This Guide to Antitrust Compliance is designed to help SWFC members
comply with state and federal antitrust laws when participating in SWFC
meetings or activities. This Guide, which emphasizes common antitrust
risks, is limited in scope and does not attempt to describe the
complexities of antitrust law. Instead, it is intended to further SWFC
members’ understanding of basic antitrust principles and enhance their
ability to identify antitrust issues. Keep in mind that antitrust laws
are complex and subject to change. Conduct permissible under one set of
facts may be questionable under another.
While this Guide provides helpful guidelines for proper conduct, it
is not intended as legal advice to cover particular fact patterns. By
necessity, it does not discuss rare situations that may violate the
antitrust laws. Therefore, it is imperative that you consult with legal
counsel when you have concerns about whether any particular action may
violate the antitrust laws. Further, this guidance is limited to
antitrust issues that arise in the context of SWFC activities, and does
not attempt to provide guidance concerning issues SWFC members may face
in their respective businesses. Each SWFC member should rely on his or
her company counsel for guidance on issues relating to company business.
SUMMARY OF THE ANTITRUST LAWS
The antitrust laws are designed to encourage competition, discourage
anticompetitive behavior, and permit persons engaged in business
activities to compete freely and vigorously. As a result, the laws are
particularly sensitive to actions that interfere with the free market
factors of price and other terms of sale, volume of production,
marketing and sales territories, sources of supply, and channels of
The United States’ antitrust laws are contained primarily in the
Sherman Act, the Clayton Act, the Robinson-Patman Act, and the Federal
Trade Commission Act. In addition, each of the 50 states has enacted
antitrust legislation. The Sherman Act prohibits conduct that restrains
trade, including certain joint activity by two or more companies or
individuals, as well as unilateral conduct that involves the exercise of
monopoly power. The Clayton Act prohibits certain mergers and
acquisitions, and the sale of goods on the condition that the purchaser
not use or deal in the goods of the competitor(s) of the seller where
the effect may be to lessen competition.
The Robinson-Patman Act makes it unlawful for a seller to
discriminate or differentiate in price between purchasers of commodities
of like grade and quality, where the effect may be to lessen or injure
competition. The Federal Trade Commission Act prohibits "unfair methods
of competition . . . and unfair or deceptive acts or practices," and
empowers the government to attack trade practices that conflict with the
basic policies of the Sherman or Clayton Acts, even though such trade
practices do not actually violate those laws.
The U.S. antitrust laws are designed to protect and promote
competition in markets affecting consumers in the United States, and
thus govern the activities of U.S. or foreign companies competing for
domestic or import sales in the U.S. market, regardless of whether the
offensive conduct occurs in the United States or elsewhere. Further, in
certain circumstances, the antitrust laws govern the export sales of
U.S. companies and foreign sales of foreign companies.
Please note that this Guide does not address state or foreign
antitrust laws. These laws, however, are often similar to the federal
antitrust laws, and acts that violate the federal laws may likewise
violate state and/or foreign laws. Therefore, you should consider the
principles discussed below in all transactions, even those occurring
outside the United States.
PENALTIES FOR VIOLATING THE ANTITRUST LAWS
Penalties for violating the antitrust laws are severe and can be
imposed on both corporations and individual employees. Criminal
violations of the Sherman Act are felonies. A corporation convicted
under the Sherman Act may be fined up to $ 10 million; an individual may
be sentenced to serve up to three years in jail, and fined as much as
$350,000. Even larger fines may be imposed pursuant to the Comprehensive
Crime Control Act and the Criminal Fine Improvements Act, which provide
that the fine may be increased to twice the gain from the illegal
conduct or twice the loss to the victims. The current Federal Sentencing
Guidelines recommend mandatory jail terms for individuals convicted on
certain antitrust violations.
Violations of the Sherman Act also may result in civil liability in
cases which may be brought by either the government or a private party.
If a private party proves that a defendant has violated the antitrust
laws, the defendant may be liable for up to three times the damages
actually caused by the violation, plus all of the plaintiff s legal
expenses. Antitrust law violations can render contracts containing the
illegal provisions wholly unenforceable. Even the successful defense of
an antitrust suit can be extremely expensive and time-consuming.
