August 24, 2014
The U.S. Federal Trade Commission has proposed settlements in two cases involving professional associations and codes of ethics that the FTC alleged violated U.S. antitrust laws (the FTC Act) (see: here). In these two cases, involving the National Association of Residential Property Managers (NARPM) and National Association of Teachers of Singing (NATS), the associations agreed to remove provisions in their codes of ethics that, according to the FTC, limited competition among members and raised antitrust law concerns.
More particularly, the two association codes restricted comparative advertising and the solicitation of members’ competitors’ clients. The NARPM code of ethics 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 NATS code provision read: “members will not, either by inducements, innuendos, or other acts, proselytize students of other teachers”.
The proposed settlements in these cases require, among other things, the associations to adopt antitrust compliance programs, stop restricting members from soliciting competitors’ customers and from making claims that are not false or deceptive about competitors’ products or services.
These cases are the most recent enforcement action by the U.S. FTC against associations for alleged “codes of ethics” that violate U.S. antitrust laws (for several other recent cases see for example: here and here).
They are also another reminder for trade and professional associations that code of ethics provisions that restrict key aspects of competing members’ business activities, such as pricing, markets, customers, output/production or marketing and advertising can in some instances raise serious competition/antitrust issues.
In other words, what an association or its members may consider inappropriate, unseemly or tacky, that may negatively impact members’ ability to freely compete, can raise criminal or civil competition law concerns both in the U.S. or Canada (in Canada the most serious being potential violation of the criminal conspiracy provisions of the Competition Act that prohibits price-fixing, market division and output restriction agreements among competitors).
Canada’s Competition Bureau has also recently reminded associations on a number of occasions that association restrictions on the competitive activities of members are a potential source of competition law concern.
In this respect, the Bureau has cautioned associations, among other things, not to use rules to establish prices, mandate levels or types of service or restrict advertising (see: Trade Associations and the Competition Act); and not sanction or discriminate against members that do not adhere to recommended fee guidelines or other rules with respect to competitively important considerations (see: here).
Based on the perennial interest of competition enforcement authorities in association codes, it makes sense for voluntary trade and professional associations and their members to critically assess whether their codes of ethics are intended to ensure that members adhere to legitimate standards, such as relating to such things as education, professional training, truth in advertising and marketing, legally permissible conduct, etc.
On the other hand, codes that are intended to restrict or have the effect of restricting members’ competitive activities , such as members’ ability to price their products, independently compete (for example, with respect to particular markets, customers, products or business models), engage in legal and truthful advertising or impact output/supply can raise competition law concerns (and mean that some legal advice is prudent).
____________________
SERVICES AND CONTACT
I am a Toronto competition and advertising lawyer offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. I also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.
My experience includes advising clients in Toronto, Canada and the US on the application of Canadian competition and regulatory laws and I have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal, pricing and distribution, Investment Canada Act and merger matters. For more information about my competition and advertising law services see: competition law services.
To contact me about a potential legal matter, see: contact
For more regulatory law updates follow me on Twitter: @CanadaAttorney
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
