A Client Guide To Federal Antitrust Cases
Federal Healthcare Attorneys Assisting Clients with Antitrust Law Defense
Former U.S. Prosecutors & Experienced Counsel
Antitrust law is one of the most complicated legal areas most businesses will ever face, as it requires strict compliance with a variety of federal, state, and international laws. If you are planning a merger or acquisition, or have been informed that you are under investigation for potential antitrust violations, you need to hire experienced attorneys who have the knowledge and ability to respond quickly and accurately to protect your interests. If you do not take appropriate steps when planning your corporate actions, you may soon find your merger or acquisition bogged down and delayed – which most often means the deal falls through. Proper attention to antitrust concerns at the outset can prevent such a failure from occurring.
About Oberheiden, P.C.
Oberheiden, P.C. has substantial experience with antitrust matters. Several of our attorneys previously served the Justice Department’s Antitrust Division and offer clients a comprehensive, detailed, first-hand experience.
What Actions Are Prohibited?
In general, antitrust laws are designed to protect consumers. While most business decisions are made with an eye toward shareholder benefits, the government maintains an interest in preventing corporations from benefitting their shareholders and management at the expense of the corporations’ customers or potential customers. The first federal antitrust laws in the United States were passed in the late 19th century as large manufacturing conglomerates began to emerge and railroad consolidation was sweeping the nation.
In general, antitrust laws are seen as pro-competition and as an important part of the free market. Most people think of antitrust laws as prohibiting monopolies and combinations in restraint of trade, but the laws are much more far-reaching than mergers. For example, an agreement among competitors to control the price of goods is a violation of antitrust laws. So, too, would be an agreement among distributors to divide a market area into sub-areas in a way that limits competition.
It is important to note that while we focus here on the United States laws governing the antitrust arena, other countries have their own laws in this area. Multinational corporations must therefore ensure compliance with the laws in every country in which they operate. Additionally, states may have their own laws governing competition, although in most cases such laws would be preempted by the federal law in the same arena. While a comprehensive list of actions that violate antitrust laws would be beyond the scope of this article, the following are some of the most common actions that attract unwanted attention and may lead to civil or, in some cases, criminal liability for violation of the antitrust laws:
- Conspiracies, contracts, or combinations that cause an unreasonable restraint on interstate or international trade.
- An agreement among competitors to fix or set prices for certain products in certain regions or nationwide.
- Bid-rigging, or an agreement among competitors as to the content and pricing of bids on a project, or an agreement as to who will submit the lowest price.
- An agreement among competitors to allocate customers or territories between them.
- Exercising a monopoly over any part of interstate commerce, when the monopoly is obtained by suppressing competition with anticompetitive conduct such as creating barriers to entry or selling products at a loss, rather than because the company’s services or products are superior to all others
- Mergers or acquisitions that are deemed likely to lessen competition by increasing prices to consumers.
In addition, when the United States government brings a civil complaint or criminal indictment for antitrust violations, federal prosecutors will often include other charges for conduct related to the alleged wrongful activity or that is perceived to harm the competitive process or the antitrust investigation itself. For example, the government will often add a conspiracy charge to antitrust charges. A conspiracy occurs when two or more individuals jointly agree to participate in criminal activity. Conspiracy charges are especially common in antitrust cases involving charges of price fixing or bid rigging because such cases always involve more than one participant. In addition, if the parties accused of antitrust violations used the telephone, mail, fax, or email as part of their scheme, they can expect that the government will also charge them with wire fraud and/or mail fraud.
Charges relating to the antitrust investigation may include perjury, obstruction of justice, or making a false statement to a federal agency. The possibility of being charged with one of these crimes due to inadvertently answering a question from an investigator incorrectly or providing incomplete information in response to a governmental request is one reason that it is important to obtain legal representation at the earliest opportunity.
Specific Laws Applicable to the Antitrust Area
As noted above, there may be state laws applicable to mergers and acquisitions or other areas touching on antitrust law, particularly with respect to bidding on public contracts. Additionally, multinational corporations must be aware of the laws regarding competition in each country in which they operate. In the United States, there are three primary statutes governing federal antitrust law: the Sherman Act, the Clayton Act, and the Federal Trade Commission Act.
The Sherman Act of 1890 is found in 15 U.S.C. Chapter One at sections 1-7. The relevant provisions for guiding business conduct are section 1 and section 2. Section 1 provides, “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, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.” Section 1 relates to conspiracies or agreements to restrict competition. If the government brings a criminal action for violation of section 1, it will be seeking up to one million dollars in fines and prison terms of up to ten years for any individuals charged and up to one hundred million dollars in fines from any corporate defendants.
