For COVID-19 Competitor Collaborations, DOJ Antitrust Division’s “Business Review Letter” Offers Easy and Likely Effective Antitrust Protection
16 min read
On April 4, 2020, the Antitrust Division of the Department of Justice issued its first Business Review Letter under the DOJ-FTC joint expedited COVID-19 competitor collaboration review procedures, blessing several medical supply companies to work together to produce and distribute personal protective equipment (PPE) and COVID-19-related medicines. And on April 20, the Division issued its second expedited Business Review Letter, allowing another medical supplier to similarly coordinate. Granting its approval in only 5 and 6 days, respectively, and doing so even though the medical suppliers had already begun collaborating—traditionally a disqualifier for Division approval—the Division’s message is clear: the Antitrust Division wants to enable, not obstruct, bona fide competitor collaborations truly aimed at combatting the COVID-19 crisis. And the Division’s Business Letter process is not “business as usual.”
The Antitrust Division does not pre-authorize business conduct or provide any advance guarantees that any specific conduct is lawful. But parties concerned about whether their planned business activity is legal under the antitrust laws can ask the Division to provide “a statement of its current enforcement intentions,” advising whether it would challenge the proposed conduct as anticompetitive.1 The purpose of this “Business Review” procedure is to determine how the Division “may respond to proposed joint ventures or other business conduct.”2
Business Review Letters can provide de facto immunity from criminal antitrust prosecution and can be persuasive in helping to guard against civil liability, but in the past, the process has usually been unwieldy and long, creating uncertainty and a lag that can cause companies to miss out on the business opportunity while they wait to hear from the Division.
In their March 24, 2020 joint statement, however, the Division and FTC announced expedited procedures for the review of COVID-19-related collaborations. Having now seen the first two Business Review Letters issued by the Antitrust Division under this new process, the calculus for deciding whether to seek a Business Review Letter has changed—for COVID-19-related collaborations, the Division Business Review process appears to provide quick, easy, and likely effective antitrust protection.
Business Review Letters offer potential immunity from criminal antitrust prosecution and civil government enforcement, and strong defenses to private civil cases. But the normal process requires significant time and resource investment.
Upon a party’s request and after a review, the Division will issue a Business Review Letter with usually one of three responses:
- No action – The Division does not “presently intend” to bring enforcement action against the proposed conduct (this is a successful Business Review Letter);
- Declines to advise – The Division declines to state its present enforcement intentions (the Division may file suit); or
- Probable challenge – The Division “will sue” if the applicants proceed with the proposed conduct (a challenge is probable).3
Successfully receiving a no action Business Review Letter offers businesses strong benefits. Although a Business Review Letter can only state the Division’s current enforcement intention as of the date of issuance—it does not restrict the Division from bringing any subsequent action, criminal or civil, that it deems to be in the public interest4 —a no action letter likely offers substantial level of de facto antitrust protection.
As far as criminal exposure is concerned, a criminal violation of the antitrust laws, like most criminal laws, requires the perpetrator to have knowingly and willfully violated the law.5 Provided that a company is truthful with the Division during the Business Review process, and that the company’s ultimate conduct conforms with what it proposed to the Division, it follows that the company’s reliance on the Division’s advice would be inconsistent with a “knowing and willful” violation of the law. Indeed, where there has been a “full and true disclosure,” the Division has never brought a criminal prosecution after issuing a no-action Business Review Letter—a fact which the Division touts on its website.6
Similarly, while not a guaranteed protection from civil liability, a no action Business Review Letter from the antitrust enforcement officials may be “strongly persua[sive]” to courts in finding that the activity described in the Business Review Letter does not violate civil antitrust laws.7
Despite these benefits, the lengthy and cumbersome traditional Business Review process has discouraged its use. Applicants submitting requests for a Business Review Letter must make a “full and true disclosure” of all necessary information regarding the collaboration for which a review is requested, and under the traditional process, this requires including background information, “complete copies of all operative documents,” “detailed statements of all collateral oral understandings,” and any additional information the Division requests. 8
With respect to proposed joint ventures and information exchanges, the two most frequent types of business review requests the Division receives, the Division sets forth specific categories of information that parties can provide with their initial business review submissions, in an effort to resolve the request without being compelled to provide additional information (and inevitably increasing review time and expense).9 This information includes, for instance, the parties involved, the purpose and objectives of the conduct, the competitive significance of the parties and competitors in the market, customers in the market, safeguards, and synergies.
