A Novel Antitrust Defense for COVID-19 Agreements:
Section 708 of the Defense Production Act
3 min read
This alert describes the surprisingly broad antitrust defense – against federal and state antitrust actions – that Congress created in Section 708 of the Defense Production Act of 1950.1
Recent media attention on the implications of the global pandemic on competition law has focused on Section 101 of the Defense Production Act of 1950 (“DPA”), which allows the US President to require private businesses to perform government contracts, and to “allocate materials, services and facilities ... necessary and appropriate for the national defense.”2 President Trump recently directed the Secretary of Health and Human Services to invoke Section 101 to require General Motors Company to make ventilators.3
But in response to the COVID-19 crisis, on March 27, 2020, the White House also issued an Executive Order under a less-discussed provision of the DPA, Section 708. Section 708 allows private companies to assist in responding to the ongoing national emergency by agreeing to cooperate in ways that could ordinarily expose them to antitrust liability. The DPA provides a defense to civil and criminal antitrust liability to companies performing voluntary agreements under Section 708 if the companies follow the procedures in the statute and regulations. This defense is especially critical for collaborations that could otherwise implicate per se violations of the Sherman Antitrust Act, which could result in criminal prosecutions, large class action lawsuits claiming treble damage awards, joint and several liability among collaborators, and related state-law penalties.
The procedures under Section 708 are cumbersome, and involve several government agencies, but the Antitrust Division of the Department of Justice and the Federal Trade Commission have committed to responding to requests under the DPA on an expedited basis.4 The DPA, in some cases, may provide an antitrust defense, allowing private companies to work together to combat COVID-19 across a wide range of industries, from pharmaceutical companies seeking to collaborate on vaccines and treatments, to companies making medical devices and personal protective equipment.
1 For further insight on the CARES Act response to COVID-19, please see White & Case LLP’s CARES Act Provides No Relief From Antitrust Laws, But Deference On COVID-19-Related Coalitions From DOJ/FTC Will Be Fact-Specific (Mar. 30, 2020).
2 50 U.S.C. § 4511.
3 Memorandum on Order Under the Defense Production Act Regarding General Motors Company.
4 The Justice Department and the Federal Trade Commission Announce Expedited Antitrust Procedure and Guidance for Coronavirus Public Health Efforts.
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