trmg antitrust 2011 1 navigating the antitrust rules: a map for the credit executive within and...
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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
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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).
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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.
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STATUTES (cont.)STATUTES (cont.)
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.
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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.
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STATUTES (cont.)STATUTES (cont.)
●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.
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STATUTES (cont.)STATUTES (cont.)
State Antitrust Statutes
Almost every State has independent laws prohibiting monopolies, contracts, conspiracies and combinations in restraint of trade.
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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)
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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.
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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.
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DEPT. OF JUSTICE ACTIVITYTRANSPORTATION
● PRICE FIXING
● Air cargo carriers
● international freight forwarders
● water freight transportation
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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).
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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
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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
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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”
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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
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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
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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
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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)
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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
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PRICE DISCRIMINATIONPRICE DISCRIMINATION
Different price to different purchasers of commodities
Differences in terms and conditions of sale
Preferential credit terms
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PRICE DISCRIMINATIONPRICE DISCRIMINATION
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
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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
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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
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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
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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
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LEGITIMATE BUSINESS REASONLEGITIMATE BUSINESS REASON
Cost Justification
Market Conditions
Superior Credit History or Records
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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
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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.
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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
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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).
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NON-PERMISSIBLE DISCUSSIONSNON-PERMISSIBLE DISCUSSIONS
Allocation of customers
Dividing Territories
Bids
Geographic areas
Types of business
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PERMISSIBLE DISCUSSIONSPERMISSIBLE DISCUSSIONS
Delinquent account reports –NO discussion of future (i.e., intent).
Exchange of factual credit information
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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
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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
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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
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ELECTRONIC CREDIT EXCHANGEELECTRONIC CREDIT EXCHANGE
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.
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ELECTRONIC CREDIT EXCHANGEELECTRONIC CREDIT EXCHANGE
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.
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ELECTRONIC CREDIT EXCHANGEELECTRONIC CREDIT EXCHANGE
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