Ordinarily Business Review Letters Have Taken Six Months in Recent Years. Prior to the March 24 statement, providing all of the required information and waiting for the Division’s review could have taken months or even years; although the Division has stated that it seeks to respond to requests within 90 days after the requesting party has submitted all necessary information,10 the average completed case during the 2014-2018 time period took approximately six months – an average of 190.2 days – from the date the applicant submitted the request until the date the Division replied with a Business Review Letter.11
Foregoing Conduct Prior to Issuance of Favorable Letter. One of the drawbacks to the Business Review Letter process has been the requirement that the parties not start their combined activities until the Division responds. Under the traditional process, the Division will only review and state its enforcement intentions as to “proposed business conduct.”12 Indeed, the Division will generally refuse a Business Review request concerning ongoing conduct.13 This means that during the months of waiting for the Division to issue its review under the traditional process, the parties cannot begin the joint conduct, which may seriously jeopardize the purpose of the collaboration or its effectiveness.
Because of these hurdles, requests for Business Review Letters are relatively rare, compared to the size and dynamism of the US economy. During the five-year period from 2014-2018, the Division received only 12 business review requests.14 During that period, the Division approved five requests, declined to state its present enforcement intentions with regard to one, and denied zero, while one applicant withdrew its request. Five requests remained pending during that timeframe.15
Prior Business Review Letters and Court Decisions Provide Guidance for Successful Business Review Letters. Despite the relative rarity of Business Review Letters, over time, the Antitrust Division has accumulated a large number of successful requests that parties can turn to as authority to cite for a Business Review Letter.16
The Division’s recent Business Review Letter approvals of the medical suppliers’ collaboration shows the agencies’ commitment to enabling COVID-19-related cooperation both procedurally and substantively.
Recognizing that addressing the COVID-19 pandemic might require unprecedented collaborations between otherwise competing firms, jointly with the FTC, the Division issued a statement on March 24, 2020 providing for expedited Business Review procedures for collaborations and other joint efforts aimed at combatting the pandemic.17 (See Competitor Collaborations: Competition Agencies Respond to a Global Pandemic18 ).
Namely, the Division’s expedited process permits a streamlined application (now parties can seek review by submitting a simple letter to a special COVID-19 email box), allows any additional documentation to be submitted by email and aims for a 7-day review from the time the agency receives the information it needs.19 These are significant changes that offer substantial relief from the concerns that have plagued the Business Review Letter process until now. Not only simpler and easier, the 7-day review window cuts a process that had taken months down to only a week.
The Division has now issued two review letters under the new COVID-19 procedures: (1) on April 4 the Division concluded that it would not challenge a collaboration among the McKesson Corporation, Owens & Minor, Inc., Cardinal Health, Inc., Medline Industries, Inc., and Henry Schein, Inc. to expedite and increase manufacturing, sourcing, and distribution of personal-protective equipment and medication;20 and (2) on April 20, the Division granted medical supplier AmerisourceBergen Corporation’s request to join the McKesson coalition and to work with governmental agencies in ways that “significantly overlap” with the McKesson request (with main differences relating to the medication hydroxychloroquine and supply chain control).21 These letters are encouraging for proposed COVID-19 competitor collaborations for three reasons:
- The Division reviewed and approved both medical suppliers’ requests in record time. The Division received McKesson’s letter on March 30, 2020 and issued its Business Review Letter response on April 4 – just 5 days later, 2 days faster than promised, and on a Saturday no less. Similarly, the Division received AmerisourceBergen’s letter on April 14 and issued its Business Review Letter response on April 20 – 6 days later. This indicates that the Division is taking its commitment to encourage appropriate COVID-19-related collaborations seriously.
- The Division blessed the medical suppliers’ collaboration despite the fact that the competitors had already begun coordinating, typically a disqualifier. As noted above, firms are typically prohibited from engaging in the requested conduct while waiting for the Division’s response to a Business Review request. But with both recent requests, the Division issued a no-action Business Review Letter even though “some aspects of the proposed conduct already [had] been underway.”22 Accordingly, under the new COVID-19 policies, it seems that businesses no longer have to choose between getting a Business Review Letter and moving forward with their collaboration.
