|PFA's Antitrust Guidelines|
Antitrust Guidelines of the Pedorthic Footcare Association
Potentially Severe Penalties. It is essential for trade association members and staff to comply with all aspects of federal and state antitrust laws. Violation of these laws can result in severe penalties and huge litigation expenses for organizations and individuals. For example:
Even if a government or private suit is successfully defended, the cost and disruption of the litigation can be overwhelming. Thus, taking antitrust precautions is not only advisable, but also imperative.
The purpose of the Antitrust Guidelines of the Pedorthic Footcare Association (PFA) is to alert members and staff to the kinds of activities most likely to raise antitrust concerns and to the precautions that must be taken to avoid antitrust problems.
The Antitrust Laws. The antitrust laws are intended to ensure free and open competition. These laws, the Sherman Act, the Clayton Act, and the Federal Trade Commission Act at the federal level and similar laws in many states, prohibit contracts, combinations, conspiracies, and other agreements in restraint of trade, as well as monopolization and attempted monopolization.
An "agreement” among trade association members in antitrust terms is a very broad concept: it may be oral or written, formal or informal, expressed or implied.
The Supreme Court, however, has said that not every agreement in restraint of trade constitutes a violation; only those that "unreasonably” restrain trade are unlawful. Thus, in most situations, the courts will look at all of the factors and circumstances surrounding the conduct in question to determine whether it unreasonably restrains trade and, therefore, violates the antitrust laws.
Joint Conduct That Is Automatically Unlawful. Certain kinds of joint conduct are presumed to be unreasonable and therefore unlawful. These so-called "per se” unlawful practices are joint activities that the courts have long found clearly restrain competition and lack redeeming pro-competitive benefits.
Trade Associations and Antitrust Agreements. Trade associations by their very nature must be particularly sensitive to avoiding antitrust violations. One reason is that in bringing competitors together into an association, one element of a possible antitrust violation may already be present – a combination of competitors. Thus, all that may be needed to prove a violation is the action to restrain trade.
Another special antitrust issue for a trade association is that many of its valuable programs deal with subjects sensitive from an antitrust viewpoint – statistical reporting, product standards, certification, best-practices discussions, and customer relations.
Trade association members and staff should refrain from any discussion that could provide the basis for an inference that the members agreed to take any action that might restrain trade. Remember that an "agreement” among trade association members need not be in writing. A "gentleman's agreement” to "hold the line” on prices may be more than sufficient for a court to permit a jury to infer an unlawful conspiracy to fix prices. The "agreement” can also be inferred by the parallel actions of trade association members that happen to follow the discussion of the topic at an association gathering.
The basic principle to be followed in avoiding antitrust violations in connection with association activity is to see that no illegal agreements, express or implied, are reached or carried out through the association. Members and staff should also avoid engaging in conduct which may give the appearance of an unlawful agreement between themselves at association functions.
These guidelines are not designed to provide definitive answers to specific legal questions. Rather, their purpose is to make readers sensitive to the practices and situations that can give rise to antitrust issues.
To minimize the possibility of antitrust problems at PFA gatherings, the following guidelines should be followed at all meetings of the PFA Board, its committees, conferences, trade shows, training seminars, best-practices discussions, colloquiums, and task forces and working group sessions.
Procedures for Meetings
Topics to Avoid at Meetings
The following topics are some of the main ones that should not be discussed at meetings attended by PFA members or staff, including meetings or other gatherings sponsored by organizations independent of PFA:
"Best Practices” Discussions
The following guidelines should be applied to any "best practices” discussion:
Joint Activities to Influence the Government
Joint efforts by competitors to influence all levels and branches of government – legislatures, government agencies and departments, and courts – are shielded from antitrust liability by the First Amendment of the Constitution, even where the efforts are conducted with the purpose of putting competitors at a disadvantage. The courts have recognized this general exemption from antitrust liability under a doctrine known as Noerr-Pennington.
It is important to understand, however, that Noerr-Pennington immunity is not absolute. There is no immunity from joint lobbying activity that is just a "sham” or cover-up to harass competitors or to reach an unlawful agreement through the use of the governmental process. Such joint activities by PFA and its members, therefore, should be undertaken with caution and should be limited to good-faith efforts to influence legislative or regulatory action. Counsel should be consulted if there are any questions involving lobbying activities that might affect competitors.
Surveys and Other Exchanges of Information
PFA and its members should proceed cautiously in conducting or participating in surveys of groups of competing companies. Collection and dissemination of prices, costs, and other competitively significant information among competing companies can raise serious antitrust concerns.
Such exchanges of information may be found to reduce competition unlawfully if they facilitate collusion or coordinated interaction among the competing companies.
Certain surveys and other exchanges of information through trade associations, however, may have pro-competitive effects by reducing information or transaction costs and thereby increasing the efficiency of a market's operations and the competitiveness of the surveyed companies. Even permissible exchanges of data, however, must be carefully implemented to ensure that they facilitate, rather than impair, the competitive process.
Survey Guidelines. A proposal to survey and report data on competing companies' prices, costs, product or service volumes, or other competitively-sensitive matters should adhere to the following guidelines:
A. The exchange of information must be one whose goal is to reduce information or transaction costs and increase the efficiency of a market's operations and the competitiveness of the surveyed companies. In addition, the exchange needs to be limited to what is reasonably necessary to achieving this legitimate efficiency goal; and
B. The following procedural safeguards should be adopted to prevent the exchange of data from reducing competition:
Restricting Membership or Access to Association Benefits
Restrictions on trade association membership or on access to association benefits may raise "group boycott” or "concerted refusal to deal” concerns under the antitrust laws.
