trmg antitrust 2011 1 navigating the antitrust rules: a map for the credit executive within and...

TRMG ANTITRUST 2011TRMG ANTITRUST 2011 11

NAVIGATING THE ANTITRUST RULES: NAVIGATING THE ANTITRUST RULES: A MAP FOR THE CREDIT EXECUTIVE A MAP FOR THE CREDIT EXECUTIVE

WITHIN AND WITHOUT THE INTERNETWITHIN AND WITHOUT THE INTERNET

Wanda Borges, Esq.

Borges & Associates, LLC

575 Underhill Blvd.

Syosset, NY 11791

516-677-8200 x 225

[email protected]


STATUTES THAT CONTROL STATUTES THAT CONTROL ANTITRUST ACTIVITIESANTITRUST ACTIVITIES

The Sherman Antitrust Act of 1890

Prohibits contracts, combinations and conspiracies in restraint of trade in interstate commerce or with foreign nations.

Felony to conspire to restrain trade; or to monopolize (or attempt to monopolize).


STATUTES (cont.)STATUTES (cont.)

The Clayton Act of 1914

Passed to “correct” defects in Sherman Act.

Unlawful to enter into any of several specified types of prohibited transactions whose purpose or effect would be to restrain trade or injure a competitor.



The Robinson-Patman Act of 1936

Partially an amendment to The Clayton Act. Unlawful to “discriminate in price between

different purchasers of commodities of like grade and quality”…

…or knowingly to induce or receive a prohibited discrimination in price.

Liability could be civil or criminal.


STATUTES (cont.)STATUTES (cont.) The Federal Trade Commission Act

of 1914

Broadest of the antitrust statues; includes:

mergers & acquisitions unfair trade practices unfair arrangements btw suppliers & dealers deceptive sales approaches discrimination in price, services or facilities false advertising, and any other practice to deceive the public.



●The Antitrust Procedure & Penalties Act of 1976● Gives Fed, govt. new disclosure powers.

● Permits a State attorney general to sue for damages on behalf of a state’s citizens.

● Requires companies of a certain size to file pre-merger notices.



State Antitrust Statutes

Almost every State has independent laws prohibiting monopolies, contracts, conspiracies and combinations in restraint of trade.


GOVERNANCE OVER GOVERNANCE OVER ANTITRUST VIOLATIONSANTITRUST VIOLATIONS

● CIVIL ACTIONS

● punitive damages

● class action

● State AG - injunctions & damages

● Antitrust Division of US Dept. of Justice

● Federal Trade Commission (FTC)


GOVERNANCE (CONT’D)GOVERNANCE (CONT’D)

● CRIMINAL ACTION● Antitrust Div. of the US Dept. of Justice

● fines against businesses (<$100 million and individuals (<$1 million)

● jail terms for individuals (<10 years)

● Enforcement agencies: FCC for telecommunications entities. Federal Reserve Board for banks. FTC for all other matters.


DEPARTMENT OF JUSTICE DEPARTMENT OF JUSTICE ACTIVITYACTIVITY

● CRIMINAL ACTION● Antitrust Div. of the US Dept. of Justice

● fines against businesses and individuals

● jail terms for individuals.

● Enforcement agencies: FCC for telecommunications entities. Federal Reserve Board for banks. FTC for all other matters.


DEPT. OF JUSTICE ACTIVITYTRANSPORTATION

● PRICE FIXING

● Air cargo carriers

● international freight forwarders

● water freight transportation


RESTRAINT OF TRADERESTRAINT OF TRADE(Unfair Competition, Price Fixing, (Unfair Competition, Price Fixing,

Group Boycott)Group Boycott)

● “Restraint of trade” = unreasonable

per se unreasonable (did the incident occur?); or

in violation of the “rule of reason” (judged by actual or potential effect on competitive marketplace).


RESTRAINT OF TRADE (CONT.)RESTRAINT OF TRADE (CONT.)

