Trade Associations, by their nature, are inviting targets for the Federal Trade Commission (FTC) and private antitrust plaintiffs alike. Just since August 2014, six associations have entered settlement agreements with the FTC.1 Those agreements, and in particular, the two entered into Dec. 23, 2014 discussed in this article demonstrate the need for trade associations to pay careful attention to antitrust requirements in order to avoid potentially collusive behavior.
While there are innumerable ways to attract FTC attention, the two cases it recently settled both involved the same kind of restrictions of competition: limiting competition between the trade association’s members via written bylaws and a code of ethics.
The first action was brought against the Professional Lighting and Sign Management Companies of America, Inc. (PLASMA), a non-profit corporation organized in Ohio. It has approximately 25 members across the country that specialize in lighting and electrical sign installation and maintenance.2 According to the FTC, PLASMA’s bylaws restricted competition through (i) territorial restrictions prohibiting a member from providing services in another member’s territory, unless that member first declines the work; (ii) a price schedule for performing work in another member’s territory; and (iii) a one year non-compete following termination of membership.3
In the second action, the FTC alleged that the Professional Skaters Association (PSA), an association of ice skating coaches, similarly restricted competition among its 6,400 members.4 PSA membership is required by the U.S. Figure Skating Association to coach competitive skaters; many ice rinks also require coaches to be members.5 The FTC asserted that the PSA’s code of ethics limited competition by prohibiting members from soliciting “pupils of another member, directly or indirectly, or through third parties,” and by requiring members to determine if a skater has already engaged another member as a coach.6 The PSA furthered the solicitation ban by highlighting in its magazine and online, including providing examples of prohibited comments (e.g., “I am much more qualified coach than _____ is” and “Join our program. That other program isn’t very good.”).7 Finally, the PSA actually enforced the ban, including suspending one coach for six months and sanctioning eight other coaches.8
Unsurprisingly, given that the Supreme Court long ago ruled that similar conduct by trade associations violated the antitrust laws,9 both the PLASMA and PSA entered into consent orders with the FTC in which they agreed to eliminate the challenged practices, and to provide antitrust compliance training to its members.10
Antitrust requirements, as applied to trade associations, have long been relatively settled. The recent FTC actions are a reminder that trade associations must keep antitrust compliance in mind, particularly when drafting organizational documents or a code of conduct. Not even a small association of 25 members has escaped the FTC’s notice.
In particular, trade association members should confirm that any association they belong to does not restrict members from competing with each other, whether through territorial restrictions, price lists, no-solicitation provisions, and the like. Those types of explicit restraints will likely invite FTC scrutiny. Further, trade association members should avoid discussing with other members such matters as future pricing, employee wages, profits, or billing or fee arrangements. The association itself may, in certain circumstances, compile and disseminate such historical information, but it must be done with careful attention to antitrust law.
While no trade association welcomes an FTC enforcement action, the FTC did not impose monetary sanctions against the PLASMA or PSA. Certainly they went through the expense of hiring attorneys, and in the future they are required to pay attention to antitrust compliance requirements. But the key danger associations (and their members) face when investigated by the FTC is the likelihood of private litigants bringing follow-on Sherman Act complaints based on the conduct publicized by the FTC. Such cases can take years to resolve, and expose defendants to treble damages and plaintiff’s attorney’s fees. Moreover, the facts of the violations are laid bare by the FTC, making antitrust claims simple to assert (assuming the plaintiff has proper antitrust standing).
Trade associations have always faced antitrust scrutiny. Given the increased attention paid by the FTC, and danger and expense of private follow-on actions, they have even greater incentive at this time to police themselves and their members and assure compliance with antitrust requirements.
1The FTC brought actions against The National Association of Residential Property Managers, Inc., FTC Dkt. 131 0127; National Association of Teachers of Singing, Inc., FTC Dkt. 141 0031; Music Teachers National Association, Inc., FTC Dkt. 131 0118; California Association of Legal Support Professionals, FTC Dkt 131 0205; Professional Lighting and Sign Management Company of America, Inc., FTC Dkt. 141 0088; and Professional Skaters Association, Inc., FTC Dkt. 131 0168. up
2See Complaint at 1-2, In re: Professional Lighting and Sign Management Companies of America, Inc., FTC Dkt. 141 088. up
10See Agreements Containing Consent Orders, available at: http://www.ftc.gov/system/files/documents/cases/141223prolightingorder.pdf and http://www.ftc.gov/system/files/documents/cases/141223proskatersorder.pdf. up