The U.S. Department of Justice recently announced that Zaappaaz Inc., a Texas-based online retailer of customizable promotional products, and the company’s president, Azim Makanojiya, have agreed to plead guilty to conspiring to fix prices in violation of the Sherman Antitrust Act. Zaappaaz, which does business as WB Promotions Inc., Wrist-Band.com and Customlanyard.net, sells numerous customizable items to customers in the United States and elsewhere, including wristbands, lanyards, drink koozies and fidget spinners.
According to the felony charges filed August 7, 2017, in the United States District Court for the Southern District of Texas, the criminal conspiracy began as early as 2014 and continued until June 2016. The Informations charge that Zaappaaz and Makanojiya, along with other currently unidentified co-conspirators, carried out the conspiracy through meetings, text messages and online communications. In announcing the charges, the government revealed that the conspirators used social media platforms and encrypted messaging applications, such as Facebook, Skype and Whatsapp, to reach and implement their agreement to fix and maintain prices. The DOJ also expressed its commitment to continue prosecuting collusion that affects internet sales.
As a result of the charges, Zaappaaz has agreed to pay a $1.9 million criminal fine. The Sherman Act charge against Makanojiya carries a maximum 10-year prison sentence and a criminal fine of up to $1 million. Both Zaappaaz and Makanojiya have agreed to cooperate with the DOJ’s ongoing investigation.
The case against Zaappaaz highlights the significant antitrust risk that can result from anticompetitive information exchanges or agreements among competitors. But there are myriad competitor collaborations that are procompetitive and important to business growth and success. The Department of Justice and Federal Trade Commission’s Antitrust Guidelines for Collaborations Among Competitors address the agencies’ approach to analyzing such collaborations because there is always risk of anticompetitive activity when competitors come together. While the Guidelines can help businesses assess the likelihood of an antitrust challenge to a collaboration, the analysis is often fact-intensive, and the Guidelines therefore cannot address every antitrust issue that may arise.
