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C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
General Antitrust Principles
• Competition Benefits Customers • Greater Scrutiny of Dealings With
Competitors Than With Suppliers or Customers
• “Market Power” = Monopoly Power = Additional Burdens
• The Power to Set Prices Without Effective Competitive Response.
• Actions Supported by Legitimate, Pro-competitive, Non-coercive Business Purposes Generally Fine
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Basic Rules for Antitrust Compliance
• Competitors may not agree with competitors – On prices, or on terms of sale. – To allocate customers, territories, or markets. – Not to compete, such as bid-rigging – On prices for goods or services they are purchasing – To boycott suppliers/customers for anti-competitive
ends – On levels of production or service.
• Companies may not use dominant market positions to monopolize a market, control prices, or exclude competitors. Generally, Market Power = Monopoly.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Sherman Act - Section 1
• Forbids Contracts, Combinations or Conspiracies in Restraint of Trade.
• Violation Is a Felony. • Unilateral Action = Legal • Same Concerted Action = Illegal
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Per Se Antitrust Violations
• Price Agreements With Competitors • Market or Customer Allocation Agreements • Agreements to Limit Service or Boycott
Customers or Suppliers • Agreements on Terms and Conditions of Sale or
Purchase • Resale Price Maintenance Now Rule of Reason
under Federal law, still per se illegal in some states
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Law Regarding Conspiracies • Agreement Between Two or More Persons to
Accomplish an Unlawful Objective or a Lawful Objective By Unlawful Means
• Agreement May Be Inferred From Conduct • Things You Can Do Alone You Cannot Do
With Others • Liable for Acts of Co-conspirators • Withdrawal Requires Affirmative Act –
Contact Authorities – Not Just Stop
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
“Rule Of Reason” Antitrust Issues
• Balance Restrictions vs. Benefits • Bona Fide Joint Ventures • Sharing Information With Competitors • Agreements With Customers or Distributors
to Refuse to Deal With Others • Tying – Conditioning Sale of One Product
(with market power) or Service on Buyer’s Purchase of Another
• Exclusive Dealing; Resale Price Maintenance
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Sherman Act - Section 2
Forbids Monopolizing or Conspiring or Attempting to Monopolize.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Section 2 Violations
• Use of Unfair Means to Acquire or Maintain Monopoly Power
• Use of Essential Facilities to Monopolize • Monopoly Leveraging – Use of Market Power
in One Market to Create a Competitive Advantage in Another Market
• Predatory Pricing – Pricing Below Cost to Drive Out Competitors
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Clayton Act and FTC Act
• Section 4 – Private Action; Treble Damages, Attorneys Fees and Costs
• Section 5 – Guilty in DOJ Suit Is Prima Facie Evidence of Liability in Civil Suit
• Section 7 – Prohibits Mergers and Acquisitions Likely to Lessen Competition. (HSR Pre-Merger Notification)
• FTC Act Section 5 – “Unfair Methods of Competition”
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Market Definition
• Product Market – What Other Products Will Consumers Substitute If Defendant’s Product Becomes Too Expensive?
• Geographic Market – Where Can Consumers Go to Buy Product or Service From Someone Other Than Defendant If Defendant’s Price Is Too High?
• “Functional Interchangeability”
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Robinson-Patman Act
• Price Discrimination Between Competing Buyers • Purchase of Commodities, Not Services • Goods of “Like Grade and Quality” • Plaintiff Must Show Actual Harm • Sale in Interstate Commerce • “Primary Line” injures competitors of the
Manufacturer • “Secondary Line” injures a disfavored Buyer not
receiving best price given to favored Buyer • Cost Defense and Meeting Competition Defense
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
International Transactions • U.S. Antitrust Laws Reach Activities
Abroad Which Have a “Substantial and Reasonably Foreseeable Impact” in U.S.
