Antitrust Counseling in the Pandemic Economy: Six Trends to Watch

09 June 2020 The Antitrust Counselor Publication
Author(s): Benjamin R. Dryden

The coronavirus pandemic has shocked the global economy, transformed industries, and upended our daily lives. Its effects will be felt for years. So, what do these changes mean for antitrust counseling? This article explains six trends for antitrust counselors to consider in helping guide companies throughout the pandemic, the return to work period, and the years to come.

I.  New risks from “virtual” trade association meetings and networking events. 

Antitrust counselors are well familiar with the potential risks that come from trade association meetings and networking events. While these events serve valuable and legitimate purposes, they also can create opportunities for competitors to come together to fix prices or exchange market intelligence. Now that travel has essentially come to a stop, trade association meetings and networking events are being held virtually, using web-based teleconferencing tools. The rise of these “virtual” events have mixed effects on antitrust risk. On the one hand, an online meeting with a large number of participants minimizes the opportunities for a rogue employee to engage in a private sidebar with a competitor. But on the other hand, the ease of attending—and recording—virtual meetings with competitors may create new opportunities for risk.

To help reduce the antitrust risk from virtual trade association meetings and networking events, attendees can be reminded that the antitrust laws apply with equal force to “virtual” meetings as they do to in-person meetings, and that there are types of interactions and communications that should be avoided whether in person or online. Attendees should be very careful when sharing their screens during a virtual conference, to avoid displaying things like strategic plans, price lists, or even a browser tab with the name of a prospective customer. Finally, as a general rule of thumb, attendees should work under the assumption that virtual meetings they attend with a competitor may be recorded and someday used in litigation. However, before recording any virtual meetings on their own, attendees should keep in mind that some jurisdictions prohibit the recording of private meetings without the express consent of all participants.

II.  The rise of price-gouging and hoarding law enforcement. 

Broadly speaking, the antitrust laws are not offended when a company unilaterally exercises market power that it has legitimately acquired by virtue of a superior product, business acumen, or historic accident.1 But as prices for things like toilet paper, hand sanitizer, and personal protective equipment have soared, regulators are turning to non-antitrust powers to stop companies from exercising market power. Some states and cities are using local “price-gouging” laws to go after companies that raise prices on particular goods or services. Because these laws vary substantially from jurisdiction to jurisdiction, counselors must consult local laws to understand what goods or services are covered, what sorts of price increases are deemed excessive, and whether any exceptions to the laws might apply.2 Even then, the precise parameters of these local laws are often vague or unsettled.3 

At the same time, private companies are exploring ways to prevent resellers from raising prices on items they manufacturer. Most notably, 3M—a manufacturer of N95 protective masks—has filed lawsuits against several companies that allegedly resold those masks at inflated prices, alleging that these resellers infringed 3M’s trademark rights by misrepresenting themselves as “authorized” distributors. Antitrust counselors may also suggest that their manufacturer clients explore maximum resale price restrictions, to the extent permissible. And for its part, the federal government has invoked the Defense Production Act, which makes it a crime to “hoard” scarce healthcare items designated by the Secretary of Health and Human Services, including certain classes of personal protective equipment, disinfecting devices, and hydroxychloroquine.4 

III.  Potential increased state enforcement. 

Much of the response to the pandemic has been led by states and local governments, with the federal government in many instances playing more of a supporting role. It thus would not be surprising if certain state Attorneys General seek to play a larger role in leading the enforcement of antitrust laws in the coming months.

Even before the pandemic, a number of state Attorneys General had invested substantial resources into developing their own antitrust enforcement expertise and in pursuing their own separate law enforcement priorities. These efforts have not gone unnoticed by federal enforcers. In the context of merger enforcement, for example, Assistant Attorney General for Antitrust Makan Delrahim recently commented that state governments are “welcome” to seek relief against mergers, so long as “they seek relief that does not conflict with the [Antitrust] Division’s relief.” However, AAG Delrahim has criticized state antitrust enforcement that would impair “nationwide relief secured by the federal government,” because such an approach would undermine “the government’s ability to settle cases, and cause real uncertainty in the market for mergers and acquisitions.”With this backdrop, antitrust counselors should be mindful not only that state antitrust enforcement prerogatives may differ from federal antitrust enforcement prerogatives, but also that state antitrust interests can potentially conflict with federal ones.

IV.  In getting back to work, there can be a fine line between collaboration and collusion

In March, the Department of Justice (DOJ) and Federal Trade Commission (FTC) released a “Joint Antitrust Statement Regarding COVID-19.”6  This Joint Statement makes clear that, while the DOJ and FTC will not hesitate to sue or prosecute those who use the pandemic “as an opportunity to subvert competition or prey on vulnerable Americans,” there nevertheless “are many ways firms, including competitors, can engage in procompetitive collaboration that does not violate the antitrust laws.” For example, the Joint Statement points to collaborative responses to the pandemic that are “limited in duration” and that “provide Americans with products or services that might not be available otherwise” as the sorts of responses that the DOJ and FTC might find appropriate. 

It thus falls on antitrust counselors to draw the line between proper collaboration and improper collusion. In certain cases, parties may seek assurance from the government before proceeding with particular pandemic-related collaborations. The Joint Statement commits the DOJ and FTC to resolving any COVID-19-related requests for guidance (e.g., business review letters or advisory opinions) that relate to public health or safety within seven calendar days of receiving the necessary information. The DOJ has already used this procedure to issue an expedited business review letter confirming the appropriateness of certain drug and medical equipment distribution collaborations in response to the pandemic.7 The DOJ has also used this procedure to confirm that it will not challenge certain collaborative efforts that are being used to euthanize hogs that cannot be brought to market due to processing capacity constraints.8

V.  Legislative calls for a moratorium on mergers. 

For most non-problematic mergers and acquisitions, the premerger clearance process under the Hart-Scott-Rodino Antitrust Improvements Act is working on a close-to-normal schedule. However, for deals that are being investigated or challenged, the DOJ and FTC have obtained extensions of waiting periods and court deadlines, which has resulted in some substantial delays.

