Antitrust in Brief.

Subject as they are to strict scrutiny under both federal and state antitrust laws, associations are common targets for antitrust plaintiffs and prosecutors. The Sherman Act, the principal federal antitrust statute, prohibits "contracts, combinations, or conspiracies... in restraint of trade." By its very nature, an association is a "combination" of competitors. So one element of a possible antitrust violation is always present, and an association need only take some action that unreasonably restrains trade to create an antitrust violation.

Severe consequences. The consequences of violating the antitrust laws can be severe. A conviction can carry stiff fines for the association and its offending leaders, jail sentences for individuals who participated in the violation, and a court order dissolving the association or seriously curtailing its activities. The antitrust laws can be enforced against associations, their members, and their employees by either government agencies or private parties (such as competitors and consumers) through treble (triple) damage actions.

Because the Sherman Act is a criminal conspiracy statute, an executive who attends a meeting at which competitors engage in illegal discussions may be held criminally responsible even if he or she says nothing. The executive's very attendance may be sufficient to imply acquiescence, making him or her liable to as great a penalty as those who actively participated in the illegal agreement.

Common claims. The most serious and frequently enforced antitrust claim against associations is price-fixing. Any explicit or implicit understanding affecting the price of a member's product or service is prohibited, even if the understanding would benefit consumers. Other typical claims include group boycotts or concerted refusals to deal; customer allocation or territorial division; bid-rigging; and illegal tying arrangements. Antitrust-sensitive areas of association activity include membership restrictions, standard setting, certification and self-regulation, statistical surveys, and information exchange programs, among others.

Avoiding liability. To avoid antitrust liability, associations should adopt a formal antitrust compliance program and distribute this policy regularly to all officers, directors, committee members, and employees. The policy should require, among other conditions, that all association meetings be regularly scheduled--with agendas prepared in advance and reviewed by legal counsel--and that members be prohibited from holding "rump" meetings.

Above all else, members must be free to make business decisions based on the dictates of the market, not the dictates of the association. Any deviation from this general principle, such as adoption of a code of ethics that infringes on members' ability to make fully independent business decisions, should be approved by legal counsel.