| ||||||||||
| ||||||||||
— Analysis —
The weakness in the U.S. economy will likely mean more antitrust litigation. Two factors tend to increase the amount of antitrust litigation during a recession: the tendency of market leaders to act more aggressively in a recession to protect sales from their competitors and an increased willingness of struggling companies to dedicate resources to litigation. In short, more aggressive competition plus more incentive to sue equals more antitrust litigation. In a down economy, companies will fight harder for each sale, looking for ways to keep up profits. Accounts once deemed too small to target will command more attention. Competitors once thought too insignificant will be seen as serious threats. This is natural and is by no means anticompetitive when accomplished through competition "on the merits."
But it will be tempting for companies to use their market share to persuade customers to deal exclusively with them. Such conduct by companies with high market shares (50% plus) can expose them to Sherman Antitrust Act claims for monopolization under exclusive dealing, bundling and predatory pricing theories, among others. Moreover, in an economic downturn, more companies will struggle to survive. Struggling companies cannot afford to lose customers, and so it is not uncommon for struggling (or failing) companies to seek protection and compensation under the antitrust laws. Consumer contingency-fee class actions also will likely increase, and there will be no shortage of available antitrust lawyers to bring them, given the downturn in other areas of law practice. What's more, struggling companies may come to see legal fees for antitrust claims as a more appealing use of capital than they would in a better economy. A failing company may see an antitrust claim as a last hope. As a result, the increase in struggling companies naturally will lead to an increase in antitrust suits. Recent evidence shows that the number of antitrust suits filed in U.S. courts in 2008 so far exceeds the number filed in all of 2007. On top of this increase in private plaintiff lawsuits, President-elect Obama has stated his intention to be more active in bringing governmental challenges against monopolistic conduct. That said, the prospect of antitrust suits is not necessarily a reason for market leaders to alter business conduct. Market leaders compete more aggressively in a down economy for good reason -- to survive. Aggressive competition is not anticompetitive. Nonetheless, all companies should take prudent steps that will allow them to defend unavoidable antitrust suits efficiently and effectively. The following steps are good practice in all economic conditions but are especially prudent, given the increased likelihood of antitrust litigation. First, companies should refresh their antitrust compliance training so that executives and sales personnel avoid truly indefensible conduct like price fixing; remind salespeople that it's just not worth it to fix prices or rig bids. The cost in legal fees of just being investigated by the Department of Justice for possible price fixing is millions of dollars. A few thousand dollars spent on avoiding such an investigation is a good investment even in a recession. Second, companies should update their document-retention policies to reduce the amount of unnecessarily stored electronic documents and data. Document review can be the single most expensive part of antitrust litigation -- paring down the amount of documents a company stores can save millions of dollars. Third, companies should take steps to develop a record to assist in obtaining early dismissal of lawsuits brought by rivals or customers. Specifically, where significant changes in pricing or marketing plans are under consideration, involve in-house (and possibly outside) counsel to assist in ensuring that the reasons for such changes are documented in a way that can be used in defending lawsuits. The Supreme Court, in the past 25 years, has made it easier for defendants to obtain summary judgment or even dismissal on the pleadings (often before discovery). But it is critical for defendants to be able to tell their side of the story, supported by contemporaneous evidence. Effective counsel can work with business people in crafting defensible business strategies and ensuring that the company has evidence with which to defend actions taken in the past. Michael L. Keeley is a partner in the antitrust group of Axinn, Veltrop & Harkrider LLP, based in New York. |
|
|
|
|
|
