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From Antitrust Law Daily, August 7, 2017

U.S. files first charges in probe of online sellers of customized promotional products

By Jeffrey May, J.D.

Zaappaaz Inc., a company that markets customized promotional products such as wristbands and lanyards, has agreed to plead guilty to Department of Justice charges that it conspired to fix prices. Today, the Justice Department announced that Zaappaaz, which does business as WB Promotions Inc.,, and, and the company’s president—Azim Makanojiya—agreed to plead guilty to a one-count criminal violation of the Sherman Act. Separate felony charges were filed in the federal district court in Houston (U.S. v. Zaappaaz Inc., Case No. 4:17-cr-00477; U.S. v. Makanojiya, Case No. 4:17-cr-00478).

Zaappaaz is a Texas-based online retailer of customized promotional products. According to the charge against it, the company conspired with other sellers of such products to fix prices. The co-conspirators allegedly held meetings and communicated via text and online messaging platforms. The Justice Department contends that the sellers used social media platforms and encrypted messaging applications, such as Facebook, Skype and Whatsapp, to reach and implement their illegal agreements. The challenged conduct took place between October 2014 and June 2016.

The company agreed to pay a $1.9 million criminal fine. The Justice Department did not provide information on Makanojiya’s plea agreement. He faces a possible fine and jail time. The plea agreements are subject to court approval.

Collusion in Internet sales. "As today’s charges show, criminals cannot evade detection by conspiring online and using encrypted messaging," said Andrew Finch, Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division, in announcing the charges. "In addition, today’s 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."

The charges against Zaappaaz and Makanojiya are not the Antitrust Division’s first against Internet sellers. In 2015, the Department of Justice filed charges as a result of an investigation into price fixing by an e-commerce seller of wall posters. A former executive of an unnamed e-commerce seller of posters, prints, and framed art—reportedly Art.Com Inc.—was the first person charged for his role in that conspiracy. U.K. online retailer Trod Ltd. and a company executive were later charged in the probe. The conspirators were alleged to have used algorithm-based pricing software to fix the prices of online wall decor.

Companies: Inc.; Trod, Ltd.; Zaappaaz Inc.

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