1. www.mcguirewoods.com Click to edit Master title style www.mcguirewoods.com Demonstration Of An Effective Antitrust Compliance Training Program Presented by: Howard Feller McGuireWoods LLP 800 East Canal Street, Richmond, VA 23219 804-775-4393 hfeller@mcguirewoods.com March 8, 2016 Association of Corporate Counsel Charlotte Program

2. McGuireWoods | 2 CONFIDENTIAL I.Fundamental Concepts A.Reasons for Compliance Program B.Consequence of Violations 1.Criminal Prosecutions a.Corporations – greater of up to $100 million fine or 2 times the gain or loss b.Individuals – up to 10 years in prison and $1 million fine

3. McGuireWoods | 3 CONFIDENTIAL 2.Civil Lawsuits a.Treble damages b.Injunctions c.Plaintiffs’ attorneys’ fees d.Litigation expenses e.Management drain

4. McGuireWoods | 4 CONFIDENTIAL C.Joint vs. Unilateral Conduct D.Proof of Conspiracy

5. McGuireWoods | 5 CONFIDENTIAL II.Specific Prohibited Practices A.Price Fixing 1.Prices, Costs, Discounts 2.Price Signaling

6. McGuireWoods | 6 CONFIDENTIAL B.Dividing or Allocating Markets 1.Products, Territories or Customers C.Limitations on Quantity or Quality of Products D.Any Agreements to Reduce or Eliminate Competition among Competitors E.Bid Rigging

7. McGuireWoods | 7 CONFIDENTIAL F.Group Boycotts 1.Agreements with Competitors, Suppliers or Customers G.Resale Price Agreements H.Price Discrimination

8. McGuireWoods | 8 CONFIDENTIAL III.Industry Meetings, Customers Events and Trade Association Activities

9. McGuireWoods | 9 CONFIDENTIAL IV.Hypothetical Market Scenarios 1.Can you ask your customers to tell you what your competitors are charging so that you can set your prices? a.If you receive a copy of a competitor’s price list or price offer from a customer, what should you do with it?

10. McGuireWoods | 10 CONFIDENTIAL 2.If a customer asks you to meet a competitor’s price in order to keep the business but refuses to give you a copy of the competitor’s price offer, can you call the competitor to verify its price? a.Can you have an employee make a disguised “undercover” call to a competitor to verify its price?

11. McGuireWoods | 11 CONFIDENTIAL 3.In setting your own prices, can you monitor your competitor’s prices and charge similar or identical prices? a.If you change your prices based on your competitor’s price changes, is it better not to document this or should you document the reasons?

12. McGuireWoods | 12 CONFIDENTIAL b.Can you have a general conversation with a competitor in which you talk about the challenges facing the business and the fact that prices have been too low for awhile, but neither of you says anything about what you intended to do regarding your prices?

13. McGuireWoods | 13 CONFIDENTIAL 4.Your largest competitor announces a 5% price increase on July 1, effective September 1. You recently have experienced significant cost increases just like your competitor and see this as an opportunity to maintain your profit margin. Can you also announce an identical 5% price increase effective on the same day?

14. McGuireWoods | 14 CONFIDENTIAL a.Can you send out a press release or put a message on your webpage announcing your price increase? b.Should you include the amount of the price increase in your notification letter to customers?

15. McGuireWoods | 15 CONFIDENTIAL 5.You decide to increase your prices and have the new prices go into effect in 60 days. Can you send your price increase announcement letter to a customer that is also a competitor of yours for the sale of the same product?

16. McGuireWoods | 16 CONFIDENTIAL 6.The President of one of your major competitors is the featured dinner speaker at the industry’s trade association meeting. During that speech, the President talks about the challenges facing companies in the industry and the impact of recent developments. One of the developments he discusses is the fact that the costs of the company’s primary raw materials have increased substantially. All of the other companies in the industry have experienced the same

17. McGuireWoods | 17 CONFIDENTIAL # 6 Continued: large cost increases. He then goes on to say that “I don’t care what anyone else is going to do, but we are going to raise our prices by 5% in the next 60 days because this cost increase is hurting our business.” You are in the audience and hear this comment. What should you do?

