CORPORATE LEGAL OPERATIONS CONSORTIUM, INC.
ANTITRUST COMPLIANCE POLICY
It is the policy of the Corporate Legal Operations Consortium, Inc. (“CLOC”) to comply strictly with all laws and regulations applicable to its activities. Compliance with the letter and spirit of the antitrust laws is important to the success of CLOC and to advancing its objectives. In order to minimize the possibility of antitrust concerns, CLOC requires its members, meeting attendees, website users, officers, directors, committee and task force members, employees, agents and anyone using its technology (such as its online community, social media accounts, collaboration tools and listservs) to abide by the terms of this antitrust policy (“Policy”).
- No individual officer, director, member (including, without limitation, committee and task force members), employee, or other party is authorized to speak or act on behalf of CLOC unless specifically granted such authorization by CLOC in writing (all references to “in writing” or “written” include email).
- The Board of Directors is the only party authorized to issue policy statements or adopt positions (public or otherwise) on behalf of CLOC. In addition, responses to questions or complaints from the public or from private parties must be coordinated for prior approval by the Board of Directors.
- No individual officer, director, member (including, without limitation, committee and task force members), employee, or other party is authorized to use CLOC letterhead or CLOC’s logo without the prior written consent of the Board of Directors, or its designee.
- Agendas for CLOC meetings will be prepared in advance, with proper review by a CLOC staff member, and followed at the meeting. Only approved agenda items will be discussed. Board, committee, task force, CLOC members and other meeting attendees will not participate in “rump” sessions outside of regularly scheduled meetings to discuss items not on an agenda.
- The CLOC Secretary, or their designee, will take minutes of all Board (including Executive Committee) and membership meetings, which minutes will fully and accurately document all actions taken at the meeting (and only action items) and will be submitted to the CLOC Headquarters and reviewed by an appropriate CLOC staff member prior to distribution. Upon approval, such minutes will become the “official minutes” retained by CLOC. Each committee, task force, or other party holding a meeting will appoint a member to take meeting minutes and will submit such minutes to the CLOC Headquarters for approval. Members may not keep their own minutes.
- Periodic written reports to the Board are required from all committees, task forces, and the like reflecting all pending matters, requests for action and approvals for preliminary decisions. Such reports will be submitted for review by the President, or his or her designee, a designated member of CLOC staff, and, upon request, by legal counsel prior to distribution.
- Legal counsel should review all written communications that may involve competitively sensitive information before it is distributed, including but not limited to newsletters, letters, speeches, and presentations.
- Committees, task forces, and the like may act only within the scope of their authority, and all correspondence must comply with this Policy. Recommendations will be made to the Board of Directors for other actions to be taken.
- Participants in all meetings related to or discussing CLOC business, whether Board of Directors, membership, committee, task force, or other meetings, must comply with this Policy at all times.
- Any questions regarding this Policy or its implementation will be addressed to the CLOC President or Executive Director.
- All CLOC officers, directors, committees, task forces, members, employees, and agents must adhere to the CLOC Antitrust Guidelines, a copy of which is attached hereto as Exhibit A.
- A copy of this Policy will be made available to all CLOC members, meeting attendees, technology users, employees, and agents, and the need to comply with its terms will be communicated regularly. A copy of the Policy will be provided to each new Board member and to each new staff member within thirty (30) days of hire.
CORPORATE LEGAL OPERATIONS CONSORTIUM, INC. (“CLOC”)
Associations (such as CLOC), although well recognized as valuable tools of American society, are subject to strict scrutiny by both federal and state governments. While such scrutiny should not prevent participation in, and support for, an association, members and others should be aware of, and comply with, certain relevant legal principles. Compliance with these laws does not prevent associations and their members from lawfully engaging in a wide variety of group activities, as long as the purpose or intended effect of the activities is promotion of an industry as a whole, and not to gain a competitive advantage over non-members.