Meanwhile, in recent weeks, several high-profile members of Congress—including Senator Elizabeth Warren (D-Mass), Congresswoman Alexandria Ocasio-Cortez (D-NY), and House Antitrust Subcommittee Chairman David Cicilline (D-RI)—have called for legislation that would impose a moratorium on many mergers until the pandemic subsides. While this moratorium concept was not included in the “HEROES Act” put forward by the House of Representatives in May, antitrust counselors may want to factor the potential for substantial delays—whether statutory or negotiated—into their timelines for strategic deals.

VI.  Renewed interest in the “failing firm” and “failing division” defenses. 

Amid high-profile bankruptcies and a deep, global recession, there is renewed interest in antitrust law’s “failing firm” and “failing division” defenses. The “failing firm” defense allows one company to acquire a competitor if: (1) the competitor will be unable to meet its financial obligations in the near future; (2) the competitor will not be able to reorganize successfully under Chapter 11 of the Bankruptcy Code; and (3) the competitor has made unsuccessful, good-faith efforts to find another buyer that would keep its assets in the market and pose less of a danger to competition than the proposed merger. Similarly, the “failing division” defense allows one company to acquire a competing business division if: (1) the competing division has a persistently negative operating cash flow that is not economically redeeming for its owner; and (2) the owner of the division has made unsuccessful, good-faith efforts to find another buyer that would keep the division’s assets in the market and pose less of a danger to competition than the proposed merger.9

Anticipating the renewed interest in these defenses, two FTC Commissioners and the Director of the FTC’s Bureau of Competition have already commented publicly that failing-firm arguments during the pandemic will be met with very careful scrutiny.10 However, on May 1, 2020, the failing-division defense scored its first win of the coronavirus era, when the DOJ allowed Prairie Farms Dairy Inc. to acquire certain fluid milk processing plants from Dean Foods Company out of bankruptcy, on the grounds that these plants were otherwise likely to be shuttered in light of Dean Foods’s financial condition and a lack of alternative buyers. But the failing-firm and failing-division defenses have their limits. In fact, on the same day that the DOJ concluded its investigation into the Prairie Farms deal, the DOJ and two states filed a proposed settlement to require Dairy Farmers of America to divest to a third party certain milk processing plants that it was also seeking to acquire out of bankruptcy from Dean Foods.11 These examples show that the DOJ and FTC will review claims of “failing firms” and “failing divisions” closely before crediting the defenses. In the words of the Director of the FTC Bureau of Competition: “We will accept solid evidence that a firm is failing, and step aside when justified by the full evidence. But we will not turn away from the challenges ahead by changing the rules that have served us well in the past, including during prior economic downturns.”12 

* * *

As the pandemic economy has brought new challenges to businesses, it has also raised new issues for antitrust counselors. Some of the trends described in this article—like the invocation of state price-gouging laws and calls for a moratorium on mergers—will likely subside as the pandemic eventually runs its course. But other issues—like the fragmentation of antitrust enforcement, and the increased prevalence of “virtual” trade association meetings—may well last beyond the pandemic and return to work periods and become part of the “new normal” for antitrust counselors.


1 See Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 836 (2004) (“The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system.”).

2 See, e.g., CAL. PENAL CODE § 396(b) (“Upon the proclamation of a state of emergency . . . it is unlawful . . . to sell or offer to sell any consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than 10 percent above the price charged by that person . . . immediately prior to the proclamation or declaration of emergency.  However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier . . . provided that . . . the price represents no more than 10 percent above the total of the cost to the seller plus the markup customarily applied . . . .”).

3 See, e.g. N.Y. GEN. BUS. L. § 396-r(2) (“During any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety and welfare of consumers, no party . . . shall sell or offer to sell any such goods or services or both for an amount which represents an unconscionably excessive price.”).

4 50 U.S.C. § 4512 (“In order to prevent hoarding, no person shall accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scare materials or materials the supply of which would be threatened by such accumulation.”); see generally Department of Justice, Combatting Price Gouging & Hoarding, available at; Memorandum from the Attorney General, Department of Justice COVID-19 Hoarding and Price Gouging Task Force (Mar. 24, 2020), available at

5 See Assistant Attorney General Makan Delrahim, “Getter Better”:  Progress and Remaining Challenges in Merger Review (Feb. 5, 2020), available at opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-media-institute-luncheon.

6 Department of Justice & Federal Trade Commission, Joint Antitrust Statement Regarding COVID-19 (Mar. 2020), available at

7 See Letter from Makan Delrahim to AmerisourceBergen Corp. (Apr. 20, 2020), available at

8 See Letter from Makan Delrahim to White & Case LLP (May 15, 2020), available at

9 See Department of Justice & Federal Trade Commission, Horizontal Merger Guidelines (Aug. 19, 2010), available at 100819hmg.pdf, § 11.

10 See Federal Trade Commission, On “Failing” Firms—and Miraculous Recoveries (May 27, 2020), available at

11 Department of Justice, Press Release, Justice Department Requires Divestitures as Dean Foods Sells Fluid Milk Processing Plants to DFA out of Bankruptcy, Department Also Closes Investigation into Acquisition of Other Dean Plants by Prairie Farms (May 1, 2020), available at

12 Federal Trade Commission, On “Failing” Firms—and Miraculous Recoveries (May 27, 2020), available at


©2020. Published in The Antitrust Counselor, Issue 14.2, June 2020, by the American Bar Association. Reproduced with permission.

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