In December 2015, the Department of Justice’s investigation into the alleged price-fixing of internet-sold wall posters resulted in the indictment of Daniel William Alston and his Britain-based company, Trod Ltd. Assistant Attorney General of the DOJ’s Antitrust Division, Bill Baer, described the investigation as the first by the Department to target unlawful agreements in e-commerce. This DOJ action shows that even agreements on new methods of setting prices are still subject to old-fashioned antitrust enforcement.
Earlier last year, one of Alston’s co-conspirators, David Tompkins, was also indicted for his role in the conspiracy. According to the one-count indictment, Tompkins and his co-conspirators first agreed to fix the prices of posters sold in the United States through Amazon Marketplace. They then carried out the unlawful conspiracy through the use of a pricing algorithm. The algorithm, according to the indictment, coordinated changes to the prices for the wall posters and ensured that the prices remained in conformity with the unlawful agreement. In other words, the system was designed to automatically detect and make changes to the prices of certain wall posters.
This incident provides a glimpse into potential problems posed by the advancement and expansion of technology in e-commerce industries. This case might seem to be a fairly clear-cut example of an unlawful agreement in violation of Section 1 of the Sherman Act because the agreement among the competitors preceded the implementation of the algorithm-based scheme. A similar future case, however, may not be so clear. If there had been no explicit agreement among competitors regarding the pricing method prior to each company implementing the pricing algorithm, for example, there may not have been a violation of the Sherman Act at all, even if algorithm produced similar results in the marketplace. In such a situation, the DOJ might find that without the explicit agreement, the pricing algorithm is simply an example of “parallel conduct” and therefore lawful under the Sherman Act.
Regardless of those thorny legal questions regarding hypothetical facts, however, this incident serves as another reminder to business owners of the dangers of dealing with competitors. This particular conspiracy is a far cry from the classic conception of a price-fixing agreement taking place in a dark, smoke-filled room; however, DOJ still considered it an unlawful conspiracy under antitrust laws and worthy of criminal enforcement action.
The lawyers in Schiff Hardin’s Antitrust and Trade Regulation Practice Group have decades of experience guiding clients through interactions with competitors. Whether you’re in a new industry or old, contact one of us before contacting your competitors.