Accordingly, in order to minimize the possibility of antitrust concerns, CLOC requires its members, meeting attendees, website users, officers, directors, committee and task force members, employees, agents and anyone using its technology (such as its online community, social media accounts, collaboration tools and listservs) to abide by the terms of its Antitrust Policy and these Antitrust Guidelines.
The single most significant law affecting organizations such as CLOC is the Sherman Antitrust Act, which makes unlawful every contract, combination or conspiracy in restraint of trade or commerce. The Federal Trade Commission Act, the Clayton Antitrust Act and the Robinson-Patman Act also are applicable to associations, for they also forbid anticompetitive activities. Furthermore, virtually every state has enacted antitrust laws similar to the Sherman Act. As such, any association activity that arguably could be perceived as a restraint of trade exposes an association and its members to antitrust risk.
Associations are frequent targets of antitrust investigations and litigation because association activities often meet one of the two elements necessary for a Sherman Act violation: collective action. Under those circumstances, a plaintiff (whether the government or a private party) need only demonstrate a “restraint of trade” by an association to prove an antitrust violation. That, and the fact that antitrust laws are written in broad terms and contain general prohibitions, means associations and their activities are at a higher risk of antitrust scrutiny.
Between the state and federal laws, there is no organization too small or too localized to escape the possibility of a civil or criminal antitrust suit. It is thus imperative that every association member, regardless of the size of the association, refrain from indulging in any activity which may be the basis for a federal or state antitrust action.
There are four main areas of antitrust concern for associations: price fixing, membership, self-regulation, and standardization. The area of greatest concern historically has been price fixing. The government may infer a violation of the Sherman Act by the mere fact that all or most of the members of the association are following the same course with respect to prices or other terms or conditions of trade. It is not required that there be an actual agreement, written or oral, to set prices. Rather, price fixing is a very broad term, which includes any concerted effort or action that has an effect on competition, or on prices, terms, or conditions of trade. Moreover, such concerted actions (affecting prices) cannot be justified by showing that they will benefit customers, or that the prices set are otherwise reasonable.
Accordingly, members of CLOC and its Board of Directors, committees, task forces, meeting attendees, technology users and the like should refrain from any discussion which may provide the basis for an inference that the members agreed to take any action relating to prices, services, production, allocation of markets or any other matter having a market effect. These discussions should be avoided both at formal meetings and informal gatherings.
The following topics are some examples of the subjects which should not be discussed at any formal or informal CLOC meeting, either virtual or live:
- Do not discuss your own or others’ current or future billing rates, fees, disbursement charges, prices or other times that could be construed as “price” or anything that might affect prices or fees, such as costs, discounts, terms of sale, or profit margins. Exercise caution if discussing past billing rates, fees or prices.
- Do not discuss what is a fair proﬁt, billing rate or wage level.
- Do not discuss increases or decreases in price, fees or wages, or disbursement charges. Interest charges are considered an item of price, for example.
- Do not discuss what you or others plan to do in particular geographic or product markets or with particular services, including the elimination, restriction, or limitation of the quantity or quality of any service to be offered or limitation of services to particular territories, clients, or groups.
- Do not discuss standardizing or stabilizing billing rates, prices or pricing procedures.
- Do not discuss cash discounts or credit terms.
- Do not discuss allocating markets or clients. (This applies to services as well as products.)
- Do not complain to a competitor that its billing rates or pricing constitute unfair trade practices and do not discuss the potential of or the desirability of refusing to deal with a company or individual because of pricing or distribution practices. A law firm or a corporate legal department may be considered a competitor.
- Do not discuss anticipated wage rates.
- Do not conduct surveys (either on behalf of CLOC or informally) relating to fees, wages, billing rates, benefits, compensation or other economic matters. Only CLOC may conduct such surveys after first assessing and addressing any potential antitrust considerations and complying with available guidance and requirements.
