Different methods, same old antitrust problem

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This is the email that the sender thought was a friendly introduction to two competitors but ended with today’s charges that the sender violated the FTC Act:

Hello Phil, Our company name is InstantUPCCodes .com, as you may be aware, we are one of your competitors within the same direct industry that you are in .... Here's the deal Phil, I'm your friend, not your enemy .... Here's what I'd like to do: All 3 of us- US, YOU and [Company A] need to match the price that [Company B] has .... I'd say that 48 hours would be an acceptable amount of time to get these price changes completed for all 3 of us. The thing is though we all need to agree to do this or it won't work . . .Reply and let me know if you are willing to do this or not.

As detailed in the Commission’s complaint, the writer is Jacob Alifraghis, a principal in the company InstantUPCCodes.com. Prior to this note, Mr. Alifraghis had never communicated with the recipients, his competitors in the business of selling bar codes online. This email started an improper dialogue between Mr. Alifraghis and his counterpart at Nationwide Barcode, Philip Peretz, in which the two men expressed a readiness to raise prices if only the third competitor, “Company A,” would go along. Company A never responded to this or any subsequent emails soliciting an agreement on a coordinated price increase.

The facts as alleged here are remarkably similar to the Commission’s first invitation to collude case. In the pre-email days of 1990, two executives of Quality Trailer Products made a surprise visit to the headquarters of a competitor to make an unambiguous offer to fix prices in a face-to-face meeting with an officer of that company. They told the competitor that its price for certain axle products was too low, and promised that they would not sell those products below a specified price. The competitor declined the invitation (which must have led to an awkward moment).  

In antitrust terms, an “invitation to collude” describes an improper communication from a firm to an actual or potential competitor that the firm is ready and willing to coordinate on price or output or other important terms of competition. Based on prior Commission enforcement actions over the past 20 years, private communications among competitors may violate Section 5 of the FTC Act if (1) an explicit or implicit communication to a competitor (2) sets forth proposed terms of coordination; (3) which, if accepted, would constitute a per se violation of the Sherman Act. 

And public communications can also be invitations to collude in some circumstances as well. For instance, the Commission charged Valassis, a competitor in free-standing newspaper inserts, with making statements in an analyst call which set forth desired terms of collusion and without a legitimate business purpose. The Commission explained that Valassis’ statements provided information that would not ordinarily have been disclosed to the securities community, and the company would not have made the statements except in the expectation that its sole competitor would be listening. Valassis’ statements described with precision the terms of its invitation to collude to News America. If the invitation had been accepted by News America, the result likely would have been higher prices and reduced output.

Whatever the method of communication, an invitation to collude directed at a competitor can result in an enforcement action. In some cases, the invitation to collude could potentially constitute criminal conduct. For instance, telephone calls to competitors inviting them to join a bid-rigging scheme can be charged as criminal violations of wire fraud or conspiracy statutes even if no agreement is reached. (U.S. v. Ames Sintering Co., 916 F.2d 713 (6th Cir. 1990)). Further, if the invitation is accepted and the competitors enter into an agreement, that also could constitute a criminal violation of the antitrust laws. The FTC refers any potentially criminal conduct to the Department of Justice to investigate.

What to do if you are the recipient of a similar email? We hope that you will forward it to the Bureau of Competition at antitrust@ftc.gov. Attorneys in the Bureau’s Office of Policy and Coordination review information provided to the mailbox, and may refer the information to investigative staff for follow up.

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