When to Involve Counsel and Consultants

• Pages: 71-74

71

CHAPTER 7

WHEN TO INVOLVE

COUNSEL AND CONSULTANTS

Federal and state antitrust laws cover a wide variety of business practices. In addition to

mergers involving competitors and agreements to fix prices or allocate territories, antitrust laws

relate to practices as diverse as information sharing, discriminatory or differential pricing, and

exclusive dealing provisions in contracts between a firm and its upstream suppliers or

downstream distributors. In addition, companies with international businesses need to comply

with both U.S. and foreign antitrust laws. Though domestic and foreign antitrust laws are similar

in many respects (such as their prohibitions against “hard core” price-fixing), there also are

important differences. For example, the European Commission, which enforces European Union

competition law, views certain behaviors—especially by “dominant” firms—more negatively

than its counterparts at the U.S. Department of Justice and the Federal Trade Commission.

Certain requirements of antitrust law are relatively straight-forward. Examples include

prohibitions on price-fixing, colluding with competitors when bidding for contracts, and

allocating customers. Antitrust compliance programs should cover these “per se” violations of

antitrust law, and it is not difficult to do so. Other areas of antitrust law are less straight forward

but still need to be covered if they are relevant for the firm seeking the compliance program. For

example, “vertical” restrictions involving firms at different levels of the production chain can be

efficiency enhancing and hence promote competition. Vertical restrictions can also harm

competition. For this reason, Courts evaluate vertical restrictions by considering their actual

effects under a “rule of reason” standard, and need to balance the pro- and anticompetitive

aspects of such policies to determine whether competition is unreasonably restricted. Setting

clear guidelines for business executives as part of an antitrust compliance program can be

difficult with regard to these areas.

Outside counsel should be asked to review a compliance program whenever the business

engages in (or may engage in) conduct that falls outside of the per se review standards and into

the more complex “gray” areas of antitrust review. For example, a business that has complex

sales or distribution policies with suppliers or customers should have its compliance program

reviewed by counsel to ensure that it is not overly restrictive (or overly permissive). Risks and

penalties for antitrust violations can be substantial, but lost efficiencies or opportunities due to

overly restrictive compliance programs can also be substantial. Experience shows that firms

attempting to include more complex topics in their antitrust compliance programs often include

guidance that is too restrictive. The risks of this include discouraging or prohibiting behavior

that would be beneficial and profitable for the firm and that would also likely be found to be

legal if challenged.

The types of conduct covered by these gray areas include pricing strategies (e.g., price

discrimination, predatory or below-cost sales, meeting competition clauses), sales or rebate

policies (e.g., bundled discounts, tying together the sale of different products or services,), and

single-firm conduct (e.g., refusal to deal, monopolization or attempted monopolization). When

part of a vertical supply chain, antitrust gray areas involve “vertical restraints.” Vertical