Guide for Members of the International Window Cleaning Association
Trade associations are subject to strict scrutiny under the many
federal and state antitrust laws. One of the most powerful of these is
the Sherman Act. Section 1 of that Act prohibits "contracts,
combinations or conspiracies ... in restraint of trade.” But by its
very nature, a trade association is a combination, such that there is no
problem in proving the fact. This should serve as a signal to trade
associations, that they must proceed with extreme caution lest they be
cited for antitrust infringements, carrying stiff fines and jail
Responsibility for enforcement of the antitrust laws lies with the
Department of Justice, the Federal Trade Commission, and the over 40
states which have enacted antitrust legislation.
The federal government can be expected to bring civil and criminal
felony cases each year against trade associations, including members and
staff. Penalties are severe. Each individual can be fined up to
$1,000,000 and each member corporation can be fined up to $100,000,000.
Individuals are subject to imprisonment of up to ten years. In
addition, the government can impose civil sanctions such as cease and
desist orders, which result in government restraints on the activities
of association members. This, in turn, inhibits association functions
and may culminate in the dissolution of an association altogether.
In addition to lawsuits prosecuted by the government, civil treble
damage suits can be brought by competitors and consumers. By way of
illustration, the Sherman Act prohibits any price agreement regardless
of purpose. Thus, if members of a trade association have an agreement
as to price, they cannot justify the agreement by showing benefits to
customers. Members will be found liable for treble damages for injury
resulting from the excess price charged.
From a practical standpoint, trade associations should focus their
concern on five principal antitrust problem areas. These are:
price-fixing, division of customers, membership, standardization and
certification, and industry self-regulation.
Price-Fixing. Price (defined broadly to include all
elements of price) is the most sensitive area under the antitrust laws,
and therefore, government has evinced its greatest concern about
violations and potential violations of the price-fixing prohibitions of
the Sherman Act. A price-fixing violation can be inferred from the fact
of similar price conduct by members, even though there is no written or
oral agreement shown. If prices are fixed, it is no defense that the
prices set are reasonable or that the ends sought are worthy.
Division of Customers or Markets. An agreement among
members of an association to divide customers or markets served is, in
and of itself, a criminal act. The antitrust laws prohibit any
understandings or agreements between competitors or members of an
association that involves the division or allocation of customers. Even
informal agreements whereby one member agrees to stay out of another
member’s territory will constitute a violation of the antitrust laws.
Membership. A basic assumption about every trade
association is that its members derive an economic benefit from
membership. Denial of membership to an applicant may therefore
constitute a restraint of trade in that such denial of an economic
benefit limits the rights of an applicant to compete. Thus, membership
criteria must be carefully drafted to avoid antitrust problems.
Standardization and Certification. An association which develops
voluntary industry standards may face antitrust problems if the standard
favors some and discriminates against others. Similarly, association
certification activities which further interests to certain groups, to
the exclusion of others may result in antitrust problems.
Industry Self-Regulation. Associations commonly establish codes of
ethics for their members, with procedures enforcing them. It is
laudable for an association to promote high ethical standards, but
antitrust problems may arise of an association’s attempt to enforce its
code of ethics causes economic injury.
Rules for Members
The best way to avoid possible infringement of the antitrust laws is to
institute a program of compliance. At association gatherings, the
association should resolve to avoid discussion of certain sensitive
subjects. Informal gatherings which follow association meetings are
particularly looked upon with great suspicion by the government.
Some topics which should be scrupulously avoided in all meetings:
Do not discuss pricing.
Do not discuss profit levels.
Do not discuss an increase or decrease in price.
Do not discuss standardizing or stabilizing prices.
Do not discuss pricing procedures.
Do not discuss cash discounts.
Do not discuss credit terms.
Do not discuss controlling sales.
Do not discuss allocating customers or markets.
Do not complain to a competitor that his or her prices constitute unfair practices.
Do not discuss refusing to deal with a corporation because of its pricing or distribution practices.
Do not attend informal sessions in which any of the above subjects are discussed.
With regard to antitrust risks present in membership and industry self-regulation, membership policies should avoid:
Restrictions on dealing with non-members.
Exclusions from membership, especially if there is a business advantage in being a member.
Limitations on access to association information, unless the limitation is based upon protection of trade secrets.
Industry self-regulation and codes of ethics should avoid:
Requiring refusal to deal with any member violating the association’s code of ethics.
Arbitrary enforcement of the code.
Unreasonably severe penalties for violation of the code.
Regulations or policies which have price-fixing implications, such as preventing the advertising of prices.
Without being alarmist, trade associations should bear in mind that
they are targets for government antitrust enforcers and private treble
damage suits. By conducting their business openly and avoiding even the
appearance that they are engaging in activity which might be seen to
have an effect on prices or competition, trade associations can protect
themselves from charges of antitrust violations.