“Combination / Conspiracy”--4 elements:

1. Knowledge

2. Common purpose

3. Actual restraint, not merely facilitating

4. Intent to restrain trade “Conspiracy” = unity of purpose, common

design, meeting of minds re: unlawful purpose


PRICE FIXING ISSUES PRICE FIXING ISSUES FOR CREDIT GRANTORSFOR CREDIT GRANTORS

● Discussion beyond a “mere announcement”

● Agreement to maintain prices, with an enforcement mechanism (mfr./distrs.)

● Agreement to fix or set payment terms


CREDIT TERMS = PRICECREDIT TERMS = PRICE

● Catalano Inc. v Target Sales (Supreme Court 1980

“Extending interest-free credit for a period of time is equivalent to giving a discount equal to the value of the use of the purchase price for that period of time. Thus, credit terms must be characterized as an inseparable part of the price”


BID RIGGINGBID RIGGING

Bids manipulated so one competitor is given an unfair advantage over others.

Caution: trading favors with a competitor in one area or deal, in exchange for reciprocal consideration in a later situation


GROUP BOYCOTTINGGROUP BOYCOTTING

Concept of sufficient market power

Hallmarks of illegal group boycott:

1. Denial of access to a competitively useful commodity or service

2. Collective refusal to deal

Group boycotting can exist even through action of only one party


INVOLUNTARY PETITION IN INVOLUNTARY PETITION IN BANKRUPTCYBANKRUPTCY

CAN BE DEEMED A GROUP BOYCOTTCAN BE DEEMED A GROUP BOYCOTT

MUST NOT BE DISCUSSED BEFOREHAND MUST NOT BE DISCUSSED BEFOREHAND


INVOLUNTARY PETITION IN INVOLUNTARY PETITION IN BANKRUPTCY – PROPER STEPSBANKRUPTCY – PROPER STEPS

MAKE INDEPENDENT DECISIONMAKE INDEPENDENT DECISION

GET COMPANY AUTHORIZATIONGET COMPANY AUTHORIZATION

RETAIN ATTORNEYRETAIN ATTORNEY

SEEK OTHER CREDITOR(S)SEEK OTHER CREDITOR(S)


PRICE DISCRIMINATIONPRICE DISCRIMINATION

A single party can violate.

Robinson-Patman -- illegal to discriminate in prices between different purchasers of like goods, incl. credit and shipping terms

C.O.D. vs. Open credit can be deemed discriminatory



Different price to different purchasers of commodities

Differences in terms and conditions of sale

Preferential credit terms



Only applicable to sale of tangible goods

Not applicable to services or other intangible items

NOT applicable to transportation since transportation is not a commodity


PREFERENTIAL CREDIT PREFERENTIAL CREDIT or CREDIT DENIAL PERMITTED or CREDIT DENIAL PERMITTED

in SPECIFIC INSTANCESin SPECIFIC INSTANCES

Legitimate business reasons

History of late payments

Financial difficulty

Superior credit records


MEETING COMPETITIONMEETING COMPETITION

Discriminatory price allowed when offered “in good faith” to meet an equally low price of a competitor

Verify existence of competitor’s offer

Do not exceed competitors in size, duration or scope

Refuse to meet the competitor’s offer if illegal


GOOD FAITH STANDARDGOOD FAITH STANDARD

Reasonable belief the situation is of competitive necessity

Belief that granting a lower price would meet the lower price of a competitor

Substantial efforts must be made to verify actual price


DOCUMENTATION SUGGESTEDDOCUMENTATION SUGGESTED

Date of competitor’s offer

Name of competitor making offer

Name of customer

Terms and conditions of offer

Source of the Information & why you believe it


LEGITIMATE BUSINESS REASONLEGITIMATE BUSINESS REASON

Cost Justification

Market Conditions

Superior Credit History or Records


PROMOTIONAL ALLOWANCESPROMOTIONAL ALLOWANCES

Proportionally equal terms

Dollar volume or quantity purchased during specific period of time

Equal rate per unit or amount purchased

Specified part or percentage of local advertising


GUIDELINES FOR GUIDELINES FOR TRADE ASSOCIATION MEETINGSTRADE ASSOCIATION MEETINGS

Antitrust Compliance Statement.Antitrust Compliance Statement.