- The Division gave strong deference to medical suppliers’ cooperation because it aimed to assist FEMA and HHS. Outside of the new COVID-19 review process, competitor collaborations in conjunction with governmental agencies could be immune from antitrust scrutiny only if the action was: (1) compelled by an agreement with the federal government or a clearly defined federal policy and (2) the agency supervised the private party’s actions.23 Collaborations that fall into this category will remain unchallenged.24 But in reviewing the medical suppliers’ collaborations—both the McKesson and AmerisourceBergen requests—the Division explained that competitor collaboration simply in furtherance of a federal agency’s goals may, nonetheless, be procompetitive (and not raise antitrust concerns).25
In both requests, the medical suppliers had proposed to act collaboratively to manufacture and distribute PPE and COVID-19-related medications at the request of and to aid the Federal Emergency Management Agency (FEMA) and the Department of Health and Humans Services (HHS). While finding some of the conduct met the state action test for immunity, the Division also relied on a more flexible rule for conduct that merely assists a federal agency in responding to the COVID-19 crisis.27 Moreover, subject to certain safeguards including the prohibition of sharing competitively sensitive information among competitors, the Division allowed McKesson’s and AmerisourceBergen’s requests to communicate with competitors even without the presence of government representatives.28
Citing the reasoning of a 1993 Business Review Letter (drafted by now-White & Case partner J. Mark Gidley as then-Acting Assistant Attorney General, DOJ Antirust Division) the Division found that “collaboration among competitors in aid of a federal agency, even if it does not satisfy the standard described above, may still offer unique benefits and therefore be consistent with the antitrust laws.”29 The Division therefore concluded that the collaboration between the medical suppliers offers unique procompetitive benefits that outweigh any potential harm.30
Because the COVID-19 crisis is truly national—indeed global—many competitor collaborations aimed at fighting the pandemic are likely to also be in furtherance of at least one, if not several governmental agency’s goals. The Division’s response to the medical suppliers’ collaboration therefore suggests that competitors trying to team up to help the government should feel empowered to offer their joint assistance to government agencies without significant antitrust liability exposure.
While the first two expedited Business Review Letters have related to medical supplier coalitions, the expedited Business Review Letter process is available to companies “in any sector of the economy that are responding to this national emergency.”31 The Division does not explicitly define what kinds of proposed coalitions are “COVID-19-related” and explains that the purpose of the expedited procedures are to allow cooperation to fight COVID-19 “and its aftermath.” The Division’s swift response time and its commitment to “any sector of the economy . . . responding to this national emergency” and dealing with the “aftermath” of COVID-19 pandemic impacts invites in our view proposals for collaborations that deal with the intense, acute after-effects of the COVID-19 quarantine on many businesses. A wide range of collaborations could qualify, including those enabling essential services and an orderly reopening of the economy, just to name a few.
Of course, a Business Review Letter offers no protection if parties have misled the government in seeking a no-action letter, or engage in conduct outside what they represented they would do. Antitrust enforcers are increasingly focusing on hoarding and price gouging during the pandemic (see COVID-19 Triggers DOJ and State AG Initiatives, and a Proposed Federal Addition to United States’ Price Gouging Framework). The Division has explicitly warned against engaging in collaborations that abuse the opportunity “to subvert competition or prey on vulnerable Americans” and reiterated this concern in another recent joint statement on April 13, 2020.34
Nonetheless, the Division’s approval of two letters in a five-day period, with one of the letters coming out over the weekend, is strong testament to the crisis footing that the Division is putting COVID-19 requests on and its commitment to act swiftly.
1 Antitrust Division, US Dep’t of Justice, What is a Business Review?, available at https://www.justice.gov/atr/what-business-review.
2 US Dep’t of Justice, Introduction to Antitrust Division Business Reviews 1, https://www.justice.gov/sites/default/files/atr/legacy/2011/11/03/276833.pdf.
3 Introduction to Business Reviews, supra note 1 at 2; Antitrust Division, US Dep’t of Justice, Antitrust Division Manual (5th Ed.) at pp. III-130-31, available at https://www.justice.gov/atr/file/761166/download.
4 28 C.F.R. § 50.6(9); see also, e.g., United States v. Grinnell Corp., 30 F.R.D. 358, 363, (D.R.I. 1962) (holding that a Division statement of a “present intention not to take action” does not equate to a guarantee of future immunity).
5 See, e.g., United States v. U.S. Gypsum Co., 438 US 422, 443 (1978) (holding that a defendant’s state of mind or intent is an element of a criminal antitrust offense).
6 28 C.F.R. § 50.6(9); Antitrust Division Manual, supra note 3 at p. III-132.
7 See Matsushita Elec. Indus. Co. v. Cinram Int’l, Inc., 299 F. Supp. 2d 370, 379 (D. Del. 2004) (granting summary judgment on antitrust claims in part because court was “strongly persuaded” by the Antitrust Division’s Business Review Letter, stating the Division’s intention not to seek enforcement action against patent pool at issue).
Introduction to Business Reviews, supra note 1 at 2; Antitrust Division, US Dep’t of Justice, Antitrust Division Manual (5th Ed.) at pp. III-130-31, available at https://www.justice.gov/atr/file/761166/download.
8 28 C.F.R. § 50.6(9); see also, e.g., United States v. Grinnell Corp., 30 F.R.D. 358, 363, (D.R.I. 1962) (holding that a Division statement of a “present intention not to take action” does not equate to a guarantee of future immunity).
