The FTC has entered into a final settlement with Drug Testing Compliance Group LLC (DTC Group) by order issued January 21, 2016, resolving an administrative case that alleged DTC Group had invited a competitor to collude with respect to customer allocation in violation of §5 of the Federal Trade Commission Act.
Specifically, the FTC complaint alleged that the president of DTC Group, an Idaho-based compliance company servicing the trucking industry, approached an unnamed direct competitor to complain about the competitor’s acquisition of a DTC Group customer. This allegedly led to a meeting, wherein the DTC Group president proposed to the principals of the competitor that the two companies agree not to solicit or compete for each other’s customers, and that they abide by a “first call wins” approach to customers. Allegedly the DTC Group president explained that this arrangement would allow each company to sell its services without fearing that its rival would later undercut with a lower price offer. This alleged conduct ran afoul of the §5 prohibition on “unfair methods of competition in or affecting commerce” even without any proof or allegation that the competitor accepted the invitation. Indeed, there exists legal precedent under which the FTC can pursue an action for such conduct even without a demonstration of market power on the part of the respondent.
The settlement agreement prohibits DTC Group from communicating with competitors about pricing or rates, though public posting of rates is permitted. DTC Group is further prohibited from soliciting, entering into, or maintaining an agreement with any competitor to divide markets, allocate customers or fix prices. DTC Group is additionally prohibited from urging any competitor to raise, fix or maintain prices, or to limit or reduce service. The settlement requires DTC Group to report to FTC as to its compliance for the next 20 years. Based on publicly available information, there has been no apparent action taken against the unnamed competitor with respect to these allegations.
Of note for corporate counsel, there was no allegation in the case that DTC Group and its competitor had actually entered an agreement – rather, the underlying allegation was simply that DTC Group had invited a competitor to enter a customer allocation agreement. While it is unclear from the publicly-released materials how the FTC was alerted to this alleged invitation, this is an important reminder to companies that invitations to competitors to collude can result in legal action even if no further communications occur on the subject. Such overtures further provide an approached competitor with the opportunity to gain a competitive advantage by reporting the approaching company to the FTC.
