Trade associations are often required to strike a balance between coordinating members’ needs and avoiding collusive behavior that violates the antitrust laws. A review of last year’s antitrust activity confirms that associations were a target for several dozen suits as well as Federal Trade Commission enforcement action. This environment tends to quicken the heart rates of trade association staff. But the 2012 activity ultimately confirms that trade associations’ compliance goals should remain focused on long-standing, key areas of risk.
1. Control association meetings.
Antitrust risk tends to arise related to association meetings when members use the opportunity as a mechanism for collusive communications. Several 2012 cases illustrate the need to control communications during association meetings. The plaintiffs in at least four cases alleged that the association’s members used meetings as an opportunity to conspire, particularly through conversations outside of the “official meetings.” Three cases survived a motion to dismiss based at least in part on this allegation.1 In one case involving a highly concentrated industry, the mere attendance by members at trade association meetings helped the plaintiffs move their case forward, with the court noting that the leaders of the participating firms had the opportunity at these meetings to communicate with each other about alleged price-fixing.
Not all of the recent plaintiffs were so successful, however, with a court dismissing one claim in part because the plaintiff failed to allege injury to competition, which is a necessary element to most antitrust actions.2 Instead, the claims were limited to injury to the plaintiff itself. Moreover, the court concluded that, under the pleading requirements of the Supreme Court’s Twombly and Iqbal decisions, the plaintiffs’ conclusory statements about the alleged conversations lacked the specifics to support a plausible antitrust claim—that is, the plaintiff failed to provide sufficient details about what the conversation entailed, who participated, and what the agreement included.
These cases illustrate the importance of setting a carefully constructed meeting agenda, while keeping discussions close to that agenda, documenting the discussions, and avoiding potentially problematic conversations outside of the confines of official business. Though associations cannot monitor every conversation—and business discussions during social portions of meetings are often a valuable aspect of association meetings—members nevertheless can be prodded to put up appropriate guards.
2. Manage the information shared among your members.
Trade associations have long recognized that they can play a helpful role in exchanging information among members, particularly when that information is not related to price and is sufficiently disconnected from ongoing market competition (e.g., the information does not contain current or future data). The risk of information-sharing is highlighted, however, by the FTC’s 2012 action against three dominant players in the pipe-fittings industry.3 There, the FTC argued that these dominant competitors created a trade association for the specific purpose of exchanging pricing information to facilitate a price-fixing agreement. The Commission ruled that this conduct, along with the alleged schemers’ parallel-pricing, was sufficient to demonstrate a potential antitrust violation. While this case allegedly involved an attempt to create a fictional trade association, this type of conduct often also arises when a bona fide association’s members are able to use the association to exchange pricing information. This FTC enforcement action follows two actions in 2011 in which the FTC pursued joint price negotiations by associations of health care providers. The FTC’s enforcement activity therefore offers an opportunity for associations to reexamine their information exchange practices.
3. Tread carefully around actions that could harm particular market participants.
The requirement that a plaintiff demonstrate an injury to competition itself, in addition to injury to a particular competitor, has not stopped plaintiffs from seeking damages for association activity that harmed only the plaintiff. For instance, a realtor with a unique website with the phrase “MLS” in its URL (TheMLSOnline.com) sued another local realtor and the local trade association, alleging that the defendants conspired to impede the plaintiff’s use of its URL.4 The district court dismissed the claims. The court first confirmed that group boycotts typically are not per se, or automatic, violations of the antitrust laws, especially when there is no allegation that the trade association used dominant market power to affect suppliers or customers. The court then evaluated whether the plaintiff sufficiently pled that the anticompetitive impact could outweigh any precompetitive benefits of the collusive conduct, otherwise known as Rule of Reason analysis. The court concluded that the plaintiff’s claims focused entirely on a purported conspiracy against the plaintiff itself and not competition, and therefore could not proceed against the defendants under the antitrust laws.
By contrast, another realtor-plaintiff was permitted to proceed with its case when it alleged that its competitors colluded to set standards for access to the area’s MLS listings in a manner that excluded a subset of realtors.5 In considering the plaintiff’s case on appeal, the Fourth Circuit once again confirmed that the activities of trade associations allow members to work cooperatively in a manner that is generally considered precompetitive. But the court allowed the case to proceed because the relatively basic allegations in the complaint nevertheless set out a plausible conspiracy theory—a group of competitors had joined together to hinder a group of their competitors’ ability to compete.
Associations therefore should take care when an action will injure members’ competitors, particularly if the injury could extend beyond an individual entity.
4. Monitor dominant players.
Market-dominant members are often alleged to control an association’s decision-making to the detriment of their competitors. In one recent case, the plaintiff alleged that a standard-setting organization was effectively co-opted by a group of large, member-manufacturers and, as a result, the manufacturers and the organization impeded a supplier’s competitive position through a collusively tailored standard designed to benefit the dominant players.6 The complaint alleged that the manufacturer-defendants held positions of leadership on various committees within the standard-setting organization. Through those positions, the manufacturers allegedly used the standard-setting process in a manner that injured the plaintiff’s ability to compete. The court allowed the case to proceed against the manufacturers and the organization, while acknowledging that mere membership in a standard-setting body is not sufficient to create antitrust liability. Yet the court ruled that an organization could be liable if it allowed itself to be part of the conspiracy by permitting its members to go around its existing rules, which the plaintiff alleged had occurred. This case illustrates the importance of enforcing an association’s antitrust policy, particularly when issuing standards of conduct or other rules that effectively create a standard, such as membership criteria.
Ultimately, the use of associations to facilitate collusive conduct places all participants, including the association itself, at risk of suit as well as civil and criminal penalties. But the 2012 antitrust activity changed little on this front. It merely confirmed that compliance efforts should routinely be reexamined and reaffirmed.