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I have seen this before.  A small industry, losing money, trying to do something to stay in the black.  In my experience, the intent behind starting the conversation is never as nefarious as the government wants to make it.  It usually is a group of industry leaders, trying to solve the industry wide problem of losing money. But, conversations about profits and loses can turn into an improper conversation about prices all too quickly. And, that is how companies and executives get in trouble with the Federal Trade Commission or the Department of Justice.

 

Today, two Internet resellers of UPC barcodes used by retailers for price scanning and inventory purposes, have settled charges that they violated the Federal Trade Commission Act by inviting competitors to join in a collusive scheme to raise the prices charged for barcodes sold online. At the heart of the FTC's complaint filed today are emails stressing that the the three industry leaders must act together to stop the further lowering of prices:

 

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.

 

The writer of this email invited his two closest competitors to join him in a collusive scheme to raise and fix prices for barcodes.  Although no price increase materialized, the competitors who engaged in the discussion were charged with violations of Section 5 of the Federal Trade Commission Act.

 

In a follow up email, the writer incorrectly advised his competitors:

 

Our discussion has NOT been price fixing, merely a courtesy that we will meet each other's prices[...] even is we have to raise them to do this.

 

This writer needed advice of experienced antitrust counsel.  This was a clear invitation to collude.

 

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. 

 

Be it email, text message, in person, telephone, FaceTime or blog post, the method of communication does not matter. 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.

 

 

Federal Government

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