The U.S. Department of Justice and State Attorneys General continue to increase antitrust enforcement efforts to achieve laudatory goals, earn political capital or manufacture other sources of revenue. Your company, or industry, is not beyond their reach. Investigators will not be in the least deterred by not-for-profit status, and they will show no sympathy based upon the mission, purpose or service of your entity.
In the U.S., antitrust laws are designed to promote free and fair competition, prevent anti-competitive behavior, protect competition and protect consumers and small businesses. Unlawful or anticompetitive activity can include, among other things, price fixing, bid rigging, customer allocation, product allocation,
territorial allocation and group boycotts. In short, antitrust laws in the U.S. prohibit any agreements in restraint of trade, monopolizations or attempts to monopolize, unfair methods of competition, and price discrimination and discriminatory promotional allowances and services.
Penalties for antitrust violations can be very severe, and may be imposed regardless of motive or intent. Thus, the risks involved in engaging in anticompetitive behavior, knowingly or unknowingly, can include imprisonment, substantial fines, additional civil liability (plaintiffs’ class action lawyers are always lying in wait), litigation costs, business losses and other tangible and intangible costs. The government’s investigatory phase alone can cost your entity hundreds of thousands of dollars.
In order to protect your entity and employees from potential antitrust liability, consider the following practices, among other important considerations:
- Develop and implement an antitrust compliance program. The program does not need to be cumbersome and complex. In fact, it should be easy to understand and simple to follow.
- Always discuss with your attorney any documents that reference pricing, market allocations, and agreements or requests to refrain from dealing with a company, customer or supplier.
- If you have reason to believe that any communication may contain questionable material regarding pricing, market allocations, and agreements or requests to refrain from dealing with a company, customer or supplier, bring it to the attention of a supervisor, senior manager or attorney immediately. The failure to object to these types of communications can be used to demonstrate proof of an agreement to engage in these types of prohibited conduct. The risk of being charged with an antitrust violation increases with every communication with a competitor about prices, market shares, customer or market allocation, or similar matters—even if no action is taken.
- Avoid common “red flags,” like agreements with competitors, maintaining hard copy or electronic files containing a competitor’s nonpublic price and marketing information, exchanging nonpublic business information with a competitor, and trade association or group activities.
- Avoid unclear or careless statements in email communications that may be misinterpreted or construed against you in an investigation. Importantly, many antitrust actions are based not on the “smoking gun,” but are cobbled together with circumstantial evidence. Strive to be very clear in any email communication regarding the purpose of the message, and avoid discussions about, among other things, your company’s prices or prices charged by competitors, costs, profit margins, terms or other sensitive information. Establish a practice of performing a “compliance review” before pressing the send button.
- Similarly, while attending trade association meetings or other group meetings (in-person or over the phone or Internet), do not discuss with fellow trade association members or attendees information about (1) your company’s prices for products, assets or services, or prices charged by competitors, (2) costs, discounts, terms of sale, profit margins or anything that might affect your prices, or (3) any other competitively sensitive information concerning your company or a competitor’s company.
- Never stay at any meeting or gathering if discussions are taking place regarding pricing, market allocations and agreements or requests to refrain from dealing with a company, customer or supplier.
- Seek management and/or legal approval for any special pricing, rebates and discounts, exclusive dealing arrangements or agreements to offer pricing below your variable costs.
- Provide copies of your antitrust compliance guidelines to all participants at a trade association meeting, or all employees in your company.
- Use existing personnel and training opportunities to speak to and train your employees regarding antitrust compliance. Encourage reporting and disclosure by your employees and staff members.
- Uniformly and consistently enforce violations of any antitrust compliance policy created and adopted by your company.
Careful attention to antitrust compliance, including an antitrust compliance policy, may not prevent an investigation or criminal or civil enforcement action, but it may prove to be the ounce of prevention that is worth a pound of cure.