Association activities were the focal point of two recent antitrust enforcement actions involving allegations of collusive action designed to lower or fix prices in the market. While the allegations involved in these two actions are not new to those who have paid attention to how the antitrust laws can implicate association activities, they should serve as a cautionary reminder of the importance of instituting an effective antitrust compliance program.
FTC Consent Order
The Federal Trade Commission (FTC) published a proposed consent order on September 10, airing its allegations of anticompetitive behavior by the American Institute for Conservation of Historic and Artistic Works (AIC). (An FTC consent agreement such as this one is considered a settlement between the FTC and the accused organization and does not constitute an admission that any of the FTC’s allegations are true.) According to the FTC’s complaint, AIC, an organization whose members are professionals who manage and otherwise care for cultural objects, adopted and maintained "Guidelines for Practice of the AIC." The "Guidelines" are a subset of AIC’s code of ethics — they establish ethical standards to which association members are asked or required to adhere. Accompanying the "Guidelines" are a set of "Commentaries," which presumably interpret and expound on the "Guidelines." The FTC alleged that the "Commentaries" stated that "the consistent undercutting of local or regional market rates should be understood to be unprofessional behavior" and that "when damage to the cultural property is imminent, and funding is limited, a conservation professional may work at reduced fees or pro bono." Analyzing these provisions, the FTC stated: "Read together, these provisions mean that only in these limited circumstances can a conservator work for free or at reduced fees without being considered to be engaging in ‘unprofessional behavior.’" The proposed consent decree, which becomes final after a public comment period, requires that AIC remove the price-related provisions from all documents, publish the revised documents in its directory, publish a copy of the FTC consent order and complaint in its AIC News periodical that it sends to members "with such prominence as feature articles that are regularly published in AIC News," and publish a copy of the consent order and complaint on its website "with a link placed in a prominent position on the website’s homepage." There are also requirements that AIC make regular written reports to the FTC. Association codes of ethics have long been considered fertile ground for antitrust enforcement agencies. Such documents have often included provisions such as those cited by the FTC in this instance that seek to portray price-cutting as an unprofessional or unethical practice. Associations usually have little success in defending such provisions, which are viewed by the FTC and other enforcement agencies as evidence of price-fixing — activity that is viewed by the agencies and the U.S. Supreme Court as per se illegal under the antitrust laws. What is important to note about this most recent enforcement action is that the FTC pursued enforcement against AIC even though (1) there was no accusation that AIC’s members faced any discipline if they violated the fee-related statements; (2) the complained-about statements were only a part of the "Commentaries" that accompany AIC’s "Code of Ethics" and "Guidelines for Practice," not part of the Code or Guidelines themselves; and (3) the complained-about statements do not necessarily preclude members from offering their services at reduced fees or for free — they only seek to limit such activities.
Third Circuit and Travel Agency Commissions
The U.S. Court of Appeals for the Third Circuit held on September 9 that a trade association for the airline industry and individual airlines may not be the subject of an antitrust lawsuit that only alleges harm to competition outside the United States. The court’s decision was based on the threshold issue of jurisdiction, and as such the court was not required to (nor did it) reach any conclusion regarding the underlying merits of the case. Still, it is interesting to note the underlying accusations, which illustrate another type of association activity that is frequently scrutinized — member communications at association-sponsored meetings. In this case, a group of non-U.S.-based travel agents sued the International Air Transport Association ("IATA") and a number of major U.S. airlines, accusing them of illegally agreeing to lower the commissions that airlines will pay to such travel agents. The collusive action that was alleged by the plaintiffs to be the "smoking gun" that caused the airlines to agree to lower the commissions was a meeting of an association committee. Interestingly, none of the airline company defendants were represented at this committee meeting when the alleged agreement to collude occurred, and the committee meeting minutes stated: "U.S. based … members were prohibited by their authorities from participating in such discussions … and were therefore not present for this part of the agenda." Still, the plaintiffs stated that the U.S. airlines assisted in planning the meeting agenda, were aware that a vote to lower commissions would be taken, and endorsed the reduced commission rates. The plaintiffs’ claims were never addressed by the court on the merits, and this particular association may have had a number of valid defenses to them (one of which may have been that IATA is governed and protected to some extent by the Federal Aviation Act). Still, what this case highlights for associations is that antitrust plaintiffs can and will look beyond committee and board meeting minutes and other official documents to find evidence of a collusive agreement. The focus of an effective association antitrust compliance program should not be on avoiding evidence of antitrust liability exposure, but rather the importance of complying with the letter and spirit of the antitrust laws.
