LEGAL COMPLIANCE DOCUMENT

ANTITRUST GUIDE

For Members of the Association of Legal Administrators

Professional associations such as the Association of Legal Administrators (ALA), although well recognized as valuable tools of American business, are subject to severe scrutiny by both federal and state governments.

A Framework & Its Boundaries

The single most significant law affecting professional associations is the Sherman Antitrust Act, which makes unlawful “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce…”

A professional association — by the very nature of being made up of competitors — is itself a combination, satisfying one of the elements in proving an antitrust violation. Section 5 of the Federal Trade Commission Act applies equally, prohibiting the same conduct as the Sherman Act, and almost all states have enacted parallel antitrust statutes.

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No organization is too small or too localized to escape a civil or criminal antitrust suit. Federal actions have been brought against groups as modest as Maine Lobstermen, a Virginia audio-visual association, Bakersfield Plumbing Contractors, the Utah Pharmaceuticals Association, and local barbers associations.

The government brings approximately five civil and ten criminal cases each year against professional associations. It is therefore imperative that every member — regardless of the size of the association or its membership — refrain from any activity that could form the basis of a federal or state antitrust action.

Core Areas of Antitrust Concern

There are four principal areas of concern for professional associations: price fixing, membership, standardization and certification, and industry self-regulation. Of these, price fixing is the most consequential — the area where individual members are most likely to run afoul of the law, and where the government focuses its greatest attention.

A Sherman Act violation may be inferred from the mere fact that all or most members are doing the same thing with respect to prices. No written or spoken agreement is required. Price fixing is a broad term encompassing any concerted effort or action that has an effect on prices or on competition.

Accordingly, members should avoid any discussion that could support an inference of agreement on prices, production, market allocation, or any other matter of market effect. The topics that follow — while not exhaustive — should not be discussed at meetings or member gatherings.

Eight Rules of Restraint

01
Do not discuss current or future billing rates, fees, disbursement charges, or any other items that could be construed as “price.” Exercise the same caution when speaking of past rates or fees.
02
Do not discuss what constitutes a fair profit, billing rate, or wage level.
03
Do not discuss increases or decreases in price, fees, wages, or disbursement charges. Interest charges are considered an item of price.
04
Do not discuss standardizing or stabilizing prices, fees, wages, or disbursement charges.
05
Do not discuss current billing or fee procedures.
06
Do not discuss the imposition of credit terms or the amount thereof.
07
Do not complain to a competitor that his billing rates, fees, or wages constitute unfair trade practices. Another law firm — or even a corporate legal department — may be considered a competitor.
08
Do not discuss refusing to deal with anyone because of his pricing or fees.

Survey Requirements & Compliance

Do not conduct surveys (under the auspices of ALA or informally) relating to fees, wages or other economic matters without prior review by antitrust legal counsel.

Characteristics of a Compliant Survey

Any survey should satisfy each of the following

  • Participation is voluntary and open to non-members.
  • Data should be of past transactions.
  • Data should be collected by an independent third party, such as an accounting firm.
  • Confidentiality of each participant’s data should be preserved.

However, care must be taken to ensure that the purpose of any survey is to permit each firm to assess its own performance. If a survey is used for the purpose of or has the effect of raising or stabilizing fees, wages, disbursements, credit policies and the like, it will create serious antitrust problems.

Within this same legal framework applicable to surveys, an association can make presentations or circulate articles regarding such educational matters as establishing sound office procedures, etc., provided it is clear that the matters are educational, and not a basis for law firm uniformity or agreement.

Membership & Self-Regulation Risks

Inasmuch as association antitrust violations can subject all association members to criminal and civil liability, members should be aware of the legal risks in regard to membership policy and industry self-regulation.

Fair and objective membership requirement policies should be established. Membership policies should avoid:

Prohibited Restrictions

Policies must strictly steer clear of

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

However, care must be taken to ensure that the purpose of any survey is to permit each firm to assess its own performance. If a survey is used for the purpose of or has the effect of raising or stabilizing fees, wages, disbursements, credit policies and the like, it will create serious antitrust problems.

Within this same legal framework applicable to surveys, an association can make presentations or circulate articles regarding such educational matters as establishing sound office procedures, etc., provided it is clear that the matters are educational, and not a basis for law firm uniformity or agreement.

Enforcement, Fines & Penalties

The penalties for violating federal or state antitrust laws are severe. The maximum criminal penalty for violating the Sherman Act was increased in 2004 from $350,000 to $1,000,000 for an individual and from $10,000,000 to $100,000,000 for a corporation. Pursuant to the Sentencing Reform Act, alternative maximum fines could be increased to twice the pecuniary gain of an offender or twice the loss to another person.

Individuals and corporate officers who are found guilty of bid rigging, price fixing or market allocation will virtually always be sentenced to jail pursuant to the Sentencing Guidelines; community service cannot be used to avoid imprisonment. The minimum recommended sentence is four months; the maximum is three years.

Additionally, there are civil penalties such as injunctions or cease and desist orders which could result in government supervision of association members, restricting the association's activities or disbanding the association.

Civil suits may be brought by consumers or competitors. Civil antitrust actions result in treble damage awards and attorneys' fees. Thus, if association members are held liable to a competitor for antitrust violations which resulted in $500,000 worth of lost business, the verdict may exceed $1,500,000.

A Commitment to Openness

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

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Thus, it is important that members contact the association headquarters or legal counsel for guidance if they have even the slightest qualms about the propriety of a proposed activity or discussion.