CLOC Antitrust/Competition Law Guidelines

Applicability

These guidelines apply to all CLOC members, as well as anyone using CLOC’s technology, such as its website or collaboration tools, and anyone attending a CLOC event of any kind, or anyone participating in any CLOC activity.  You agree to comply with these guidelines, which may be amended from time to time to reflect current law, and you agree to comply with antitrust and competition laws at all times.  CLOC takes its obligation, and the obligation of its members, to comply with antitrust and competition laws very seriously.   Anyone failing to comply with these guidelines or applicable antitrust or competition laws may be subject, in CLOC’s sole discretion, to action by CLOC including, but not limited to loss of membership, removal from an event or activity, deactivation, etc.

Overview

U.S. Federal and state regulators, as well as regulatory authorities around the world, scrutinize the actions of professional associations (such as CLOC) and its members in an effort to ensure that those actions are not anticompetitive. No organization is too small or obscure to escape a civil or criminal review: regulators have taken action against associations such as the Maine Lobstermen; Bakersfield Plumbing Contractors; and the Utah Pharmaceuticals Association to name a few.

Penalties

The penalties for violating federal or state antitrust laws are severe. For example, the maximum criminal penalty for violating the Sherman Act is $1,000,000 for an individual and $100,000,000 for a corporation. Civil antitrust actions may result in treble damage awards and attorneys’ fees. Thus, if CLOC members are held liable for antitrust violations resulting in $500,000 worth of lost business, the verdict may exceed $1,500,000.

Individuals and corporate officers found guilty of bid rigging, price fixing or market allocation will virtually always be sentenced to jail pursuant to Federal Sentencing Guidelines.  Currently, sentences run from four months to a maximum of three years.

Additionally, civil penalties may include injunctions or cease and desist orders resulting in government supervision of CLOC or its members, restrictions on CLOC’s activities, or the disbanding of CLOC altogether.

Restraints on Trade

U.S. antitrust laws prohibit competitors from engaging in actions that could result in an unreasonable restraint in trade.  There are four main areas of antitrust concern for professional associations: Price Fixing; Membership; Standardization; and Industry Self-regulation.

Some activities are deemed so harmful that they are considered per se violations; it does not matter whether or not the activities have a harmful effect on competition. These generally include price fixing (and this is the area where individual members are most likely to violate the law) and some forms of boycotts.

Other actions, such as standards development and relationships between distributors and suppliers, generally are evaluated under a rule of reason: regulators balance the pro-competitive benefits of the action against the anti-competitive aspects to determine lawfulness.

In some cases, the government infers a violation by the mere fact that all or most of the members of the professional association are doing the same thing, especially with respect to actions involving prices. It is not required that there be an actual agreement, written or unwritten, to influence prices—up or down. Price fixing is a term with a broad meaning, including any concerted effort having an effect on prices, or on competition, and the term “price” is interpreted broadly, as noted in the section below.

Prohibited Conduct: The Basics

General.  It’s impossible to outline all actions that are impermissible or problematic, but the following list provides a broad outline of conduct that violates or could violate U.S. or international competition laws.

As such, CLOC members should refrain from any discussion—both at formal gatherings and in informal settings, through email exchanges, or on collaboration sites— which may provide the basis for an inference that CLOC members agreed to take action relating to prices, allocation of markets, or any other matter having a market effect. The following provides some basic guidelines for navigating this topic:

  1. Do not discuss current or future billing rates, fees, disbursement charges or other items that could be construed as “price.”  And be very careful if discussing past billing rates, fees or prices.
  2. Do not discuss what is a fair profit, billing rate or wage level.
  3. Do not discuss an increase or decrease in price, fees or wages, or disbursement charges. Interest charges are considered an item of price, for example.
  4. Do not discuss standardizing or stabilizing prices, fees or wages, or disbursement charges.
  5. Do not discuss current billing, terms of sale, warranties or fee procedures.
  6. Do not discuss credit terms.
  7. Do not complain to a competitor that its billing rates, fees or wages constitute unfair trade practices. Here, a law firm, or a corporate legal department may be considered a competitor.
  8. Do not discuss refusing to deal with anyone because of their pricing or fees.
  9. Do not conduct surveys (on behalf of CLOC or informally) relating to fees, wages or other economic matters without prior review by CLOC antitrust legal counsel.

Surveys.  Surveys are a sensitive area.  Surveys must serve the goal of allowing members to assess their own performance–and nothing more.  If a survey is used for the purpose of, or has the effect of, raising or stabilizing fees, wages, disbursements, credit policies, etc., it will create serious antitrust problems.

Any survey should include: voluntary participation; participation open to non-members; data should be of past transactions; data collection by an independent third party, such as an accounting firm; confidentiality of each participant’ data; and data presented only in a composite form to conceal the information of any single participant. If a survey meets these criteria, CLOC can collect and disseminate data on many topics, including past salaries, technology used, etc.

Within this same legal framework applicable to surveys, CLOC can present on or circulate articles to educate members on sound operations procedures, etc.  But, the goal must be education, and not forming a basis for uniformity or agreement.

Membership.  CLOC will maintain fair and objective membership.  These requirements and policies seek to avoid:

  1. Restrictions on dealing with non-members;
  2. Exclusions from membership, especially if there is a business advantage in being a member;
  3. Limitations on access to association information, unless the limitation is based upon protection of trade secrets.

The government’s attitude toward professional associations requires CLOC members, as well as CLOC itself, to at all times: conduct business openly and avoid any semblance of activity which might lead to the belief that CLOC or its members agreed, even informally, to something that could have an effect on prices, fees or competition.

CLOC members should contact a CLOC Leadership Team Member, or CLOC legal counsel for guidance if they have even the slightest qualms about the propriety of a proposed activity or discussion.

Please send questions or raise issues by email via info@cloc.org, or to Jeff Franke at Jeff.Franke@cloc.org