Further, an injunction or cease and desist order can be imposed that
requires dissolution of a trade association and that prohibits otherwise
lawful business practices, thus creating trade disadvantages for the
defendant entity. In short, the potential consequences of violating or
appearing to violate the antitrust laws are severe to trade
associations, corporations, and their employees.
APPLICATION OF THE ANTITRUST LAWS TO TRADE ASSOCIATION ACTIVITIES
One portion of the antitrust laws with special relevance to SWFC’s
operations is Section One of the Sherman Act, which prohibits two or
more parties from acting together or "conspiring" to unreasonably
restrain trade. For example, two competitors may not enter into
agreements to fix prices, allocate or divide customers or territories
among competitors, or engage in group boycotts (i.e., agreeing with
others not to purchase from or sell to a particular party) that have an
anticompetitive effect. From a practical standpoint, trade associations
should focus their concern on five principal antitrust problem areas:
price-fixing, allocation of customers, membership, standardization and
certification, and industry self-regulation.
Perhaps the greatest antitrust risk facing associations and
association members, and the risk about which the government has evinced
its great concern, involves agreements to fix prices. Indeed, the
predominant antitrust issue arising in the fertilizer industry over the
years, creating potential civil and criminal liability, has been price
fixing among competitors. Price fixing can be a criminal violation under
the Sherman Act. Such an unlawful agreement does not have to be formal
or in writing. In fact, the agreement does not even have to be
expressed, but can be implied (and proved in court by "circumstantial"
or indirect evidence that tends to indicate that such an agreement was
made). For example, a pattern of concurrent or nearly simultaneous
matching price changes among competitors may tend to prove that those
competitors agreed to raise or lower prices. In addition, where
competitors simultaneously announce changes in prices, terms, or
strategies, an agreement arguably may be inferred, with the outcome
turning on what a judge or jury ultimately determines. The goal of a
price fixing agreement need not be realized for the antitrust laws to be
violated, and if prices are fixed, it is no defense that the prices set
are reasonable or that the ends sought are worthy.
Allocation of Customers or Markets
Like price fixing agreements, an agreement among members of an
association to allocate customers or territories (i.e., agreeing with a
competitor that you will not solicit business from customer A or in
market X) can be a criminal violation of the Sherman Act. The antitrust
laws prohibit any understandings or agreements between competitors or
members of an association that involve the division or allocation of
customers, bid-rigging, agreements not to compete, etc.
Even informal agreements by which one member agrees to stay out of
another member’s territory will constitute a violation of the antitrust
Some SWFC members also are members of organizations founded in
accordance with the provisions of the Webb-Pomerene Act, such as the
PhosChem and Canpotex. As such, the joint marketing activities of those
export marketing associations are accorded certain limited antitrust
exemptions (even when concerning particular actions described in this
Guide as strictly unlawful). SWFC enjoys no such exemptions, and all
SWFC members, regardless of whether they also are members of an export
marketing association, must take care when engaging in SWFC business to
ensure they remain in full compliance with the antitrust laws.
A basic assumption about any trade association is that its members
derive an economic benefit from membership. Denial of membership to an
applicant, therefore, may constitute a restraint of trade if that denial
of an economic benefit limits the ability of the applicant to compete.
Thus, to avoid antitrust problems, membership criteria must be drafted
carefully, and those criteria must be applied consistently in the
evaluation of member applications.
Standardization and Certification
An association that develops voluntary industry standards may face
antitrust problems if the standards unjustifiably favor some and
discriminate against others. Similarly, association certification
activities that further the interests of certain groups to the exclusion
of others may result in antitrust problems. SWFC members’ participation
in certification activities or in the promulgation of industry standards
must be guided by their professional expertise — exercised in the best
interests of the industry — and must not be seen as an opportunity to
disadvantage or otherwise harm a competitor.
On a related note, benchmarking, and then emulating the "best
practices" used by other successful companies, is an increasingly
popular method for companies to improve their operations. Benchmarking
typically involves collecting information from companies in the
industry, as well as outside companies, either directly or through the
use of third parties. Because benchmarking can involve information
sharing with competitors, antitrust risks may be raised, especially if
the information exchanged relates to costs, prices, or output levels,
The rules governing information exchange and how that exchange may occur
are complex, and require that you seek the advice of legal counsel when
considering any benchmarking process or program.
