Antitrust for Trade Associations

1. Antitrust for Trade Associations ABA Young Lawyers Division Brown Bag Lunch Dec. 19, 2007 Mike Murray, Jerry Swindell, Ken Ewing

2. 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 Overview

3. 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

4. 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

5. 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

6. 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

7. Lobbying • “Noerr-Pennington” exempts lobbying from antitrust lawbut 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

8. 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

9. 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

10. 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

11. 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?

12. 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 Overview

13. 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)

14. 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?

15. 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

16. 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

17. 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