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Established January 2005
The purpose of this document is to briefly review the federal antitrust laws applicable to association activities and to set forth some general guidelines for compliance with those laws
There are two antitrust statutes which are of principal concern to individuals and firms who take part in association activities: the Sherman Act and the Federal Trade Commission Act. These laws prohibit contracts, combinations, and conspiracies in restraint of trade. The Supreme Court has said that not every contract or combination in restraint of trade constitutes a violation; only those which unreasonably restrain trade are unlawful. Thus the courts will look at all of the facts and circumstances surrounding the conduct in question in order to determine whether it unreasonably restrains trade and therefore violates the laws.
Certain kinds of conduct are exclusively presumed to be unreasonable and therefore unlawful. Such conduct, which is considered to be unlawful per se, consists of certain practices which clearly restrain competition and have no other redeeming benefits. Examples of such practices include:
Associations by their very nature present potential antitrust problems. One reason is that in bringing competitors together into an association, there exists the means by which collusive action can be taken in violation of the antitrust laws. Since both the Sherman and Federal Trade Commission Acts prohibit combinations in restraint of trade and since an association by its very nature is a combination of competitors, one element of a possible violation is already present. Only the action to restrain trade must occur for there to be a violation.
Another special antitrust problem of an association is that many of its valuable programs deal with subjects sensitive from an antitrust viewpoint -- price reporting, product standards, certification, statistics, and customer relations.
Association members should refrain from any discussion which could provide the basis for an inference that the members agreed to take any action that might restrain trade. An “agreement” among association members in antitrust terms is a very broad concept -- it may be oral or written, formal or informal, expressed or implied. A “gentleman’s agreement” to “hold the line” on prices is more than sufficient to evidence an unlawful conspiracy to fix prices.
The basic principle to be followed in avoiding antitrust violations in connection with association activity is: to see that no illegal agreements, expressed or implied, are reached or carried out through the association. Members should also avoid engaging in conduct which may give the appearance of an unlawful agreement.
Following are some general guidelines which can minimize the possibility that inferences of antitrust guilt can be drawn from association activities:
The following topics are some of the main ones which should not be discussed at meetings of association members:
Some of the basic areas of association activity which should be carefully scrutinized from an antitrust standpoint are the following:
There are both civil and criminal penalties for violating the antitrust laws. The penalties for violating the antitrust laws are severe. An individual and a corporation found to have violated the antitrust laws may be fined up to $1 million and $100 million, respectively, and/or jail sentences of three to ten years. Additionally, there are civil penalties available to government antitrust enforcement agencies such as a cease and desist order and dissolution of the association. In addition to government enforcement of the antitrust laws, an individual or company that suffers injury as a result of an antitrust violation may file a private suit against the violator and recover treble damages. Therefore, the association’s antitrust liability does not lie solely at the hands of government enforcement agencies.