Tariff Pricing Under Pressure: Avoiding Antitrust Liability

As businesses consider their responses to Trump’s tariffs, including price and supply chain adjustments, antitrust enforcers are scrutinizing their conduct for antitrust violations and have raised concerns that certain strategies may run afoul of the antitrust laws, including collusive behavior in violation of Section 1 of the Sherman Act, predatory pricing strategies in violation of Section 2 of the Sherman Act and the Clayton Act, and price discrimination in violation of the Robinson-Patman Act. This article addresses these competition concerns and offers a framework to remain compliant while structuring contracts to manage tariff-driven volatility.

Why Antitrust Compliance Matters

Antitrust laws are fundamental to preserving competitive markets across the U.S. economy. Enforced primarily by the antitrust division of the Department of Justice and the Federal Trade Commission, these laws prohibit things like collusive conduct, unreasonable restraints on trade, monopolistic conduct and price discrimination when that conduct distorts market outcomes and harms competition. Violations can result in steep civil and criminal damages and penalties, into the hundreds of millions or even billions of dollars, and expose employees to personal financial liability and prison sentences.

Navigating Competitor and Customer Interactions

When evaluating potential collusive behavior under the Sherman Act, courts consider one of two types of scrutiny. The first, called per se illegality, means that the conduct is so likely to have anticompetitive effects that it is inherently unlawful and there are no procompetitive business justifications for the conduct. Relevant in this situation, per se illegality typically applies to horizontal agreements, arrangements between competitors, includes conduct like price fixing, output restrictions and market and customer division. The second, called the “rule of reason analysis,” is a balancing test where the anticompetitive effects of the conduct are weighed against its procompetitive justifications. The rule of reason is used to evaluate certain horizontal agreements, like joint ventures and other forms of competitor collaborations. Most vertical agreements, agreements between parties at different levels of the supply chain, are also analyzed under the rule of reason.

Pricing or sales strategies, even those that constitute independent conduct, can draw antitrust scrutiny. For example, certain forms of price discrimination are prohibited by the Robinson-Patman Act. The Robinson-Patman Act primarily focuses on preventing sellers from charging different prices to different, but similarly situated, buyers for the same goods when those buyers are in competition with each other and the sales are close in time. Similarly, below cost or predatory pricing can be unlawful. This occurs when a seller, typically one with significant market power, temporarily lowers its prices below cost with the goal of forcing smaller competitors out of the market, thereby allowing the more powerful seller to subsequently raise its prices even higher.

Both DOJ and FTC have warned companies to be careful with their pricing conduct in response to the Trump tariffs. FTC Chairperson Andrew Ferguson has cautioned against competitors discussing how to account for tariffs in their pricing, stating that “these necessary tariffs should not be interpreted as a green light for price fixing or any other unlawful behavior.” Principal Assistant Attorney General Roger Alford noted “a risk of antitrust response, anticompetitive behavior, respond to the high tariffs, and that is dynamic pricing behavior [e.g., price discrimination and predatory pricing] of the remaining competitors.”

While Trump’s tariffs may present an opportunity for companies, especially those with significant market power, to price out competitors, engaging in conduct like price discrimination, predatory pricing and unlawful tying arrangements, should be avoided. Similarly, companies must avoid discussing with their competitors Trump’s tariffs in the context of pricing strategies or run the risk of costly Sherman Act violations.

Strategic Contracting

Companies should closely monitor their interactions with competitors and customers. Strategically drafted, well-structured contracts are among the most effective tools for mitigating tariff-related costs and supply chain interruptions, while avoiding provisions that may inadvertently restrict trade or raise antitrust concerns. To that end, the following considerations are a useful guide for strategic contracting in times of tariff volatility.

Change in Law and Force Majeure

Importers might look to define new or increased tariffs as a “change in law” that triggers contract relief, where, if successful, the affected party could renegotiate price or seek cost-sharing. Exporters by contrast might aim to exclude tariffs from the definition to avoid such obligations. Generally, tariff-related cost increases do not qualify as force majeure, which applies only to events that make performance impossible, not merely more expensive. To close this gap, companies may revise force majeure clauses or add hardship provisions to cover tariffs. Such provisions are not standard in international contracts, and courts rarely assume tariffs excuse performance; their effectiveness depends on contract language.

Exclusivity

Contracts with exclusivity clauses and minimum order requirements can heighten tariff exposure if duties increase on the supplier’s goods. Exclusive deals that block competitors from key inputs may trigger antitrust scrutiny, especially if they limit market access. In assessing potential antitrust concerns, regulators will consider factors such as the length of the exclusivity arrangement and the legitimacy of the supplies at issue.

Cost and Risk Allocation and Price Adjustment

Two other important areas are cost and risk allocation and price adjustment. In international commercial contracts, the International Commercial Terms rules define the allocation of responsibilities between buyers and sellers, including which party bears the costs of customs tariffs. The importer is typically responsible for all duties, taxes and import fees in the destination country under most Incoterms, except for the Delivery Duty Paid Incoterm. Thus, strategic selection of Incoterms, paired with built-in pricing formulas tied to tariff changes, can shift risk and preserve supply relationships.

Takeaways

Overall, strategic contracts can protect margins and stabilize supply chains amid tariff uncertainty. However, no contract completely insulates a company from liability for unlawful conduct, and pricing strategies that undercut competitors or unreasonably discriminate among competing buyers may still violate the antitrust laws if it distorts market competition, regardless of tariff pressures. When preparing contracts that could implicate antitrust laws, businesses should have competent antitrust counsel involved in both negotiating and drafting the contracts.