The Association Antitrust Compliance Guide

The Association is a nonprofit association committed to addressing the interpretation and enforcement of Cargo Preference Rules for Project Cargo financed by USEXIM.  The Association is composed of International Transportation and Distribution professionals working for U. S. contractors who specialize in engineering, procurement, manufacturing, and construction projects or for consulting, transportation, export packing, and freight forwarding companies who provide services for those U. S. contractors. Many of these consultants and industry-oriented members compete with one another.  Whenever competitors or their employees meet, including encounters at professional association meetings, there is the potential for problems under the antitrust laws, which generally prohibit anti-competitive behavior. 

The law recognizes the Association’s objectives and programs as legitimate and beneficial.  The Association makes every effort to comply with the antitrust laws.  However, given the complex nature of those laws, violations can result from seemingly innocent activities.  The Association wants to avoid not only actual violations of the antitrust laws, but any appearance of a violation which might invite suspicion or investigation on the part of the enforcement authorities.  To accomplish this goal, and to protect itself and its members, the Association has authorized the issuance of this Antitrust Compliance Guide to help its members recognize what is, or might become, an antitrust question, and to avoid problems under the antitrust laws of the United States, Canada, and Mexico. 

This Compliance Guide is divided into two parts.  Part I is a set of General Guidelines for members and staff.  Part II explains the operation and enforcement of the antitrust laws and describes the consequences of violating those laws. 

Part I:  General Guidelines 

  1. The chair or Association staff chairperson should prepare a written agenda for each Association committee, subcommittee, and local subsection meeting. The agenda should be given to attendees in advance of each meeting, if possible, or at the beginning of the meeting. Agenda items should be specific and avoid broad topics such as “marketing practices” or “future production.” 
  2. Adhere to the written agenda. In general, subjects not included on the agenda should not be taken up. If new subjects are raised, it is preferable to put them on an agenda for a future meeting, if appropriate. If the circumstances necessitate that attention be given to new subjects, as noted above, care should be taken to avoid antitrust-sensitive subjects (e.g., exchange of price information; seeking advantage over business competitors; creation of monopolies). Also, as previously noted, minutes should carefully reflect the necessity for the new matters and that antitrust-sensitive items were not addressed. 
  3. The Association files for every Association meeting should include the notice of the meeting sent to invitees, the agenda, a list of attendees, and the minutes of the meeting. This is to be provided by the volunteer serving as secretary for the meeting or by Association staff in certain cases. 
  4. To the extent possible, an Association staff person familiar with this Compliance Guide should attend each Association meeting. The chairperson should also be fully familiar with this Guide. If staff cannot attend a meeting or seminar, the appropriate staff person should receive a copy of the agenda well in advance of the meeting. 
  5. Minutes of every meeting are to be prepared promptly by the committee secretary following the meeting, or by the committee chairperson, or by an Association staff member when appropriate. They should include a list of attendees and a concise summary of substantive matters discussed and of any actions taken. 
  6. Minutes should be clear and unambiguous, and should briefly explain terms or phrases that might be subject to misinterpretation. Preparers of minutes should bear in mind that those minutes might be examined at some future time in either an investigation or a litigation context. 
  7. The Association staff members and committee members should also apply this “clear and unambiguous” standard to their oral and written communications relating to the Association. Facetious remarks can be interpreted incorrectly and affect the outcome of litigation; innocent intentions, of themselves, cannot be relied on as a defense. Assume that a government prosecutor may someday examine anything you write. 
  8. Where it appears that matters of antitrust sensitivity might arise at a meeting, the Association staff and the chairperson should discuss the matter with counsel. 
  9. Because some subjects are obviously more antitrust-sensitive than others, discussions of some matters at the Association meetings could raise serious antitrust questions and should therefore be avoided altogether (refer to Item 10 below). Committee chairpersons and Association staff should carefully monitor the course of discussions and, where appropriate, cut off any discussion that appears likely to stray into prohibited or particularly sensitive areas. Under no circumstances should any “off the record” remarks be permitted at meetings. 
  10. The Association will not sponsor or in any way encourage or condone “rump” or “splinter” gatherings at Association meetings. Association business affairs, and particularly those dealing with potentially antitrust-sensitive issues, must be confined to formal meetings at which accurate minutes are kept and for which an advanced agenda has been prepared. 
  11. A number of Association meetings may be convened to develop and articulate a policy position (i) to be presented to Congress or a state legislature, (ii) to be advanced before a federal or state administrative agency in a rule-making procedure, or (iii) to involve consideration of pending court litigation. Activities of this nature are normally protected under the Noerr-Pennington doctrine, which holds that efforts, such as lobbying or submissions to administrative agencies, to influence governmental action are generally immune from antitrust liability, even if they are anti-competitive in purpose or effect. The President of the Association should be aware of such activities at their very earliest stage to assure avoidance of antitrust problems. 

