On April 4, 2020, the Department of Justice issued a business review letter allowing collaboration among five distributors of personal-protective equipment (“PPE”), oxygen, and medications. This is the first business review letter issued under the expedited review procedure for streamlining pandemic-related public health efforts issued jointly by the Federal Trade Commission and DOJ on March 24, 2020 (as previously reported here and here). The DOJ turned the request for review around in only five days, but offered few new insights into how the agencies might weigh public-health considerations against potential competitive harms.
The parties sought guidance regarding a proposed collaboration in connection with Project Airbridge, a project established by the federal government as a partnership among medical supplies distributors and logistics companies under the direction of FEMA and HHS. Project Airbridge’s purpose is to quickly source and airlift PPE, including masks, gowns, gloves, and other equipment designed to protect against infection, as well as to distribute Covid-19 treatment-related medication to areas of greatest need across the country. The Business Review Letter notes that potential harm to competition from the distributors’ collaboration is minimal because (1) the parties would be acting only pursuant to agreements with the federal government; (2) the federal government and its agencies, including DOJ Antitrust Division staff attorneys would be actively directing and supervising the parties’ conduct and participating in meetings; and (3) the parties would not be sharing any competitively sensitive information directly, but only through “bilateral communications” with the relevant federal agency. The DOJ concluded that it “is satisfied that this and similar conduct – pursuant to an agreement with FEMA or another federal government agency, supervised by the agency, and in furtherance of the agency’s defined policy goals – should not raise any concerns under the antitrust laws.”
Although the collaboration would be conducted under the explicit direction of U.S. government agencies, the Business Review Letter noted that the parties would engage in direct communications without oversight in the interest of time and efficiency. In order to alleviate competitive concerns, the parties set forth a number of safeguards, including “not using any collaboration to increase prices, reduce output, reduce quality, or otherwise engage in COVID-19 profiteering,” limiting the scope and duration of the collaboration to the time needed to respond to the pandemic, and sequestering competitively sensitive information. The DOJ concluded that the “procompetitive aspects of any arrangement far outweigh any potential harm,” which would be limited by such safeguards. DOJ further acknowledged that immunity doctrines, such as Noerr-Pennington (protecting joint conduct to petition government action) or State-Action Immunity likely also would apply to the conduct under review.
The DOJ confirmed that it does not intend to challenge the conduct for one year, after which the parties may apply again if there is still a need for such a collaboration.
The DOJ’s first business review letter allowing a competitor collaboration to help battle the COVID-19 pandemic comes just a few weeks after the DOJ announced the expedited procedure. The eleven page decision lays out the DOJ’s analysis and demonstrates the agency’s commitment to responding immediately to such requests. If you are considering participating in a collaborative effort to address the pandemic, and could benefit from the comfort of antitrust review, the process seems to be working well. Although this particular request raised few, if any real competitive concerns, the business review letter provides some insight for companies considering seeking the Agency’s input regarding a potential competitor collaboration.
Companies seeking expedited review should:
- Demonstrate that the collaboration is limited in scope and duration to the pandemic response;
- Articulate why joint conduct is needed to contribute effectively to the COVID-19 effort; and
- Commit to safeguarding competitively sensitive information by utilizing firewalls and robust compliance policies.
As you are aware, things are changing quickly and the interpretations described here may change. This blog post represents our best understanding and interpretation based on where things currently stand.
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*This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. Please contact your Sheppard Mullin attorney contact for additional information.*
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