• Non-residents and Non-citizens of U.S. Can Be Subject to U.S. Antitrust Liabilities
• A Proposed Arrangement May Also Be Impacted by the Competition Laws of the EU or Another Country
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Types of Associations
• R&D; Joint Study and Action on Industry Issues
• Joint Advocacy • Benchmarking and Cooperation • Self-Regulation and Codes of Conduct • Adopt and Enforce Technical Standards • Social Camaraderie
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Association Problem Areas
• Facilitates Competitor Interaction • Raises Issues of Concerted Activity • Standards Can Be Anti-Competitive • Codes of Conduct and Coercion • Membership Must Be Fairly Open • Mere Membership Is Not An Agreement, But
Members and Officers Are Exposed
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Association Problem Areas
• Informal Discussions Between Competitors Who Gather Together at Meetings
• Anticompetitive Membership Restrictions • Anticompetitive Programs Involving
Certification of Products (Generally For Safety or Quality) or Setting of Standards
• Filing of Sham Lawsuits
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Information Exchanges
• Benchmarking, Safety, Quality • Concerted Legislative Lobbying • Price Exchange is Most Sensitive • Use Third Party Collector and Share
Aggregate Data Not Most Current • Involve Counsel at Each Step, and
Written Support for the Process
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Ductile Iron Fittings Cases
• Consent Decrees -- Information must be at least 6 months old.
• Statistics must cover 6 months and only twice a year. • Must be anonymous aggregation of data from no
fewer than 5, no individual’s data can be more than 25% of total, and no three can be more than 60%.
• Communications (1) at official meetings, (2) written agenda, and (3) in presence of antitrust counsel.
• All statistics must be made public at the same time they are communicated to any contributor.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Association Membership
• Must have “reasonable rules in order to function effectively.” Northwest Wholesale Stationers (1985).
• The more important the membership, the more sensitive any exclusion (boycott) of a logical member.
• Excluded Member Must Show Damages.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Membership Criteria
• Possible Group Boycott • Participant in a Particular Industry • At a Particular Level or Levels • Or in Particular Geographic Areas • Fees Can Vary if Criteria are Logical • Have Objective Rules, Uniformly Applied and
Procedurally Fair. • Different Membership Classes and Rights Can
Be Solution.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Criteria Rules of Reason
• How important is membership? • How objective are criteria? • How consistently are criteria applied? • How fairly are admission and expulsion
and other decisions made? • By members or by disinterested third
parties?
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Member Services
• How important are they to compete? • What alternatives are available? • “Mere” cost savings? • Or necessary to stay in business? • Can the service be provided without full
membership? • Fair charges OK for non-members.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Trade Show Access
• Rule of Reason. Objective Fairness. • Importance of Show. • Reasonable Participation Rules. • Not a Private Club. • Participation, Location, Sponsorships,
Prominence all raise issues.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Standards
• Technical, Quality, Safety, Compatibility; Certifications.
• Sherman Act Section 1; FTC Act Section 5; State Laws, Tortious Interference.
• Pro-Competitive – Allied Tube (1988). • Usually Rule of Reason. • Horizontal/Vertical Refusals to Deal.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Standards Issues
• Promulgation Usually Requires Exchange of Confidential Information.
• Cost of Compliance is a Major Factor, but Prices and Margins are Sensitive.
• Quality and Safety Reasons to Justify. • Is the Goal Legitimate? • Is the Standard Reasonably Related? • Balance the Burden vs. the Benefit.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
How to Adopt Standards
• Use an Expert Organization. • Involve the Government. • Open the Process to All Affected. • “Due Process” Approach. • Mandatory or Voluntary; Who
Enforces? • Or Mandatory in Fact?
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Standards and Patents
• Standards Organizations must expect full disclosure.
• Patent holder gets standard adopted that only its patented product satisfies.
• Instant monopoly! • RAND/FRAND licensing usually the
solution.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Standards Cases
• ASME v. Hydrolevel – Misuse of Pressure Vessel Standard by Competitor.
• Plant Oil (2011) Cases dismissed because compliance not necessary to compete.
• Allied Tube – backdoor exclusion of new PVC product by steel competitors.
• Healthcare cases excluding unqualified doctors.
• Sports League Cases assuring uniformity.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Noerr-Pennington and Lobbying
• Wide antitrust immunity for competitors and associations to seek legislation.
• Noerr (1961) and Pennington (1965) • OK Even if Competition is restricted or
eliminated or a monopoly is created. • First Amendment Trumps Sherman Act. • But Does Not Protect Fraud or Sham
Litigation. Sykes (2010).