The courts have recognized that every trade association must be allowed to have some reasonable membership or access criteria, as well as disciplinary rules, to function efficiently and achieve its legitimate goals. As a result, restrictions on membership and access are today generally analyzed under the rule of reason rather than the per se rule.
Nevertheless, exclusion or denial of access may be found illegal where the trade association possesses market power or provides the exclusive access to an element essential to effective competition.
Guidelines. To minimize exposure under antitrust laws, PFA members and staff should consider the following factors in setting restrictions on membership or on access to association benefits:
Because evaluation of these criteria can often be complex, PFA members and staff involved in setting or reviewing membership and access requirements should consult with legal counsel when developing a particular set of membership or access rules, and when application of those rules in a particular situation is unclear or potentially problematic.
Standard-Setting, Including Model Contracts and Forms
Standard-setting is a legitimate, pro-competitive activity for a trade association to the extent that the activity lowers transaction costs and facilitates market transactions. But standard-setting can prompt antitrust concern where competitors use the activity to reduce their competition with one another or to disadvantage rivals.
Guidelines. Before engaging in standard-setting, including issuing "recommended practices” and drafting model contracts and forms, PFA members and staff should ask the following questions:
1. Will significant efficiencies, such as a reduction in market transaction costs, result from the standard-setting?
If so, the association is in clear "rule of reason” territory, and all relevant factors will be considered to determine if competition and customers are, on balance, likely to be harmed or helped by the standard-setting activity.
If not, the activity should be abandoned altogether. Any cooperation among competitors regarding market variables that does not hold the potential for meaningful efficiencies and cost reductions runs the risk of being characterized as inherently suspect, and ultimately per se illegal.
2. Does the standard-setting activity involve "core” economic terms in market transactions, such as price or other terms that are closely related to price?
If so, the association could be running into antitrust trouble. As a general rule, so-called "standards” should not be set for price or other highly sensitive contract terms. Efficiency gains from standard-setting generally come from reduced transaction costs or facilitation of a common language or interface between suppliers and customers, not joint setting of competitively sensitive market terms.
If not, the association is on much safer ground to proceed with its standard-setting. For example, mere boilerplate contract terms that involve significant time and expense to negotiate are good candidates for inclusion in a standard form contract, while terms relating to core financial negotiations between the contracting parties should be left out.
3. Are the standards voluntary, leaving individual parties free to disregard the standard and strike their own deal if they so choose?
If so, the federal enforcers and courts are much more likely to approve the standards and related activity. This is because the standards will rise or fall on their own competitive merits in individual transactions, without any exercise of market power or coercion by the trade association.
If not, the standard-setting activity can run a significant anti-trust risk of being construed as a concerted refusal to deal with customers or suppliers except on standardized terms.
4. What is the collective market share of the companies setting the standards?
All other things being equal, joint activity such as standard-setting will be scrutinized more closely the greater the collective market power of the companies involved. However, trade associations that represent entire industries often engage in efficient and lawful standard-setting. It is essential that the standard-setting activity be tailored to facilitate, rather than impair, the efficient workings of the market. In addition, the greater the combined market share involved, the more important it is that everyone involved understand that the standards are voluntary.
5. Are the procedures that give all interested parties a chance to have meaningful input into the development of the standards, either through direct involvement or through a notice and comment procedure?
Industry standards will be viewed much more favorably by the government and the courts where customers of the companies formulating the standards have been participants in the standard-setting process. This is because they have had the opportunity to protect their own interests in the process, and presumably would not have approved any standards that would harm them.
6. Are the activities of the standard-setting body or committee no broader than necessary to formulate and promulgate the efficiency-enhancing standards?
All activities of the standard-setting body should be carefully limited to what is reasonably necessary to achieving the efficiency goals of the standard-setting. If the committee is developing technical standards, for example, it should have no need to discuss prices. Discussion of price and other competitively sensitive terms should be strictly avoided at meetings of the standard-setting body or committee, since it can create the risk of an inference of agreement even apart from the legitimate activities of the group. Moreover, all such meetings should have an advance agenda and minutes should be kept to ensure that discussion does not spill over into inappropriate areas.
Endorsement of Products or Services
Under certain circumstances, a trade association's certification or endorsement of a product or service may raise antitrust questions. If the endorsement provides the seller of the endorsed product or service with a competitive advantage, a disappointed competitor may claim that the association's failure to endorse its offering amounts to a group boycott – often a per se violation of the antitrust laws.
Guidelines. Therefore, in endorsing or certifying a product or service, PFA should adhere to the following principles:
Memoranda and Other Documents
In any antitrust investigation or lawsuit involving a trade association, virtually any association document (except privileged attorney-client communications) may be compelled to be turned over to a government agency or private litigant. Conduct that is perfectly legal can become suspect because of a poor choice of works or a misleading manner of expression.
Guidelines. All PFA correspondence, minutes, reports, memoranda, notes, or other documents, therefore, should be carefully written to avoid misstatements or hyperbole that may be misinterpreted or taken out of context. Some specific "don'ts” are:
While a failure to comply with all of these provisions does not mean the antitrust laws have necessarily been violated, following them will give PFA and its members a high degree of confidence that the activity is safe from antitrust attack. Any proposed deviation from these guidelines should be thoroughly discussed in advance with legal counsel.