DOJ and FTC Warn Employers Against COVID-19–Related Business Collusion

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

The United States Department of Justice’s (DOJ) Antitrust Division and the Federal Trade Commission (FTC) warned employers in a joint statement issued on April 13, 2020, that they are “on alert” and working together to monitor employer collusion that exploits the COVID-19 pandemic in order to engage in anticompetitive conduct or fraud. The agencies specifically called out essential businesses and employers of frontline employees, staffing companies (including medical travel and locum tenens agencies), and recruiters. The statement reemphasized existing antitrust enforcement policies that prohibit agreements that would lower wages, reduce salaries or hours worked, and agreements that would suppress or eliminate competition by setting employment terms regarding compensation, benefits, hiring, soliciting, recruiting, or the retention of workers.

The agencies’ aim is to prioritize protection for doctors, nurses, first responders, grocery store workers, pharmacies, and other workers deemed essential.

“Although many individuals and businesses have demonstrated extraordinary compassion and flexibility in responding to COVID-19, and will continue to do so, others may use it as an opportunity to prey on American workers by subverting competition in labor markets. The Division and the Bureau will not hesitate to hold accountable those who do so,” the statement read.

The DOJ enforces federal laws that prohibit employers from engaging in unfair competition through wage fixing, no-poach agreements, anticompetitive noncompete agreements, and the unlawful exchange between employers of sensitive employee information, such as compensation data. The DOJ and FTC have formed an interagency Procurement Collusion Strike Force, which remains on “high alert” for collusive practices in the sale of COVID-19–related products to federal, state, and local agencies, the agencies said in an April 13, 2020, press release. The Strike Force is handling COVID-19-related fraud complaints.

In a joint statement released on March 24, 2020, the agencies committed to offering an expedited seven-day response period for any employer seeking advice through the DOJ’s Antitrust Division’s Business Review Process or the FTC’s Advisory Opinion Process for COVID-19–related requests.

In all, the agencies have confirmed that they remain active and on the watch for employers that attempt to take advantage of the COVID-19 crisis to engage in anticompetitive practices. The agencies will pursue civil remedies for agreements that restrain competition through increased prices, lower wages, decreased output, or reduced quality. Moreover, they will pursue criminal violations against businesses that conspire to fix prices or wages, rig bids, or allocate markets.

Employers that are concerned that their COVID-19–related efforts may fall under scrutiny may want to remain mindful of the following:

  • COVID-19–related joint ventures for the purpose of bringing goods to communities in need, expanding capacity, or develop new products, may be permitted under the National Cooperative Research and Production Act (NCRPA). The NCRPA flexibly treats certain joint ventures under the antitrust laws.
  • Collaborative activities designed to improve the health and safety response to the pandemic are generally consistent with antitrust laws.
  • Businesses may share technical know-how, but not specific data about prices, wages, outputs, or costs.
  • Joint purchasing arrangements among healthcare providers to increase procurement and reduce transaction costs do not typically raise antitrust concerns.
  • Antitrust laws do not prohibit joint lobbying efforts, such as private industry meetings with the federal government to discuss strategies to respond to COVID-19.
  • The agencies will take into account “exigent circumstances” such as efforts to assist patients, consumers, and communities affected by COVID-19 and its aftermath.
  • For those employers that wish to “benchmark” how peers or competitors are responding to the COVID-19 crisis, the DOJ’s Antitrust Division has previously published “safety zone” guidelines on how employers can exchange compensation data and related information without running afoul of the law, provided the following conditions are satisfied:
    • data must be managed by third parties;
    • data must be more than 3 months old; and
    • data must be derived from at least 5 entities, and no individual can represent more than 25 percent of the data.
  • Antitrust laws not only cover “horizontal agreements” among competitors, but also “vertical agreements” within supply chains.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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