EMA is committed to the free enterprise system. The Federal and State antitrust laws are designed to preserve the free enterprise system, and it is EMA’s policy to assure full compliance with those laws.
EMA’s officers, directors, and members should be familiar with these antitrust compliance guidelines, and adhere to the spirit and letter of these guidelines. These guidelines are not a definitive statement of all applicable antitrust laws or their interpretation. Rather, they state absolute prohibitions and exceed the minimum requirements of the law, as a reflection of EMA’s policy.
Violation of this policy may adversely affect EMA, its members, and the individual violator. No such violation will be tolerated by EMA. In addition, individuals may be subject to criminal and civil penalties for their own acts. As will be apparent from the discussion that follows, each member must not only comply with the law, but should also conduct himself or herself in such a manner that it will not even appear that the law has been violated.
EMA will make every effort to keep all members informed as to their obligations and responsibilities for compliance with all antitrust laws and regulations at any EMA meetings that might involve discussions relating to competition issues. However, the primary responsibility for compliance rests with each individual participant.
Whenever a member or participant is concerned about whether any action, question, or comment might create an antitrust problem, it is that person’s responsibility to seek guidance from the presiding member or legal counsel in order to obtain the necessary legal guidance.
Executive personnel of EMA are expected to be able to recognize antitrust problem areas but should not undertake to resolve such matters without consultation with legal counsel. Legal counsel shall be responsible for the interpretation of this policy in consultation with EMA’s President and Chairman, and in appropriate circumstances shall investigate violations, monitor compliance, and answer inquiries as to compliance with the laws and regulations involved in this policy.
III. SUMMARY OF MOST IMPORTANT PROVISIONS
The primary antitrust provision with which EMA and its members must be concerned is Section 1 of the Sherman Act. Under Section 1 of the Sherman Act every contract, combination, or conspiracy (joint conduct by two or more), in unreasonable restraint of trade or commerce, is unlawful. Certain forms of joint conduct by competitors are presumed by the courts to be unreasonable, such as price-fixing agreements or the allocation of territories or customers. Other conduct is governed by the “rule of reason,” is not presumed to be unreasonable, and may be justified by legitimate economic efficiencies and business considerations. These guidelines are designed to make sure that members avoid circumstances of potential unlawful, joint conduct.
The Clayton Act supplements the Sherman Act and covers specific types of conduct, such as an unlawful “tying” (conditioning the sale of a unique or desirable product on the purchase of a less desirable product where the seller has a dominant market position in the desirable product and competition in the less desirable product is foreclosed). Similarly, requirements and exclusive dealing contracts can also violate the Clayton Act in circumstances where competitors are foreclosed and there is the likelihood of a substantial lessening of competition.
The Robinson-Patman Act amendments to the Clayton Act prohibit a seller from discriminating in price and promotional allowances and services in the sale of products of like grade and quality to purchasers competing in the sale of those products.
Section 5 of the Federal Trade Commission Act supplements the Sherman Act by declaring unlawful unfair methods of competition in, or affecting, commerce. The Federal Trade Commission can define what constitutes an unfair method of competition and uses Section 5 to attack conduct that may not strictly come within the prohibitions of the antitrust laws, but which violates the spirit of those laws.
Many states have enacted antitrust and trade regulation laws similar to the federal laws, and which also may impact EMA’s activities.
IV. SPECIFIC AREAS OF ATTENTION
There are certain critical areas that deserve special attention:
A. Price Fixing
It is unlawful for competitors to reach any agreement or understanding about prices, whether it is to raise, lower, or stabilize prices, and any such discussions should be strictly avoided. The same restriction applies to agreements on certain other terms and conditions of sale, such as discounts, payment terms, credit, allowances and other terms that affect prices, profit margins, cost factors, discount, or credit terms. To avoid the appearance of an agreement, there should be not discussion of any member’s future intentions concerning any of those subjects. EMA’s members should not exchange with competitors price schedules or future notices of price or product promotions.
B. Allocation of Customers or Markets Among Competitors
Several other types of agreements or understandings are treated as harshly as price-fixing under the antitrust laws. Therefore, EMA members and meeting participants should not discuss or exchange information with each other about any division or allocation of markets, territories, or customers, or their merchandise volumes or any restrictions on the volume of any member’s products available for licensing, sale or rental.
A boycott is an agreement by two or more parties, usually but not always at the same level of competition, to deny customers, supplies, or other competitive advantages to a third party.
Horizontal boycotts involve agreements by two or more competitors to coerce their customers or suppliers not to deal with a third party, to deny that third party access to crucial competitive resources, or to refuse to do business with a third party. EMA members should never discuss joint action in refusing to deal with suppliers or customers or obtaining agreement of a supplier or customer not to deal with a competitor of either.
The Antitrust Division of the Department of Justice and the Federal Trade Commission enforce the antitrust laws. In addition, state agencies may also enforce state and federal antitrust laws. Violators of the antitrust laws may face both civil and criminal penalties. In addition to prison terms up to three years, criminal penalties may include a fine of $350,000 for individuals, and $10,000,000 for corporations. Those injured by violations of the federal antitrust laws may recover in civil actions three times the amount of actual damages they have sustained. Such litigation is very costly to defend and can lead not only to exposure for damages, but also to the opposing parties being awarded attorneys’ fees and costs. State laws also provide for recovery of damages by injured parties. Finally, an injunction or consent judgment may be entered in a civil action. Consent judgments often contain sweeping prohibitions going beyond the scope of the violation originally involved in such cases, thereby limiting the future business freedom of the parties involved.
VI. DOs & DON’TS - A CHECKLIST
A checklist of “dos and don’ts” provides a shorthand method that members can use to avoid antitrust exposure.
There should be no discussion or exchange of any information by or among competitors concerning:
- Prices, price changes, price quotations, pricing policies, discounts, payment terms, credit, allowances, or terms or conditions of sale;
- Profits, profit margins, or cost data;
- Market shares, sales territories, or markets;
- The allocation of customers or territories;
- Selection, rejection, or termination of customers or suppliers;
- Restricting the territory or markets in which a company may resell services or products;
- Restricting the customers to whom a company may sell;
- Unreasonable restrictions on the development or use of technologies;
- In sum, matter which is inconsistent with the proposition that each company must exercise its independent business judgment in pricing its services or products, dealing with its customers and suppliers, and choosing the markets in which it will compete.
There are many instances in which some of the topics on the list may be discussed for clearly pro-competitive purposes, but these should be held under the guidance of antitrust counsel so as to avoid even the appearance of impropriety. In the absence of antitrust counsel, any member or meeting participant exposed to any discussions or activities which appear to violate this checklist should object immediately and: (1) disassociate itself from any such discussions; (2) if they continue, officially adjourn the meeting and leave immediately; and (3) report it to EMA’s President, who then should consult with counsel.