high or involve unfavorable terms, to make a pre-selected bid more appealing.
- Bid rotation – Companies take turns being the winning bidder, ensuring that each firm wins a predetermined number of contracts over time.
Bid rigging can be deemed a per se violation of the Sherman Act. This type of illegal activity can be commonplace in industries where contracts are awarded by soliciting competitive bids. The law takes a strict approach against bid rigging because bidding processes are designed to hinge on the invisible hand of capitalism and competition to yield the best results for the entities that need bidding over products or services, but bid riggers short-circuit this invisible hand of capitalism and harm competition.
What are supply agreement disputes?
It is not just about price. Competitors may violate antitrust laws when they collude to raise, maintain, or lower supplies of products or services. Supply fixing is unlawful.
A supply agreement is a contract between a supplier and a buyer, stipulating the terms of sale for products or services. These agreements can be complicated, and disputes often arise regarding their interpretation or enforcement. Common types of disputes in supply agreements include the following, without limitation:
- Price disputes – disagreements over the price of products or services or changes in pricing over the contract term;
- Quality disputes – conflicts over the quality or specification of supplied products or services; or
- Delivery disputes – issues related to the timing, location, or delivery method.
Regardless of the nature of the dispute, an experienced antitrust lawyer on your side is crucial to finding real-world solutions.
What are customer allocations, market divisions, group boycotts, and tying?
Several other types of agreements among competitors or businesses across the horizontal or vertical chains of product or service markets can trigger antitrust liability. These include customer allocations or market division, group boycotts, and tying.
- Customer Allocations or Market Division: These schemes are anticompetitive agreements in which businesses divide markets among themselves. Claims can arise when competitors agree to allocate or divide customers, products, services, or geographic territories.
- Group Boycotts: Group boycotts exist when businesses agree to take joint action to exclude another business from the market. These anticompetitive actions can take the form of concerted refusals to deal and are often intended to freeze out other competitors, sellers, suppliers, or customers.
- Tying: Depending on the market power of a business or other factors, tying can be subject to “per se” liability. This occurs when companies tie, bundle, or otherwise tether the purchase or sale of one product or service with the purchase or sale of another product or service. Negative tying can also arise when a company forbids a claimant from doing business with another company.
Why Choose Nematzadeh PLLC?
Our antitrust lawyers have extensive experience negotiating and litigating antitrust disputes—even taking them to trial and through appeals. We represent both plaintiffs and defendants, allowing us to understand and anticipate the goals, strategies, tactics, and arguments of all parties involved. We are skilled in handling intricate litigation involving complex economic and legal principles, and we dive head-first into learning the ins and outs of the industries and relevant products or services markets involved in antitrust disputes.
Whether you are a victim of price fixing, bid rigging, supply agreement disputes, customer allocations, market divisions, group boycotts, or tying, or whether you are accused of being involved in any alleged schemes, we are well-equipped to represent you. Such disputes are important to individuals and mission-critical to businesses whose bottom lines–and even survival—are jeopardized. You need the powerful representation that Nematzadeh PLLC provides. We partner long-term with our clients by offering creative legal fee structures, even contingency engagements. Contact us in confidence at 646-417-8424 and firstname.lastname@example.org.