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The ongoing COVID-19 outbreak has, at least temporarily, reshaped the way that many companies do business. Nevertheless, companies must continue to be vigilant about compliance with the antitrust laws and understand that the U.S. antitrust agencies will continue to scrutinize their behavior during this period (although EU competition authorities have taken an arguably more permissive approach, while maintaining that overt cartels at the expense of consumers will not be tolerated). In fact, on March 24, 2020, the Antitrust Division of the U.S. Department of Justice (DOJ) and U.S. Federal Trade Commission (FTC) issued a joint statement (“Joint Statement”) to outline an expedited review process for certain collaborations and to remind the public that they are monitoring markets behavior during this global health and economic crisis and will vigorously prosecute companies and individuals that violate the antitrust laws—in particular, conduct that restrains competition, exclusionary conduct by monopolists, and criminal antitrust violations. This follows a recent caution from the DOJ regarding potential anticompetitive behavior in the healthcare and healthcare manufacturing sectors.
At the same time, the U.S. antitrust agencies also recognize that to combat the COVID-19 crisis, certain communications and collaborations among competitors should be encouraged because they can promote important public and commercial interests and are not likely to violate the antitrust laws.
Below, we outline the agencies’ recent guidance and address some frequently asked questions about the U.S. antitrust laws that may arise from novel business situations during the COVID-19 crisis. As always, Shearman & Sterling attorneys are available to advise you on ways to promote your company’s interests while minimizing antitrust risk during these uncertain times.
The Joint Statement provides examples of conduct that would be consistent with the antitrust laws, especially during the COVID-19 outbreak. For example, joint ventures may be necessary to expedite the provision of goods to communities in need, businesses may need to temporarily combine production, distribution or service networks to facilitate production and distribution of COVID-19-related supplies or services, parties may need to collaborate on research and development and healthcare providers may need to enter into joint purchasing arrangements.
However, the permissibility of these collaborations under the antitrust laws is not automatically guaranteed, and companies should take care to assess any proposed conduct on a case-by-case basis. The agencies already have processes in place whereby companies can contact them to ask them to evaluate proposed conduct according to the applicable antitrust laws. During the ongoing crisis, however, the agencies have announced a commitment to expedite their evaluation and responses to COVID-19-related collaboration requests, in particular by:
The reality is that these are unenforceable commitments and responses to antitrust queries may still take far longer, particularly because the agencies’ timeline can be extended simply with a request for more information. Companies should continue to seek antitrust counsel and adhere to the following general guidance that applies regardless of whether there is an ongoing emergency.
The antitrust laws continue to prohibit agreements among competitors to fix prices, allocate markets or rig bids. However, competitors have many legitimate and pro-competitive reasons for communicating with one another, and those kinds of communications do not violate the antitrust laws as long as they are done correctly.
During times of economic turmoil, competitor communications and collaborations can provide significant consumer benefits. For example, the COVID-19 outbreak has disrupted many companies’ supply chains and caused product shortages for consumers and health care providers. Communication and collaboration among competitors to manage these disruptions can lead to more products being available for consumers, which is an outcome that the antitrust laws encourage. Indeed, the agencies’ Joint Statement noted that sharing technical know-how, rather than company-specific data about prices, wages, outputs or costs, can create benefits for consumers.
But that does not mean that competitors should freely communicate with one another. Before engaging in communications with competitors, you should consult with an antitrust attorney who can assist with designing an appropriate framework for these communications. In general, these communications should be tightly controlled and follow a written agenda that has been reviewed by counsel to ensure that the communications are limited to what is necessary to achieve the pro-competitive goal. Competitors may be able to share technical know-how but should be cautious of exchanging competitively-sensitive information, such as company-specific data about prices, wages, outputs, costs, margins or future strategic plans. Communications that stray beyond what is necessary can be used as evidence to support allegations of an antitrust violation.
Competitors can also share best practices with one another, such as how to manage supply chain disruptions, labor issues or remote working policies, subject to guidelines similar to those described above. When doing so, the participants to the communication should make clear that they are not agreeing to adopt any particular practice and that each participant is free to adopt, reject or change any practices discussed. With respect to medical providers, the Joint Statement made clear that it would not, absent extraordinary circumstances, challenge standards for patient management related to COVID-19 that providers develop with one another.
Likewise, various industry players might also be considering a collective outreach to state or federal legislators or other government officials about measures that the government could take to aid the recovery of particular sectors of the economy. The agencies acknowledge that antitrust laws generally permit private collective lobbying of the government, and that general rule applies to communications to the government about the use of federal emergency authority for COVID-19 responses. Communications among competitors to discuss and prepare a position to present to the government can be similarly protected, but these communications must be narrowly tailored to the objective of communicating with the government.
In sum, there are many legitimate and pro-competitive reasons for competitors to communicate with one another that can accelerate the recovery from the COVID-19 crisis and be beneficial for consumers, but certain guardrails must still be observed. We are available to assist with designing those communications in a way to minimize antitrust risk.
As a general matter, there is no prohibition under the federal antitrust laws against “price gouging.” Companies are free to sell products at any price they want, provided that price is set independently. Some lawmakers have recently sent a letter to the DOJ and FTC asking those agencies to take steps to counteract price gouging during the COVID-19 outbreak, particularly of health care products and consumer staple goods, with the possibility that Congress could provide the antitrust agencies with additional statutory authority, if necessary, to prevent this practice. At this point, it is unclear, what, if any, steps the federal antitrust agencies will take to prevent unilateral, but supposedly excessive, pricing.