Members should be reminded that the account discussions about to take place will be conducted in accordance with Federal Antitrust guidelines. Therefore, there can be no discussions of any prices, terms, company policies or credit lines. Remarks must be confined to present and completed transactions only, with no mention of any future plans of action. All of the information obtained from the Group is strictly confidential and may not be disclosed to anyone other than the members' own credit department.


TRADE ASSOCIATION MEETINGS TRADE ASSOCIATION MEETINGS (CONT’D)(CONT’D)

Independent representative present

Written agenda followed

Minutes of all meetings maintained

No discussions outside the meeting


NON-PERMISSIBLE DISCUSSIONSNON-PERMISSIBLE DISCUSSIONS

Credit terms.

Production limits

Distribution and boycott Involuntary Petition in Bankruptcy Refusal to do business with certain customers

Price fixing (key phrases could be misconstrued).


NON-PERMISSIBLE DISCUSSIONSNON-PERMISSIBLE DISCUSSIONS

Allocation of customers

Dividing Territories

Bids

Geographic areas

Types of business


PERMISSIBLE DISCUSSIONSPERMISSIBLE DISCUSSIONS

Delinquent account reports –NO discussion of future (i.e., intent).

Exchange of factual credit information


PERMISSIBLE ACTIVITIESPERMISSIBLE ACTIVITIES[when you get back to the office][when you get back to the office]

Credit Term ChangesCredit Term ChangesCredit RecordCredit RecordReview of customer’s financial informationReview of customer’s financial informationYour company’s position in the marketYour company’s position in the market


PERMISSIBLE ACTIVITIES – cont’dPERMISSIBLE ACTIVITIES – cont’d[when you get back to the office][when you get back to the office]

Refusal to deal with particular customerRefusal to deal with particular customerMust be unilateralMust be unilateralMust be independent decisionMust be independent decision


ELECTRONIC CREDIT EXCHANGEELECTRONIC CREDIT EXCHANGE

Antitrust Rules still applyAntitrust Rules still applyRequest for referencesRequest for referencesGiving referencesGiving references

Electronic data lasts foreverElectronic data lasts forever



RECOMMENDED LANGUAGE ON RECOMMENDED LANGUAGE ON ELECTRONIC TRANSMISSIONSELECTRONIC TRANSMISSIONS

This Credit Reference is provided at the request of This Credit Reference is provided at the request of and is based upon information maintained in my filed and is based upon information maintained in my filed as a result of my company’s experience with ______.as a result of my company’s experience with ______.No judgment or recommendation concerning credit No judgment or recommendation concerning credit decisions is given or implied by this information. The decisions is given or implied by this information. The recipient must determine its own credit decision. The recipient must determine its own credit decision. The data contained in this report is for information data contained in this report is for information purposes only.purposes only.



REQUIRE AFFIRMATION IN ADVANCEREQUIRE AFFIRMATION IN ADVANCEThe credit information you are about to view The credit information you are about to view electronically is accurate information contained in my electronically is accurate information contained in my records and you are requesting same in order to records and you are requesting same in order to determine the creditworthiness of ____________.determine the creditworthiness of ____________.You may make one printed copy of this Electronic You may make one printed copy of this Electronic Information for your own use. You may not Information for your own use. You may not distribute, transmit or otherwise circulate the distribute, transmit or otherwise circulate the Electronic Information to anyone else.Electronic Information to anyone else.



CREATE MANDATORY CONSENTCREATE MANDATORY CONSENT

I have read and understand this Use Agreement I have read and understand this Use Agreement and Agreement to be bound by its termsand Agreement to be bound by its terms

Lock mechanism to disable anyone from Lock mechanism to disable anyone from proceeding without accepting restrictionproceeding without accepting restriction


RECORD KEEPINGRECORD KEEPING

Records justifying cancellation of non-performing agents

Credit reports on which decision was based

trmg antitrust 2011 1 navigating the antitrust rules: a map for the credit executive within and...

Documents

trmg antitrust

state antitrust statutes

antitrust statues

antitrust activities

antitrust rules

sherman antitrust act

federal trade commission

restraint of trade