Antitrust laws are designed to promote fair competition in the marketplace. They apply to businesses and individuals. Amongst other things, the antitrust laws seek to prevent or punish illegal cooperation between competing businesses, sometimes referred to as agreements in restraint of trade. Illegal cooperation can take many forms, including price-fixing, allocating customers, allocating markets or territories, and engaging in bid-rigging. The standard for proving an agreement is quite low. In some instances, exchanging price or cost information and then acting in concert with other industry participants can be enough.
Federal and state antitrust enforcement agencies identify and prosecute antitrust violations. Antitrust violations can give rise to civil proceedings aimed at enjoining anticompetitive conduct and remediating the anticompetitive effects of past violations. Violators may also become the subject of criminal suits, where large fines and jail sentences may be imposed.
Many small businesses are under the misconception that antitrust laws only affect big businesses. One way in which small businesses have run afoul of antitrust laws in recent years is through participation in trade associations. Antitrust agencies closely scrutinize trade associations because of the number of industry participants attending meetings/participating in forums, and the fact that in many industries, trade associations have been used in the past in order to enable or hide anticompetitive conduct. The concern, of course, is that trade association members may come together to fix prices, allocate customers, allocate markets or territories, engage in bid-rigging, etc.
The relatively recent case of In re Processed Egg Products Antitrust Litigation provides an example of how trade association membership can lead to antitrust problems for large and small businesses. The defendants in the In re Processed Egg Products case included both large, national egg producers and small family poultry farms. The small farms were members of an industry-wide trade association that allegedly took certain actions to reduce the supply, and increase the price of, eggs and egg products. The evidence of illegal cooperation by the small farmers was that they paid dues to the trade association, sat on committees, or, in some cases, simply received newsletters that talked about steps that farmers might take to affect the numbers of eggs on the market.
Trade associations can be an important resource for a small businesses, especially in a big industry. However, members need to be well briefed on what is, and what is not, an acceptable topic of discussion at a trade association meeting or in a trade association forum. Social or informal interactions with competitors can lead to anticompetitive business discussions. Even the passive presence of a trade association member in an inappropriate discussion must be avoided (agreements made by, or commercially sensitive information exchanged among, other parties can be attributed to passive participants).
Most trade associations publish an agenda ahead of scheduled meetings. Members should ensure that the agenda topics are acceptable and that the meeting does not deviate from the agenda. Members should also avoid informal meetings and discussing non-public information at meetings. If your business is a member of a trade organization, or considering becoming a member (or purchasing a member organization), you should consider talking with one of our business attorneys about the risks involved and how to minimize the chances of committing antitrust violations.