The FTC recently announced a settlement with two trade associations who agreed to eliminate provisions in their respective codes of ethics that limit competition among their members. These settlements are the latest FTC enforcement actions challenging restraints on competition that are incorporated into the ethics codes of professional associations.
The FTC brought a complaint against the National Association of Residential Property Managers, Inc. ("NARPM") which represents more than 4,000 real estate managers, brokers, and agents. According to the Complaint, many NARPM members are in the business of managing single-family homes and multi-family residential properties, condominiums, townhouses, and short-term rentals. Other NARPM members also manage commercial and industrial properties and provide management of homeowners' associations. The FTC charged that NARPM and its members restrained competition in violation of the FTC Act through provisions in its code of ethics that restrict comparative advertising and solicitation of competitor’s clients. The provisions read, “The Property Manager shall not knowingly solicit competitor’s clients,” and “NARPM Professional Members shall refrain from criticizing other property managers or their business practices.” The proposed consent order settling the FTC’s charges requires NARPM to stop restraining its members from soliciting property management work, and from making statements that are not false or deceptive about a competitor’s products, services, or business or commercial practices. NARPM also must implement an antitrust compliance program.
Similarly, the FTC reports in its press release that it brought a complaint against the National Association of Teachers of Singing ("NATS"), which represents more than 7,300 vocal arts teachers in the United States. The FTC charged that NATS restrained competition in violation of the FTC Act through a code of ethics provision that prohibits members from soliciting students from other members. The provision reads: “members will not, either by inducements, innuendos, or other acts, proselytize students of other teachers.” The proposed order settling the FTC’s complaint against NATS requires that it stop restraining members from seeking teaching work and stop telling its members that soliciting students is unethical. Among other things, the order also requires NATS to obtain a certification from each of its chapters that the chapter is not restricting solicitation, advertising, or price-related competition by its members, and to sever its ties with any chapter that NATS learns is restraining solicitation, advertising, or price-related competition by its members. NATS also must implement an antitrust compliance program.
These enforcement actions serve as a reminder of a fundamental tenet of antitrust law: competitors are prohibited by the antitrust laws from agreeing on anything affecting competition or acting in any way that would have the effect of such an agreement. Dealings among competitors that violate antitrust laws still violate the law even if they are done through trade or professional associations. In fact, most price-fixing and other per se illegal conspiracies happen in trade associations. If you are a member of a trade association, remember that the following topics are off-limits:
- Pricing of goods, including any discussions of methods, strategies, timing, discounts, advertising, or what constitutes a fair and reasonable price;
- Terms or conditions of sale, including credit or promotional programs;
- Output restrictions or production capacity;
- Allocation of customers or territories;
- Whether to do business with suppliers, customers, or competitors;
- Exchange of pricing, margins, costs and other competitively sensitive information
- “Areas of responsibility” like geographic regions, types of customers, or types of products.
If any trade or professional association discussions or meetings appear to violate the antitrust laws – or even makes you think it could be an issue – disassociate yourself immediately from the discussion and leave. In situations where there are no meeting minutes (e.g., trade shows, social gatherings), bring someone else with you. Consider memorializing the discussion in an e-mail to discussion participants afterward. Additionally, consider notifying your company's legal counsel in writing of the action. You won't be sorry you did.