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Noerr-Pennington and Associations
• Protects Association Support of Legislation.
• Testimony; Political Action Arms. • Litigation Challenging Regulations. • All Are Protected. • But Not Shams or False Testimony or
Illicit Conspiracies. But Bobrick Case.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Noerr-Pennington Exceptions
• Superior Court Trial Lawyers (1990). Noerr does not protect concerted boycott to secure higher rates.
• And does not protect private action aimed at a government, vs. to secure new laws. Carpet Group (2003).
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
State Action Doctrine
• Parker v. Brown (1943). • California permitted raising growers to
withhold raisins to raise prices. Immune. • Health Care Equalization Committee
(1988). Iowa directed organization to refuse to deal with uncertified chiropractors. Immune.
• Phoebe Putney/Dintelman Cases (2011).
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Non-Member Access
• Not Required Unless Access is Only Reasonable Competitive Alternative.
• Fees and Charges Must Be Fair; Not Required to Subsidize Non-Members, Particularly if They Could Have Joined.
• OK to Have Reasonable Advance Access to Results for Members.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Codes of Ethics
• Extremely Important to Maintain Ethics and Reputation of the Industry.
• But Take Care to Avoid Backdoor Boycott, or Subtle Price Agreement, or Concerted Sales Practices.
• Especially Sensitive if Price or Competitive Practices are Dealt With.
• Legitimate, Objective, Uniform, Fair.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Specific Practices
• Avoid Exchange of Price Information, Publication of Members’ Current Prices, and Suggested Retail Prices.
• Do Not Ban Price Cutters, Price Adjusting, or the Development or Sale of Legitimate New Services.
• Do Not Restrict Members’ Services, Allocate Customers or Territories, or Engage in Boycotts or Refusals to Deal.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Trade Association Cases
• National Society of Professional Engineers (1978). Code of Conduct Restricted Bidding.
• ABA (1996) Competitive Law Schools. • National Association of Realtors (2006) Brokers
Barred from On-Line Sales Practices. • National Association of Music Merchants
(2009) Wrongful Price Information Exchange. • American Needle v. NFL (2010) Rule of Reason
Applied to Logo Licensing.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Gray Areas
• Standardization • Certification and Seals of Approval • Standards of Industry-wide Contracts
and Warranties • Codes of Conduct • Trade Show Access • “Mere Membership” is Not Agreement.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Websites
• Members chats and Q&As need careful monitoring.
• Opinions about competitive products must be fair.
• And with full disclosure of any conflict of interest.
• B2B sites require fair access and confidentiality without exclusivity.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Joint Research & Development
• National Cooperative Research and Production Act of 1993
• Standards Development Organization Advancement Act of 2004
• Applies Rule of Reason to JVs and standards development organizations; permits attorneys fees.
• Actual vs. Treble Damages if Notification is filed with DOJ and FTC.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Joint Ventures
• Not Per Se Illegal If Joint Venture Involves a Bona Fide Integration of Resources.
• Venture Then Becomes One Actor. • Market Analysis Used to Measure
Competitive Effects of Proposed Venture. • Creation of a New Product or Service Is a
Pro-competitive Justification. • Elimination of Competition Between Joint
Venture Partners Is the Typical Concern.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Mergers
• Hart Scott Rodino -- 30 Days • FTC or DOJ – “Second Request” • “Item 4(c) and 4(d)” Documents • No Bar to Private Lawsuits
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Sherman Act Violations Are Felonies
• Sherman Act Fines up to $100 Million for Corporations and $1 million for Individuals; Prison Sentence up to 10 Years. Maximum fine may be increased to twice the loss suffered or twice the amount gained.
