Rejecting advertisements.

An association publication's effectiveness in reaching a well-defined constituency makes it extremely attractive to advertisers interested in selling their products or services to a targeted market. But not all advertisements are equally attractive to associations. Associations may prefer not to run an advertisement for many reasons - concern about the advertisement's content, doubt about the advertiser's financial status, desire not to carry ads for competitors' products or services, or inconsistency with basic editorial or stylistic policies, to name a few - but not without apprehension that doing so may generate legal problems. In this column, Elena Broder provides a short overview of legal principles that most commonly affect advertising decisions by association publishers.

- Jerald A. Jacobs, ASAE General Counsel

In exercising control over the content of their publications, associations are generally free to reject advertisements for any reason whatsoever. Informing advertisers of this fact from the outset by including on advertising cards or similar materials a clear statement of the publisher's right to decline to publish any advertisement is a simple and important measure to reduce misunderstanding and disputes. Associations may choose to provide fuller elaborations of their editorial policies, explaining specific, but not exclusive, grounds upon which advertisements may be rejected.

Although the law primarily grants publishers broad discretion in accepting advertisements, in a few situations it directs a specific course of action. For example, principles of defamation law counsel that associations should reject advertisements that they suspect to be false and disparaging, as publishers may be held liable for defamatory statements in advertisements regardless of their lack of involvement in the creation of the defamatory content. Likewise, associations should be wary about the unauthorized use of trademarks or copyrighted material in advertisements.

By contrast, the antitrust laws - primarily the Sherman Act and applicable case law - carve out a limited number of circumstances that may mandate acceptance of advertisements. The antitrust laws are designed to prevent anticompetitive behavior, so the major antitrust concerns about advertising restrictions in association publications arise from the notion that an association publication's effectiveness at reaching a target audience, particularly where it is the sole practical method of reaching that audience, gives the association power to impede competition by controlling access to the market.

In general, an association may risk being found to have violated the Sherman Act if it refuses to give its competitors access to an "essential facility" - that is, a facility that competitors cannot duplicate in an economically feasible way but which they require to be able to compete. Although it is relatively unusual for a publication to be considered an essential facility because of the many avenues for marketing available today, associations should be aware of the risks of rejecting advertisements if the association publication is the only economical way for an advertiser to reach the members of an industry, profession, or interest group, such that a failure to advertise there would likely lead to the advertiser's business failure. This situation is, of course, unlikely to arise unless the association publication is the sole publication directed to members of a particular industry, profession, or interest group, and there are no other general-interest publications or alternatives such as direct mail, billboards, television, or trade shows that can feasibly be used to reach the potential customers. The existence of other competitors of the advertiser who are able to compete without advertising in the association's publication is a good indicator that the publication is not an essential facility.

In addition to the essential-facility context, an advertising policy that permits only association members to advertise in association publications is not recommended and may be inconsistent with an association's tax exemption. As with the provision of other services of competitive value, the greater the actual value of advertising in the association publication, the greater the risk that this policy will be viewed as giving unfair competitive advantage to one class of competitors at the expense of another. Such an arrangement might be characterized as a group boycott - an agreement among the association members and the association itself not to transact business with other competitors.

Despite these areas of caution, associations can take comfort that overall liability risks from advertising decisions are relatively low. So long as the association is on the lookout for defamation and infringement issues in advertisements it accepts, this course of action will rarely lead to liability. The likelihood of claims for tortious interference with contract for rejecting ads is low if the association clearly indicates its editorial policy. Furthermore, although associations should be aware of antitrust concerns, in most situations, facts likely will show that associations do not actually wield the market power or have the anticompetitive incentive with which the law is concerned. If the association offers a legitimate, pro-competitive, and non-pretextual reason for its advertising decision, its risk of incurring antitrust liability is small. When in doubt about particular advertising decisions, however, it is always advisable to check with an attorney before acting, rather than spending money and energy to respond to a claim or defend a suit after the fact.

Jerald A. Jacobs is a partner at Jenner & Block, Washington, D.C. Elena N. Broder is an attorney with Jenner & Block's Washington, D.C., office. Jacobs edits this column.