Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
business builder law
by Leon Goodrich
Recent history provides graphic examples of costly antitrust law lessons companies have been taught. They span a variety of conduct any company should know how to avoid.
Companies, small as well as large, need to have a compliance program or policy that gets the antitrust message to their owners or managers and employees. Failure to do so can bring great expense and grief to a company and the persons associated with it.
The federal government as well as Minnesota and other states have antitrust laws. These laws are enforced by governmental authorities and private parties injured by antitrust law violations.
The principal purpose of antitrust laws is to preserve competition. Effective competition provides consumers with the lowest prices and greatest choices of products and services. The enemies of competition are agreements between companies in the same business not to compete with each other.
Don’t conspire with competitors about prices. The two-ton gorilla of antitrust violations to avoid is price-fixing by competitors. A recent, well-publicized example involved two international art auction houses. In July 2002 a federal Court of Appeals upheld the conviction of Alfred Taubman, former chairman of Sotheby’s, for price-fixing. He was fined $7.5 million and sentenced to spend a year in jail.
Taubman or a subordinate met privately on a number of occasions with executives of his principal competitor, Christie’s, to discuss increasing the commissions their companies charged customers for whom they were selling art objects.
Their conspiracy was elaborate, with meetings extending over a period of time. But a casual comment about prices, or something affecting prices, in a single brief meeting (or phone call) between competitors also can result in a serious antitrust law violation.
Don’t divide up customers with any competitor. Agreements between companies in the same business to not compete for customers are, like price-fixing, a hard-core antitrust law violation. They consist of agreeing not to compete in particular territories or for particular customers.
For example, in January 2003 two chains publishing alternative newspapers, Village Voice and New Times, settled a federal government lawsuit charging them with unlawfully allocating territories. The only two cities in which the chains had competing papers were Cleveland and Los Angeles. In October 2002 they entered into written agreements to “swap” markets — Village Voice would close its paper in Cleveland and New Times would close its paper in Los Angeles.
The government chose not to sue the two chains in criminal actions. However, criminal prosecutions have become the normal approach of the U.S. Department of Justice (DOJ) to redress hard-core antitrust law violations.
Over the past six years, it has obtained more than $2 billion in fines against corporations convicted of antitrust violations — primarily price-fixing. In a recent fiscal year defendants in DOJ antitrust prosecutions received sentences totaling more than 10,000 days in jail, with the average sentence exceeding 18 months.
Small is no defense
Small companies also can find themselves targeted by antitrust enforcement authorities for short-lived violations. In 2001 the DOJ brought a criminal action against two individuals for allegedly agreeing with others to raise prices for five months for auto replacement glass sold in the Dallas area.
State enforcement officials have pursued smaller businesses for antitrust law violations. Over the years the Minnesota Attorney General has brought price-fixing actions against two gasoline filling stations in Park Rapids, road construction contractors in southern Minnesota, physicians in northern Minnesota, wholesale suppliers of beauty products in Minnesota and automobile body repair shops in Winona.
More clout requires more antitrust caution. If a company is not involved in a hard-core violation, the antitrust law consequences of its conduct in the marketplace generally turn on its market power. A company with a high market share, say 60 percent or more, may be considered a monopoly. Then it not only must avoid conspiring with its competitors. It also must avoid independent use of unfair or anticompetitive practices that hinder competitors and do not benefit consumers.
If a small business finds a niche not occupied by other companies, it might have considerable market power and be vulnerable to being a monopoly under the antitrust laws. The federal government recently has considered each of the following seemingly narrow lines of business to be a separate market in which to assess market power: sale in the United States of advanced linear structural analysis engineering software, and provision to physician groups in northern California of clinical laboratory testing services.
Conduct by U.S. Tobacco Co., which had about 77 percent of the moist snuff market in the country, illustrates anticompetitive practices a monopoly should avoid. Its sales persons over a number of years allegedly removed and destroyed sales racks of competing brands at retail outlets and gave retailers misleading competitive sales information.
In January 2003 a $1.05 billion judgment for unlawful monopolization, based on a jury verdict in a lawsuit brought by a competitor, became final against U.S. Tobacco Co. Its practices in and of themselves did not violate the antitrust laws. They became unlawful when used by a monopoly. Such actions could also violate state unfair competition laws if used by a company with much less market power.
Know what antitrust laws permit. So far we have discussed what any company should avoid in its contacts with competitors and special limitations on a company dominant in its market. It is also important for a company to know sales practices which the antitrust laws permit it to use with customers. These practices may help the company market its products or services more effectively.
For example, a manufacturer or supplier, particularly if it lacks market power, may be able to impose limitations on the territories in which or customers to whom its wholesalers or retailers resell. Ceilings, but not floors, on the resale prices charged by the wholesalers or retailers for the supplier’s products may also be permissible. The supplier may be able to ask that its wholesalers or retailers buy only from the supplier or buy several related products together.
Recognize when antitrust law advice is needed. Before a company imposes any of the above limitations on its customers, it should check with legal counsel as to whether doing so is appropriate for that company. Every company also should review with counsel whether it has in place an adequate antitrust law compliance program.
[contact] Leon Goodrich provides antitrust law counseling and court representation at the Minneapolis law firm Oppenheimer Wolff & Donnelly: 612.607.7000; check his antitrust law primer at www.oppenheimer.com
