Alvin Dunn is senior counsel at Pillsbury Winthrop Shaw Pittman LLP in Washington, DC.
Many associations seek to advance DEI in their industries with good intentions, but even well-intentioned initiatives require careful implementation. Keep antitrust risks in mind when designing initiatives that help members promote diversity, equity, and inclusion.
Energized by the Black Lives Matter movement and the #MeToo movement before it, businesses and nonprofit organizations have increasingly committed—often publicly—to advancing diversity, equity, and inclusion (DEI), both internally and in their outside activities. DEI initiatives should be planned and implemented thoughtfully to reap the organizational and societal benefits while ensuring compliance with legal requirements, including those arising under the U.S. antitrust laws.
Going beyond legally mandated prohibitions against discrimination, DEI efforts are voluntarily developed, strategic responses to encourage diversity, equity, and inclusion. DEI initiatives encompass a wide spectrum of organizational choices:
To achieve this trifecta, a DEI initiative may affect an organization’s approach to hiring and recruitment, compensation, leave policies, retention and promotion strategies, training, and overall organizational culture. A DEI initiative can also influence how an organization selects and works with suppliers and even how it serves customers, members, or constituents.
Antitrust laws aim to ensure fair market competition and, at the federal level, are enforced by the U.S. Department of Justice (DOJ) and the U.S. Federal Trade Commission (FTC). Antitrust scrutiny reaches beyond formal, written agreements. An anticompetitive agreement can be inferred, such as from discussions, the sharing of competitively sensitive information, and parallel behavior by competitors.
Because association members are often direct competitors, associations that encourage their members to adopt and collaborate on DEI initiatives should be aware of the antitrust compliance obligations that apply to such efforts.
While many DEI initiatives aim to enhance diversity, equality, and inclusion in connection with hiring, promotion, and retention, those that focus externally on improving access for underserved customers or other stakeholders pose the greatest risk for antitrust violations.
Any collaborative effort by competitors to serve the same customer base could raise antitrust red flags because the antitrust laws, at their heart, promote the premise that free and unfettered competition best advances consumer welfare. For example, if competing mortgage lenders, with the best intentions, agreed to offer a rate of 0.5 percent below their customary rates to a certain class of traditionally underserved borrowers, that agreement could be seen as a price-fixing arrangement in violation of the antitrust laws.
Any association program that suggests its members adopt practices to benefit customers should make clear that such practices are voluntary, particularly if specific goals are set to increase access for or provide more beneficial terms to customers, even from underserved demographics.
Associations developing DEI initiatives that impact customers should proceed with caution. Any association program that suggests its members adopt practices to benefit customers should make clear that such practices are voluntary, particularly if specific goals are set to increase access for or provide more beneficial terms to customers, even from underserved demographics. In no way should an association promote agreements among its members on pricing or competitive business practices, and no member participating in such initiatives should be prevented from offering even more beneficial terms to underserved customers, or any customers.
Antitrust enforcement most often relates to competition for customers and market share, but organizations compete for employees as well. Any agreements between employers regarding the terms of employment can violate the antitrust laws.
DEI initiatives often focus on hiring, promoting, and retaining employees. In encouraging members to undertake such initiatives, associations should take care not to expose competing members to claims that they have reached an explicit or implicit agreement on terms of employment—particularly regarding compensation or benefits—or have agreed not to “poach” others’ employees or job candidates.
Many DEI initiatives aim to raise awareness of existing inequities. For example, associations may seek to help their members identify any disparities between salaries paid to minority and non-minority employees.
There are ways for associations to lawfully facilitate the sharing of information—even sensitive confidential information regarding salaries and benefits—among competitors. The DOJ and FTC have defined safety zones that permit third parties, such as trade associations, to collect, aggregate, and disseminate this kind of information without violating the antitrust laws. Through such information collection, an association can help its members understand how their own terms of employment and hiring and retention practices affect their minority employees and compare with industry trends.
Associations should proceed with caution and consult with counsel before implementing an information-sharing program. They should also take steps to ensure that members do not discuss the information that is shared in ways that could be seen as facilitating agreements on terms of employment or hiring and retention policies.
Some DEI initiatives focus on influencing government policy to improve diversity, equality, and inclusion. For example, an association may lobby government agencies to implement their own DEI initiatives or policies. Nearly all such efforts are immune from antitrust scrutiny under the Noerr-Pennington doctrine, which protects advocacy efforts to influence government policy on any matter, even if the goal is to use government policy to reduce competition. This protection extends to efforts to influence both legislation and administrative rulemaking and enforcement.
Even though it is unlikely that advocacy related to DEI initiatives would seek laws and regulations that limit competition, nonprofit organizations participating in such efforts in nearly all cases would not have any antitrust concerns.
When implementing DEI initiatives, associations made up of members that directly compete should take steps to maintain compliance with antitrust laws. In the end, DEI initiatives and antitrust laws share the same goal of advancing consumer welfare, and with careful planning, they can exist harmoniously.