Though at times a return to normalcy may seem far off, it makes sense to contemplate what the legal landscape will look like when the current COVID-19 crisis abates, and what we can do now to protect ourselves as best we can. That’s what we explore in our third and final installment on antitrust and consumer protection in a COVID-19 world. Be sure to read Part 1, “Antitrust law in a COVID-19 world: Do we care? Should we care?” and Part 2, “Price gouging during COVID-19: The flip side of competition law.”
What we know
We know that after every public emergency, litigation becomes rampant. Breach of contract suits, insurance disputes and bankruptcy litigation all increase for obvious reasons. But so do consumer protection actions. After Hurricane Katrina and Hurricane Sandy, private lawsuits and government enforcement actions were filed related to price gouging and a variety of fraudulent schemes.
Lawsuits and investigations have already begun, by both private parties and state and federal authorities. On the state front, Florida Attorney General Ashley Moody said her office is investigating more than 1,200 complaints about price gouging. The Federal Trade Commission has sent warning letters to dozens of companies regarding their unsupported claims that their products can treat or prevent COVID-19. The Federal Bureau of Investigation has arrested a Brooklyn man for hoarding critical supplies. A consumer class action was filed against GrubHub, Doordash, Postmates and Uber Eats claiming that they forced restaurants to charge the same for delivered meals as they charge for dine-in meals and they further charged excessive delivery fees. And 3M filed a suit against a mask distributor claiming price gouging and deceptive trade practices and was awarded a temporary restraining order prohibiting the defendant from distributing their masks.
What we expect
These type of actions are likely to become commonplace as state Attorneys General and the federal government increase investigations into price gouging and inappropriate collaboration. Often, consent decrees are followed by civil class actions that can take years to adjudicate. Given that many states – e.g., Illinois, Maryland, Massachusetts, New York, and Washington – are enacting or considering new price gouging laws, an onslaught of new litigation is almost certain and the sheer number and breadth of such cases is likely to be unparalleled. Companies should not rely on a given state’s lack of price gouging laws or absence of a private right of action when analyzing its pricing strategies. Plaintiffs are already bringing their price gouging claims using other statutes, such as unfair business practices laws.
Companies in the middle of the supply chain are especially vulnerable. Where increased prices affect pricing downstream, the same company may be fighting the same issue from dual perspectives – plaintiff and defendant. Companies in the middle of the supply chain, where they are both buyers and sellers, can be the villain to one constituency, but yet the victim of other companies’ activities. This risk is especially heavy in states that provide no defense in price gouging suits where there is an increase in the cost of producing or transporting goods.
In a different vein, failed businesses may seek a scapegoat and may view business practices by competitors – whether collaborative or unilateral – as the source of their failure. Consumers too will look to deep-pocket companies as a source against whom they can vent their frustrations. It may not be too big of an exaggeration to say that every company’s actions during the crisis will come under scrutiny, one way or another.
What can we do now?
We all know there is no way to prevent someone from suing you. But you can try to protect yourself as best as possible to minimize chances of suit later or at least maximize your chances of prevailing in such lawsuits, and prevailing early. Here are some recommendations:
- Make sure your documents are clean. As we have mentioned before, make sure your employees are not careless in their documents or emails. Talking about “raising prices excessively,” “correcting the market,” “getting rid” of that pesky competitor or praising the COVID-19 for allowing you to raise prices are all statements that can land a company in hot water. Now is the time to impress upon your employees to ensure that such statements are not made.
- Review your supply chain. Document well your increased input costs in case there are allegations of price gouging down the line. And review your contracts to make sure that you are charging prices within your contractual rights.
- Maintain antitrust compliance. As competitors face the same economic forces arising from the COVID-19 crisis, now is not the time to relax antitrust compliance. The Department of Justice and Federal Trade Commission have called on the public and whistleblowers to report antitrust violations. Enforcement officials will want to add teeth to those calls. Do not let your company get bitten. Industry-wide solutions to COVID-19 issues must be vetted by antitrust counsel.
- Review your pricing decisions and supply decisions. These days, you may have to make hard choices about whom to supply and at what prices. Talk too counsel about these decisions and make sure they comply with federal and state laws and regulations. Do not just “wing” it. Not only may there be civil or criminal penalties, but the damages to your goodwill may be immeasurable.
We are going through unprecedented times and the future will likely be very different from what we expected. But with forethought and diligence we can protect ourselves legally and come through this stronger. We hope you have enjoyed our 3-part series. We will continue to issue alerts and podcasts as events unfold. And we hope that all of you and your loved ones remain safe and healthy!
Information about COVID-19 and its impact on local, state and federal levels is changing rapidly. This article may not reflect updates to news, executive orders, legislation and regulations made after its publication date. Visit our COVID-19 resource page to find the most current information.