Recent Antitrust Enforcement Actions
Co-Author: Stacey L. Pine
In recent years, the Antitrust Division of the Department of Justice and the Federal Trade Commission (FTC), the two federal agencies charged with antitrust enforcement, initiated very few enforcement actions involving associations. In 2009, however, the Obama Administration publically promised that the days of relaxed anti-trust enforcement were gone and that it would employ vigorous antitrust enforcement efforts as a necessary means of reviving the economy. Two key cases filed by the FTC against trade associations in 2013 show that the FTC is committed to upholding its enforcement promise and that associations are not exempt from enforcement action.
Antitrust violations encompass much more than just price fixing, and may result from any activity that restrains competition. For instance, in actions filed against the Music Teachers National Association, Inc. (MTNA) in March of 2013, and against the California Legal Support Professionals (CALPro) in August of 2013, the FTC alleged that the associations' codes of ethics prohibited competition among members and were in direct violation of Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.”
In the Matter of Music Teachers National Association, Inc.
The ethics provision at issue in MTNA was seemingly harmless, requiring its members to respect their colleagues and not actively recruit students from competing teachers. According to the association this provision was added for the purpose of promoting collegiality among its members. The FTC, however, believed it restrained competition and deprived consumers of the benefits that result from competition among music teachers. The FTC further alleged that the association violated the FTC Act because of non-competitive behavior carried out by its state affiliates. While the national association did not have a pricing policy, some of its state affiliates prohibited members from charging fees that were lower than the community average or from advertising free lessons or scholarships. The FTC alleged that by allowing affiliates to have such pricing policies, MTNA was engaging in concerted activity with the affiliates for the purpose of restricting competition.
MTNA's settlement with the FTC required MTNA to remove the non-solicitation provision from its code of ethics and “cease and desist from restricting solicitation among its members.” The association was also required to sever relationship with all affiliates known to be engaging in conduct that restrains solicitation, advertising, or price-related competition by its members. MTNA must also notify its affiliates that as a condition of continued affiliation with the national association, each affiliate must execute a statement affirming it is in no way restricting advertising or price-related competition among its members.
In the Matter of California Association of Legal Support Professionals
In CALSPro, the association's members were required to abide by the code of ethics as a condition of membership. The FTC alleged that the following four code of ethics provisions restrained the ability of its members to compete on price, solicit legal support professionals for employment, and to advertise.
- “It is not ethical to cut the rates you normally and customarily charge when soliciting business from a member firm's client . . .”
- “It is not ethical to . . . speak disparagingly of another member.”
- “Never discuss the bad points of your competitor.”
- “It is unethical to contact an employee of another member firm to offer him employment with your firm without first advising the member of your intent.”
The settlement required CALSPro to, among other things, cease and desist from restraining its members from engaging in price competition, solicitation of employees, or advertising and also required the association to adopt an antitrust compliance program. Additionally, for the next five years, CALSPro must appoint an Antitrust Compliance Officer and provide in-person annual training to its board of directors, officers, and employees.
These recent enforcement actions provide valuable lessons about just how vulnerable trade associations, which by nature are a collaboration of competitors, are to antitrust violations. They also evidence the FTC's commitment to holding associations accountable for violations. Given these enforcement efforts, associations should have their codes of ethics reviewed to ensure they do not violate antitrust law.