Zaappaaz and Wrist-Band.com: The Price Agreement Behind the Encrypted Messages

In the Zaappaaz Wrist Band price fixing case, the company’s criminal plea agreement described agreements with rivals to raise prices and eliminate discounts on customized promotional products. The messages concerned decisions a sales or pricing employee would recognize immediately: when to increase prices, whether a discount would survive, and how to keep competitors from starting a price war. The bill landed on charities, churches, campaigns and small businesses.

Zaappaaz operated as WB Promotions Inc., Wrist-Band.com and Customlanyard.net. Its business was selling products such as wristbands and lanyards customized to the customer’s specifications. The company’s criminal plea put the price agreement inside that ordinary business, with officers and directors talking to competing sellers about what their customers would pay.

What Is Price Fixing?

Price fixing is rivals agreeing on prices or discounts. Zaappaaz’s criminal plea agreement describes both: an agreement to increase prices and an agreement to remove a discount. The second can matter just as much to a customer who was counting on a lower price.

The factual account in the plea says that, in February 2015, Zaappaaz agreed with a competitor to implement an across-the-board price increase. It then explains what the competitors wanted from each other:

The transparency ran between the sellers. Its purpose, as the plea describes it, was to keep them from competing down the price. A price war was something the competitors wanted to avoid. The lower prices were precisely what a buyer stood to gain.

The same factual account describes an October 2015 text exchange in which Zaappaaz agreed with competitors to eliminate a price discount. Further communications discussed matching or raising prices and removing discounts to make the participating sellers more profitable.

What Zaappaaz Sold Online

Zaappaaz sold customized promotional products from its principal place of business in Richmond, Texas. Its criminal plea describes sales to customers in the United States and elsewhere, with wristbands and lanyards among the products they could customize.

The plea identifies at least $17,095,514 in Zaappaaz’s online sales affecting U.S. customers during the covered period. These were sales of promotional items to organizations and businesses, giving the price agreement a reach well beyond the competitors’ conversations.

The agreement’s description of online sales also includes sales by telephone and other means. That matters to an insider whose view of the business comes from a customer call or a sales order. The price decision could reach the customer through more than a website.

For someone who handled customer pricing, the commercial connection is concrete: which product was being sold, what the customer was quoted, and whether a discount had been removed after a conversation with a rival. We use that connection to understand how an agreement between sellers reached the buyer’s bill.

How the Encrypted Messages Fit the Price Agreement

The Justice Department’s August 7, 2017 announcement said its criminal investigation found that the conspirators used social media and encrypted messaging applications to reach and carry out their agreements. It named Facebook, Skype and Whatsapp among the platforms used, alongside meetings and in-person communications.

The company and its president agreed to plead guilty to a Sherman Act price-fixing charge. The corporate plea gives the fuller account. Its factual basis covers at least as early as October 2014 through at least June 2016 and describes officers and directors communicating with rival sellers by phone, email, text message and social media, as well as meeting in person.

The plea also says that one or more of the conspirators made online sales at the agreed and fixed prices to customers in the Southern District of Texas. That carries the story past the agreement itself. The communications concerned what rivals would charge, and the factual account follows those agreed prices into actual sales.

Other Online Sellers, the Same Agreement Problem

Custom Wristbands appeared in the same federal investigation of online promotional products. In its August 22, 2017 announcement of the criminal charges, the Justice Department said the company and its top executive agreed to plead guilty. The charges described meetings, text messages and other online messaging used to reach and implement a price agreement covering products including wristbands.

The neighboring online poster case shows another way to carry out a competitor agreement. In that criminal plea, an e-commerce executive admitted participating in a conspiracy in which rival sellers agreed on poster prices and implemented their agreement through pricing algorithms on Amazon Marketplace.

The connection is the pricing decision made together. In the wristband case, the plea describes texts about raising prices and removing a discount. In the poster case, coordinated code implemented the agreement. An insider may recognize the instruction to change prices before anyone outside the business can explain what moved them.

What Can Help the Antitrust Division Understand My Report?

We connect the people who agreed, the price decision they made and the prices customers were then offered. For a wristband or lanyard business, we examine how competitor communications fit with customer quotes, discount decisions and sales records. The factual account in Zaappaaz’s plea supplies concrete examples of the decisions that connection can reveal.

A message about an across-the-board increase gives the surrounding price records a specific question to answer. An exchange about eliminating a discount gives a customer-facing employee something more precise to recognize than a general complaint that prices went up. Our work with an insider is to put those parts together and establish what each actually shows.

In this case, the value lies in combining an observed price change with an insider’s account of the decision behind it. In Zaappaaz’s plea, that account reaches the competitors’ stated desire to avoid a price war. Knowing how a discount disappeared can explain something a price comparison alone leaves unanswered.

Can an Antitrust Whistleblower Get a Reward?

An antitrust whistleblower can qualify for a reward. We assess that opportunity with you. The Justice Department and Postal Service agreement provides for rewards for qualifying antitrust reports. Your knowledge of the pricing agreement, the business and its transactions is where that assessment starts.

Where collusion also produces false claims for government money, we assess a possible case under the False Claims Act. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We examine any government purchases and payment records with you before identifying the route for your case. Questions about your own role in the pricing decisions belong in that conversation too.

You Know Why the Discount Disappeared

Our whistleblower experts can connect the wristband sellers’ encrypted discussions with the price instruction sent into the business.