COVID-19 and Competition: Antitrust Law During the Global Pandemic

Healthcare

Overview

COVID-19’s rapid spread has necessitated collaborations to equip communities with the proper tools to combat the disease. Many have risen to the occasion and worked tirelessly to help protect the health and safety of the United States.  As the DOJ and FTC (the “Agencies”) put it in their March 24th Joint Antitrust Statement, however, “others may use [COVID-19] as an opportunity to subvert competition or prey on vulnerable Americans.”[1]

The FTC, DOJ, and Trump Administration have taken measures to guide businesses on how to collaborate legally and have sent forceful reminders about the repercussions of violating antitrust laws during the pandemic. Thus, it is as important as ever to understand the current landscape of antitrust laws.

DOJ and FTC dedication to continued enforcement of antitrust laws

Since the beginning of the COVID-19 outbreak in the United States, the DOJ and FTC have sent a consistent message: if you exploit this pandemic, you could be criminally prosecuted. It is important to remain vigilant and understand that COVID-19 is not a defense to antitrust liability.

For example, on March 9, 2020, the DOJ issued a statement making clear it planned to hold violators of antitrust laws accountable in connection with the manufacturing, distribution, or sale of public health products such as face masks, respirators, and diagnostics.[2] According to Attorney General William P. Barr, “[t]he Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time.”[3] Thus, “individuals or companies that fix prices or rig bids for personal health protection equipment such as sterile gloves and face masks could face criminal prosecution.”[4] And, “competitors who agree to allocate among themselves consumers or public health products could also be prosecuted.”[5]

On March 24, 2020, the FTC and DOJ issued a Joint Antitrust Statement that said the Agencies will “not hesitate to seek to hold accountable” those who may use COVID-19 as an opportunity to harm competition.[6] The Agencies stated they stand ready to pursue violations of antitrust laws which include price fixing, bid rigging, and market allocation schemes. On April 13, 2020, the Agencies issued a joint statement saying collusion or anticompetitive conduct in labor markets, “such as agreements to lower wages or to reduce salaries or hours worked” would not be tolerated.[7]

Expedited antitrust review and guidance on collaborations

To best equip individuals and businesses with the information needed to respond quickly and often unpredictably to COVID-19 without violating antitrust laws, the DOJ and FTC, in the March 24, 2020 Joint Antitrust Statement, outlined an expedited antitrust review procedure and guidance regarding collaborations undertaken to protect health and safety during the pandemic.[8]  Per the statement, the Agencies “wish to make clear to the public that there are many ways firms, including competitors, can engage in procompetitive collaboration that does not violate antitrust laws.”[9]

Although the DOJ already has a Business Review Process and the FTC has an Advisory Opinion Process that provide businesses with guidance on whether certain activity would violate antitrust laws, those processes generally take several months. The expedited review process established in the Joint Antitrust Statement recognizes “that many individuals and businesses are trying to address a rapidly evolving crisis as quickly as possible,” thus businesses that seek review under the expedited review process will ideally receive a response within seven calendar days of submitting the request.[10]

In the joint statement, the Agencies outlined the type of collaborative activities that are typically consistent with antitrust laws, including:

  • Collaboration on research and development;
  • Sharing technical know-how, rather than specific company data about prices, wages, outputs, or costs;
  • Providers’ development of suggested practice parameters that also may provide useful information to patients, providers, and purchasers;
  • Joint purchasing arrangements among healthcare providers, such as those to increase the efficiency of procurement and reduce transaction costs; and
  • Private lobbying addressed to the use of federal emergency authority “insofar as those activities comprise [] mere solicitation of governmental action with respect to the passage and enforcement of laws.”

The Agencies also noted that they will take into account “exigent circumstances in evaluating efforts to address the spread of COVID-19 and its aftermath.”[11]

Following the Joint Antirust Statement, the DOJ granted expedited review on three occasions. On April 4, 2020, the DOJ announced it “will not challenge collaborative efforts of McKesson Corporation, Owens & Minor Inc., Cardinal Health Inc., Medline Industries Inc., and Henry Schein Inc. to expedite and increase manufacturing, sourcing, and distribution of personal-protective equipment (PPE) and coronavirus-treatment-related medication.”[12] On April 20, 2020, the DOJ announced it “will not challenge the collaborative efforts of AmerisourceBergen Corporation to identify global supply opportunities, ensure product quality, and facilitate product distribution of medications and other healthcare supplies to treat COVID-19 patients.”[13] Most recently, on May 15, 2020, the DOJ announced that it “will not challenge the proposed collaborative efforts of the National Pork Producers Council (NPPC) to work with the U.S. Department of Agriculture (USDA) to address certain hardships facing hog farmers as a result of the COVID-19 pandemic.”[14]

Executive orders that implicate antitrust laws

The Trump Administration has signed a number of executive orders to address COVID-19 that also implicate antitrust laws, such as those addressing price gouging, collaborations, and antitrust immunity. In each, the President has invoked the Defense Production Act (DPA), which allows the federal government to demand private companies to perform government contracts and allocate resources, services, and facilities as deemed necessary to combat national emergencies. The Act also provides for antitrust immunity under certain circumstances. There are three orders worth noting here:

  • On March 18, 2020, President Trump signed Executive Order on Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of COVID-19.[15] The President invoked DPA to allow the President or his delegates to require manufacturers of ventilators, masks, respirators, and other medical equipment to prioritize government contracts and orders and allocate medical resources to areas deemed to need it most;
  • On March 23, 2020, President Trump signed Executive Order on Preventing Hoarding of Health and Medical Resources to Respond to the Spread of COVID-19.[16] The executive order delegates to the Secretary of Health and Human Services the authority to prevent the hoarding or accumulation of health and medical resources necessary to respond to the spread of COVID-19 (1) “in excess of reasonable demands of business, personal, or home consumption,” or (2) “for the purpose of resale at prices in excess of prevailing market prices;” and
  • On March 27, 2020, President Trump signed Executive Order on Delegating Additional Authority Under the Defense Production Act With Respect to Health and Medical Resources to Respond to the Spread of COVID-19.[17] The Order, in conjunction with 50 U.S.C. § 4558(j)(1), aims to enable “greater cooperation among private businesses in expanding production of and distributing [health and medical] resources.” To do so, some voluntary agreements and plans of action by private businesses undertaken to address the spread of COVID-19 can receive immunity from antitrust liability if certain procedures are followed.[18]

Conclusion

The FTC, DOJ, and Trump Administration have taken measures to address unique issues posed by COVID-19 that intersect with antitrust law. Each measure has made clear that antitrust violations, as has always been the case, will not be tolerated. And, there remain ways to collaborate legally to confront COVID-19.

[1] Department of Justice and Federal Trade Commission Joint Antitrust Statement Regarding COVID-19, March 24, 2020, available at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19.

[2] Department of Justice, Press Release, “Justice Department Cautions Business Community Against Violating Antitrust Laws in the Manufacturing, Distribution, and Sale of Public Health Produces,” March 9, 2020, available at https://www.justice.gov/opa/pr/justice-department-cautions-business-community-against-violating-antitrust-laws-manufacturing.

[3] Department of Justice, Press Release, “Justice Department Cautions Business Community Against Violating Antitrust Laws in the Manufacturing, Distribution, and Sale of Public Health Products,” March 9, 2020, available at https://www.justice.gov/opa/pr/justice-department-cautions-business-community-against-violating-antitrust-laws-manufacturing.

[4] Id.

[5] Id.

[6] Department of Justice and Federal Trade Commission Joint Antitrust Statement Regarding COVID-19, March 24, 2020, available at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19.

[7] Federal Trade Commission, Press Release, ‘Federal Trade Commission and Justice Department Issue Joint Statement Announcing They are on Alert for Collusion in U.S. Labor Markets,” April 13, 2020, available at https://www.ftc.gov/news-events/press-releases/2020/04/federal-trade-commission-justice-department-issue-joint-statement.

[8] Department of Justice and Federal Trade Commission Joint Antitrust Statement Regarding COVID-19, March 24, 2020, available at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19.

[9] Id.

[10] Id.

[11] Id.

[12] Department of Justice, Press Release, “Department of Justice Issues Business Review Letter to Medical Supplies Distributors Supporting Project Airbridge Under Expedited Procedure for COVID-19 Pandemic Response,” April 4, 2020, available at https://www.justice.gov/opa/pr/department-justice-issues-business-review-letter-medical-supplies-distributors-supporting.

[13]Department of Justice, Press Release, “Justice Department Issues Business Review Letter to AmerisourceBergen Supporting Distribution of Critical Medicines Under Expedited Procedure for COVID-19 Pandemic Response,” April 20, 2020, available at https://www.justice.gov/opa/pr/justice-department-issues-business-review-letter-amerisourcebergen-supporting-distribution.

[14] Department of Justice, Press Release, “Department of Justice Supports National Pork Producers Council’s Ability to Combat Meat Shortage, May 15, 2020, available at https://www.justice.gov/opa/pr/department-justice-supports-national-pork-producers-council-s-ability-combat-meat-shortage.

[15] Executive Order 13909 of March 18, 2020, available at https://www.federalregister.gov/documents/2020/03/23/2020-06161/prioritizing-and-allocating-health-and-medical-resources-to-respond-to-the-spread-of-covid-19.

[16]Executive Order 13910 of March 23, 2020, available at https://www.federalregister.gov/documents/2020/03/26/2020-06478/preventing-hoarding-of-health-and-medical-resources-to-respond-to-the-spread-of-covid-19.

[17] Executive Order 13911 of March 27, 2020, available at https://www.federalregister.gov/documents/2020/04/01/2020-06969/delegating-additional-authority-under-the-defense-production-act-with-respect-to-health-and-medical.

[18]Westlaw, Practical Law, “COVID-19: The Defense Production Act and Antitrust Immunity,” available at https://uk.practicallaw.thomsonreuters.com/w-024-5607?originationContext=document&transitionType=DocumentItem&contextData=(sc.Default)&firstPage=true&bhcp=1 (detailing the statutory procedures for antitrust immunity under DPA).

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