Associations commonly establish codes of ethics or other self-imposed
regulations or procedures for enforcing them. It is laudable for an
association to wish to promote high ethical standards, but antitrust
problems may arise if an association’s attempt to police its
constituents causes economic injury. SWFC members must ensure that they
do not use any ethical or industry rules to disadvantage or otherwise
harm a competitor.
CONDUCT FOR MEMBERS TO FOLLOW AT SWFC MEETINGS
The Sherman Act is a criminal conspiracy statute. If you, as an
association member, sit in a room while other members engage in an
illegal discussion, such as price-fixing, you and/or your company may be
held criminally liable even though you say nothing during the
discussion. Your attendance at such a meeting may be sufficient to find
that you acquiesced in the discussion and are equally as liable as those
who vocally agree to violate the antitrust laws. Although within certain
sectors of the industry, employees and officers from competing firms
know each other as friends and peers, in the eyes of antitrust
enforcers, they are viewed simply as competitors with the ability to
collude in an anticompetitive manner. SWFC members should adhere to the
following general guidelines when participating in SWFC activities:
- Do not discuss current or future prices or costs.
- Do not discuss what is a fair profit level.
- Do not discuss an increase or a decrease in price.
- Do not discuss standardizing or stabilizing prices.
- Do not discuss pricing procedures.
- Do not discuss cash discounts.
- Do not discuss credit terms.
- Do not discuss controlling sales.
- Do not ban or otherwise restrict legitimate advertising by
- Do not discuss allocating customers or markets to or among
- Do not complain to a competitor that its prices constitute
unfair trade practices.
- Do not ask competitors why a past bid was so low, or to describe
the basis for a past bid.
- Do not discuss refusing to deal with a company because of its
pricing or distribution practices.
- Do not attend informal sessions in which industry problems or
issues are discussed.
- Do not vote or act in your capacity as a SWFC member with the
intention to harm a competitor.
It is important to bring questionable conduct or potential issues to
the immediate attention of legal counsel.
Even if members avoid the types of conduct described above, careless
or poorly worded language in written or oral communications by SWFC
members can be interpreted as signifying wrongful conduct, even when no
wrongful conduct has occurred. For example, statements such as "SWFC
membership gives us a competitive advantage over our competitors," "SWFC’s
planned actions in this area should restore order to the out of control
competition that exists in this market," or "This action by SWFC pleases
us because Company X has had it coming to them for a long while" are
simply inappropriate. Members should be especially careful when
commenting on competitors or on SWFC activities that may have a
competitive impact on a competitor’s business, such as standard setting.
SWFC is designed to bring together the industry’s experts to address
issues and problems that promote the success of the industry as a
whole. Accordingly, SWFC activities are not and must not be seen as
opportunities for members to advance their respective companies’
Without being an alarmist, SWFC members should bear in mind that
trade associations and their members are targets for government
antitrust enforcers and private treble damage suits. By avoiding
activities — and even the appearance that they are engaging in
activities that might be seen to have an effect on prices or competition
— members can protect themselves from charges of antitrust violations.
SUMMARY AND CONCLUSION
Trade association meetings provide a unique opportunity for
competitors to meet and to discuss items of concern to the industry. At
the same time, however, trade association meetings provide a fertile
breeding ground for formal or informal discussions that could lead to
conduct or agreements which violate the antitrust laws. When attending
such meetings, discussion of areas upon which agreements would be
illegal, such as any of the specific areas enumerated above, should be
In general, participation in trade associations should be guided by
the awareness that such participation is potentially suspect in the eyes
of antitrust enforcement agencies. Even mere attendance at a meeting at
which illegal activity occurs or is discussed may result in antitrust
liability. Remember always that those people who are your "friends" at
such meetings are your to competitors" in the eyes of the law.
Antitrust issues that arise in the context of a trade association
meeting are not limited to the trade association itself, but can create
liability in each of the individual members and their companies. This
underscores the need for members to educate themselves on basic
antitrust principles and to take proper precautions and action when
participating in trade association activity. As noted above, this Guide
is an introductory summary of a very complex area of the law. Legal
counsel should be contacted when potential issues arise.