ANTITRUST LAWS TRADE ASSOCIATIONS

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					                                                   five principal antitrust problem areas. These       Some topics which should be scrupulously
                                                   are: price-fixing, division of customers,           avoided in all meetings:
                                                   membership standardization and certification
                                                   and industry self-regulation.                       1. Do not discuss pricing
                                                                                                       2. Do not discuss profit levels
                                                   PRICE-FIXING. Price (defined broadly to             3. Do not discuss an increase or decrease in
                                                   include all elements of price) is the most             price
                                                   sensitive area under the antitrust laws, and        4. Do not discuss standardizing or stabilizing
                                                   therefore government has evinced its                   prices.
                                                   greatest concern about violations and               5. Do not discuss pricing procedures.
                                                   potential violations of the price-fixing            6. Do not discuss cash discounts .
                                                   prohibitions of the Sherman Act. A price-           7. Do not discuss credit terms.
                                                   fixing violation can be inferred from the fact of   8. Do not discuss controlling sales.
                www.ssct.org                       similar price conduct by members, even              9. Do not discuss allocating customers or
                                                   though there is no written or oral agreement           markets
                                                   shown. If prices are fixed it is no defense that    10. Do not complain to a competitor that his
ANTITRUST LAWS &                                   the prices set are reasonable or that the ends      or her prices constitute unfair practices
                                                   sought are worthy                                   11. Do not discuss refusing to deal with
TRADE ASSOCIATIONS                                                                                         a corporation because of its pricing or
Guide for Members of the                           DIVISION OF CUSTOMERS OR MARKETS.                       distribution practices.
                                                   An agreement among members of an                    12. Do not attend informal sessions in which
Southern Society of Coatings                       association to divide customers or markets              any of the above subjects are discussed
Technology – SSCT                                  served is, in and of itself, a criminal act The
                                                   antitrust laws prohibit any understandings or       With regard to antitrust risks present in
Trade associations are subject to strict           agreements between competitors or                   membership and industry self-regulation,
scrutiny under the many federal and state          members of an association that involves the         membership policies should avoid:
antitrust laws. One of the most powerful of        division or allocation of customers. Even
these is the Sherman Act. Section 1 of that        informal agreements whereby one member              1. Restrictions on dealing with non-members
Act prohibits "contracts combinations or           agrees to stay out of another member’s              2. Exclusions from membership, especially if
conspiracies… in restraint of trade." But by its   territory will constitute a violation of the           there is a business advantage in being a
very nature a trade association is a               antitrust laws                                         member.
combination, such that there is no problem in                                                          3. Limitations on access to association
proving the fact. This should serve as a           MEMBERSHIP. A basic assumption about                   information, unless the limitation is based
signal to trade associations that they must        every trade association is that its members            upon protection of trade secrets
proceed with extreme caution lest they be          derive an economic benefit from
cited for antitrust infringements carrying stiff   membership. Denial of membership to an              Industry self-regulation and codes of ethics
fines and jail sentences.                          applicant may therefore constitute a restraint      should avoid:
                                                   of trade in that such denial of an economic
Responsibility for enforcement of the antitrust    benefit limits the rights of an applicant to        1. Requiring refusal to deal with any member
laws lies with the Department of Justice, the      compete. Thus membership criteria must be              violating the association's code of ethics
Federal Trade Commission and the over 40           carefully drafted to avoid antitrust problems.      2. Arbitrary enforcement of the code
states which have enacted antitrust                                                                    3. Unreasonably severe penalties for violation
legislation.                                       STANDARDIZATION AND                                    of the code
                                                   CERTIFICATION.                                      4. Regulations or policies which have
The federal government can be expected to          An association which develops voluntary                price-fixing implications such as preventing
bring civil and criminal felony cases each         industry standards may face antitrust                  the advertising of prices
year against trade associations, including         problems if the standard favors some and
members and staff. Penalties are severe.           discriminates against others. Similarly             Without being alarmist trade associations
Each individual can be fined up to $1,000,000      association certification activities which          should bear in mind that they are targets
and each member corporation can be fined           further interests to certain groups, to the         for government antitrust enforcers and
up to $100,000,000. Individuals are subject to     exclusion of others may result in antitrust         private treble damage suits By conducting
imprisonment of up to ten years. In addition,      problems.                                           their business openly and avoiding even the
the government can impose civil sanctions                                                              appearance that they are engaging in activity
such as cease and desist orders which result       INDUSTRY SELF-REGULATION.                           which might be seen to have an effect on
in government restraints on the activities of      Associations commonly establish codes of            prices or competition, trade associations can
association members. This in turn inhibits         ethics for their members, with procedures           protect themselves from charges of antitrust
association functions and may culminate in         enforcing them. It is laudable for an               violations.
the dissolution of an association altogether.      association to promote high ethical standards
                                                   but antitrust problems may arise of an
In addition to lawsuits prosecuted by the          association’s attempt to enforce its code of
government civil treble damage suits can be        ethics causes economic injury .
brought by competitors and consumers. By
way of illustration the Sherman Act prohibits
any price agreement regardless of purpose.         RULES FOR MEMBERS
Thus, if members of a trade association
have an agreement as to price, they cannot         The best way to avoid possible infringement
justify the agreement by showing benefits to       of the antitrust laws is to institute a program
customers. Members will be found liable for        of compliance. At association gatherings, the
treble damages for injury resulting from the       association should resolve to avoid
excess price charged.                              discussion of certain sensitive subjects.
                                                   Informal gatherings which follow association
From a practical standpoint trade                  meetings are particularly looked upon with
associations should focus their concern on         great suspicion by the government.