“A credible and effective compliance program also plays a crucial role for trade associations because they face unique compliance issues. Given that an association provides a forum where competitors collaborate on association activities, trade associations are exposed to greater risks of anti-competitive conduct. A number of past Bureau cases have involved trade associations that were engaged in agreements to harm competition. It is critical that trade associations implement credible and effective programs with strict codes of ethics and conduct and appropriate procedures and compliance steps to prevent improper conduct and to protect the trade association and its members from being used as a conduit for illegal activities.”
COMPETITION LAW COMPLIANCE
TIPS FOR ASSOCIATIONS
Most association activities are legitimate and unlikely to raise competition law concerns. However, given that many, if not most, trade and professional association activities involve the direct interaction of competitors, it is prudent for association executives, staff and their advisors to take practical steps to reduce potential competition law risk.
Trade and professional associations have also grown as a Competition Bureau priority over the past few years including several high profile association related enforcement matters, regular discussion of association activities in Bureau personnel speeches and new enforcement guidelines including the Bureau’s recently issued pamphlet Trade Associations and the Competition Act.
Some basic guidelines for associations to minimize potential criminal or civil competition law risk include the following:
1. Adopt and maintain an effective competition law compliance program.
According to the Competition Bureau, an effective compliance program “plays a crucial role for trade associations.”
Some of the key benefits of a compliance program include reducing the risk of violating federal competition law, reducing the costs of investigations and proceedings and the potential mitigation of penalties.
Competition compliance options for associations range from formal compliance programs encompassing all association activities to compliance guidelines for key activities based on risk (e.g., meetings, information exchanges and specific initiatives that may raise competition law issues, such as benchmarking, research and development initiatives and joint negotiations with suppliers or customers).
2. Adopt agendas and minutes for all association meetings.
Associations should prepare written agendas and keep minutes for all meetings. Discussions at meetings should also stay within the boundaries of legitimate agenda items and discussions (or exchanges) of “competitively sensitive information” should be avoided – this includes discussions of current/future pricing, costs, individual customers, markets, market shares and business or strategic plans.
3. Adopt and follow conduct of meeting guidelines.
One of the most practical steps an association can take to reduce competition law risk is to adopt and strictly follow conduct of meeting guidelines.
Such guidelines commonly include restrictions on the exchange of competitively sensitive information (of the types discussed above) and on discussions of topics that may lead to conspiracy risk under section 45 of the Act (e.g., discussions relating to pricing, markets, concerted refusals to deal or limiting the production or supply of goods or services).
Such guidelines also commonly include recommendations on steps to take if inappropriate discussions or activities arise during association meetings or events.
4. Perform periodic compliance audits.
Having a compliance program or policy in place that is not followed can, in some circumstances, be more harmful than not having a program at all, particularly if association personnel understand the compliance program and choose not to follow it.
As such, one practical way for associations to monitor compliance is to conduct periodic audits of association activities, which can be performed on an association-wide, activity-specific or spot basis.
5. Conduct competition compliance orientations for new association executives and staff.
Another practical step associations can take to ensure competition law compliance is to conduct compliance orientations for new board and executive members.
In this regard, senior management and involvement in competition compliance is one of the Bureau’s key elements for an effective compliance program.
6. Get legal advice for key association initiatives.
Many associations do not have the budget for extensive legal advice. Recognizing this, is nevertheless prudent for associations to obtain advice for key activities and initiatives that may raise competition law concerns.
These may include specific types of initiatives that may raise competition law issues, such as benchmarking, research or some types of joint member initiatives (e.g., joint marketing, purchasing or negotiations with significant purchasers).
7. Avoid informal or “off the record” meetings.
Associations should discourage informal or “off the record” meetings between members, particularly on the “fringes” of association meetings or using association facilities.
This is not to say that members cannot meet informally for social purposes, but in a number of past association cases members either met informally (and in several cases actually established “sham” associations) to form and maintain criminal cartel arrangements.
Association members should also be aware that merely because a meeting is held “off the record” or “in camera” (i.e., a discussion is not recorded in meeting minutes) does not mean discussions or the fact of the meeting itself cannot be used as evidence in competition law proceedings. The Bureau and private plaintiffs can, and commonly do, use such “circumstantial evidence” as part of their cases.
8. Review all association activities through a “competition lens”.
Associations should generally review their initiatives and activities through a “competition lens”. For example, if a particular association activity may lead to higher prices, less quality or choice, make it more difficult for some members or competitors to compete or generally reduce competition, this may well raise competition law concerns (or at minimum mean that advice should be sought).
9. Require associations to have credible competition compliance programs as a condition for personnel to participate.
Before allowing company personnel to participate in association activities, ensure that the association has adopted and applies a credible competition compliance program. As a practical matter, if competition law issues arise (or enforcement) the association, member firms and their participating personnel and directors and officers may be exposed to risk or penalties.
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