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International Castor Oil Association
Antitrust Compliance Policy and Guidelines
Adopted by the ICOA Board on May 12, 2009
This document contains ICOA’s “Antitrust Policy,” “Antitrust Guidelines” and “Antitrust Reminder” which together represent ICOA’s antitrust compliance program. The document is intended to educate ICOA members about the United States antitrust laws which are applicable to trade association activities, and to serve as a basic guide to assist ICOA and its members in conducting ICOA meetings and activities in conformity with these laws. In recent years, U.S. courts have ruled that the U.S. antitrust laws often have extraterritorial application – a U.S. citizen may haul a foreign citizen or company before the U.S. courts even as to transactions that take place entirely outside the U.S.
It is the policy of ICOA to comply strictly with all laws which relate to the conduct of its activities, including the antitrust laws of the United States. All ICOA members, officers, and staff should familiarize themselves with the ICOA “Antitrust Guidelines,” and should agree to conform all ICOA sponsored meetings and activities in strict accordance with the Guidelines. The Guidelines shall be updated and revised as appropriate by the ICOA Board in consultation with counsel. The Guidelines are intended to provide basic guidance on the antitrust laws which may be applicable to ICOA activities. Counsel should be consulted in all cases involving specific situations, interpretations or advice. ICOA staff members or counsel generally attend all meetings, and counsel usually attend meetings in which issues with antitrust implications are expected to be discussed.
Overview of the Antitrust Laws
The U.S. antitrust laws are intended to foster and protect competition. As such, the laws prohibit particular anti-competitive activities, and more generally those which are deemed to unreasonably restrain trade. Agreements among competitors are inherently suspect under the antitrust laws. Therefore, while the purpose of ICOA is to promote the exchange of ideas and developments in the castor oil industry and thereby foster competition among industry participants, group activities of competitors – such as those conducted by a trade association – are inherently suspect under the antitrust laws. For this reason, ICOA has developed these Antitrust Guidelines to provide a general overview of antitrust laws and specific guidelines to assist ICOA in conducting its activities in conformity with antitrust laws.
The basic statutes which are applicable to trade associations are the Sherman Act and the Federal Trade Commission Act. The Sherman Act prohibits “contracts, combinations or conspiracies in restraint of trade or commerce.” Taken together, the contract, combination or conspiracy requirement has been found to exist where there is some form of agreement between
two or more parties. Such agreements may be explicit, e.g., taking the form of a contract or other oral or written communication, or implicit, e.g., implied by the conduct of the parties and construed to indicate an agreement was formed.
In most cases, the prohibitions of the Sherman Act extend only to transactions which are found to be unreasonable restrictions on competition. Hence, courts examine the “reasonableness” of the restraint involved in light of all the relevant circumstances. In applying this “Rule of Reason” to alleged noncompetitive business activities, the courts conduct an extensive economic analysis of the alleged restraint on trade, the business context in which it arose, its purpose and probable anti-competitive effects, and the business or economic justification for the restraint.
Certain activities discussed below, however, are deemed unlawful without a detailed examination of their context or effects on competition and constitute “per se” or automatic violations of the Sherman Act.
Federal Trade Commission Act
Section 5 of the FTC Act prohibits “unfair methods of competition” and “unfair or deceptive acts or practices.” The FTC Act’s broad enforcement provision empowers the Commission to determine the meaning of “unfair”. In addition, activities considered illegal under the Sherman Act also are generally enforceable under Section 5 of the FTC Act. Furthermore, Section 4 of the FTC Act empowers the FTC to take action against “incipient” unfair practices; that is, conduct which does not yet amount to – but is likely to lead to – a violation of the other antitrust statutes.
Enforcement and Penalties
The U.S. Department of Justice, states, and private parties harmed by the anti-competitive conduct of others may bring suit for violations of the Sherman Act. Enforcement of the FTC Act is vested exclusively in the FTC. Violations of the Sherman Act may result in both criminal and civil penalties. In addition, private plaintiffs may recover three times the amount of damages suffered, plus the costs of bringing suit, including attorneys’ fees.
In the past, not only organizations but their officers and directors have been found criminally and civilly liable for antitrust violations. In addition to the strict penalties associated with antitrust violations, the courts and the FTC have ordered the dissolution of associations found to have engaged in anti-competitive practices. Therefore, it is imperative that all ICOA members and staff take all appropriate measures to minimize the risk of antitrust violations.
General Antitrust Guidelines
This section describes types of activities and practices which courts have found to constitute violations of the Sherman Act. ICOA officers, staff and members must take extreme care to avoid even the appearance of engaging in these types of activities, as well as any others
which could be construed as having an anti-competitive intent or purpose.
Per se violations have traditionally included agreements among competitors that have the purpose and effect of “fixing prices,” “allocating territories,” or “boycotting third parties.” Under the antitrust laws, “price fixing” includes much more than an agreement to set prices at a particular level, within a specific range, or in accordance with a particular formula. It potentially includes any agreement which tends to raise, fix, stabilize or otherwise affect price. Thus, even if the parties permit the price to vary somewhat under the agreement, the agreement is illegal if it has the effect of stabilizing the price among those participating in the conspiracy. Similarly, price fixing includes agreements to control other factors that directly or indirectly affect price, such as establishing production levels, setting uniform discounts, credit or warranty terms, or agreeing on matters relating to costs, especially when those costs account for a substantial percentage of the final price.
Territorial or market allocation involves an agreement among competitors operating at the same level of the market structure – such as manufacturers, distributors, etc. – to divide the market in such a way as to allow each party to the agreement to serve its share of the market without competition from the others. Such prohibited allocations in the past have been made on the basis of geographical boundaries or particular types of customers.
No discussions or agreements shall take place concerning allocation or division of retail packaging markets or geographical or other restrictions on representatives, distributors or other customers of ICOA members’ products.
Group boycotts or “refusals to deal” are considered per se violations in certain instances. Agreements or collective action to refuse to deal with certain suppliers, customers, or other competitors, or to undertake actions that tend to exclude certain participants from the marketplace or deny them access to a significant competitive benefit available to others in the market are prohibited. Before the per se rule is applied, however, several factors are considered, such as whether the activity was undertaken for an anti-competitive purpose, whether the group possesses market power, and whether it holds exclusive or unique access to a business element necessary for effective competition.
In the trade association context, group boycott issues may arise in relation to membership and/or exhibition restrictions, or in disciplinary or expulsion action against members. Because these situations must be analyzed closely in accordance with strictly defined legal guidelines, counsel should be notified prior to ICOA’s consideration of any of these actions.
ICOA members shall not engage in any discussion or agreement concerning particular representatives, distributors, other customers, or suppliers involving decisions to deny, limit or terminate business relations between any ICOA member and such firms. Also, counsel shall be notified prior to any discussion by ICOA concerning restricting or denying membership or exhibition space to any nonmember firm which competes in the industry.
In addition to the issues described above, other antitrust problems may arise where trade association activities are undertaken which may have anti-competitive effects on non- members. Particular guidelines must be followed before undertaking any association project such as a manufacturing or other commercial standard development program, an industry survey or other statistical program, or petitioning industry or government organizations on matters which may have a competitive impact on non-members. Accordingly, counsel must be contacted before discussing or planning these programs.