Once again, trade associations are reminded that they are not immune from scrutiny and liability under the antitrust laws. On March 4, 2009, the Federal Trade Commission (“FTC”) announced that it had entered into a voluntary settlement with the National Association of Music Merchants, Inc. (“NAMM”) over allegations that NAMM enabled and encouraged the exchange of competitively-sensitive pricing information among its members. According to the FTC, sharing this information enabled NAMM members to coordinate price increases for musical instruments and establish unfair minimum advertised prices.
NAMM is a nonprofit trade association comprised of more than 9,000 member companies, including most U.S. manufacturers, distributors, and dealers of musical instruments. Among other activities, NAMM promotes the musical instrument industry by lobbying the government, offering seminars, promoting music educations, and organizing trade shows. In addition, NAMM holds various meetings throughout the year.
According to the FTC, between 2005 and 2007, NAMM organized and sponsored meetings where “members were encouraged to discuss strategies for implementing manufacturers’ minimum advertised pricing policies, restricting retail price competition, and securing higher retail prices,” in violation of Section 5 of the Federal Trade Commission Act. The FTC alleged that NAMM played an active role in facilitating this illegal conduct by determining the scope of the discussions, selecting moderators for the discussions, steering the discussions, and setting the agendas for the programs. According to the FTC, NAMM’s actions crossed the line of legitimate trade association activities when it engaged in conduct that had the “principal tendency or likely effect of harming competition and consumers.”
Under the terms of the proposed consent order, NAMM is barred from coordinating the exchange of price information among members, coordinating discussions about the terms under which manufacturers will buy or sell products, and facilitating anticompetitive agreements among members related to price, minimum advertised pricing, and terms of dealing. NAMM is also required to implement an antitrust compliance program and have antitrust counsel provide written review of association materials and guidance to NAMM on complying with the competition laws. The FTC noted that the settlement will not limit NAMM’s ability to engage in legitimate trade association activities. The proposed consent order will expire in 20 years.
This settlement reemphasizes the need for associations to be well educated in the antitrust laws to ensure that they do not cross the bounds of legitimate association activities. It is also important for associations to be cognizant of the potential antitrust risks inherent in bringing members together and to work to minimize those risks by implementing safeguards such as providing members with written agendas of all meetings, ensuring the presence of antitrust counsel when competitively-sensitive topics are discussed, and educating association staff and members on the antitrust laws. Key to this last point is working with counsel to implement an effective antitrust compliance program that addresses the specific antitrust risks faced by the association.