New DOJ Business Review Letter Provides Guidance to Competitor Collaborations in Wake of Global Pandemic

In response to the COVID-19 pandemic, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) committed to providing the DOJ’s Business Review Letters (BRLs) and the FTC’s Advisory Opinions (AOs) on an expedited basis if the requests relate to business responses to the COVID-19 pandemic. The DOJ has now published the first of these expedited letters, which provides helpful insights into the way businesses are working with federal government agencies to fashion creative solutions to supply challenges, and also cautions businesses against relaxing their antitrust compliance practices and procedures during this time.

The Proposed Collaboration

The five medical equipment manufacturers at issue requested guidance from the DOJ relating to their proposed coordinated efforts “focused on, and limited to, facilitating the government’s efforts to guide Personal Protective Equipment (PPE) and medications to the places they are needed most.” In particular, the otherwise competing companies have been working directly with the Federal Emergency Management Agency (FEMA) and other federal agencies to increase the supply of PPE in the US, and ensure it goes to the places most needed. For example, the proposed collaboration of competitors will:

• Help FEMA, the Department of Health and Human Services (HHS) and foreign governments address bottlenecks with our existing foreign suppliers.
• Help FEMA and HHS identify and qualify new sources of supply.
• Help FEMA and HHS identify and monitor areas of increased demand for supplies and medications.
• Help expedite distribution of supplies and medications to FEMA-designated COVID-19 hotspots.
• Help FEMA and HHS understand competitive prices for these supplies and medications.
• Help FEMA and HHS negotiate competitive prices, through bilateral communication with FEMA.
• Provide FEMA and HHS with data necessary to do the above.
• Provide FEMA and HHS with claims data and data otherwise requested by FEMA.
• Manufacture, source and distribute medications and health care products as directed by FEMA, HHS or additional government agencies.

While this level of coordination might normally raise antitrust concerns, the DOJ explained that Sections 402 and 502 of the Stafford Act allow the government in an “emergency” to “coordinate all disaster relief assistance (including voluntary assistance) provided by federal agencies, private organizations and state and local governments.” Because of the businesses’ direct coordination with the federal government, the pressing national need and the businesses’ commitment to other good antitrust compliance practices, the DOJ determined that it would not challenge the proposed collaboration.

Good Antitrust Compliance Practices Still Required

While the DOJ acknowledged that federal agencies planned to remain actively involved with all aspects of the emergency collaboration, it recognized there will be times when the government cannot actively participate in discussions or otherwise be part of planning or executing the collaboration. In those instances, the companies have committed to observing important antitrust compliance practices to prevent unlawful disclosures of competitively sensitive information between them, as well as unlawful competitor agreements. For example:

• The collaborating businesses will not use the collaboration to increase prices, reduce output, reduce quality or otherwise engage in COVID-19 profiteering.
• If FEMA, HHS, other government entities, or their consultants and designees request any competitively sensitive information from any of the collaborating businesses, those businesses each will make all reasonable efforts to share this information only with the requesting government agency, and not with any other participating businesses or with another competitor.
• The businesses’ collaboration is limited to the “time period necessary to assist FEMA and other government agencies in responding to COVID-19 shortages.”
• Upon resolution of the COVID-19-related disruptions and the disbanding of the related U.S. government response initiatives, the businesses will formally dissolve their competitor collaboration and immediately notify the DOJ, in writing.
• The collaborating businesses will commit to work with the DOJ to determine appropriate sequestration of competitively sensitive material that was produced during the collaboration period.

Rule of Reason and Noerr-Pennington/Implied Immunity

The DOJ’s BRL also addressed the proposed collaboration under more traditional antitrust principles. For example, like other competitor collaborations and joint ventures, the DOJ confirmed that any collaborative conduct occurring between the businesses outside the government’s direct supervision likely would fall within the so-called “rule of reason” (where an agency or court determines whether the conduct at issue is more likely to have procompetitive benefits or anticompetitive effects), as opposed to “per se” scrutiny (where conduct is considered unlawful regardless of any potential procompetitive benefits). In particular, the DOJ noted that competitor collaborations like this one “may enable participants to offer goods . . . that are . . . brought to market faster than would be possible absent the collaboration” and “may allow [their] participants to better use existing assets than would be possible absent collaboration.” And in light of the current pandemic, the DOJ observed that the proposed collaboration likely would benefit consumers due to its “potential to save lives and limit the tremendous damage physically and economically the pandemic is causing.”

The DOJ also reaffirmed that, if there were ever any claims that the businesses have been influencing governmental decisions during these unprecedented times, those businesses would be able to take advantage of the so-called Noerr-Pennington doctrine and implied immunity because “the resulting government decision reflects a [governmental] policy choice rather than capitulation to the economic pressure of the private firm,” and any “anticompetitive injury to others is caused by the government decision rather than by the private restraint seeking to compel that decision.” Specifically, the DOJ commented that the proposed collaboration “appears to meet at least several of the factors that the Supreme Court requires before finding conduct immune, such as FEMA’s and HHS’s regulatory authority and direction under that authority.”

In the coming days the DOJ and FTC may continue to publish additional guidance as companies request assurances that their own business initiatives to address U.S. supply challenges during the COVID-19 pandemic do no run afoul of the federal antitrust laws. Notably, the DOJ stated that any guidance provided in response to this most recent request, and likely other COVID-19 guidance, is limited because “the circumstances that led to [the] request are exceptionally pressing and unlikely to recur frequently.” Therefore, it is advisable to take a narrow view of the guidance published by the DOJ and the FTC during the COVID-19 pandemic, though elements of such guidance likely will still be relevant and important for businesses to understand as they engage in competitor collaborations and other business initiatives that have potential antitrust consequences.

The antitrust laws are nuanced and complex, and their application to particular circumstances is highly fact sensitive. We strongly recommend that businesses consult with antitrust counsel before engaging in any conduct that might implicate federal, state or international competition laws.