FTC Consent Order
The Federal Trade Commission (FTC) published a proposed consent order on September 10, airing its allegations of anticompetitive behavior by the American Institute for Conservation of Historic and Artistic Works (AIC). (An FTC consent agreement such as this one is considered a settlement between the FTC and the accused organization and does not constitute an admission that any of the FTC’s allegations are true.) According to the FTC’s complaint, AIC, an organization whose members are professionals who manage and otherwise care for cultural objects, adopted and maintained "Guidelines for Practice of the AIC." The "Guidelines" are a subset of AIC’s code of ethics — they establish ethical standards to which association members are asked or required to adhere. Accompanying the "Guidelines" are a set of "Commentaries," which presumably interpret and expound on the "Guidelines." The FTC alleged that the "Commentaries" stated that "the consistent undercutting of local or regional market rates should be understood to be unprofessional behavior" and that "when damage to the cultural property is imminent, and funding is limited, a conservation professional may work at reduced fees or pro bono." Analyzing these provisions, the FTC stated: "Read together, these provisions mean that only in these limited circumstances can a conservator work for free or at reduced fees without being considered to be engaging in ‘unprofessional behavior.’" The proposed consent decree, which becomes final after a public comment period, requires that AIC remove the price-related provisions from all documents, publish the revised documents in its directory, publish a copy of the FTC consent order and complaint in its AIC News periodical that it sends to members "with such prominence as feature articles that are regularly published in AIC News," and publish a copy of the consent order and complaint on its website "with a link placed in a prominent position on the website’s homepage." There are also requirements that AIC make regular written reports to the FTC. Association codes of ethics have long been considered fertile ground for antitrust enforcement agencies. Such documents have often included provisions such as those cited by the FTC in this instance that seek to portray price-cutting as an unprofessional or unethical practice. Associations usually have little success in defending such provisions, which are viewed by the FTC and other enforcement agencies as evidence of price-fixing — activity that is viewed by the agencies and the U.S. Supreme Court as per se illegal under the antitrust laws. What is important to note about this most recent enforcement action is that the FTC pursued enforcement against AIC even though (1) there was no accusation that AIC’s members faced any discipline if they violated the fee-related statements; (2) the complained-about statements were only a part of the "Commentaries" that accompany AIC’s "Code of Ethics" and "Guidelines for Practice," not part of the Code or Guidelines themselves; and (3) the complained-about statements do not necessarily preclude members from offering their services at reduced fees or for free — they only seek to limit such activities.
Third Circuit and Travel Agency Commissions
The U.S. Court of Appeals for the Third Circuit held on September 9 that a trade association for the airline industry and individual airlines may not be the subject of an antitrust lawsuit that only alleges harm to competition outside the United States. The court’s decision was based on the threshold issue of jurisdiction, and as such the court was not required to (nor did it) reach any conclusion regarding the underlying merits of the case. Still, it is interesting to note the underlying accusations, which illustrate another type of association activity that is frequently scrutinized — member communications at association-sponsored meetings. In this case, a group of non-U.S.-based travel agents sued the International Air Transport Association ("IATA") and a number of major U.S. airlines, accusing them of illegally agreeing to lower the commissions that airlines will pay to such travel agents. The collusive action that was alleged by the plaintiffs to be the "smoking gun" that caused the airlines to agree to lower the commissions was a meeting of an association committee. Interestingly, none of the airline company defendants were represented at this committee meeting when the alleged agreement to collude occurred, and the committee meeting minutes stated: "U.S. based … members were prohibited by their authorities from participating in such discussions … and were therefore not present for this part of the agenda." Still, the plaintiffs stated that the U.S. airlines assisted in planning the meeting agenda, were aware that a vote to lower commissions would be taken, and endorsed the reduced commission rates. The plaintiffs’ claims were never addressed by the court on the merits, and this particular association may have had a number of valid defenses to them (one of which may have been that IATA is governed and protected to some extent by the Federal Aviation Act). Still, what this case highlights for associations is that antitrust plaintiffs can and will look beyond committee and board meeting minutes and other official documents to find evidence of a collusive agreement. The focus of an effective association antitrust compliance program should not be on avoiding evidence of antitrust liability exposure, but rather the importance of complying with the letter and spirit of the antitrust laws.