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FTC Watching Trade Associations for Antitrust Violations

September 18, 2009
Business Law Advisory

In early spring 2009, the Federal Trade Commission (FTC) reminded us that trade association activities continue to be subject to their ever-increasingly watchful eyes. This time, that scrutiny resulted in an enforcement action against the National Association of Music Merchants (NAMM) for antitrust violations. More specifically, the FTC issued a complaint and consent order contending that NAMM, a 9,000 member association of U.S. manufacturers, distributors and retailers of musical instruments, enabled and encouraged discussions among its members as regarding competitively sensitive pricing information, policies and strategies and, as such, violated federal antitrust law.

The FTC explained that NAMM organized meetings and programs (for which NAMM selected moderators and set the agenda) at which competitors were encouraged to discuss "strategies for implementing manufacturers' minimum advertised pricing policies, the restrictions of retail price competition, and the need for higher prices." It was in this role – as a facilitator "steering the agenda" – that NAMM came under close scrutiny.

The complaint and consent order provide new guidance for associations generally, and could have significant implications on association activities. Of immediate concern to associations is the need to establish (or update) and strictly adhere to properly structured and specifically-tailored antitrust compliance programs. In the consent order, the FTC outlined the elements that must be contained in NAMM's new antitrust compliance program (which other associations might now view as necessary to their own new programs), including without limitation:

  • Appoint "Antitrust Counsel";
  • Conduct annual antitrust training for the association's board of directors and staff;
  • Have antitrust counsel present at all association events and meetings; and
  • Have antitrust counsel review and approve all final agendas and materials prior to distribution at meetings.

Under the new Obama administration, and with a new chief at the FTC, it is highly unlikely that this recent enforcement action by the FTC will be its last. Rather, trade and industry associations should expect even higher scrutiny of their activities in the wake of this enforcement action and should act accordingly to avoid an enforcement action of their own. We recommend that associations take steps now to establish (or examine and, if necessary, update) their antitrust compliance programs in light of this recent development.

For more information, or for assistance in preparing an antitrust compliance program specific to your needs, please contact your Varnum attorney.

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