What Board Members Need to Know about Antitrust Compliance
Antitrust laws are complicated, and the penalties can be severe. Association board members should ensure that their association has a properly drafted and implemented antitrust policy that addresses common mistakes and outlines best practices.
According to Robert J. Vechiola, an attorney with Foley & Lardner LLP, areas to be mindful of include codes of conduct, statistical reporting, standards/certification programs and business meetings. The following is a list of suggestions and best practices provided by Vechiola.
It is clear that antitrust compliance requires associations to do more than just avoid facilitating conversations about products and services pricing. Creating detailed, specific and comprehensive policies by focusing on best practices is a critical step for associations hoping to protect both the organization and its members.
- Codes of ethics – Recent Federal Trade Commission (FTC) orders make it clear that associations’ codes of ethics should be carefully drafted so that associations do not directly or indirectly restrict members’ rights or abilities to compete on advertising, pricing, discounts, etc. For example, in April, the FTC entered into two separate consent orders settling charges that associations’ codes of conduct restrained competition among their members. In one case, an association’s code banned comparative ads, prevented members from offering discounted rates to other members' clients and prevented members from recruiting other members' employees. In the other case, the association’s code of ethics prevented members from soliciting clients from another member.
- Statistical reporting – There are several proper reasons for associations to gather business-related statistical information and disseminate the information to industry members. However, statistical reporting by associations can potentially be used to facilitate and/or “police” unlawful agreements among competitors. For example, the exchange of detailed data regarding sales, production and inventories, as well as estimates of future production and market demand, could be used by association members to curtail production and/or set prices. In fact, there are instances in which government prosecutors have used such information exchanges to support price-fixing charges. Therefore, procedural safeguards should be put into place to help avoid antitrust difficulties. Best practices include ensuring that the data is collected by an independent third party, is reflective of past transactions, is not unnecessarily detailed and cannot be attributed to any particular company.
- Standards/certification programs – Associations often offer members various certification and standards programs. It is important to know that these programs could potentially be used as devices to fix prices or otherwise inhibit competition. Therefore, board members should be certain that procedures are in place to ensure that such programs are non-discriminatory and are not used to boycott or exclude competitors, or to control prices or production.
- Business meetings – It is important to properly manage association meetings, such as board meetings and membership meetings, because they are often meetings of competitors. In order to avoid inadvertent antitrust violations or even the appearance of impropriety, certain rules should be implemented for association meetings, including:
- Experienced counsel should be present at meetings where discussions could potentially lead into areas of concern;
- Minutes should be kept and should be reviewed by both expert counsel and the meeting chairman so that they accurately reflect what occurred;
- Periodic antitrust training should be given to directors, members and staff;
- Outside presenters should be notified in advance regarding the association’s antitrust-compliance policies; and
- Presentation materials should be reviewed by counsel prior to the meeting.
JUNE 2014 EDITION
| Board Forward is published 10 times a year by SmithBucklin, the association management and services company more organizations turn to than any other. SmithBucklin has served volunteer board members for almost 70 years.