Standards Anti-Trust Compliance Briefing August 31, 2004

Anti-Trust 101 Anti-trust laws are, in general, a collection of statutes, rules, regulations and court decisions which collectively govern the competitive operation of commerce in the United States.

Anti-Trust Laws Section 5 of the Federal Trade Commission Act prohibits "unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce." Section 1 of the Sherman Act prohibits "contracts, combinations, or conspiracies... in restraint of trade."

The Sherman Act Sherman Act is a criminal conspiracy statute Liability even if you are not an active participant Simply attending a meeting where others discuss price-fixing can leave you criminally liable

Silence Is Not Protection Mere attendance at a meeting that violates the Sherman Act may be sufficient to imply acquiescence in the discussion and thereby make the individual and company as liable as those who actively agreed to fix prices.

Consequences Fines for the trade association Fines for participants ($1,000,000/individual $100,000,000/company) Triple damages (private actions) 10 years in jail Consent decree under which the trade association must operate (more fines) Court order disbanding the association

Noerr-Pennington Noerr-Pennington doctrine applies to groups lobbying government Standards Committee participants are NOT protected by free speech

Leading Supreme Court Case Hydrolevel Corp. v. The American Society of Mechanical Engineers, 456 U.S. 556 (1982) Held an association liable for the acts of its agents

Standards Participants Must Not: Adopt rules or policies which have price-fixing implications such as prohibitions on advertising prices Require participants to refrain from dealing with a company that has violated Standards or association's rules, policies or by-laws Enforce any rule, policy or bylaw arbitrarily Impose unreasonably severe penalties for violation of a rule, policy or by-law

Topics Which Must be Avoided at Standards Meetings Current or future prices (Great care must be taken in discussing past prices) What constitutes a "fair" profit level Possible increases or decreases in prices Standardization or stabilization of prices Pricing procedures

Topics Which Must be Avoided at Standards Meetings (continued) Cash discounts Credit terms Boycotts or limiting supply Allocation of markets Refusal to deal with a corporation because of its pricing or distribution practices The pricing practices of any industry member that are unethical or constitute an unfair trade practice

Committees Should Have all agendas approved by legal counsel prior to meeting Never have meetings without an official agenda Never hold separate “after meetings” Keep meeting minutes that are reviewed by legal counsel Remember that the Sherman Act also applies after meetings

SDO Protection HR 1086 became Law in June SDO actions will be judged under a “rule of reason” Harsher penalties for companies and individuals Increased penalties to individuals and corporations New law encourages cooperation with authorities by offering lower penalties