Responding to FTC Allegations of Price Fixing

Responding to FTC Allegations of Price Fixing

Being accused of price fixing by the Federal Trade Commission can be scary. But there are steps companies can take to respond appropriately and potentially avoid penalties.

What is Price Fixing?

Price fixing refers to an agreement between competitors to raise, lower, maintain, or stabilize prices or price levels [1]. This includes agreements on wages or purchase prices. Price fixing is illegal under antitrust law.

If competitors are found to have coordinated prices, there is generally no defense, even if they claim the prices were reasonable or necessary to avoid competition [1].

How Allegations Arise

Allegations of price fixing often arise when:

• Competitors have very similar prices over time
• Competitors raise or lower prices at the same time
• Competitors use similar pricing formulas
• Competitors limit production or capacity

These factors alone are not enough to prove coordination. But they may prompt an investigation, especially if competitors had opportunities to communicate and coordinate [1].

Responding to Allegations

If your company faces allegations of price fixing, stay calm. Here are some steps to take:

1. Consult experienced legal counsel immediately
2. Preserve all relevant documents, communications, and data
3. Review pricing policies, formulas, communications
4. Determine if any employees acted improperly
5. Cooperate fully with investigators
6. Carefully craft external messaging

Your legal team can help collect facts, assess risks, and interface with investigators. Be sure to preserve all documents, emails, texts, and data relevant to pricing decisions [4].

Building a Defense

There are several potential defenses in price fixing cases:

• No agreement – Argue there was no actual agreement to fix prices
• Legitimate purpose – Provide evidence pricing was set independently and for legitimate business reasons
• Lack of intent – Show no intent to coordinate pricing with competitors
• Compliance program – Demonstrate a strong antitrust compliance program was in place

Documenting how pricing decisions were made independently can be crucial. Analyze whether communications with competitors were appropriate and not about coordination [5].

Seeking Leniency

If improper coordination occurred, companies may seek leniency under the DOJ’s leniency program. To qualify:

• The company must be the first to come forward
• Must fully cooperate with investigators
• Must terminate wrongdoing immediately

If these conditions are met, no criminal charges will be sought. Fines may still apply but will be lower .

Penalties for Price Fixing

If found guilty of price fixing, penalties can include:

• Criminal fines up to $100 million for corporations
• Jail time up to 10 years for individuals
• Civil damages in private lawsuits
• Injunctions against future conduct
• Court-ordered compliance programs

Recent major price fixing cases have resulted in massive fines, such as $100 million against a generic drug maker [6]. Reputational harm can also be severe.

Avoiding Allegations

Companies can take proactive steps to avoid price fixing allegations:

• Avoid communications with competitors about pricing, costs, production, etc.
• Do not belong to trade associations that share sensitive data
• Document pricing decisions and business justifications
• Implement a strong antitrust compliance program
• Train employees regularly on antitrust risks

Staying far away from anything that could suggest coordination with competitors is wise. When in doubt, consult experienced legal counsel.

Getting Help

Responding to allegations of price fixing is complex. Work closely with your legal team and keep communicating with the FTC. Their contact page lists ways to reach them with questions or information.

With the right evidence and cooperation, companies can potentially resolve allegations without severe penalties. But expert legal advice is key, as price fixing allegations are serious.

References:

[1] https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/dealings-competitors/price-fixing

[2] https://www.ftc.gov/enforcement/report-antitrust-violation

[3] https://www.ftc.gov/about-ftc/mission/enforcement-authority

[4] https://www.ftc.gov/about-ftc/contact

[5] https://www.ftc.gov/system/files/ftc_gov/pdf/d09413-answer-and-defenses-of-respondent-intercontinental-exchange-inc-public.pdf

[6] https://www.ftc.gov/horizontal-restraints/price-fixing

https://www.justice.gov/atr/leniency-program