“I am tired of losing business,” wrote Michael S. Dell, the founder the fabulously successful computer company Dell, Inc., in an e-mail to Intel’s chief executive Paul S. Otellini. Dell attributed the loss of business to being stuck using the slower microchips from Intel, instead of using the more powerful ones sold by Advanced Micro Devices (“AMD”).
In response Otellini wrote that Intel paid Dell more than $1 billion, an amount that “was more than sufficient to compensate for the competitive issues.” The payment caused Dell to delay purchases of AMD’s chips. Otellini later told a colleague that Dell “the best friend money can buy” and thus was born an antitrust suit filed by New York’s attorney general, Andrew M. Cuomo.Antitrust violations are serious matters. Violations can subject an individual to a fine of up to $1 million and ten years in the slammer, in addition to the company being fined up to $100 million for each count and being subject to suits by injured parties who can sue for treble damages, plus their attorney’s fees. We’re talking about some serious money here.
Antitrust violations can occur on two fronts: in relationships with competitors and in relationships with customers.
Some people think antitrust violations only deal with pricing issues. But in reality, the reach of antitrust is much broader than that. It is more about stacking the deck to achieve an unfair competitive advantage. Talking with your competitors about pricing, for example, is merely one mechanism for achieving such an unfair advantage. Other taboo topics between competitors include discussions and agreements about:
* terms and conditions of sale (including credit terms),
* cost structure,
* product or service offerings,
* profits or profit margins,
* production or sales volume,
* market share,
* selling territories,
* distribution methods or channels,
* marketing plans, and
* decisions about boycotting customers or suppliers.
In discussions with customers, agreements that stifle competition and injure consumers can fall under similar scrutiny.
When making their case, plaintiff’s lawyers will rely heavily on documents, such as the e-mails between Dell and Intel. In the process it is not uncommon for courts to allow juries to infer collusion from a few carelessly written or spoken words or sentences. It is therefore helpful to review my rules for avoiding smoking gun documents.
Ironically, former Intel CEO Andy Grove used to conduct antitrust compliance fire drills, conducting random audits and collecting the kind of documents and Department of Justice or the Federal Trade Commission might demand in a subpoena. Mock depositions were conducted as part of the simulation to duplicate the experience of what it’s like to be grilled by a hostile lawyer.
“A memo is introduced into evidence and you shrug,” said Grove. “You fully understand how that memo could be written. Moreover, you could have written it yourself. And then you see that memo turned into a tool and a weapon against you, in front of your eyes . . . You start shivering, ‘There but for the grace of God go I.’ I could have written that memo.”
My own experience with clients is consistent with Mr. Grove’s. Raising awareness with live simulations and showing employees how to avoid liability in the future helps manage risk by jump-starting proactive thinking. It’s a lot easier and less nerve wracking than having Andrew Cuomo do it for you.