Avoid Antitrust Exposure with Conscientious Competition
September 3, 2016
Tradeshows are wonderful opportunities to meet new people, reconnect with old friends and learn something new. They also put glass companies into close contact with their market competitors. And where market competitors come together the specter of antitrust violations is present. Before eyes glaze over at the thought of an article addressing antitrust laws, recall that competition laws in the United States are heavily regulated, and the penalties are severe.
Antitrust laws seek to keep capitalist markets functioning fairly. They are intended to promote fair competition by protecting consumers and business from commercial behaviors that have the tendency to undermine competition. The laws generally focus on commercial transactions and companies with significant market share in a region. Those limits are not, however, always true.
There are four primary sources of federal antitrust law. The Sherman Act prohibits unreasonable restraints on trade and market monopolization. The Clayton Act focuses on activities that lead to monopolies; for example, tying arrangements, exclusive dealings, and how companies acquire and merge with one another. The Robinson-Patman Act deals with pricing discrimination. Finally, the Federal Trade Commission Act gives the Federal Trade Commission the power to enforce the other acts, and address activities that it believes might be unfair or deceptive.
In addition to federal antitrust laws, virtually all states have enacted statutory schemes that address market manipulation activities within their own jurisdiction.
Whatever the source, antitrust violations usually relate to how a company deals with its competitors and its customers/supply chain. Agreements among competitors to fix prices, rig bids, divide markets or engage in group boycotts have all been found to be anti-competitive. Companies that impose excluding dealings, mandatory pricing, and sales tying requirements on their customers and supply chain members have also been found to have violated antitrust laws. Single company actions that threaten competition such as monopolies, predatory pricing, and refusals to deal, can also form the basis of an antitrust violation.
It is impossible to list all the actions that can expose a company to antirust problems. How, then, can antitrust issues be identified, and what can be done to limit the potential for such exposure?
There is no single answer. Antitrust laws are broad and varied because the markets are broad and varied. Even so, some general considerations can help steer clear of the most obvious forms of anticompetitive behaviors:
- When talking with a competitor there are certain categories of discussion that should be off limits. Examples include current or future pricing, bids, forecasts, or specific credit terms. Careless or cavalier discussions regarding these items could be viewed as improper cooperation between market participants, which violates antitrust laws.
- Competitors sometimes discuss market tendencies and customers. While not all such discussions are antitrust violations, an agreement to not sell in a particular region, not to sell to particular customers, or to buy from a certain supplier could each be violations. It is best to simply avoid these discussions.
- The sale is important when dealing with customers, but the terms surrounding the sale are where antitrust problems can arise. Watch for sale requirements that include minimum pricing requirements, limitations on open sales, tying sales of one product to sales of another, or agreements to limit promotion for other dealers. A desire to impose similar requirements should be reviewed by counsel.
- When the time has come to end a customer or dealer relationship, be sure that the decision to terminate has a sufficiently documented, neutral business justification. A vindictive or retaliatory termination can result in sometimes baseless antitrust claims.
- Many alleged antitrust violations can be challenged where a company lacks sufficient market share or otherwise has a reasonable business case in defense. Know your market locally and throughout the state/country. Educate yourself on the market and where problems can arise with pricing or conditions of sale. Be ready to present the business-related justification for your actions.