Part II:  Explanation of the Federal Antitrust Laws 

The Statutes 

Congress has enacted a series of statutes, known collectively as the federal antitrust laws, to promote and preserve our competitive private enterprise system by encouraging free competition in open market. The federal antitrust laws give the force of law to the philosophy underlying our economic system; namely, that a free market serves to achieve the most equitable allocation of high quality goods and services at the lowest possible prices. 

The central core of federal antitrust legislation is formed by the Sherman, Clayton, and Federal Trade Commission Acts. (Most states have also enacted antitrust laws similar to the federal statutes.) Section 1 of the Sherman Act prohibits “contracts,” “combinations,” or “conspiracies” in restraint of trade or commerce. These terms connote collective action or conduct by two or more persons, and they include agreements and understandings of all kinds, whether written or oral, formal or informal, which unduly restrain competition. Because of the collective nature of most trade association activities, this provision is the principal weapon used by the Department of Justice or Federal Trade Commission (FTC) in antitrust suits against trade associations or their members. Such suits are usually based upon an alleged conspiracy or agreement among competitors to restrain trade. 

Section 2 of the Sherman Act prohibits monopolization, attempts to monopolize, and combinations or conspiracies to monopolize any line of commerce. Often, the same facts that give rise to a violation of Section 1 may also be sufficient for a Section 2 violation. 

The Clayton Act has several sections that may be important to the activities of certain organization members of the Association, such as provisions dealing with price discrimination, tying and exclusive dealing arrangements, and mergers. Other provisions of the Clayton Act provide for the filing of treble-damage and injunction lawsuits. 

Section 5 of the Federal Trade Commission Act (the FTC Act) prohibits “unfair methods of competition and deceptive acts or practices in commerce.” Section 5 is meant to prohibit activities which in themselves are violations of the other antitrust laws, as well as conduct which, if allowed to continue, would evolve into such violations. Thus, Section 5 of the FTC Act covers violations of the “spirit” of the Sherman or Clayton Acts and activities which fall into gaps in these Acts. 

The language of the antitrust statutes is deliberately general in its coverage, prohibiting every “contract, combination or conspiracy in restraint of trade” and “unfair method of competition.” This necessarily involves difficult questions of interpretation, though useful guidelines for antitrust compliance have evolved from the courts’ decisions. The importance of obtaining legal counsel in any area of uncertainty cannot be overemphasized, for the sanctions imposed for violations of the antitrust laws are severe. 

Antitrust Enforcement 

The Department of Justice and the FTC enforce the federal antitrust laws. The various state attorneys general typically enforce state antitrust statutes. In addition, private and class action lawsuits by individuals or by state attorneys general on behalf of their citizens may be brought to recover three times the actual civil damages found as well as attorneys’ fees and costs. 

All of the following penalties can be imposed for violations of the antitrust laws: 

  1. Imprisonment. Violations of the Sherman Act are criminal felonies and each participant is subject to a prison sentence of up to three years. Prison sentences have become increasingly common, particularly in price-fixing cases. 
  2. Fines. Fines of up to $10,000,000 for corporations and $350,000 for individuals may be imposed on persons convicted of violating the Sherman Act. In addition, the fines can be increased to twice the convicted defendant’s gain from the violation or twice the victim’s loss. Fines are not deductible for income tax purposes. 
  3. Court Injunctions and FTC Orders. Orders or injunctions prohibiting future violations or activities can be imposed as a result of civil proceedings brought by the Department of Justice, FTC, or private parties. Such injunctions may contain sweeping prohibitions which go well beyond the scope of the violations charged and prohibit conduct which is not itself considered contrary to the antitrust laws. Such orders can seriously limit freedom of association action, require burdensome and time-consuming reporting obligations, cause day-to-day activities to be supervised by a court or agency, and even require dissolution of an association. Violation of an injunctive order issued by a court can result in contempt proceedings with attendant fines, while failure to comply with a cease and desist order issued by the FTC carries penalties of up to $10,000 for each day the noncompliance continues. 
  4. Treble Damages. The “treble damage” provision of the antitrust laws allows persons or businesses injured by an antitrust violation to recover three times the amount of actual damages sustained, plus plaintiffs’ costs and attorneys’ fees. Such cases have resulted in hundreds of millions of dollars of damages being paid to private litigants. Thus, an antitrust violation could impair the financial resources of any corporation or association. 

