United States: FTC Continues Focus On Antitrust Violations In Association Codes Of Ethics

On September 24, 2015, the Federal Trade Commission (FTC) announced a proposed consent order against the National Association of Animal Breeders (NAAB). NAAB's members collect, process, market, and sell dairy and beef cattle semen for artificial insemination (AI). In the complaint accompanying the order, the FTC alleges that NAAB's code of ethics limits competition among NAAB members by prohibiting comparative advertising and limiting price-based advertising. The FTC's proposed consent order eliminates those provisions and requires that NAAB adopt certain safeguards to avoid further potential anticompetitive conduct.

Although trade and professional association codes of ethics—and similar well-intentioned restrictions on association members, or on certificants or accreditants (if a certification or accreditation program is involved)—are generally viewed as promoting competition, the FTC and the U.S. Department of Justice (the primary federal antitrust enforcement agencies) continue to scrutinize association restrictions that directly or indirectly prevent members from competing against each other—regardless of the size of the association. In January 2015, for example, the FTC announced consent orders against the Professional Lighting and Sign Management Companies of America and the Professional Skaters Association, finding that the associations' bylaws restricted solicitation of a competing member's customers, and, in the case of the Professional Lighting and Sign Management Companies of America, the association's bylaws restricted price competition.

With respect to NAAB, the Commission's complaint alleged that the NAAB code of ethics restricted competition in those markets by regulating the advertising used by NAAB members. Specifically, the NAAB code of ethics prevents its members from:

  1. Naming members or other competitors when making statements comparing the products and services of a member with the products and services of any other member or competitor; and
  2. Publicizing or disclosing price information relating to the purchase or sale of animals.

The FTC attached to the complaint several comparative advertisements published by NAAB members to demonstrate how the code of ethics had resulted in members publishing advertisements that avoided naming competitors.

The Commission also alleged that NAAB established a dispute resolution system to enforce its code of ethics. Accordingly, the FTC found that advertising limitations in NAAB's code of ethics restricted trade by prohibiting the disclosure of truthful and nondeceptive information by restricting comparative advertising among AI organizations.

The FTC's proposed 20-year consent order prevents NAAB from regulating its members' advertising or otherwise restricting or guiding members' publication of information. In addition to standard injunction relief and notification requirements, the order also contains provisions requiring that NAAB: (1) appoint antitrust counsel for the duration of the order; (2) enable members to confidentially report violations and discipline NAAB personnel who violate the order; (3) train its board members, staff and others regarding compliance with antitrust laws; and (4) conduct a presentation on the order and antitrust compliance at the NAAB annual convention. The proposed consent order is subject to public review, with comments due by October 26, 2015.
Suggested Best Practices to Minimize Potential Legal Risk

As has been covered in previous Venable articles (available  here and here), trade and professional associations' codes of ethics and other membership restrictions have been a recent focus of FTC antitrust enforcement. However, there are a number of best practices that an association can follow to limit potential risk when implementing a code of ethics or similar program or structure imposing competitive restrictions on the association's membership, certificants, or accreditants (through the bylaws or otherwise). At the top of the list is adopting an antitrust compliance policy and working with antitrust counsel to review and clear any proposed codes of ethics or similar membership restrictions.

A formal antitrust policy should include, at a minimum, the following provisions:

  • An overview of antitrust laws and explanation of prohibited types of conduct;
  • Affirmation of the association's commitment to compliance with federal and state antitrust laws;
  • Requirements for employee training and distribution of the policy to the association's officers, directors, employees, and, in certain cases, committee members and other volunteers, consultants, and other representatives;
  • Requirements that association meetings have an agenda circulated in advance, and that minutes of all meetings properly reflect the actions taken at the meeting; and
  • A requirement that any committee, board, or staff recommendations or decisions that potentially impact competition be reviewed in advance by in-house or outside legal counsel.

With regard to membership codes of ethics and other, similar restrictions on the association's membership, the association should keep the following best practices in mind:

  • Codes of ethics or other membership restrictions should never be created or used for the purpose of raising, lowering, or stabilizing prices or fees; excluding competitors from the market; or limiting the supply of products or services;
  • There should be a valid, objective reason for each code or membership provision. The association should document the development and reasonableness of the proposed code or membership restrictions. Code of ethics, membership criteria, and similar provisions should be no more stringent or rigid than necessary to ensure that minimum acceptable levels of conduct are met;
  • The code of ethics and other restrictions on the association's membership should be reviewed and updated periodically to ensure that they are current. In addition, associations should document any and all complaints or concerns about these documents and resolve them as appropriate;
  • A code of ethics and other restrictions on the association's membership should be clear and unambiguous, reasonable, fair, and objective. Equally importantly, the process for enforcing them must be objectively and uniformly administered without subjectivity, favoritism, or discrimination. The rules of the process must be scrupulously, consistently, and objectively followed by those administering the program. Due process should be built into the program; and
  • Associations should maintain strict confidentiality with respect to all adverse allegations, complaints, actions, and proceedings that arise in connection with the process.

Finally, it is important for associations to recognize that codes of ethics and other membership restrictions can raise legal concerns in the areas of due process, defamation, and tortious interference. Common law due process, for example, requires associations to provide notice of potentially adverse decisions to members or prospective members, an opportunity for such persons to defend themselves, and an opportunity to appeal any adverse decision.

Any association that has a code of ethics or other competitive restrictions on the association's membership, or certificants or accreditants, or is looking to implement such restrictions, should take steps to ensure that the restrictions serve a legitimate and pro-competitive function, are not structured any more restrictive than necessary to further this function, and do not expose the association to potential antitrust or other legal risk. Spending time on these issues upfront can save costs and headaches in the long run.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.