Why You Need an Antitrust Compliance Policy

By: John M. Peterson

A written policy can be a regular reminder to staff and members about antitrust dos and don'ts.

Q. Should my association have an antitrust compliance policy? What should it include?

A. The importance of an association having and abiding by a formal antitrust compliance policy cannot be overstated. Companies are rightly hesitant to send their employees to association meetings unless they know that the association practices strict compliance with the antitrust laws in all of its activities. Potential criminal fines and penalties, expensive litigation, potential jail time, and treble-damage judgments are not worth the risk.

While most trade association activities are pro-competitive or competitively neutral because they involve representatives of direct competitors, they still run the risk of breeding horizontal agreements or actions in restraint of trade, in violation of federal and state antitrust laws. Creating, disseminating, and following an antitrust compliance policy not only helps avoid antitrust liability for the association and its members, but it reflects favorably on an association if ever investigated or sued.

Association executives are savvy enough to know that members can't agree with their competitors to fix prices, rig bids, or divide up a market or customers. The courts have long ago declared such activities so inherently harmful that they are per se illegal—that is, the accused parties cannot seek to justify or explain the rationale behind their actions.

However, those same association executives may not realize that the antitrust laws also forbid agreements among competitors on terms and conditions of sale, such as credit terms and warranties, production quotas, or capacity utilization. In addition, the direct exchange of prices and costs or discussions of other sensitive competitive topics, followed by common or parallel actions by those involved even without a formal agreement, can violate the antitrust laws if it results in more uniform or higher prices or less competitive terms or conditions of sale than would have otherwise existed.

Properly drafted and utilized, an antitrust policy can regularly serve as a reminder of antitrust do's and don'ts to both members and association staff. Because not every association participant comes from a company that has an antitrust compliance program, the associations policy may be a members only introduction to, or regular reminder about, antitrust laws.

A policy should not only be a written document, but also a compliance program that is followed by the board, committees, membership, and staff.

What to Include

The policy should begin with a statement that it is your associations policy to comply strictly with the letter and spirit of all applicable federal and state antitrust laws. It should point out the potentially serious civil and criminal consequences for the association, members, and member representatives found in violation of the antitrust laws, as well as the costs in time and money spent in defending antitrust investigations and litigation.

The policy should list topics that should not be discussed at association meetings, on association listservers, in other similar electronic communications, or at association social activities, such as golf outings, cocktail parties, or dinners.

It should contain a requirement that meeting agendas be reviewed in advance by legal counsel or staff fully conversant with the antitrust laws, that meeting discussions should be limited to agenda items, and that meeting minutes should be reviewed by legal counsel before being distributed to others. It should also require regular meeting attendance by antitrust counsel or at least at those meetings where the agenda and discussion topics call for it.

The policy should limit and clarify who has authority to communicate or make any oral or written representation that states, or appears to state, an official policy or position of the association. It should also make it clear that violations of the policy can subject those involved to disciplinary measures, up to and including termination of membership.

Finally, your policy should contain a plan for the regular distribution and mention of the policy in connection with all meetings. Ideally, this would include an annual presentation by the associations antitrust counsel to the staff and board of directors or at least to the new board members as a part of their orientation. A periodic update on recent antitrust cases and developments by antitrust counsel is also helpful.

Have your association adopt a properly drafted antitrust compliance policy, disseminate it regularly, and don't just give it lip service; make sure your members and staff follow it.

John M. Peterson is managing partner of Howe & Hutton, Ltd., in Chicago. Email: [email protected]