18. McGuireWoods | 18 CONFIDENTIAL 7.You are at a trade show and an employee of one of your competitors comes up to you and says – “We are going to raise our prices next week. Prices in this market are way too low. What are you going to do? Will you support us?” – What should you do in this situation?

19. McGuireWoods | 19 CONFIDENTIAL 8.You are a member of an industry trade association and it wants to conduct a survey regarding prices, costs, production and wages for certain common types of employees who are employed by members of the association. Can price, cost, production and salary information be shared legitimately with and published by the association?

20. McGuireWoods | 20 CONFIDENTIAL 9.Can two local companies that sell very different products and are not competitors in the same industry exchange salary information about entry level IT employees and agree to offer the same starting salary for these employees? a.Can you and a competitor agree that you will not solicit or hire each other’s employees in certain positions?

21. McGuireWoods | 21 CONFIDENTIAL 10.Can competitors agree to set and adhere to specific safety or quality standards for their products?

22. McGuireWoods | 22 CONFIDENTIAL 11.Can competitors work together to secure the passage of new legislation or regulations that favor those competitors, but may lead to a competitive disadvantage or harm to others?

23. McGuireWoods | 23 CONFIDENTIAL 12.To try to keep your costs down, can you talk to competitors about the recent purchase price trends and agree on the maximum amount that you will pay to suppliers for the products or services you need?

24. McGuireWoods | 24 CONFIDENTIAL 13.You are asked to participate with several of your competitors in a group purchasing organization which is designed to pool the purchasing power of the members and obtain lower costs for many commonly needed products and supplies. Can you participate in this group purchasing organization with your competitors?

25. McGuireWoods | 25 CONFIDENTIAL 14.You and your 3 largest competitors participate in an industry trade association. Can a representative of the trade association negotiate with suppliers and enter into contracts with suppliers on behalf of the 4 largest members for a common purchase price?

26. McGuireWoods | 26 CONFIDENTIAL 15.Can you talk to a competitor about the credit history or creditworthiness of a prospective customer?

27. McGuireWoods | 27 CONFIDENTIAL 16.A competitor asks you if you would be willing to split the capital cost of building and operating a new facility that will provide a new service to customers. You would not build the facility by yourself because the cost is too high and it is risky. However, if you could split the cost with one or more competitors, you would probably make the smaller investment and take the chance. Can you joint venture with competitors in this situation?

28. McGuireWoods | 28 CONFIDENTIAL 17.As long as you don’t talk about prices, can you talk to other suppliers about whether they are going to bid for a particular contract? a.If you cannot supply or satisfy a contract that has been put out for bid by yourself, can you talk to another supplier about jointly bidding for the contract with you?

29. McGuireWoods | 29 CONFIDENTIAL 18.A supplier goes to lunch with one of its long- standing, good customers. The customer starts talking about which customers the supplier should sell to in that market area and which customers it should not. Is that a legitimate topic for conversation?

30. McGuireWoods | 30 CONFIDENTIAL 19.Can a supplier decide not to sell certain products or services to some customers, but sell them to others?

31. McGuireWoods | 31 CONFIDENTIAL 20.A supplier has been selling to a customer for many years. But the customer changed its marketing strategy and doesn’t feature or promote its products any longer. Can the supplier terminate the customer?

32. McGuireWoods | 32 CONFIDENTIAL 21.An appliance manufacturer, Salton, developed a hot new product, an indoor grill, which it called the George Foreman indoor grill. Salton invested heavily in a large advertising campaign. Other appliance manufacturers quickly developed their own indoor grill products to compete with the George Foreman grill, but the George Foreman grill clearly was the market leader. In fact, it was the No. 1 selling product in the small appliance category. Based on the popularity of this product, Salton told Wal-Mart that it could have the George Foreman grill only if Wal-Mart agreed to sell this indoor grill exclusively. Was this lawful?

