FTC, DOJ Warn Against Labor Market Collusion; FTC Issues Warning Letters on Unsupported COVID-19 Health Claims

Yesterday the U.S. Department of Justice (DOJ) Antitrust Division and the Federal Trade Commission (FTC) issued a joint statement warning that they were on alert for any efforts to use the COVID-19 pandemic crisis to collude on wages, hours or other conditions of employment. Today, the FTC issued warning letters to 10 entities that allegedly made unsupported claims that their products can treat or prevent COVID-19. These actions provide a reminder that antitrust and consumer protection laws continue to apply during the crisis.

Labor Markets

Federal and state antitrust agencies have been aggressive in investigating and challenging agreements that place restrictions on hiring or employment. While the most publicized efforts have focused on no-hire or no-solicit agreements among companies or in franchise agreements,¹ the agencies are concerned about agreements that restrict competition in labor markets. In their statement,² the federal agencies express particular concern about agreements among or between employers, staffing companies and recruiters to limit or eliminate competition on wages, salaries, hours or other conditions of employment. Even absent an agreement, the FTC emphasized that it would pursue even invitations to enter into such agreements. Both agencies stated that they are prepared to pursue civil remedies against anyone who enters into such agreements, and DOJ noted that in certain circumstances, such agreements can be a criminal antitrust violation, which can result in major financial penalties for companies, as well as debarment, and significant jail time for individuals.

This is not to say that all agreements among entities that may be competing in labor markets violate the antitrust laws. For example, agreements to allocate scarce labor resources during the crisis intended to assure that those resources are made available most efficiently and where most needed may be permissible. Indeed, the antitrust agencies have indicated that they are prepared to review agreements intended to assist in responding to or resolving this crisis on an expedited basis.³ In light of the need to carefully construct any such agreement, experienced antitrust counsel should review any proposed agreements before implementation.

Unsupported Medical Claims

The FTC and the Food and Drug Administration (FDA) have been actively monitoring claims that certain products can either treat or prevent COVID-19. Last month, even before most stay-at-home orders were in place, the FTC and FDA sent warning letters to seven companies alleging that they were making false claims about their COVID-19 products.⁴ The FTC has since received a number of complaints about other product claims and today announced that it had issued a further 10 warning letters. The letters note that if the claims do not cease, the FTC will seek a court injunction to prevent further dissemination of the claims and require refunds to consumers.

The FTC has long pursued false or misleading medical claims.⁵ However, it has made clear it will be particularly vigilant in monitoring claims related to COVID-19, including on social media, and has actively encouraged consumers to report any potentially false or misleading claims. The FTC generally requires that medical claims be supported with scientific evidence including well-controlled human clinical trials. If a company does have products that can meet these standards, it is critical that the necessary supporting evidence, is available prior to making any public claims.

 

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¹  See Sidley Update, “U.S. Department of Justice Brings a New Challenge to ‘No Poach’ Agreements” (April 6, 2018), available at https://www.sidley.com/en/insights/newsupdates/2018/04/us-doj-brings-a-new-challenge-to-no-poach-agreements.

² Fed’l Trade Comm’n & U.S. Dep’t of Justice, “Joint Antitrust Statement Regarding COVID-19 and Competition in Labor Markets” (April 13, 2020), available at https://www.ftc.gov/system/files/documents/advocacy_documents/joint-statement-bureau-competition-federal-trade-commission-antitrust-division-department-justice/statement_on_coronavirus_and_labor_competition_04132020_final.pdf.

³ Fed’l Trade Comm’n & U.S. Dep’t of Justice, “Joint Statement Regarding COVID-19” (March 24, 2020), available at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19.

⁴ See Fed’l Trade Comm’n, “FTC, FDA Warn Companies Making Coronavirus Claims” (March 9, 2020), available at https://www.ftc.gov/news-events/blogs/business-blog/2020/03/ftc-fda-warn-companies-making-coronavirus-claims.

⁵ See Fed’l Trade Comm’n, Health Claims, available at https://www.ftc.gov/news-events/media-resources/truth-advertising/health-claims.