In contrast, many states have laws that specifically prohibit price gouging during declared emergencies and can and do enforce such laws. For example, on March 4, 2020, the Washington Attorney General announced that it was investigating price gouging during the COVID-19 crisis. The penalties for price gouging vary widely among the states, ranging from relatively small civil penalties to criminal penalties, including imprisonment.
Companies should remind their employees to be thoughtful when creating documents about competitively-sensitive business topics, like pricing or strategic planning, to avoid any implication that their conduct is anything other than the result of its independent decision-making and market conditions. While these document creation habits are important in normal economic conditions, they are even more critical to observe during crises when stressful and uncertain situations can cloud people’s judgment. Documents created today may become public for a variety of reasons, including government investigations, and even informal and apparently benign communications could be portrayed as nefarious when taken out of context years later in an antitrust complaint.
In general, employees should be advised of the basics of antitrust laws and should act as if an antitrust regulator is reading all of their documents, including emails, texts, chats and presentations. Employees should always identify the legitimate business reasons for engaging in certain conduct rather than merely citing to COVID-19 without any greater context and should avoid even joking about matters that may implicate the antitrust laws. The context of those communications can (and almost certainly will) be lost if they are quoted in a later antitrust lawsuit.
In contrast to the 2008 financial crisis when regulators tended to review transactions more quickly as the volumes went down, we anticipate that the agencies will take longer to review proposed transactions over the coming months because agency staff will be working at limited capacity during the COVID-19 outbreak.
Both the DOJ and the FTC have announced a series of temporary changes to the filing of the required notification form under the Hart-Scott Rodino Act (HSR), as well as the Premerger Notification Office (PNO) and civil merger investigation processes, which will remain in place for the duration of the COVID-19 crisis. These include:
Unless any legislative changes are made, the 30-day statutory initial waiting period will continue to apply, meaning parties can consummate mergers after that time if they have not heard anything from the agencies. The FTC and DOJ may begin to issue “Second Request” notices for further information even in situations where the parties would not expect to receive one in order to extend the time for the review of filed mergers or transactions. Parties can consider withdrawing their notification form and resubmitting the paperwork (known as “pull and refile”) to give the agency a second 30-day initial waiting period in which to complete the review. The FTC has advised parties to submit all pull and refiles as normal.
Many other questions have not been addressed by the agencies’ guidance and we anticipate additional changes as the situation unfolds. Parties will need to be flexible in navigating the merger review process in the next several months and we will continue to provide updates as they become available.
Please reach out to us if you have any questions regarding these practice tips or process changes.
 Read Department of Justice Antitrust Division and Federal Trade Commission, Joint Antitrust Statement Regarding COVID-19 (March 24, 2020),
 Read Department of Justice Antitrust Division, Justice Department Cautions Business Community Against Violating Antitrust Laws in the Manufacturing, Distribution, and Sale of Public Health Products (Mar. 9, 2020).
 For information on how the EU antitrust authorities are addressing the COVID-19 outbreak, please see these Shearman & Sterling updates: COVID-19 and Antitrust: Crisis and Change, (March 19, 2020); COVID-19: State Aid and Support to Business, (March 17, 2020
 See, e.g., Cal. Penal Code § 396 (prohibiting the sale of household essentials (among others) for more than 10% over the cost of these items immediately preceding the declaration of a state of emergency; § 501.160, Fla. Stat. (1993)prohibiting the sale of household essentials (among others) at “unconscionable” prices, that is prices “grossly” exceeding average prices in the 30-day period preceding the emergency)); N.Y. Gen. Bus. Law § 396-r (prohibiting the sale of “goods and services vital and necessary for the health, safety and welfare of consumers” at an “unconscionably excessive price” during a declared state of emergency); Tex. Bus. & Com. § 17.46(b)(27) (prohibiting the sale of, leasing or demanding “fuel, food, medicine, lodging, building materials, construction tools, or another necessity at an exorbitant or excessive price” after a disaster or declared emergency, continuing for 30 days after the declaration expires).
 See, e.g., Cal. Penal Code § 396; § 17206 (up to 1 year in jail and/or up to a $10,000 fine and civil penalties of up to $2,500 per violation (plus injunction and restitution); § 501.164, Fla. Stat. (1993) § 501.164 (civil penalties of $1,000 per violation, up to a total of $25,000 per 24-hour period); N.Y. Gen. Bus. Law § 396-r (civil penalties up to $25,000 per violation); Tex. Bus. & Com. § 17.47(c) (civil penalties of up to $10,000 per violation (up to $250,000 if the victim was over 65 yrs. old) and injunctive relief). Criminal penalties are available in at least Arkansas, California, Florida, Louisiana, Maine, Mississippi, Oklahoma, South Carolina, and West Virginia).
 Read Department of Justice Antitrust Division, Justice Department Announces Antitrust Civil Process Changes for Pendency of COVID-19 Event (Mar. 16, 2020).
 Read Federal Trade Commission, COVID-19 - Guidance for Filing Parties, (March 17, 2020).
 Read Federal Trade Commission, Resuming early termination of HSR reviews, (March 27, 2020).