In addition to these types of sanctions, the costs of defending an antitrust action can be enormous. Such litigation typically extends over several years, and may involve the producing and copying of hundreds of thousands of documents; depositions of scores of witnesses; employment of technical, economic, and accounting experts; trials lasting weeks or months; and protracted appeals. Attorneys’ and experts’ fees and associated legal costs frequently run into hundreds of thousands and even millions of dollars, even if the defendant is ultimately found not to have violated the antitrust laws. 

Prohibited Activities 

As discussed above, the vast majority of antitrust cases against associations have been brought under Section 1 of the Sherman Act. There are three main elements to a violation of Section 1. 

First, as noted above, there must be a contract, combination, or conspiracy—in other words, some form of concerted action between two or more parties. Association activities are almost always found to involve concerted conduct because associations inherently include collections of individuals or entities. 

Second, the agreement must restrain interstate or foreign trade or commerce. Thus, it must be shown that the goods or services affected by the agreement were in the flow of commerce across state lines or that the agreements affect interstate commerce or foreign trader. 

The third requirement necessary to establish a violation of Section 1 is that the challenged conduct must restrain trade unreasonably. This requirement is applied to the challenged conduct to determine, after an analysis of the conduct’s economic and competitive purpose and effect in light of all surrounding facts, if it unduly restrains trade. 

There are certain practices that are conclusively presumed unreasonable upon proof of their existence and, thus, illegal.Among these practices are agreements to fix prices, to divide markets, to allocate production, and to impose boycotts on competitors. These activities are illegal per se. That is, these activities are illegal without further analysis of their reasonableness, good intentions, arguable benefits to the public, or extenuating circumstances.  In short, there are no defenses for these activities. Because these violations can be inferred from circumstantial evidence, and because there are no defenses to these violations, extraordinary caution should be taken to insure that the Association’s and its members’ activities do not raise even the appearance of any of the following violations. 

  1. Agreements Involving Prices. Pricing is the most sensitive subject under the antitrust laws. Price, in the context of the antitrust laws, includes all the elements of the terms of sale: sales prices, discounts, allowances, freight, credit terms, installation charges, container deposits, and all other services or conditions integrally related to a sale. In addition, it is just as unlawful for competitors to agree on the prices at which they will offer to buy from their suppliers, as on those at which they will sell. Any agreement between competitors that fixes, stabilizes, maintains, bolsters, depresses, or tampers in any way with price is per se unlawful. The essential rule is that each seller must determine on its own the prices at which it purchases and sells. The Association should not assume any role in any company’s pricing. To avoid inferences of agreement or collusion, participants in Association activities—without exception—must not engage in any direct or indirect discussions with any competitors regarding prices, pricing policies, costs, transportation rates or rate policies, production, capacity, inventories, or any other marketing policy which may affect pricing.
  2. Agreements to Divide Markets and Allocate Customers. Any agreement among competitors to divide or allocate sales territories or customers is unlawful per se. Exchanges of any type of information by Association members with competitors, directly or indirectly, which relates to customers or territories can create the appearance of such collusion or agreement and must be strictly avoided. 
  3. Agreements to Allocate Production or Sales. Competitors may not agree to limit or control production or sales. Any limitations on output by direct or indirect agreements are illegal per se and cannot be justified even if the purpose is to preserve the industry or conserve natural resources. In addition, such activities can also give rise to a charge of price fixing. Therefore, exchanges of any type of information by Association members with competitors, directly or indirectly, which relates to production, capacity, output, inventories or any other information affecting production or sales must be strictly avoided. 
  4. Agreements to Impose Boycotts or Refusals to Deal. An agreement among competitors which results in a refusal to deal with suppliers, customers, or other competitors may be per se illegal. For this reason, any Association activities that unreasonably exclude a particular competitor or group of competitors, such as adoption of a standard that without technical justification excludes certain competing products, should be avoided. 

