US DOJ announces first criminal prosecution into online price fixing

By Gabriele Accardo

On April 6, 2015, the US Department of Justice’s Antitrust Division announced the first criminal prosecution of a conspiracy specifically targeting e-commerce. The case arose from an ongoing federal antitrust investigation into price fixing in the online wall décor industry.

Mr. David Topkins, a former executive of an e-commerce seller of posters, prints and framed art, has agreed to plead guilty to conspiring to fix the prices of posters sold online, and to pay a fine of $20,000. His plea agreement requires court approval. Price fixing in violation of Section 1 of the Sherman Act carries a maximum sentence of 10 years and a fine of $1 million for individuals, which makes the case even more exceptional in that, despite the very serious offence (price fixing), Mr. Topkins would dodge prison time.

According to the charges, Mr. Topkins and his co-conspirators participated in conversations and communications with representatives of other poster-selling firm to discuss (that is fix, increase, maintain and stabilize) the prices of the agreed-upon posters sold online through Amazon Marketplace, from as early as September 2013 until in or about January 2014. Amazon was not charged in the case.

To implement the anticompetitive agreement, Mr. Topkins and his co-conspirators adopted specific pricing algorithms with the goal of coordinating changes to their respective prices and wrote computer code that instructed algorithm-based software to set prices in line with the agreement. Similar algorithm-based pricing software is common in online marketplaces, but its use is not indicative of any wrongdoing absent this sort of coordination.

Although there is little information available, the case appears to show that the companies concerned used the “traditional tool-box” of anticompetitive behavior, such as contacts and exchange of information, etc.

According to the Department of Justice, this case arose from an ongoing federal antitrust investigation into price fixing in the online wall décor industry, so we should expect more of the same in the coming months. Watch this space.