The Federal Trade Commission and the Antitrust Division of the Department of Justice (the “U.S. antitrust authorities”) are always on the hunt for collusion amongst competitors. Indeed, in response to the current pandemic, Attorney General William P. Barr stated, “The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time.” Perhaps more than ever, the U.S. antitrust authorities are paying particularly close attention to industries that provide essential goods and services to consumers, including medical supplies, food, and housing/real estate.
As we’ve previously written, there may be certain opportunities for lawful competitor collaborations under the antitrust laws to fight against and respond to the current pandemic. However, other types of competitor collusion have the potential to lessen competition and are deemed unlawful, such as an agreement (explicit or implied) amongst two or more competitors to fix price or some other element of competition. Importantly, such violations can be subject to both criminal and civil penalties. Thus, companies must take care to avoid sharing competitively sensitive information – such as confidential rate, cost, and occupancy data – with competitors so as not to lead to violations. In the real estate context, such unlawful collusion can take many forms, including, for example, agreements amongst competitors to:
- Coordinate future competitive plans and strategies
- Fix rental rates
- Set rental rate floors or ceilings
- Abate rents for the duration of the pandemic (or some other period)
- Extend payment due deadlines
- Maintain certain occupancy levels
- Not hire staff or other personnel from each other
While the antitrust laws prohibit agreements between competitors not to compete, they do not prohibit unilateral action by competitors to adjust pricing. Thus, property owners are free to take unilateral actions to abate rents or provide other accommodations to tenants, especially when applied broadly and in a nondiscriminatory manner. But when done subject to a tacit or explicit agreement with a competitor, even efforts to accommodate or reduce the burden on tenants, can run afoul of the antitrust laws, and the U.S. antitrust authorities will continue to monitor for violations during the pandemic.
The Goodwin antitrust team regularly advises our real estate industry clients on the ways in which they may lawfully collaborate with competitors and avoid collusion pitfalls. We stand ready to advise your business in its efforts to respond to the current pandemic.