Clients - Risks, Misconceptions and Key Advice

Clients Risks, Misconceptions and Key Advice

The preceding suggests considerations to be considered or evaluated in identifying, assessing and minimizing antitrust risk:

1. Because of the serious consequences flowing from per se illegal conduct in the form of price-fixing , bid rigging and market or customer allocation, the counselor must assess whether conduct that is proposed, or detected , may not only be illegal, but also criminal in nature. If the conduct is illegal, the client must be advised against it, most especially when criminal penalties may be attached. (Detection of criminal activity raises significant issues of whether to seek amnesty under the Department of Justice amnesty program and that of other jurisdictions.)

2. More generally , risk assessment is shaped by evaluation of a number of interrelated considerations. They include: (a) the market shares (in properly-defined antitrust "relevant markets") of the parties to arrangements or agreements; (b) whether the arrangement is one between competitors (horizontal) or between a supplier and its distributor (vertical), the former viewed with more suspicion than the latter (except for minimum resale price-fixing, which is a per se illegal vertical restraint); (c) the effect of the conduct on the competitive process, and the extent to which that conduct suggests that its real purpose is to raise prices or restrict output rather than to increase output, reduce costs or offer more efficiencies. The impact a particular practice will have on competitors or customers (who may be potential private action plaintiffs) may also be assessed. Conduct likely to have a devastating effect on a competitor or customer (such as driving it out of business) may present greater risks. However, probable deleterious impact on competitors or customers does not mean that the course of action is illegal, or even that the client should not go forward with it. Rather it is a factor that should be evaluated in making risk assessments, especially bearing on the probability of litigation

3. It is important for the client to appreciate that the Hart Scott-Rodino Act filing and any subsequent investigation in connection with a merger or joint venture can potentially affect the timing of the closing of a reportable transaction. If the timing is affected, such delays may affect the transaction's financing, strategy and integration. (Timing may be further complicated if premerger filings are required in the European Union and other foreign jurisdictions, with their own filing requirements, waiting periods and potential agency inquiries.) In addition, if there is an extensive investigation by an agency, there could be a significant amount of assistance required from the clients executives, not only in helping develop a presentation of facts in favor of the transaction, but also in terms of working on a day-to-day basis with the lawyers as the strategies unfold. Unless clients have been through the exercise before (many have), executives may be surprised by the intensity and depth of a government investigation, involving a significant amount of document production and even deposition testimony (particularly if there is a request for additional information (a "second request") in the United States). Therefore, the client needs to understand that processes or procedures need to be in place to facilitate the production of required information to government agencies. Agencies in the United States have issued statements and policies concerning procedures that may be followed in order to expedite more extensive reviews and to do so with minimized expense.

4. Some companies, particularly smaller firms, may confuse firm size with antitrust vulnerability. They may mistakenly believe that antitrust enforcement is only concerned with firms whose annual sales volumes are very large, and cannot understand why there is an interest by the government in their particular merger transaction or in the pricing practices or other conduct of firms in their industry, when the government did not previously challenge very large merger transactions or investigate firms in large and prominent industries. However, government agencies' interest in a transaction is not determined by how large (dollar size or assets) the companies are, but rather by their position in the market (e.g., their market share, even in a relatively small overall market), or by the type of conduct involved (e.g., price fixing or market allocation). For example, price-fixing or bid-rigging cases may be brought against firms with relatively small sales in absolute dollars, even selling in small, local markets, because price-fixing is viewed as a very serious offense. It is no defense that the price-fixing or bid-rigging does not involve many consumers (compared to other industries), because conspiracies of these types are considered to be serious offenses with no redeeming value. The agencies believe that it is their job is to protect competition from illegal conduct, even in "small" markets with firms whose sales are much smaller than Fortune 500 firms.

5. Many firms have an antitrust compliance program tailored to their specific needs. The most successful programs consist of a written policy with appropriate supplementary instruction and monitoring. Antitrust counsel can assist in developing such a policy.

6. Many antitrust specialists not only counsel clients on the antitrust implications of business conduct, but also litigate antitrust cases. Antitrust litigation tends to be expensive and complicated, characterized by extensive pre-trial discovery (often including production of massive amounts of business documents to one's adversary and depositions of corporate employees ), use of expert consultants and witnesses (including economic and accounting experts who testify on market- related and damage issues), and protracted time frames . Antitrust specialists who also litigate antitrust cases are able to use their litigation experience in counseling clients concerning the litigation risks of particular courses of action.