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From Antitrust Law Daily, January 31, 2019

From wristbands to Koozies, the promotional products pricing probe expands

By Peter Reap, J.D., LL.M.

G Nova Corporation and its CEO and General Manager, Yeh Fei Chu, aka Jim Chu, have been indicted by a federal grand jury in Houston for participating in a conspiracy to fix prices of Koozies, the Department of Justice announced today.

A federal grand jury in Houston has returned an indictment charging G Nova Corporation and its CEO and General Manager, Yeh Fei Chu, aka Jim Chu, with participation in a conspiracy to suppress and eliminate competition for the sale of foam Koozies—promotional products made of foam or fabric sleeves that thermally insulate beverage containers such as cans or bottles—sold in the United States, the Department of Justice announced today (U.S. v. Chu, Case 4:19-cr-00070).

G Nova and Chu. G Nova and Chu are charged with participating in a conspiracy to fix prices of Koozies beginning in about May 2012 and continuing until at least February 2014. The one-count felony indictment charges that G Nova and Chu carried out the conspiracy by agreeing to fix the prices of Koozies during meetings and other communications. The charged combination and conspiracy was in unreasonable restraint of trade and commerce in violation of Section 1 of the Sherman Act, the Justice Department alleges.

"The results announced today are the latest in a series of charges against eleven defendants filed in the Division’s ongoing investigation into conspiracies that corrupted the online marketplace and deprived consumers of the benefits of competition," said Assistant Attorney General Delrahim of the Antitrust Division. "Whether the conspiracy takes place in smoke-filled rooms that are real or virtual, the Department of Justice and its law enforcement partners are committed to uncovering and prosecuting collusion."

According to the charges, G Nova and Chu initiated communications with two of the largest online retail sellers of promotional products in the United States (named only as Company A and Company B), suggested entering into a price-fixing agreement for foam Koozies, and served as the go between for communications that included those two companies. The defendants facilitated the conspiracy through in-person meetings, telephone calls, and electronic messages.

Company A, headquartered in Houston, and Company B, headquartered in Miami, both purchased unfinished foam Koozie material from G Nova through defendant Chu, the indictment details. Companies A and B competed directly with each other, among others, in the sale of foam Koozies to online retail customers.

For example, in May 2012, Chu, as a representative of G Nova, met with representatives of Company A and proposed that it enter into an agreement with Company B to fix the prices of foam Koozies sold to online retail customers. After that meeting, Chu sent an electronic message to Company A confirming that Company B had agreed to increase the price of foam Koozies to online retail customers in accordance with the proposed agreement. Through phone calls and messages, Companies A and B maintained consistent pricing so as not to undercut one another, according to the charges. The conspiracy continued until Company B was acquired by another company in February 2014, thereafter changing its pricing strategy.

Netbrands. Earlier this month, the Department filed the first criminal antitrust case of 2019, charging Netbrands Media Corp., another promotional products company, with conspiring to fix prices. On January 24, the government filed a one-count charge against Netbrands Media in the federal district court in Houston, alleging that the defendant and co-conspirators agreed to fix the prices of customized promotional products, including wristbands, lanyards, temporary tattoos, and buttons, sold online from as early as May 2014 until at least June 2016 (U.S. v. Netbrands Media Corp., Case 4:19-cr-00065).

This followed plea agreements from the company’s owner/chief executive officer and its owner/chief operator officer. Netbrands Media is an online retail company that sells customized silicone and vinyl wristbands, as well as other promotional products. Earlier this month, Mashnoon Ahmed and Mueen Akhteran both agreed to fines and to serve prison time for their role in the conspiracy. Sentencing is set for March.

In addition to pleading guilty, Netbrands has agreed to pay a $6,531,687 million criminal fine and cooperate with the Antitrust Division’s ongoing investigation. As part of their guilty pleas, Ahmed and Akhter also agreed to cooperate with the ongoing investigation. Both also agreed to fines and to serve prison time for their role in the conspiracy. Sentencing is set for March.

Companies: G Nova Corporation

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