Azim Makanojiya founded Zaappaaz Inc. as a nineteen-year-old university student and quickly turned it into a multi-million dollar business.

WHAT HAPPENED:

• On Tuesday, August 7, online retailer Zaappaaz Inc. and its twenty-nine-year-old president and founder, Azim Makanojiya, agreed to plead guilty for conspiring to fix the prices of “customized promotional products” such as silicone wristbands and lanyards.
• According to an Information filed in the United States District Court for the Southern District of Texas, the company  “engaged in a conspiracy with other persons and entities engaged in the sale of customized promotional products,” which was carried out in part “via text and online messaging platforms.”  The alleged conspirators reportedly used social media platforms Facebook, Skype and WhatsApp to coordinate their price-fixing efforts.
• Acting Assistant Attorney General Andrew Finch of the Department of Justice’s Antitrust Division explained the significance of the charges in a press release, stating that, “[a]s today’s charges show, criminals cannot evade detection by conspiring online and using encrypted messaging.”  “In addition,” he continued, “today’s charges are a clear sign of the Division’s commitment to uncovering and prosecuting collusion that affects internet sales.  American consumers have the right to a marketplace free of unlawful collusion, whether they are shopping at retail stores or online.”
• While Zaappaaz Inc. has agreed to pay a $1.9 million criminal fine, the Department of Justice has not yet indicated what sentence it will support for the company’s president, Azim Makanojiya. He could face up to 10 years in prison for violating the Sherman Act, though in practice sentences tend to be much shorter, especially when defendants agree to cooperate with an ongoing investigation, as both defendants have done here.
• At this time, the Department of Justice has not named any of Zaappaaz Inc.’s competitors as alleged conspirators, but other companies in the promotional products industry are reportedly under investigation.

WHAT THIS MEANS:

• The successful prosecution of Zaappaaz Inc. and Makanojiya reflects efforts by the Antitrust Division to keep pace with technological developments while policing conspiratorial activity in both the online and brick-and-mortar arenas.
• Meanwhile, its decision to file charges against Makanojiya is consistent with a trend of holding individual executives accountable for their role in corporate criminal activity.
• Retailers should take note that the Division’s enforcement efforts are not limited to concentrated markets for commodities or essential services; sellers of low-value, readily abundant consumer goods can find themselves under the Division’s scrutiny as well.