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February 1999
TRADE ASSOCIATIONS
U.S. ANTITRUST GUIDELINES
...continued - pg 5.
Procedural Safeguards
If the Association sponsors activities to establish standards (whether such
standards relate to acceptable procedures or to products purchased by or sold by
industry companies), the standards must be objective. The standards must also be
voluntary in the sense that there be no agreement to compel compliance with the
standards or to compel a reduction in the number of available products. In
addition, quality standards should ordinarily be set forth as minimum acceptable
standards, to be regularly updated to reflect advances in the state of the art
so as not to reduce innovation or development of new techniques and products.(5)
To attain objective standards that will achieve general acceptance and
reflect the state of the art, the procedures by which standards are set and
updated must be structured so as to obtain the input of persons to be affected
by the standards, including consumers in some cases. Such procedures may include
public hearings and review of private complaints.
Evaluation of the risks involved in establishing standards will vary with the
particular facts. In one case, standardization of product quality was found to
be a method by which sellers, in effect, fixed prices by prohibiting quality
competition. In other circumstances, an organization's members could be engaged
in a group boycott if they only purchase, whether by agreement or not, products
that are certified as meeting standards set by that organization.
The U.S. Supreme Court years ago held the American Society of Mechanical
Engineers, Inc. ("ASME"), civilly liable for the actions of several of
its volunteer individual members, who, as agents with apparent authority,
intentionally misrepresented an existing ASME code and then used the erroneous
information to the disadvantage of one of their competitors. Representations
made by ASME's agents damaged the agents' competitors because the statements
carried the weight of ASME's reputation and acknowledged expertise in setting
engineering standards. The Court imposed liability on ASME in order to
deter abuses of ASME's code and because ASME was, in the Court's judgment, in
the best position to prevent improper use of its code.
If the Association were to set standards that favor certain manufacturers who
are members of a trade association, the Association and the manufacturers and
their trade associations might be deemed to have conspired to injure the
business of those who could not comply (or who were not members of the trade
association) in an attempt to monopolize that line of commerce.
If the Association certifies products or processes as meeting certain
standards, the certification process must be fair, open to nonmembers, free of
any burdens not imposed on members, and at no greater cost than that charged to
members, taking into account the members' payment of dues to cover the
certification costs. The Association must provide for certification of any
products which qualify, and should provide for appeals of adverse decisions.
Business Review Letters
The DOJ and the FTC have established procedures to review, from an antitrust
point of view, proposed activities of companies and organizations. After
reviewing the documents submitted, each of these agencies will state whether (a)
it intends to take enforcement action for specified reasons, (b) it does not
intend to take such action, or (c) it can express no present view as to
enforcement. A statement of intention is not legally binding on the agency
issuing the statement and does not preclude civil actions by private parties,
the DOJ, the FTC or other government agencies.
In general, we believe that a request for a business review letter would not
be of significant assistance to the Association unless (1) a proposed activity
presents particularly difficult antitrust questions, (2) the proposal is
concrete and (3) the effects of the activity can be predicted with relative
certainty.
Conclusion
This memorandum is intended to provide only general guidelines for the
conduct of the Association's activities. Because an intent to violate the
antitrust laws is not necessary to establish antitrust liability, and since the
antitrust laws are confusing and the circumstances in which antitrust questions
can arise are numerous, we recommend that advice be requested on specific
activities of the Association when they are proposed and as they move through
each stage to completion.
Questions regarding this memorandum may be directed to Robert A. McTamaney of
our New York Office; (212) 732-3200; mctamaney@clm.com.
Endnotes
1. The phrase "whose law" is intended to
include not only a country's domestic antitrust law, but also all international
agreements and other binding obligations to which that country and the United
States are parties.
2. The Justice Department did not issue new guidelines in
the wake of The National Cooperative Research Act of 1984, nor has it announced
an intention to publish guidelines applicable to The National Cooperative
Research and Production Act of 1993.
3. The DOJ has maintained that R&D ventures may become
anticompetitive if a substantial portion of relevant market competitors
participate in the venture and rely on it as their sole or primary source of
research. The anticompetitive effect of such over-inclusiveness is that the
venture may inhibit innovation that otherwise would flourish. Thus the Act aims
to maintain multiple sources of independent research, comparable in
technological capability.
4. Products liability questions can also be raised. See
note 5 below.
5. As the law of products liability currently stands, an
organization that establishes standards can be liable to persons injured by the
failure of a produce that conforms to the standards if the organization was
negligent in fixing the standards. The general trend of products liability law
is always toward stricter standards of care.
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