Agency blog post reminds industry groups that “competitors are expected to compete”.
If you’re a trade association and you’ve recently had that creepy feeling that someone’s watching you, you’re probably right. That would be the Federal Trade Commission (FTC), one of whose missions is to preserve competition in the marketplace. Since trade associations are cooperative entities composed of members who normally compete against one another, the potential for anticompetitive conduct is evident.
And in case anybody had forgotten about that, the FTC has in a recent blog post on its website reminded trade associations that they are subject to the same antitrust rules as other businesses. In particular, the FTC cautioned that it remains vigilant about trade association activity that restrains competition among its members without a legitimate business justification.
While acknowledging the great benefit that a trade association can provide to its industry, the FTC noted that some association practices have been condemned by the courts for antitrust violations. The FTC was focused particularly on association rules and bylaws that constrain the normal give-and-take among competing association members in the marketplace.
The FTC’s message in a nutshell: “Competitors are expected to compete” and “there are no special antitrust rules for trade associations.”
The announcement was apparently prompted by recent FTC enforcement actions involving a couple of associations which had imposed on their members anticompetitive restrictions lacking a legitimate business rationale. Historically, collusion among members to raise prices has long been one of the more obvious types of anticompetitive behavior. The misconduct flagged in the two recent actions was arguably less obvious. In one case, an association not only barred its members from taking out comparative ads but it also prevented members from offering discounted rates to another member’s clients or recruiting another member’s employees without giving prior notice. In the other case, the association prevented members from soliciting clients from a rival.
The FTC put the kibosh on all these provisions. In the view of the FTC, the prohibited activities – i.e., competing for customers, cutting prices, and recruiting employees – all limited the ability of members to compete against one another. The FTC concluded that, absent some “procompetitive justification”, such limitations were unreasonable restraints on trade that violate the Sherman Antitrust Act.
The FTC’s blog announcement is a clear warning to trade associations: their conduct (including organizational rules, bylaws, etc.) will be scrutinized to insure that they do not restrict competition in a way that harms consumers. And when an association’s conduct is determined to effect such restrictions, that conduct will be viewed by antitrust enforcers – and, presumably, the courts – as impermissible joint decision-making by otherwise independent competitors.
While the particular antitrust misbehavior described in FTC’s blog post may not look like the types of activities in which broadcast-related associations (including, e.g., state broadcaster associations) routinely engage, bear in mind that the FTC’s post is not all-inclusive. The FTC plans further reminders regarding other types of association activities likely to attract the attention of antitrust enforcement efforts – think group boycotts, advertising restrictions, information exchanges, exclusive membership benefits, etc. We’ll keep an eye out, so stay tuned.
Of course, any trade associations uncertain about their own organizational rules or activities should consult counsel.