May companies work with their competitors to produce equipment needed to battle COVID-19 without running the risk of antitrust enforcement actions or treble damages lawsuits? In most cases, the answer is “yes,” provided that the collaborations are entered in good faith and are structured to comport with established judicial and regulatory guidelines.

The COVID-19 crisis has caused an unprecedented increase in demand for products such as medical devices and personal protective equipment. In attempting to respond quickly to this spike in demand, many companies are collaborating with competitors. But such collaborations, no matter how well-intentioned from a public health perspective, could expose the companies involved to antitrust risk.² Consequently, there have been calls for President Donald Trump to invoke the Defense Production Act, which would provide an antitrust exemption for collaborative actions taken with the President’s specific approval. As of April 13, 2020, however, President Trump had invoked the Act on only three occasions in response to the COVID-19 crisis. Most recently, he authorized the Pentagon to oversee the production of $133 million worth of N95 masks.³ But for companies not expressly exempted by the Defense Production Act, there are several other ways in which they can limit their antitrust exposure while still collaborating with competitors in response to COVID-19.

First, there are well-established pathways whereby otherwise competing companies can operate joint ventures—even to the extent of setting prices—while avoiding antitrust liability. In Texaco Inc. v. Dagher,⁴ the Supreme Court held that “[w]hen ‘persons who would otherwise be competitors pool their capital and share the risks of loss as well as the opportunities for profit . . . such joint ventures [are] regarded as a single firm competing with other sellers in the market.’”⁵ Therefore, while such activity “may be price fixing in a literal sense, it is not price fixing in the antitrust sense.”⁶ Accordingly, companies that pool their capital and share financial risks in a legitimate, arms-length joint venture are unlikely to run afoul of the antitrust laws.

Companies can also find solace in the Antitrust Guidelines for Collaborations among Competitors issued by the Department of Justice and Federal Trade Commission.⁷ In the Guidelines, the DOJ and FTC combat the “perception that antitrust laws are skeptical about agreements among actual or potential competitors,” noting that competitor “collaborations often are not only benign but procompetitive.”⁸ In the Guidelines, the agencies explain that while “[a]greements of a type that always or almost always tends to raise price or reduce output are per se illegal,”⁹ the rule of reason applies to most joint venture analyses. Thus, where companies can show that the purpose of a collaboration is to increase output (which seems likely to be the case in the COVID-19 context), these collaborations are unlikely to be considered per se illegal and thus will be evaluated under the more lenient rule of reason.

Moreover, the two “safety zones” provided by the Guidelines may also benefit companies collaborating in response to COVID-19. First, under to the Guidelines, the agencies generally do not challenge a competitor collaboration “when the market shares of the collaboration and its participants collectively account for no more than twenty percent of each relevant market in which competition may be affected.”¹⁰ Second, the agencies are less likely to challenge collaborations in so-called “innovation markets”¹¹ when “three or more independently controlled research efforts in addition to those of the collaboration possess the required specialized assets or characteristics and the incentive to engage in R&D that is a close substitute for the R&D activity of the collaboration.”¹² Considering the circumstances created by the COVID-19 crisis where, for example, (a) companies that did not previously produce equipment such as ventilators are reportedly collaborating in order to enter the market, and (b) producing such equipment may involve unprecedented, fast-tracked research, development and testing, these safety zones could prove significant.

Finally, on March 24, 2020, the DOJ and FTC issued a joint statement outlining some of the ways in which they will help collaborations move forward quickly. First, the agencies pledged to quickly process requests for collaborations under the National Cooperative Research and Production Act. The Act primarily applies to research and development joint ventures, and enables companies, by filing a notice describing the terms of the joint venture with the DOJ and FTC, to limit the recovery to actual damages in a future antitrust suit arising out of the joint venture. Second, the agencies will use their existing business review and advisory opinion processes, which provide guidance as to the legitimacy of a joint venture under the antitrust laws, to address COVID-19 concerns. Specifically, the agencies plan to respond to requests for COVID-19 guidance within seven days of receiving a request. Consistent with this, on April 4, 2020, less than a week after receiving a request to review a proposed collaboration to produce personal protective equipment, the Department of Justice issued an expedited business review letter stating it does not intend to challenge the proposed arrangement.¹³

In sum, companies that stay within the guide rails provided by the Supreme Court and the antitrust agencies may be able to collaborate effectively and meet the needs of the country at this difficult time. Yet there is still a need for caution: the House Subcommittee on Antitrust, Commercial and Administrative Law recently sent a letter to the FTC requesting documents relating to its expedited approval of a 2012 merger between two ventilator manufacturers, suggesting that Congress will closely scrutinize potential antitrust issues related to the COVID-19 pandemic.¹⁴

¹ Eamon O’Kelly is of counsel and Adam C. Mendel is an associate in Robins Kaplan’s antitrust and trade regulation group in New York. They prosecute complex antitrust actions involving price-fixing, unlawful monopolization, and other anti-competitive practices.
² Courts generally do not recognize public health and safety concerns as legitimate justifications for anticompetitive conduct under the antitrust laws. See F.T.C. v. Indiana Fed’n of Dentists, 476 U.S. 447, 462 (1986) (rejecting “‘quality of care’ justifications” for defendants’ anticompetitive conduct); Nat’l Soc’y of Prof’l Engineers v. United States, 435 U.S. 679, 695 (1978) (recognizing “[t]he fact that [defendants] are often involved in . . . projects significantly affecting the public safety does not alter [the Sherman Act] analysis”).
³ Connor Perrett, The White House Has Invoked the Defense Production Act to Produce over 39 Million N95 Masks over the Next 90 Days, BusinessInsider, Apr. 11, 2020, available at https://www.businessinsider.com/defense-production-act-authorized-to-manufacture-39-million-n95-masks-2020-4.
⁴ Texaco Inc. v. Dagher, 547 U.S. 1 (2006).
⁵ Id. at 6 (quoting Arizona v. Maricopa County Medical Soc., 457 U.S. 332, 356 (1982)).
⁶ Id.
⁷ Federal Trade Commission & Department of Justice, Antitrust Guidelines for Collaborations among Competitors (Apr. 2000) (the “Guidelines”).
⁸ Id.at 1.
⁹ Id. at 8.
¹⁰ Id. at 26.
¹¹ According to the Guidelines, an “[a]n innovation market consists of the research and development directed to particular new or improved goods or processes and the close substitutes for that research and development.” Id. at 17.
¹² Id. at 26-27.
¹³ See Response to McKesson Corporation, Owens & Minor, Inc., Cardinal Health, Inc., Medline Industries, Inc., and Henry Schein, Inc. Business Review Request Pursuant to COVID-19 Expedited Procedure (Apr. 4, 2020), available at https://www.justice.gov/atr/page/file/1266511/download.
¹⁴ Letter from the House Subcommittee on Antitrust, Commercial and Administrative Law to FTC Chairman Joseph Simons (Apr. 10, 2020), available at https://judiciary.house.gov/uploadedfiles/2020-04-10_letter_to_ftc_on_covidien_acquisition.pdf.