Section 2 of the Sherman Act addresses monopolies rather than focusing on agreements between two or more actors, although it can include conspiracies. It states, “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any party of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.” Thus, monopolies carry the same punishments and risks as do contracts in restraint of trade. Both section one and section two provide that a guilty verdict will result in a felony conviction.
The primary difference between section one and section two of the Sherman Act is that section one was designed to break up trusts and oligarchies, and is primarily focused on agreements between competitors, such as price fixing, dividing territories, or bid rigging. Section two was designed to prevent monopolies; a violation of section two requires that the actor or actors have or seek to obtain a monopoly in a certain product or area of the marketplace.
The Clayton Act was passed in 1914 to cover issues that were thought to have been missed by the Sherman Act’s broad proscriptions. In general, the Clayton Act was passed in order to stop anticompetitive conduct before it rose to the level of an oligarchy, trust, or monopoly. It is also codified in Title 15, Chapter One of the U.S. Code, at sections 12-27, and in Title 29 of the U.S. Code at sections 52 and 53. The Clayton Act prohibits four specific types of activities. First, 15 U.S.C. § 13 prohibits price discrimination: “It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.” Note that section 13 goes on to list several qualifiers to this broad prohibition, including allowances for differences in the cost of manufacture, sale, or delivery of the goods or services.
Next, 15 U.S.C. § 14 prohibits contracts for exclusive dealing or tying arrangements: “It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.”
Third, 15 U.S.C. § 18 (known as section 7 of the Clayton Act), prevents mergers and acquisitions that may lessen competition, even if they do not create a monopoly or oligarchy. It reads, in part: “No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” Section 7a of the Clayton Act requires that the government be notified in advance of proposed mergers that meet certain minimum thresholds for size.
Finally, 15 U.S.C. § 19, which is section 8 of the Clayton Act, impacts the ability of individuals to serve as directors or officers of competing companies. It provides that no person shall, at the same time, serve as a director or officer in any two corporations (other than banks, banking associations, and trust companies) that are (A) engaged in whole or in part in commerce; and (B) by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws; if each of the corporations has capital, surplus, and undivided profits aggregating more than $10,000,000 as adjusted. Like section 13, section 19 provides several caveats and exceptions to this general rule.
Unlike the Sherman Act, the Clayton Act is civil in nature. Either the federal government or a private citizen can bring a suit and recover treble damages, injunctive relief, court costs, and attorneys’ fees.
The third relevant law, the Federal Trade Commission Act, created the Federal Trade Commission (“FTC”) to enforce the antitrust laws contained in the other two statutes. The Federal Trade Commission works in concert with the Department of Justice antitrust division in enforcing these federal laws. This act also empowered the FTC to enforce the Sherman and Clayton Acts, to establish rules regarding unfair trade practices, and to issue cease and desist orders to prevent certain unlawful practices such as deceptive advertising and price gouging.
Facing Antitrust Challenges Today
There is a common misconception that antitrust lawsuits are no longer common, or that mergers and acquisitions are allowed to proceed after only minor, cursory review under current administration guidelines. However, believing that antitrust laws are no longer rigorously enforced may lead to disastrous results for your business. Only recently, a Texas federal jury returned a verdict of $131.4 million against General Electric for anticompetitive conduct in the market for servicing anesthesia machines. Seventeen private plaintiffs who employed service technicians for such machines sued G.E., alleging that G.E. had improperly raised prices for parts by appointing a single supplier and that G.E. had made it impossible for the Plaintiffs’ technicians to receive training on new machines. The jury agreed with the Plaintiffs that these actions were anti-competitive in nature.
Due to the nature of the various and overlapping antitrust statutes, you must be cognizant of all the different types of investigations or lawsuits that your business might face. First, the Department of Justice could bring an investigation or prosecution against you. The Department of Justice has both civil and criminal jurisdiction over conduct that violates antitrust laws, and often seeks both monetary sanctions and incarceration for cases that it deems to pose a serious threat to competition.
Second, the FTC could bring a administrative lawsuit, or, in some cases, a civil lawsuit against you. The FTC and the DOJ have overlapping jurisdiction over the antitrust laws, and work together to be sure that efforts are not duplicated. FTC lawsuits or investigations are often triggered by the notice requirements of the Clayton Act, which requires companies of a certain size to notify the FTC of specific types of planned mergers. If the FTC intends to challenge the merger, its first step is usually to issue what is known as a “second request” for additional documents and information about the merger or acquisition. Such requests can take considerable time and resources for a proper response, which must also be done as quickly as possible to avoid derailing the planned corporate deal.
