Antritrust
Guidelines
Professional associations such as the Association of Legal
Administrators (ALA), although well recognized as valuable tools of American
business, are subject to severe scrutiny by both federal and state
governments.
The single most significant law affecting
professional associations is the Sherman Antitrust Act, which makes unlawful
"every contract, combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce..."
A professional
association by the very nature of the fact that it is made up of competitors is
a combination, thus satisfying one of the elements in proving an antitrust
violation. Section 5 of the Federal Trade Commission Act is also applicable to
professional associations; it makes unlawful the same types of conduct that are
prohibited by the Sherman Act. Furthermore, almost all states have enacted
antitrust laws similar to the Sherman Act.
There is no
organization too small or too localized to escape the possibility of a civil or
criminal antitrust suit. The federal government has brought civil or criminal
actions against such small organizations as Maine Lobstermen, a Virginia
audiovisual association, Bakersfield Plumbing Contractors, the Utah
Pharmaceuticals Association, and local barbers
associations.
The government has brought approximately five
civil and ten criminal cases a year against professional associations. It is
thus imperative that every professional association member, regardless of the
size of the association or the size of those comprising the membership, refrain
from indulging in any activity which may be the basis of a federal or state
antitrust action.
There are four main areas of antitrust
concern for professional associations: price fixing, membership, standardization
and certification, and industry self-regulation. The area of greatest concern,
for it is the area where individual members are most likely to violate the law
and the area where the government appears most concerned, is price fixing. The
government may infer a violation of the Sherman Act by the mere fact that all or
most of the members of the professional association are doing the same thing
with respect to prices. It is not required that there be an actual agreement,
written or unwritten, to increase prices. Rather, price fixing is a very broad
term which includes any concerted effort or action which has an effect on prices
or on competition.
Accordingly, professional association
members should refrain from any discussion, which may provide the basis for an
inference that the members agreed to take action relating to prices, production,
allocation of markets, or any other matter having a market effect. The following
topics, while not the only ones, are some of the main ones, which should not be
discussed at regular meetings or member gatherings:
- Do not discuss current or future billing rates, fees, disbursement
charges or other items that could be construed as "price." Further, be very
careful of discussions of past billing rates, fees or prices.
- Do not discuss what is a fair profit, billing rate or wage
level.
- Do not discuss an increase or decrease in price, fees or wages, or
disbursement charges. In this regard, remember that interest charges are
considered an item of price.
- Do not discuss standardizing or stabilizing prices, fees or wages,
or disbursement charges.
- Do not discuss current billing or fee procedures.
- Do not discuss the imposition of constitute unfair trade practices.
In this context, another law firm (or even a corporate legal department) may
be considered a competitor.
- Do not complain to a competitor that his billing rates, fees or
wages constitute unfair trade practices. In this context, another law firm (or
even a corporate legal department) may be considered a competitor
- Do not discuss refusing to deal with anyone because of his pricing
or fees.
Do not conduct surveys (under the auspices of ALA or informally)
relating to fees, wages or other economic matters without prior review by
antitrust legal counsel. Any survey should have the following characteristics:
a) participation is voluntary and open to non-members, b) data should be of
past transactions, c) data should be collected by an independent third party,
such as an accounting firm, d) confidentiality of each participant's data
should be preserved, and e) data should be presented only in a composite form
to conceal data of any single participant. If these criteria are met, an
association can collect and disseminate data on a wide range of matters,
including such things as past salaries, vacation policies, types of office
equipment used, etc.
However, care must be taken to ensure that the purpose of any survey is
to permit each firm to assess its own performance. If a survey is used for the
purpose of or has the effect of raising or stabilizing fees, wages,
disbursements, credit policies and the like, it will create serious antitrust
problems.
Within this same legal framework applicable to
surveys, an association can make presentations or circulate articles regarding
such educational matters as establishing sound office procedures, etc., provided
it is clear that the matters are educational, and not a basis for law firm
uniformity or agreement.
Inasmuch as association antitrust
violations can subject all association members to criminal and civil liability,
members should be aware of the legal risks in regard to membership policy and
industry self-regulation. Fair and objective membership requirement policies
should be established. Membership policies should avoid:
- Restrictions on dealing with nonmembers.
- Exclusions from membership, especially if there is a business
advantage in being a member.
- Limitations on access to association information, unless the
limitation is based upon protection of trade secrets.
The Association of Legal Administrators has a code of ethics, which
sets forth parameters of ethical conduct. However, to ensure that the Code of
Ethics does not create any antitrust problems, ALA must continue to ensure that
its Code does not have arbitrary enforcement procedures or
penalties.
The penalties for violating federal or state
antitrust laws are severe. The maximum criminal penalty for violating the
Sherman Act is $350,000 for an individual and $10,000,000 for a corporation.
Pursuant to the Sentencing Reform Act, alternative maximum fines could be
increased to twice the pecuniary gain of an offender or twice the loss to
another person.
Individuals and corporate officers who are
found guilty of bid rigging, price fixing or market allocation will virtually
always be sentenced to jail pursuant to the Sentencing Guidelines; community
service cannot be used to avoid imprisonment. The minimum recommended sentence
is four months; the maximum is three years.
Additionally,
there are civil penalties such as injunctions or cease and desist orders, which
could result in government supervision of association members, restricting the
association's activities or disbanding the
association.
Civil suits may be brought by consumers or
competitors. Civil antitrust actions result in treble damage awards and
attorneys' fees. Thus, if association members are held liable to a competitor
for antitrust violations, which resulted in $500,000 worth of lost business, the
verdict may exceed $1,500,000.
The government's attitude
toward professional associations requires professional association members, as
well as professional associations themselves, to at all times conduct their
business openly and avoid any semblance activity which might lead to the belief
that the association members had agreed, even informally, to something that
could have an effect on prices, fees or competition. Thus, it is important that
members contact the association headquarters or legal counsel for guidance if
they have even the slightest qualms about the propriety of a proposed activity
or discussion.
Click here for
a PDF version of the Antitrust Guide from ALA