• DOJ averages over $750 million per year. • Also treble damages and attorneys fees. • EU – fines up to 10% of worldwide turnover
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Civil Actions
• Treble Damages • Plus Attorneys Fees • Tremendous Costs • And Diversion of Attention
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Illustrative U.S. Cases
• HeereMac (Marine Construction Industry) $49 Million
• Archer Daniels Midland (Preservatives) $100 Million
• Hoffman-LaRoche (Vitamins) $500 Million
• Pfizer (Additives) $20 Million • BASF (Sweeteners) $225 Million • International Cartels Were
Involved in 90% of Recent Cases
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
DOJ Amnesty Program • Stop and Self-Report Before Investigation • Report Wrongdoing Candidly and Completely • Fully Cooperate With DOJ • Make Restitution Where Possible • No Instigation or Coercion of Illegal Conduct • All Directors, Officers, and Employees Who Come
Forward, Admit and Cooperate, Also Amnesty • Sometimes a Race to the Courthouse • Dodd Frank Whistleblower Program
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Practical Considerations • Care During Trade Association Meetings and
Other Meetings With Competitors • All Agreements Evaluated for Antitrust Risk • Avoid Coercive Conduct • Proper Documentation of Price Changes • Care in Creating, Preserving, and Discarding
Written Communications, Including E-mail • Think Before You Sue – Antitrust
Counterclaims • Get Legal Advice
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Guide to Document Preparation
• What is a document? • Includes draft documents,
letters, emails, attendance notes, meeting transcripts and diary entries
• Rules for document creation • Avoid Sensational or Suggestive
Language • Write positively • Focus on facts • Know when to get advice
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Words to Avoid
• Do Not Copy • Destroy After
Reading • Annihilate • Off-the-record • Dominate • Out Of The Market • Leverage
• Hurt • Control • Eradicate • Preempt • Secret Agreement • Kill • Break Down
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
U.S. Trade Sanctions
• Typically Imposed by President Under Emergency Authority and with Maximum Possible Scope to Cover All Trade by Any U.S. Person with the Target Nation.
• “U.S Person” Includes All Persons in the U.S., All U.S. Citizens and Permanent Resident Aliens, Wherever Located, and All Entities Organized Under the Laws of the U.S.
• Criminal Penalties of up to 20 Years in Prison, $1,000,000 in Corporate Fines and $250,000 (or more) in Individual Fines. Civil Penalties of up to $275,000 Per Violation.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
U.S. Trade Sanctions
• Afghanistan • Angola • Burma • Cuba* • Iran* • Iraq*
• Liberia • Libya* • North Korea* • Sierra Leone • Sudan*
* Comprehensive Trade embargos currently in place against these nations and others
Target Nations Include
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
U.S. Trade Sanctions
Prohibited Activities • Import of goods or services to the U.S.
originating in a target nation. • Export of goods, technology or services
by a U.S. person to a target nation. This includes transactions through a third country.
• Financial transactions and investment. • Facilitation or approval by a U.S. person
of a transaction between a foreign person and a target nation.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
U.S. Anti-Boycott Legislation • Prohibits U.S. Companies and Their Foreign
Affiliates From Participating in Foreign-led Boycotts Against Countries Which Are (A) Friendly to the U.S. and (B) Are Not Themselves Subject to U.S.-Led Boycotts.
• In General, No Prohibition on Complying With Restrictions That a Boycotting Country Places on the Goods It Imports Into Its Own Country, or on the Export of Its Own Goods.
• The Penalty for Each Violation May Include 5 years’ imprisonment, and a Fine up to $50,000 or 5X the Value of the Exports Involved, Whichever Is Greater.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Export Controls
• International Traffic in Arms Regulation (ITAR) – military uses.
• Export Administration Regulations (EAR) -- goods and technology with both civilian and military uses.
• OFAC enforces sanctions against foreign countries and nationals, terrorists and international narcotics traffickers.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Foreign Corrupt Practices Act
• FCPA Prohibits Corrupt Payments to Foreign Government Officials to Obtain or Keep Their Government’s Business.
• Massive Fines and Substantial Prison Sentences in Recent Cases.
• An Employer May Not Pay an Employee’s Fines.
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Adopt An Antitrust Policy
• First question a new Member asks. • Announce it at Meetings. • Counsel present at all key meetings. • Agendas and Minutes and Websites and
Membership Criteria all reviewed. • Be conservative – even winning the case
can be very expensive!
C , L & MARTER EDYARD ILBURNwww.clm.com Partners for Your Business®
Questions
Robert A. McTamaney (212) 238-8711