Application of Antitrust Laws to Association Activities 

Although many Association meetings may involve meetings of competitors, most will not raise questions of antitrust sensitivity. If the participating members of the Association are sensitive and alert to the prohibited types of behavior described above, and react quickly when danger signals appear, the activities of the Association can be accomplished effectively and without threat of antitrust violations. 

At a minimum, Association activities should be conducted in such a way as to avoid any possible inference of agreement among its members with respect to prices, controlling production or sales, division of territories, or refusals to deal in any form whatsoever. Specific guidelines for the conduct of Association activities are set out above. 

In reviewing the guidelines, Association members should keep in mind the following: 

  • As indicated above, an otherwise lawful act may become unlawful if done for an improper purpose, or if it is part of a larger unlawful scheme; 
  • Good motives are not an excuse for doing things that are otherwise unlawful; 
  • An ostensibly lawful program or activity runs a greater risk of violating the antitrust laws if conducted by a group of competitors making the same product; 
  • Members of the Association and their employers can be held responsible for any improper acts that may occur which they know about, or should know about, if they do not protest and unequivocally dissociate themselves from them; and 
  • Appearance can be as important as substance in antitrust matters. 

Conclusion 

The antitrust laws are extremely complex. This Compliance Guide is only a summary of significant points relevant to the Association. The purpose of the Guide and the “Do’s and Don’ts” and examples is simply to alert members and staff to issues arising under the antitrust laws so that they can avoid common types of problems. Whenever uncertain or troublesome questions arise, Association staff or legal counsel should be consulted.

Antitrust Compliance Do’s and Don’ts 

It is imperative that the members and staff of the Association adhere to the letter and spirit of the antitrust laws in connection with all Association activities.  The consequences of violating the antitrust laws are extremely serious.  [Penalties include prison terms, fines up to $10 million or more, multimillion-dollar civil suits, and enormous legal costs and expenses.  The Association itself and participants in all facets of Association activities, including individual members and nonmembers and their employees, may be liable for these penalties and costs. 

The Association is not able to defend and indemnify the participants in its activities against claims of antitrust violations in certain instances.  In those cases, the Association member companies will vigorously protect the interests of those participants as well as itself. 

Accordingly, to avoid antitrust problems and facilitate compliance, all members and the Association staff, as well as others participating in the Association’s activities, should familiarize themselves with the Antitrust Compliance Guide.  The following “do’s” and “don’ts” provide a ready-reference summary to assist members and staff in assuring that their activities comply with the requirements of the antitrust laws. 

DO’s 

  1. DO prepare and circulate written agendas for all of the Association committee, subcommittee, and local section meetings.  Conduct meetings pursuant to the previously prepared written agendas, as closely as reasonably possible, and prepare clear, concise, and unambiguous written minutes of each such meeting.  If it becomes necessary to depart from the agenda, care should be taken to avoid antitrust-sensitive subjects (e.g., exchange of price information, efforts to damage competitors’ business interests or monopolize, and the like), and minutes of the meeting should carefully reflect the rationale for going beyond the agenda and the matters addressed beyond agenda items. 
  2. DO avoid all loose, facetious, or careless remarks, especially those in writing, that could be misconstrued as posing antitrust problems if read out of context.  Examples:  avoid insinuating that price information is being exchanged, that advantage is being sought over competitors, or that monopolies are proposed. 
  3. DO review all matters of potential antitrust sensitivity with your own legal counsel before discussing with the Association President or other designated staff person.  Such matters would include any proposed discussion of prices, limitation or allocation of production, division or allocation of markets or customers, exclusions of competitors, and boycotts or refusals to deal.  

DON’Ts 

  1. DO NOT engage in any discussions with or among any competitors regarding prices, pricing policies, costs, transportation rates, terms of sale, or any marketing or competitive information that could affect pricing of any product or service. 
  2. DO NOT engage in any discussions with or among competitors which relate to customers, sales territories, production, capacity, output, or any other information relating to production or output of any product or service. 
  3. DO NOT exchange or discuss any other confidential statistical or financial information of any company. 
  4. DO NOT discuss the advantages, desirability, or possibility of eliminating or impairing any competition, whether existing or potential, foreign or domestic. 
  5. DO NOT assume that foreign sales or production are not subject to the United States antitrust laws. 
  6. DO NOT attempt to use, or allow a particular supplier to use, the Association’s standards program to favor or disfavor, without sound justification, particular competitors or products. 
  7. DO NOT guess.  When in doubt, get help–consult with your company staff and legal counsel. 
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