In his article, “The Insider: Sherman Act, Section 2,” in-house counsel veteran Sterling Miller discusses why all corporate counsel must have a basic understanding of the Sherman Act, especially Section 2 on monopoly.
Why you need to know
According to Miller, there are many reasons why Section 2 can be very problematic for in-house counsel. Once a competitor launches an antitrust lawsuit or government regulators request a meeting, every bit of communication, from contracts, to clauses, to PowerPoint presentations, to emails and beyond are available for examination.
Then there are is the antitrust lawsuit. Antitrust lawsuits are expensive, often totaling up in the tens of millions of dollars. If the court finds against the business, the plaintiff is entitled to triple the damages. On top of this, plaintiffs could also seek injunctive relief.
As challenging as are antitrust lawsuits, there are even worse situations for your company, according to Miller: government regulators. If government regulators become interested in your company, then you can expect numerous meetings with these regulators, interviews with company witnesses and often years under suspicion of being a monopoly, even if you are innocent. You also risk the chance that the regulators break up your company, as they have the power to do.
What activities may trigger antitrust scrutiny
Miller provides a partial list of activities that may peg a company as a monopolist. They include:
- Stipulating that a customer must buy another product as a condition of that same customer purchasing the product in which the company has a monopoly
- Abusing the processes of government, such as filing frivolous lawsuits
- Bundling pricing
- Shutting out a competitor or a customer who is not loyal from buying the company’s products
- Making contracts providing for exclusive deals
- Keeping competitors out
- Talking badly about a competitor’s product
- “General bad behavior” which lumps many acts together. This concept is often used by plaintiffs who desire to throw everything at the company in their lawsuit, hoping that maybe something will stick.
Who may run afoul of Section 2
Not all companies are likely to come under antitrust scrutiny, only those that meet certain conditions. Miller explains what those conditions are, including product market, geographic market and crossing a certain threshold of market share.
However, even if your company does meet those conditions, it still may not be clear that you do run afoul of the Sherman Act, Section 2. Miller notes that there remains much murkiness. For example, if your company has a solid pro-business or pro-competitive rationale, then seemingly anti-competitive behaviors do not paint your company as a monopolist.
Actions in-house counsel can take
Miller also enumerates five actions corporate counsel can take if their company crosses the 50 percent market penetration threshold. They are:
- Keep descriptions of the company’s market broad. Watch over documents and emails to ensure the company’s employees use terms like “marketplace” or a “channel/segment.” That’s because the broader, bigger the market description reduces the likelihood of your company being tagged as a monopolist.
- Be wary of warlike language. Often companies will get carried away when describing how they will meet their competition, using violent, warlike terms like “destroy,” “crush,” “obliterate.” These strong, active words can come back to bite your company when they are subpoenaed for the antitrust trial.
- Make a business case. Making a business case for your strategies and actions can often go a long way from being branded as a monopolist. By coaching your coworkers to use language that emphasizes business reasons rather than motives, you help them provide a context for those actions, often reducing or even mitigating the possibility of an antitrust lawsuit.
- Seek solid advice from accomplished antitrust counsel. Although you may never need their services, it is wise to have a few of these colleagues in mind, should you be faced with a lawsuit.
- Be vigilant. Be vigilant for signs both outside and inside your company. Keep scanning your business horizon for signs that a competitor, government regulator or customer may be contemplating an antitrust action against your company. Train your coworkers to send you any emails that may even seem to hint at the filing of an antitrust lawsuit.
In closing out his article, Miller provides several resources.