Trade associations have long been recognized as serving a valuable, procompetitive and entirely lawful role in promoting the economic development and consumer welfare of our country. However, serious antitrust problems can arise if a trade association’s activities are not properly conducted. Accordingly, the Personal Care Products Council (“PCPC” or “Council”) assigns the highest priority to full compliance with both the letter and the spirit of the antitrust laws. It is thus vital that all meetings and activities of PCPC be conducted in a manner consistent with that policy.
Agreements among competitors that unreasonably limit competition are unlawful under the antitrust laws, and violators are subject to criminal fines and incarceration, civil fines and private treble damage actions – as well as substantial administrative disruption, defense costs and adverse publicity. Examples of such illegal agreements by competitors are agreements to fix or stabilize prices, agreements to allocate territories or customers, and agreements to limit output or even investments in innovation and regulatory compliance. Accordingly, it is inherently risky and potentially illegal for competitors to discuss any prices, pricing policies, specific terms and conditions of sale, profit margins, problems experienced with individual customers or suppliers, individual company costs, production or R&D plans, specific market shares of any competitor, or any other elements or factors that may affect competition.
It is important to bear in mind that those in attendance at PCPC meetings, or participating in other PCPC activities, include your competitors. Any discussion of sensitive antitrust subjects with one’s competitors should be avoided at all times before, during, and after any PCPC meeting or activity. If at any time during the course of any meeting or activity, PCPC staff believes that a sensitive topic under the antitrust laws is being discussed, or is about to be discussed, they will so advise those present and halt further discussion. Attendees at any PCPC meeting or other activity should likewise not hesitate to voice any concerns they may have in this regard. All PCPC members and staff executives share in this important responsibility.
BASIC ANTITRUST GUIDELINES
FOR THE PERSONAL CARE PRODUCTS COUNCIL
The Personal Care Products Council (“PCPC”) complies fully with the letter and the spirit of the antitrust laws. We set forth below basic guidelines for the PCPC staff and members to follow to help achieve such compliance. The summary points are not intended to answer every antitrust question or situation that might arise, but rather to provide general guideposts. If you have any questions, you should consult counsel.
There is no antitrust immunity for activities conducted through trade associations. If anything, there may be a higher level of antitrust scrutiny due to the opportunities for discussions among competitors.
Price Fixing. Any agreement that affects price competition potentially may violate the antitrust laws. Competitors are expected to price their products and services independently and without cooperating with each other. The concern applies to agreements between competing buyers as well as competing sellers. Similarly, it applies to all aspects of competition, such as credit, in-kind benefits and the like. The agreement need not be explicit. Courts frequently infer that a tacit agreement was reached based on mere discussions about prices among competitors. Naked price fixing agreements among competitors are per se unlawful.
Group Boycotts. Agreements among competitors not to deal with a particular customer or supplier can be per se illegal under the Sherman Act. Again, the agreement need not be explicit. A government antitrust official described the common feature of illegal group boycotts as “an effort by an association and its members to use their collective economic clout to threaten a boycott of those they deal with in the marketplace, in order to preserve or improve the members’ income, or their profits.” (Anne K. Bingaman, Assistant Attorney General, “Recent Enforcement Actions by the Antitrust Division Against Trade Associations,” February 28, 1996).
Territorial Allocations. Agreements not to compete in particular territories or for particular customers also can be illegal. These types of agreements have the effect of eliminating price competition with respect to the restricted customers and are analogous to price-fixing.
Information Exchanges. The most common problem encountered by trade associations is the exchange of information between members at trade association gatherings. Plaintiffs or government agencies may seek to use the information exchange as evidence of an unlawful agreement between the PCPC’s members. The more recent and firm-specific the information, the more danger the information exchange presents. This is particularly true of information exchanges relating to current costs, pricing, or marketing plans.
Criminal Penalties. Hard core antitrust violations – such as naked price fixing – are subject to criminal penalties. Penalties for such violations of Section 1 of the Sherman Act are severe. Corporations may be fined up to $100 million and individuals up to $1 million as well as up to ten years incarceration. There is also a separate penalty provision that allows the imposition of fines in certain cases of up to double the loss suffered by the victims or the gain to the perpetrators. Under this provision, fines of well over $100 million have been assessed.
Civil Penalties. Antitrust violations entitle prevailing plaintiffs to treble damages plus attorneys’ fees. Further, the costs of defending against an antitrust claim, even if successful, can be significant.
SPECIFIC GUIDANCE FOR PCPC EMPLOYEES
Discussions between you and individual PCPC members do not present the same degree of antitrust concern as discussions directly between PCPC members. If, however, you act as a conduit by telling one member what another told you, you may subject the PCPC, its members, and yourself to antitrust liability. Thus, PCPC personnel need to exercise particular care not to convey to one PCPC member competitively sensitive information obtained from another PCPC member. To the extent possible, you should avoid conversations with individual PCPC members regarding the following topics:
Product Prices. Avoid discussing current or future product prices charged by an individual member of the PCPC. This includes the price of a specific transaction, or price levels in the market generally, past, present, or future.
Production Data. Avoid discussing individual company or industry sales levels, capacities, inventories, or market shares.
Costs. Avoid discussing specific cost structures with individual members.
Future Pricing, Promotional, or Marketing Plans. Avoid discussing future plans of a company with respect to sensitive topics, such as prices, new drug products, promotions, investments, and output.
PCPC personnel can discuss with individual PCPC members past, present, and future employee initiatives of the kind the PCPC Employee Working Group is contemplating undertaking. Under certain limited circumstances and with the advice of counsel, the PCPC may collect some sensitive information from members for use in aggregated form. In all events, the PCPC should avoid discussing any such sensitive information from one member with another.
These guidelines are meant only to help PCPC personnel identify the antitrust issues most likely to arise. All personnel should consult the legal department if they have questions or concerns at any time.