9 What is a Business Review?, supra note 1.
10 Antitrust Division Manual, supra note 3 at p. III-129.
11 Antitrust Division, US Dep’t of Justice, Business Review Letters and Request Letters, available at https://www.justice.gov/atr/business-review-letters-and-request-letters.
12 28 C.F.R. § 50.6(2).
13 Introduction to Antitrust Division Business Reviews, supra note 2 at 1.
14 Antitrust Division, US Dep’t of Justice, Workload Statistics FY 2009-2018 1-2, available at https://www.justice.gov/atr/file/788426/download.
16 See, e.g., M. Delrahim, McKesson Corporation, Owens & Minor, Inc., Cardinal Health, Inc., Medline Industries, Inc., and Henry Schein, Inc. Business Review Request Pursuant to COVID-19 Expedited Procedure, DEP’T OF JUSTICE 7 nn.32–33 (Apr. 4, 2020), available at https://www.justice.gov/atr/page/file/1266511/download (“McKesson Letter”) (relying on reasoning from past Business Review Letter as authority)
17 Dep’t of Justice & Fed. Trade Comm’n, Joint Antitrust Statement Regarding COVID-19 (Mar. 24 2020), available at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19 (“Joint Statement”).
18 J. Mark Gidley et al., Competitor Collaborations: Competition Agencies Respond to a Global Pandemic, White & Case (Mar. 27, 2020.
19 See Joint Statement, supra note 17.
20 McKesson Letter, supra note 16.
21 M. Delrahim, Response to AmerisourceBergen Corp. Business Review Request Pursuant to COVID-19 Expedited Procedure, DEP’T OF JUSTICE (Apr. 20, 2020), available at https://www.justice.gov/atr/page/file/1269911/download (“AmerisourceBergen Letter”).
22 McKesson Letter, supra note 16 at 2 n.4; AmerisourceBergen Letter, supra note 21 at 2 n.4.
23 See Byers v. Intuit, Inc., 600 F.3d 286, 295 (3d Cir. 2010); Name.Space, Inc. v. Network Sols., Inc., 202 F.3d 573, 581–84 (2d Cir. 2000) (“[T]he applicability of this [antitrust immunity] doctrine to private entities depends, for example, on the extent to which the federal government or its agencies directly own and/or exercise plenary control over the entity in question.”).
24 McKesson Letter, supra note 16 at 7; AmerisourceBergen Letter, supra note 21 at 8.
25 McKesson Letter, supra note 16 at 7; AmerisourceBergen Letter, supra note 21 at 9.
26 McKesson Letter, supra note 16 at 7–8; AmerisourceBergen Letter, supra note 21 at 4–5.
27 McKesson Letter, supra note 16 at 8–9; AmerisourceBergen Letter, supra note 21 at 9.
28 McKesson Letter, supra note 16 at 6, 10; AmerisourceBergen Letter, supra note 21 at 5–6.
29 McKesson Letter, supra note 16 at 7 (emphasis added); see also J. Mark Gidley, Response to Association of Official Analytical Chemists’ Request for Business Review Letter, DEP’T OF JUSTICE (Jan. 14, 1993), available at https://www.justice.gov/atr/response-association-official-analytical-chemists-request-business-review-letter (concluding that a working group, formed at the request of HHS to help the agency develop tests for smokeless tobacco, was “unlikely to be anticompetitive and [would instead] facilitate a new, standardized means of testing the content of smokeless tobacco not currently available”); AmerisourceBergen Letter, supra note 21 at 9.
30 McKesson Letter, supra note 16 at 8; AmerisourceBergen Letter, supra note 21 at 5–6.
31 Joint Statement, supra note 17 (emphasis added).
32 Noah A. Brumfield et al., COVID-19 Triggers DOJ and State AG Initiatives, and a Proposed Federal Addition to United States’ Price Gouging Framework, White & Case (Apr. 14, 2020)
33 Joint Statement, supra note 17.
34 Dep’t of Justice & Fed. Trade Comm’n, Joint Antitrust Statement Regarding COVID-19 and Competition in Labor Markets, (Apr. 13, 2020), https://www.ftc.gov/system/files/documents/advocacy_documents/joint-statement-bureau-competition-federal-trade-commission-antitrust-division-department-justice/statement_on_coronavirus_and_labor_competition_04132020_final.pdf (noting “antitrust enforcers closely monitoring employer coordination to disadvantage workers” and emphasizing that “COVID-19 does not provide a reason to tolerate anticompetitive conduct that harms workers including doctors, nurses, first responders, and those who work in grocery stores, pharmacies, and warehouses, among other essential service providers on the front lines of addressing the crisis”).
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