by David Boling
Posted 6/5/2006 12:00 am
Updated 11 months ago
Business leaders tend to think that only big companies need to worry about antitrust. The truth is that even small or medium-sized businesses need to think about the antitrust laws. Failure to do so can have serious consequences.
The core rule in antitrust is that competitors cannot agree with one another on the prices that they charge to their customers. This rule applies to all companies, no matter how big or small. It is illegal for competitors to fix prices or rig bids for contracts. Why? Because it rips off the consumer. If competitors are agreeing on prices, they are not vigorously competing, and that means consumers are paying higher prices for lower quality.
This rule is so fundamental to antitrust that, under the law, the moment competitors agree on price, it is illegal. It doesn't matter if they later decide to break the agreement or dump it completely. In legalese, the agreement itself is per se illegal.
Ignoring this fundamental rule can lead to jail time. The U.S. Department of Justice criminally prosecutes executives and companies that fix prices. It recently prosecuted four medium-sized concrete companies in Indiana for fixing prices. The companies' behavior only affected the Indianapolis market for concrete, but that did not stop Justice from getting involved. Justice's Antitrust Division considers prosecuting this type of behavior to be its top priority — and the size of the players doesn't really matter.
In the 1970s, it was only a misdemeanor for executives to fix prices. But over the years, Congress has toughened up the law. By the 1980s, the jail term was increased to three years. Recently, Congress increased the jail time to 10 years.
In April, when Congress renewed the Patriot Act to combat terrorism, it also included a provision affecting antitrust. It gave Justice the power to request wiretaps if it suspects that executives are violating the antitrust laws. In the eyes of Congress, antitrust has become just another white-collar crime that it will not tolerate in the post-Enron environment.
So what does all this mean for Arkansas businesses?
• Small does not equal immunity. Don't think that because you aren't a multinational company that you are immune from the antitrust laws. If the Justice Department is willing to go after relatively small businesses in the nation's heartland — Indiana — it is certainly willing to come to Arkansas.
• Prevention saves money. Putting in place an antitrust compliance program to get the message out to management and employees is important. A compliance program can range from complex to simple, but the first step is to get one in place. Antitrust litigation is notoriously expensive and time-consuming. Avoiding potentially illegal activity that may prompt an investigation by Justice or a lawsuit by another company or customer is the key.
• Blow the whistle. If a company discovers that one of its executives or employees has been fixing prices with competitors, it still may be able to get a free pass from Justice. The Antitrust Division has an amnesty program that, in exchange for cooperation and being the first company in the door, gives an otherwise guilty company a pass from prosecution. This means that the company might avoid stout fines that often go into millions of dollars. This pass also may protect the company from future lawsuits against it by other companies or customers.
Business leaders may think that antitrust and the Patriot Act are an odd couple. Certainly violating the antitrust laws is not as serious as committing acts of terrorism, but the march to get tough on antitrust violations is part of steady pattern initiated by Congress. Arkansas businesses should take the antitrust laws seriously, no matter what their size may be.
(David Boling is a lawyer with Mitchell Williams Selig Gates & Woodyard PLLC in Little Rock. He worked for 10 years as lawyer for the U.S. Department of Justice's Antitrust Division and helped draft the antitrust amendment to the Patriot Act while working on the Senate Judiciary Committee. E-mail him at dboling@ mwsgw.com.)