February 16, 2014
A New Zealand association related case announced a few days ago is a recent reminder that voluntary industry associations are not price regulators (see: Commission issues warning over “no discounting” clause). While there can sometimes be a temptation for trade associations and their leadership to get involved in the competitive activities of their members, and pressure from members to do so, such as relating to prices, services, customers and markets, this recent enforcement by the New Zealand Commerce Commission (“ComCom”) illustrates the potential competition/antitrust law risk of doing so.
In this case, according to the ComCom, New Zealand community pharmacies entered into standard form Community Pharmacy Services Agreements with District Health Boards that included “no discounting clauses” advocated by the Pharmacy Guild (clauses prohibiting pharmacies from waiving, or discounting, certain co-payment fees). In the ComCom’s view, this collective arrangement banning discounts, endorsed by the association, likely breached the New Zealand Commerce Act.
In Canada, like New Zealand, trade and professional associations that do not have legislative authority to dictate member pricing, services or relations with customers need to take care that “standard form” agreements adopted by members do not become cartel agreements that violate the criminal conspiracy offences under the Competition Act (violation of which is subject to criminal fines of up to $25 million per count and imprisonment for up to 14 years). For some of the key competition issues that can arise in the context of association activities see: here.
While voluntary associations may be able to assist members in the formulation of “forms of agreement” that may be adopted with customers or suppliers, a common strategy to reduce competition law risk in this area can be to allow members to amend terms relating to price, discounts, scope of services, customers, etc. (and to remind members of their ability to do so).
In other words, it is not to say that associations cannot have an important role in assisting members with legal support or the development of industry agreements (indeed, education is one of the core roles of most associations); but rather that when that assistance in developing agreements crosses the line to dictating competitively sensitive terms, this can raise significant criminal or civil competition law risk.
This recent New Zealand association case is also a reminder that merely because a voluntary trade or professional association and/or its members are dealing with a government or government agency does not necessarily mean that private parties will be immune from the application of competition/antitrust law.
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