By on March 16th, 2015. This post currently has no responses.

3C’s: Invitations to Collude Invite Big Trouble

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On Thursday February 26th I enjoyed a day long Symposium on Section 5 of the Federal Trade Commission Act hosted by BakerHostetler and organized and moderated by my friend and former colleague Carl Hittinger. The conference focused on the history of Section 5, its current scope and where it may be headed. There was particular discussion about whether the FTC should have guidelines to explain and limit the application of Section 5.

While I found the entire conference interesting, of particular interest to me was the discussion of “invitation to collude” cases, which is a way of saying to a competitor “Would you like to form a cartel with me?” Section 5 broadly prohibits “[un]fair methods of competition” and “unfair or deceptive acts or practices.” One way Section 5 has been used by the FTC has been to charge invitations to collude cases.

An invitation to collude case can arise when one competitor (or a group of competitors) reaches out to another competitor to invite the competitor to agree to fix prices.  An invitation to collude investigation/case arises usually when there is some specificity in the offer—much like contract analysis. General grousing about prices in an industry, while extremely foolish and may draw an investigation, is not likely to result in a formal charge. And, in US v. Foley, 598 F. 2d 1343 (4th Cir. 1979)  a realtor hosted a dinner for seven other realtors and announced he didn’t care what others did, he was raising his commission. Some discussion ensued from which a jury concluded that an agreement has been reached.  The realtors were indicted and convicted.

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