HOWE, ANDERSON & STEYER, P.C.

The courts and regulatory agencies have often pointed out that antitrust violations are likely occurrences at a meeting of competitors.  They have cautioned trade and professional associations to be aware of this potential and to properly structure meetings in ways that will eliminate potential antitrust problems.  Traditional antitrust violations are the favorite targets of federal investigators and private litigants.  If it is discovered that these kinds of violations occur at an industry meeting the consequences to the sponsoring organization and the attendees can be disastrous.

Thus, it is essential for association executives to learn to recognize those situations that can get meeting attendees into trouble.  Remember, antitrust investigations conducted by the United States Department of Justice, the Federal Trade Commission and private civil antitrust litigation are extensive fact-finding exercises.  It is common for government investigators to review meeting records because they suspect that the meeting was the locus in quo of the antitrust violation.

The following are examples of activities to watch for and avoid at trade association meetings:

Price Fixing

Price fixing occurs when competitors get together and agree to control or stabilize prices.  This type of activity is not as easy to recognize as one might think.  In most cases these agreements are not explicit, but the requisite understanding can be proven by circumstantial evidence.  It may be inferred from comments in written correspondence, from remarks noted in meeting minutes or from comments noted in telephone logs.  An agreement can be made by a wave of the hand or a wink of an eye.  Illegal agreement can involve the components of prices, for example, competitors could agree about the credit terms they will extend to common customers.

The gathering and dissemination of industry statistics is one of the most important functions that a trade or professional organization can perform.  However, the misuse of this information can be construed to be price fixing.  Meetings when statistical information is discussed must be carefully structured to avoid discussion of information concerning current and future pricing.

Customer and Territorial Allocation

Customer and/or territorial allocation occurs when competitors get together and agree not to solicit each others customers or sell or perform services within another's territory.  An organization that limits membership within certain territories by setting up unreasonable barriers to entry can be guilty of promoting a territorial allocation scheme.

Standards Making

It is proper for professional societies and trade associations to engage in standards making to enhance safety and provide functional uniformity or products.  However, this activity is illegal when its purpose is to limit the availability and selection of products, limit competition, restrict entry into an industry, inhibit innovation, or inhibit the ability of members to compete.  Thus, proper procedures have to be established to permit access by interested competitors to participate and comment in the standards making process.

Codes of Ethics

Codes of ethics have been a favorite target of antitrust enforcers for the last several years.  Thus, special precautions need to be taken whenever a meeting is held to discuss developing or enforcing an industry code of ethics.  Any time codes of ethics are administered in a way which could inhibit or restrict competition it could be evidence of an antitrust violation.  This does not mean that all codes of ethics are illegal, it simply means that meetings where such topics are discussed must be carefully structured.

Illegal Boycotts

It is a violation of the antitrust laws for meeting attendees who are competitors to agree to boycott a particular supplier or customer.  A boycott can be accomplished by refusing to do business with specific entities, refusing to admit them to membership or refusing to permit them access to necessary competitive information.

Antitrust Rules Regarding Meeting Attendees

The courts over the years have held that the antitrust laws define the rights of a competitor to participate in trade association and professional society activities.  One of the landmark cases in this area is Associated Press v. United States, which was decided by the United States Supreme Court in 1944.  In that case, the Court struck down the policies of the AP which restricted access to the AP news wire service to members only and gave each member the right to block any non-member competitor from memberships.  The Court ruled that this practice was illegal because membership in the AP gave companies a distinct competitive advantage.  By denying non-members access to the AP wire service the members were guilty of impeding and hampering the growth of the competitor.  This ruling has been followed and amplified since.  The Court's decision has long served as the foundation for the general association antitrust principle that non-members should be allowed access to association activities where the denial of access would have an adverse effect on competition.

On the other hand, this rule does not mean that non-members must be permitted to attend every meeting function, or that they must be given access to the meeting for the same price as a member.  The law requires that access be granted only to those activities which provide a competitive benefit.  Thus non-members should be permitted access to seminars, educational sessions and trade shows.  They do not have to be permitted access to association general meetings, board meetings or social functions.  Non-member attendees may also be charged a higher fee than the membership, provided the fee is reasonable and not so high as to prohibit participation.