Antitrust for Trade Associations

ABA Young Lawyers Division Brown Bag Lunch Dec. 19, 2007

Mike Murray, Jerry Swindell, Ken Ewing

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Overview



The Law



Trade Associations



Antitrust 101



Lobbying



Government Sales



Data Collection & Exchange



Standard Setting



Association Rules



Concrete Advice



Compliance Culture



Key Questions



General Principles



“You Can Help”

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Meetings Tool Kit 2

Trade Associations

 Trade associations do much good   Help to develop, communicate, lobby for public policy Help to improve economic efficiency and transparency  But   Everything a trade association does is by agreement of competitors – “conspiracy” Events & conference calls are venues at which competitors could “conspire”  Most price-fixing and other per se illegal conspiracies happen in trade associations

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Antitrust 101 – Sherman Act

  Agreeing with a competitor can land you in jail and cost your company millions to defend – per se illegal     What price to sell or buy at How much to sell or buy Whom to sell to or buy from Whether or not to deal with someone  Who will win a bid “A wink and a nod” are enough   Oral or written, formal or informal Inferred from parallel conduct plus factors that make collusion more likely – e.g. trade association activities

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Antitrust 101 – Litigation Reality

 Everything you say and write can and will be used against you…  Minutes & handouts   Emails & handwritten notes Day timer & palm computer  Who might sue?

     U.S. Dept. of Justice, Federal Trade Commission, State Attorneys General Aggrieved customers or suppliers Competitors looking for a leg up

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Topics to Avoid

 Prices, payment terms, costs, wages or salaries, profit levels  Joint negotiation with customers or vendors  Business strategy, bidding tactics  “Announcements” of business strategies   Market-place reactions to public policy  Comments on how to react in the market-place “Areas of responsibility” like geographic regions, types of customers, or types of products

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Lobbying

 “Noerr-Pennington” exempts lobbying from antitrust law but LIMITED exemption:  Only actions reasonably necessary for the lobbying   Not direct action / effects in the marketplace Not “sham” petitioning – using the process rather than the result, lying to court or administrative agency  Even exempt lobbying can be used to show broader conspiracy

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When You Sell To Government

 Some courts hold Noerr-Pennington doesn’t apply  Be even MORE CAREFUL when lobbying  Focus on broad policy arguments  Lobby only high-level officials    Stay away from the normal procurement organization Refuse requests for a “single point of contact” for negotiations Remind everyone that companies act independently in the market  Other than lobbying, remember…   Lying to the federal government is also a crime, and...

…often procurement rules and contracts require statements that no collusive bidding

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Data Collection and Exchange

 Can be very pro-competitive, but requires careful antitrust planning      Set up to prevent even appearance of using the data or the collection process to fix prices etc.

Generally only “historical” prices, costs, capacity, output levels – how old is enough?

Aggregate sufficiently before publication – how many survey respondents is enough?

Trade association or third-party contractor to collect and aggregate Firewalls and other measures to ensure raw data isn’t shared among competitors  Consider providing to customers or the public  Get antitrust advice in advance

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Standard Setting

 Can also be very pro-competitive but also requires careful antitrust planning      Market power?

Performance-based v. design specification “Due process” in creating and enforcing standards  May need to include non-member competitors  Consider including customers or other stakeholders Don’t set standards that hinder new products or new entrants  Police subcommittees to avoid “capture” by incumbents Document benefits and rationale  Consider a “business review request” to DOJ or FTC

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Association Rules

   Who can join?

  Don’t exclude simply for competing with a member Don’t exclude simply for affiliating with a competing association What standards of conduct for members?

 “Ethical” or “professional” rules can be useful but also very dangerous – get antitrust advice before even beginning to consider How expel members?

 Due process – critical but not alone enough    Documented violation of objective rules Can’t use expulsion to enforce an anticompetitive rule or agreement Hard to expel if membership is critical to being able to compete – market power? critical assets or services?

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Overview



The Law



Trade Associations



Antitrust 101



Lobbying



Government Sales



Data Collection & Exchange



Standard Setting



Association Rules



Concrete Advice



Compliance Culture



Key Questions



General Principles



“You Can Help”



Meetings Tool Kit 12

Cultivate Compliance Culture

 Culture of compliance among association staff and members  Train association staff to be trouble-shooters   There are no stupid questions, so ASK FIRST.

Certain topics should not be discussed – period.

 Know your objectives (agendas) and your outcomes (minutes)  Bring antitrust counsel in early and often on special projects (e.g., surveys, codes of conduct, consortia)

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Key Questions for Inside Counsel

 When (at what meetings) should antitrust counsel be present?

 How can you spread the compliance message and basic policy to staff and members?

  Antitrust training beyond the written policy  Who needs it?

 How often?

 How do you do it?

Antitrust audits – why, when, and how?

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General Principles

 Some clear no no’s   Don’t talk about current or future prices, costs, output levels, business plans, bids Don’t use the association to negotiate commercial terms – even if the (government) customer asks for it  Get antitrust advice on tougher issues   Lobbying campaigns touching on sensitive topics Data collection and exchange   Standard-setting Joint activities in the market-place

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For Members: “You Can Help”

     Read and follow the Association Antitrust Guidelines Take charge of your meetings and help Association staff keep antitrust order Make sure agendas don’t create antitrust problems  Questions or doubts? Ask a staffer or lawyer in advance Limit all discussions to the agenda Steer discussions away from competitively sensitive topics

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A Tool Kit for Meetings

    If a speaker strays into an inappropriate topic…  “We can’t talk about that. Let’s return to…” If the speaker resists or continues…  “Joe, let’s cover that topic another time, after we have some guidance from the lawyers.”  If a staffer is present, add “Jane can you look into that?” If the speaker still insists…  “Joe, I’m sorry, but I will have to get legal guidance before we can continue.” You may need to shut down the meeting

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