Guest article by Jonathan Dibble
Before a company enters the United States to sell its products or services it must first deal with critical “Gateway issues.” It is essential to understand the basic laws and trade regulations that govern commerce in the United States. Companies that understand the federal and state antitrust and competition laws will compete most efficiently and effectively.
I spent two days in Osaka working with the owner of an optical factory who had been sued in Portland, Oregon for violating the Robinson-Patman Act. He was not aware of this law and indeed the whole concept of antitrust regulation. Had those conversations occurred prior to his entry into the United States markets, he could have avoided a very costly lawsuit and settlement. More importantly, the introduction of his product into the United States markets was hindered and he lost the competitive edge to European manufacturers and their U.S. distribution schemes. Timing in business today is critical.
An antitrust violation can, among other costs, result in: 1) criminal penalties and jail time, 2) civil penalties, 3) private litigation which can be expensive, 4) loss of employee time for document production and depositions, and 5) loss of competitive edge as employees become unsure, timid or fearful and the marketing becomes uncertain or is delayed.
A compliance program can avoid these costs and threats to a business. The investment in a few hours of legal counsel can prevent the expenditures of millions of dollars. A brief education of “dos” and “don’ts” will sensitize employees to spot critical issues and obtain counsel on those issues before stepping into a trap. The United States Department of Justice recognizes a compliance or education program to be a significant mitigating factor in their enforcement actions.
Recently two companies made independent decisions to pursue different lines of waste disposal. One concentrated on general waste, the other on highly regulated, specialized waste. Specialization has economies of scale. What these two companies did appeared to make business sense. They entered into cross-sales agreements that were simultaneously executed. The general waste company traded its specialized waste business to the other company that was primarily involved with that type of waste, and the specialized company, in turn, traded its general waste business to the company that was primarily in general waste collection and disposal. They also agreed to what they thought were reasonable ancillary restraints to protect each company’s investment. They signed agreements not to compete against each other in the respective businesses that they had traded to each other. They made no attempts to sell each business independently or entertain other offers. However, some state Attorneys General viewed the transaction as a horizontal market allocation scheme, a violation of Section 1 of the Sherman Act and the respective state laws. The Attorneys General finally settled the cases with civil penalties. However, additional litigation followed as the plaintiffs’ attorneys appeared and private litigants sued in multiple jurisdictions. The cases were transferred to multidistrict litigation. How could legitimate business objectives have been accomplished without the violation of or the appearance of violations of the antitrust laws?
Counseling on antitrust issues before pursing a marketing strategy or business plan in American markets can avoid many problems, and reduce the exposure and risk of an antitrust challenge.
Note: In an effort to serve our clients with the convenience of a single stop for the legal services critical to the conduct of business in the United States, Kirton & McConkie has determined to supplement its own array of professional services. Our objective is to assure our clients of the highest quality professional legal services, at the most reasonable cost, in crucial legal specialties such as antitrust and trade regulation. In pursuit of those objectives Kirton & McConkie has arranged to co-counsel with Ray Quinney & Nebeker (another law firm located in our geographic region with service rates significantly lower than East and West Coast centers) to provide services in this important legal area. Jonathan Dibble, our guest author, is a shareholder of Ray Quinney & Nebeker and is listed in Corporate Counsel, December 2004 issue, as one of America's Best Lawyers in Antitrust. Jonathan Dibble can be reached at jdibble@rqm.com.