33. McGuireWoods | 33 CONFIDENTIAL 22.A supplier comes to you and says it has a hot new product. It believes that this product is really going to sell well and it wants the customers that it will select to sell the product to agree to sell the product exclusively. The supplier says that it has talked to two of your major competitors and they have said that they are willing to be exclusive if you are also going to be exclusive. Can you agree to be exclusive in this situation?

34. McGuireWoods | 34 CONFIDENTIAL 23.Can a supplier offer a lower price if a customer buys multiple product lines and a higher price if it only buys one product line?

35. McGuireWoods | 35 CONFIDENTIAL 24.A supplier sends a minimum suggested retail price (MSRP) list to its customers but doesn’t prevent them from selling below those suggested prices. One of the customers starts to sell the products at very low prices, substantially undercutting its competitors. The discounter’s competitors complain to the supplier about the customer’s low prices and want the supplier to do something about it. Can the supplier terminate the low price customer because it is disrupting its customer network?

36. McGuireWoods | 36 CONFIDENTIAL 25.Can a supplier talk to a retailer about what the best resale price points would be for its products and ask the retailer to agree to resell the products at or above specific price points? a.Can a supplier issue a minimum advertised price policy in which it provides co-op advertising money to retailers as long as they advertise the supplier’s products at or above its Minimum Advertised Prices?

37. McGuireWoods | 37 CONFIDENTIAL b.Can the retailers sign the MAP policy indicating they will comply with it?

38. McGuireWoods | 38 CONFIDENTIAL 26.Can a supplier give a lower price to a customer that says it received a lower price offer from one of the supplier’s competitors?

39. McGuireWoods | 39 CONFIDENTIAL 27.A&P sought to purchase private label dairy products and solicited bids from suppliers. Borden offered a $400,000 discount but A&P already had a $735,000 discount offer from Bowman Dairy. A&P then told Borden that its price “was not even in the ballpark” and that a $50,000 reduction “would not be a drop in the bucket.” Borden submitted a re-bid and offered an $820,000 discount. A&P didn’t tell Borden that its second bid undercut Bowman and accepted the lower price. Was this illegal price discrimination by Borden?

40. McGuireWoods | 40 CONFIDENTIAL 28.If a supplier gives a lower price to one customer because it is meeting a competitor’s offer, does it have to lower its price to all of the customer’s competitors?

41. McGuireWoods | 41 CONFIDENTIAL 29.Can a supplier develop promotional or advertising programs for specific customers in which it offers them special performance allowances?

42. McGuireWoods | 42 CONFIDENTIAL 30.Shark and Target were competitors in the sale of various products and services. Shark signed an agreement to purchase all of the stock of Target and made a Hart-Scott-Rodino premerger filing. The DOJ investigated the transaction and allowed the transaction to close. The parties then actually closed the deal and merged their businesses. Because Shark was concerned about preserving the value of the deal, the Merger Agreement contained a number of provisions that governed Target’s conduct before the

43. McGuireWoods | 43 CONFIDENTIAL # 30 Continued: closing. The Agreement prohibited Target in the pre- closing period from offering customers discounts of over 20%, entering into service contracts of more than 30 days at a fixed price, or entering into any contract to provide certain services, without Shark’s prior written approval. Target also was required to submit pre-approval forms to Shark which contained information about Target’s customers and its

44. McGuireWoods | 44 CONFIDENTIAL # 30 Continued: prospective bids for new business. Shark had the right to approve or reject proposed customer contracts seeking discounts over 20%, or which fell in the other categories. Was there anything wrong with these coordination activities before the deal closed and the parties merged their businesses?

45. McGuireWoods | 45 CONFIDENTIAL 31.If a prospective buyer needs information during the due diligence investigation about the competing seller’s current contracts or bids in order to value the seller’s business, can the buyer obtain that information?

46. McGuireWoods | 46 CONFIDENTIAL 32.Once competitors agree to merge and obtain HSR approval, what activities can they begin to integrate before the closing so that they can “hit the ground running” when the deal closes?

47. McGuireWoods | 47 CONFIDENTIAL Questions or Comments? www.mcguirewoods.com