Online Retailer and Executive Plead Guilty to Price-Fixing Conspiracy Conducted Via Social Media and Text Messaging
An online retailer and its president recently pled guilty to a price-fixing conspiracy for customized promotional products that was implemented through text messaging and social media platforms. The successful prosecutions are the latest in the Department of Justice’s ongoing antitrust investigation into the online promotional products industry.
According to a criminal Information filed in a Texas federal court against Zaappaaz Inc. (d/b/a WB Promotions Inc., Wrist-Band.com, and Customlanyard.net), the e-commerce company conspired with other online retailers to fix prices for customized promotional products, including wristbands and lanyards, in violation of federal antitrust law. Zaappaaz and its co-conspirators, which were not named in the Information, allegedly used text messages and social media outlets, such as Skype and Whatsapp, to reach agreement and implement their illegal price-fixing scheme between 2014 and 2016. Nearly identical felony charges were also filed against Zaappaaz’s president and director, Azim Makanojiya, for his role in the criminal activity.
In addition to their guilty pleas, Zaappaaz has agreed to pay a $1.9 million criminal fine. While the specifics of Makanojiya’s sentencing have yet to be released, the company’s president could face a maximum sentence of 10 years in prison and a fine of $1 million for violating the Sherman Act. The plea agreements are subject to court approval.
The criminal charges in this matter arise from the DOJ’s ongoing investigation into price fixing in the promotional products industry, and signal the DOJ’s commitment to prosecuting anticompetitive activity among online retailers in general. As the DOJ explained in its press release, the “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.”
Arent Fox’s Antitrust and Advertising & Promotions practices will continue to monitor developments in this area. If you have any questions, please contact Andrew Murad, Brian Schneider, or the Arent Fox professional who usually handles your matters.