Finally, and perhaps most commonly, a private citizen can bring a lawsuit for violation of the Sherman or Clayton Act. Such a lawsuit will result in treble damages if the private citizen wins the case. Private individuals or companies may also seek injunctive relief to stop anti-competitive conduct or to prevent a merger or acquisition from going through. As you might imagine, such lawsuits are brought not only by consumers of your company’s products or services or investors who disagree with a planned action, but frequently by competitors who see the action you are planning as threatening to their business. Such competitors often seek a temporary injunction against a planned merger; if such an injunction is obtained, in many instances the case will be over as quickly as it began, because most planned mergers cannot withstand lengthy uncertainty over litigation outcomes.
Not every action that causes some perceived harm to a consumer or competitor violates the antitrust laws. Instead, the courts will carefully consider whether the government or private citizen has met their burden of proof to show that the action under question violates the law. In a criminal case, the DOJ must prove antitrust violations beyond a reasonable doubt. In a civil case, the burden of proof depends upon the type of anticompetitive conduce alleged; in some cases, the burden of proof can even shift back and forth between the plaintiff and the defendant.
When to Hire an Antitrust Attorney
It is clear to most corporations that if they have been sued for anti-competitive conduct by the government or a private individual, they need to hire an antitrust lawyer. However, in most instances, you will be well-served to hire such an attorney to counsel and advise you as soon as you plan any business combination or new corporate strategy that might be viewed as anti-competitive and raise concerns from the government, consumers, or competitors.
As noted above, certain mergers must be pre-screened by the government before they can close. In every such case, you will want a team of attorneys to work on your presentation of the stock or asset combination to the FTC in order to assure the agency that no monopoly or other violation of law will occur by virtue of the planned merger. In this way, you may be able to avoid receiving a costly and time-consuming second request. And, if you do receive a second request, your attorneys will be better prepared to respond to it if they have been involved in consideration of the antitrust implications of your plans from day one.
Even before you inform the government of your plans, it is advisable to have attorneys review any planned public announcements of the new strategy or merger as well as any investor reports, investor calls, advertisements, or any other statement that relates to your plans. By careful review of public statements from the outset, an experienced antitrust attorney can help lessen the chance that such statements may be used to justify a criminal or civil investigation by the government or be used as evidence in a private complaint seeking to stop your deal.
Why Do Clients Trust Oberheiden, P.C.?
Our firm’s stellar reputation as a trusted resource for clients facing federal investigations didn’t happen by accident. Here are a few of the reasons why our clients trust us:
1. Our Experience
Most attorneys practice primarily within their own state legal systems. Our attorneys, by contrast, have practiced in the federal system for decades. If you are concerned about regulatory compliance, we can guide you through the maze. If you are facing a federal investigation, we can help you fight back effectively.
2. Our Government Insights
Prosecutors look at cases very differently from defense attorneys. Wouldn’t it be nice to be able to peer into the minds of the investigators and prosecutors who are hounding you? We can’t read minds, but we can offer the next best solution — several of our attorneys enjoyed successful careers as federal prosecutors before joining us. The perspective these attorneys provide us has proven useful to nearly every client who retains us.
3. Our Results
As the subject of a federal investigation, you face an uncertain and distressing future – you might be indicted, you might be heavily fined, your professional license might be yanked, or you might even be convicted of a crime. At Oberheiden, P.C., we have successfully countered all of these risks on many occasions – in fact, many of our cases have resulted in no civil or criminal liability for our clients.
4. Our Teamwork Ethic
Teamwork is one of the core values of our firm. Every client is assigned a team of attorneys, and we seek to operate with the kind of cohesiveness that can turn five fingers into a clenched fist that can vigorously defend your interests. The government will definitely assign a team of investigators, federal agents, and prosecutors to your case, and you will need a team to fight back.
5. Our Commitment
At Oberheiden, P.C., client loyalty is our most important core value, head and shoulders above all the rest. Without absolute loyalty and fierce dedication to the protection of our clients; interests, nothing else we do will matter. You can rest assured that we will not stand idly by and allow you to be pushed around by the government. We won’t push you around either – we will seek to secure a favorable outcome for you as quickly and as cost-effectively as we possibly can.
How Can Oberheiden, P.C. Help You?
At Oberheiden, P.C., our team of professionals is ready to help you respond quickly to antitrust concerns to ensure that your corporate plans can proceed without interference. You can contact any of our antitrust team members seven days a week for a free and confidential consultation about your situation.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.