How to Avoid Antitrust Problems When Working Together to Defeat COVID-19

Davis Wright Tremaine LLP

Davis Wright Tremaine LLP

When healthcare providers, medical equipment manufacturers, and others on the front lines of our common battle against COVID-19 join forces to provide care or manufacture desperately needed medical supplies, do they really need to worry about the antitrust laws?

Yes – Antitrust laws have not been suspended during the pendency of the current COVID-19 pandemic.

But, properly understood, antitrust law should not hamper many of the collaborations that providers and manufacturers are contemplating in their efforts to battle the virus more effectively and expeditiously. This week the Department of Justice and Federal Trade Commission announced they will respond quickly to inquiries from those who want to collaborate to fight the virus, but who would like to know in advance how the federal antitrust enforcers view their joint conduct. The enforcers also helpfully summarized antitrust law applicable to joint ventures.

This alert identifies situations in which antitrust issues can arise, describes the summary of joint venture antitrust law provided by the federal enforcers, and ends by considering when it is—and when it isn’t—advisable to obtain antitrust review from a federal agency before engaging in a collaboration.

Examples of Antitrust Issues Can Arise When Providers or Manufacturers Collaborate to Fight COVID-19

  • Hospitals and local authorities are gearing up for the anticipated spike in COVID-19 cases that may require massive hospitalization of patients in communities across the nation—in many areas, hospitalization well beyond the capacity of our healthcare system. Some communities with multiple hospitals under different ownership may collectively designate one hospital as a non-COVID hospital so that medical/surgical patients who cannot postpone care receive help there (far from the hospitals treating infected patients), while the other hospitals in the area focus exclusively on COVID-19 patients. To an antitrust pedant, this sounds like an illegal allocation of markets between competing hospitals. Is it?
  • Patients, of their own volition (and in some cases, by government fiat), are postponing physician visits, outpatient surgery, or hospital care for matters that can be delayed. Suppose a sudden lack of patients places great financial pressure on an ambulatory surgical center—can it turn its facilities, staff, and equipment over to an unrelated healthcare system that needs those resources?
  • Many firms that haven’t traditionally made medical equipment are now gearing up to do so (and we should thank them for that). But black letter antitrust law teaches that collaborations with competitors are suspect. If two firms believe that the best way to make more equipment of higher quality and quickly is to work together, can they do so?

Most Joint Ventures That Healthcare Providers and Manufacturers Are Contemplating Now Likely Do Not Pose Serious Antitrust Risk

The activities described above would probably be permissible under current antitrust laws, although precise answers depend on particular circumstances. In the advice issued this week, the federal antitrust enforcers provided a helpful framework in which to assess the competitive effects (and so the lawfulness) of particular joint ventures. The points the enforcers made in yesterday’s guidance include:

  • Sharing technical know-how rather than specific data on prices, wages, outputs, or costs is less likely to lead to an antitrust concern.
  • When a collaboration is “a necessary response to exigent circumstances that provide Americans with products or services that might not be available otherwise,” it’s very unlikely to violate the antitrust laws.
  • When firms collaborate on research and development, this “efficiency-enhancing integration of economic activity” is typically procompetitive.
  • Most joint purchasing arrangements among healthcare providers don’t raise antitrust concerns, particularly when the arrangements are designed to make procurement more efficient and reduce transaction costs.

The agencies emphasize that joint efforts to defeat the virus should be “limited in duration and necessary to assist patients, consumers, and communities affected by COVID-19 and its aftermath.”

The Antitrust Agencies Are Offering to Answer Your Questions Quickly—Should You Ask?

Probably not - The agencies say they “will aim to respond expeditiously to all COVID-19-related requests and to resolve those addressing public health and safety within seven (7) calendar days of receiving all necessary information.”

Seven days in this crisis is a long time. And it’s seven days from when the agencies receive “all necessary information.” Providers and others submitting a request may be met with an agency response that more information is needed for the question to be answered. This is understandable. Even though we’re in a crisis, agency guidance will be looked to for years to come as having provided insight into how the enforcers will assess similar antitrust issues in the future.

While there may be some situations when formal agency guidance makes sense, more often than not, doing the right thing and serving the public health doesn’t need to be delayed while the enforcers are contacted. We suggest:

  • Contact your antitrust lawyer immediately when you have a question.
  • Ask for an answer.
  • Only if your lawyer can’t give you an answer with high confidence should you consider asking for agency advice. And if you do that, you should consult an attorney.
  • Consider the opportunity for informal agency advice. Your antitrust lawyer may be able to call a lawyer at a federal antitrust agency—or perhaps a lawyer with a state antitrust agency—and obtain informal guidance. When every day matters for saving lives, a rough-and-ready result could well be the right thing to do.
  • Keep in mind that the federal agencies are not the only enforcers of antitrust laws. Your lawyer can advise you about any risks from state-level or private enforcement as well.

[View source.]

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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