Written by Theodore L. Banks
In the current bizarre circumstances, we are all struggling to keep our lives and businesses as normal as possible. Many may find that their attempts to adapt to the current situation are frustrated by laws that, in “normal” times, they observe without a problem. But with all of the talk about the government relaxing certain rules, like delaying the filing of federal tax returns, does that mean that all bets are off? Absolutely not. If you have a question about the applicability of a law, contact your attorney before you decide to do something you wouldn’t have done in normal times.
Let’s look at a couple of examples: antitrust and bribery.
Antitrust: A fundamental rule of antitrust law is that competing companies must operate independently. Agreeing with a competitor to limit competition, such as agreeing on prices to charge, normally violates state and federal antitrust laws. But in these times of shortages and production changes, wouldn’t some coordination make sense so that companies don’t overlap and try to do the same thing? The short answer is yes – but how you do it makes a lot of difference.
The Department of Justice and the Federal Trade Commission have announced that they are open to requests from competitors to coordinate public health-related activities. The key, however, is to ASK FIRST. If you have a proposed course of action (such as temporarily coordinating distribution systems) that requires communication with a competitor, you can check with the Department of Justice or FTC, which have committed to responding within 7 days. They have already approved some coordination between major medical supply distributors. But the agencies have also warned that they will not tolerate attempts to use the COVID-19 crisis to cover up illegal activities, so be prepared to explain why working together will help fight COVID-19 better than working alone, and that the coordination will end as soon as the crisis does.
The normal rules of competition respect the economic principles of supply and demand, so when demand goes up, so do prices. However, the enforcement agencies have made it clear that they will be aggressive in enforcing the laws against price-gouging. In some states, a price increase as little as 10 percent can violate the anti-price-gouging law. Some price increases are expected when the costs of operating your business go up but be prepared to document your cost increases should there be an inquiry. If you are in doubt whether a planned price increase would be suspicious, check with your attorney before going forward.
Bribery: If you are competing for scarce goods, there might be a temptation to pay a little under the table to an employee of a supplier to get those items. Don’t. There has been no relaxation of the commercial bribery laws, and the undermining of the supply chain through bribery will be prosecuted once detected. And it will be detected, if not right away, but after things settle down and people look to settle scores. As we saw with the mortgage meltdown, while the violations were not prosecuted right away, when enforcers looked at what had gone on, they came down hard on the banks that had abused the system. This time, the enforcers will also make sure that they go after individuals as well as companies.
On the international side, U.S. companies and individuals are governed by the Foreign Corrupt Practices Act, which prohibits corrupt payments to government officials. Suppose your company has a manufacturing facility overseas, but it has not been designated as “essential” under the local lockdown rules. Your company makes parts or products that are deemed essential in the US. You hear that the local officials are willing to change the status of your plant to “essential” with a small payment. Should you do it?
Here is where a conversation with an enforcement agency might be appropriate. The FCPA allows for “facilitating payments” where a small amount is paid to a foreign official to get that official to do what he or she is supposed to do – like stamping a passport. If the production is essential in the US, enforcement officials may well be sympathetic to the need to make a facilitating payment to get a foreign official to approve something that is otherwise legal. But the larger the sum of money becomes, the less likely it is for the government to look kindly on the payment. At some point a facilitating payment becomes a bribe.
If you are pressed to make a decision that might run counter to your traditional understanding of antitrust, bribery, or any other laws, you need to consult quickly with your lawyer, who will be able to give guidance on what might considered appropriate under the circumstances.