Members and others should object to any discussions or meeting activities that appear to violate these guidelines, promptly excuse themselves if the discussion continues, insist that the minutes reflect their departure, and immediately communicate their objection to CLOC’s legal counsel.
Inasmuch as an association’s antitrust violations can subject all association members and involved parties to criminal and civil liability, members should be aware of the legal risks regarding membership policy and industry self-regulation. Because membership in an association can be of substantial benefit, associations must ensure that they do not in any way restrict or prejudice competitors from membership or illegally discriminate against non-members. Membership policies should avoid:
1. Restrictions on dealing with non-members.
2. Excluding from membership any qualified participant.
3. Limitations on access to association information.
In encouraging certain conduct, associations may lawfully establish a code of ethics. However, codes that may have an anticompetitive effect, such as those banning advertising or competitive bidding, are prohibited. In general, industry or professional self-regulation, ordinarily manifested by a code of ethics, must avoid:
1. Requiring refusal to deal with any member violating the association’s code of ethics.
2. Arbitrary enforcement of the code.
3. Unreasonably severe penalties for violation of the code.
4. Regulations or polices which have price fixing implications, such as preventing the advertising of prices.
Standardization programs can be among the most beneficial activities in which associations engage. There is a substantial risk, however, that such programs will be used to restrict competition or discriminate against certain competitors. Thus, the following guidelines should be followed:
1. Standards should be voluntary.
2. Non-members must be allowed to participate although they may be charged a reasonable, higher fee.
3. Proposed voluntary standards should be widely circulated for comment by affected parties.
4. Performance standards, rather than design standards, should be used.
5. Periodic review of standards criteria should occur in order to account for changing technology.
6. Due process procedures for denials should be established.
7. Standard validation by an independent authority may be beneficial.
An association may be held strictly liable for the illegal conduct of its members and agents acting under the association’s name even if the association has not authorized the activity. Thus, an association must ensure that its members and agents are not using the association’s legitimate activities for anticompetitive purposes. Associations that undertake standardization programs are particularly vulnerable to this type of liability and should closely monitor such activities. Thus, associations should consider:
1. Adopting written guidelines outlining the authority and responsibility of members and staff, including who may “speak” for the association and who may use association letterhead.
2. Requiring written committee reports of pending and completed matters.
3. Implementing due process procedures for decision-making and dispute resolution.
The penalties for violating federal and state antitrust laws are severe. The Sherman Act is a criminal conspiracy statute. Therefore, active participants, as well as individuals who silently acquiesce in illegal activity, can be held criminally responsible. Violation of the Sherman Act is a felony punishable by a fine of up to $100 million for corporations, and a fine of up to $1 million or up to ten years imprisonment (or both) for individuals. Under some circumstances, the maximum potential fine may be increased above the Sherman Act maximums to twice the gain or loss involved. In addition, collusion among competitors may constitute violations of the mail or wire fraud statutes, the false statements statute, or other federal felony statutes. In addition to receiving a criminal sentence, a corporation or individual convicted of a violation may be ordered to make restitution to the victims for all overcharges. Additionally, there are civil penalties such as cease and desist orders, requiring government supervision of association members, restricting the association’s activities and disbanding the association.
The greater likelihood of occurrence, and possibly the more severe penalty, may be civil suits brought by competitors or even consumers. Civil antitrust actions result in treble damage awards. Thus, an antitrust violation which caused $500,000 in damages would result in an award of $1,500,000.
The government’s attitude toward associations requires associations and their members and others participating in their activities to, at all times, conduct their business openly and avoid any semblance of activity which might lead to the belief that association members had agreed, even informally, to something that could have an effect on prices or competition. Thus, it is important that members and others participating in CLOC activities contact CLOC for guidance if they have even the slightest qualms about the propriety of a proposed activity or discussion. Because of the importance of the antitrust laws, as well as the practical importance of associations, to the successful functioning of the American economy, strict compliance with the antitrust laws by associations and their members is critical.