11/3/2016
Wanda Borges, Esq.
Borges & Associates, LLC
575 Underhill Blvd.
Syosset, NY 11791
516-677-8200 x 225
[email protected]
NACM GREAT LAKES
CONFERENCE - 2016

1
The Sherman Antitrust Act of 1890
◦ Prohibits contracts, combinations and
conspiracies in restraint of trade in interstate
commerce or with foreign nations.
◦ Felony to conspire to restrain trade; or to
monopolize (or attempt to monopolize).
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
The Clayton Act of 1914
◦ Passed to “correct” defects in Sherman Act.
◦ Unlawful to enter into any of several specified
types of prohibited transactions whose purpose
or effect would be to restrain trade or injure a
competitor.
NACM GREAT LAKES CONFERENCE 2016
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3
The Robinson-Patman Act was designed
to prevent discriminatory practices
adversely affecting free competitive
enterprise, to preserve competition
generally, and to protect small businesses
which are usually unable to buy in
quantity against large competitors.
Equally unlawful for any person engaged
in commerce to “knowingly induce or
receive a discrimination in price”
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2
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
The Robinson-Patman Act of 1936 makes
it
◦ Unlawful to “discriminate in price between
different purchasers of commodities of like
grade and quality”… where the
◦ Effect of such discrimination may be
substantially
 to lessen competition – or
 Tend to create a monopoly – or
 To injure, destroy or prevent competition with any
person who either grants or knowingly receives the
benefit of such discrimination, or with the customers
of either of them
NACM GREAT LAKES CONFERENCE 2016
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The Federal Trade Commission Act of
1914
◦ Broadest of the antitrust statues; includes:







mergers & acquisitions
unfair trade practices
unfair arrangements btw suppliers & dealers
deceptive sales approaches
discrimination in price, services or facilities
false advertising, and
any other practice to deceive the public.
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 The
Antitrust Procedure & Penalties Act of
1976

Gives Fed, govt. new disclosure powers.
 Permits a State attorney general to sue for
damages on behalf of a state’s citizens.
 Requires companies of a certain size to file
pre-merger notices.
NACM GREAT LAKES CONFERENCE 2016
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7
State Antitrust Statutes
Almost every State has independent laws
prohibiting monopolies, contracts,
conspiracies and combinations in restraint
of trade.
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
CIVIL ACTIONS
 punitive damages
 class action
 State AG - injunctions & damages


Antitrust Division of US Dept. of Justice
Federal Trade Commission (FTC)
NACM GREAT LAKES CONFERENCE 2016
 CRIMINAL
9
ACTION
 Antitrust Div. of the US Dept. of Justice
 fines against businesses and individuals
 jail terms for individuals.
 Enforcement agencies:
FCC for telecommunications entities.
Federal Reserve Board for banks.
FTC for all other matters.
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
Definition (per the FTC)
◦ An agreement, written, verbal or implied (express
or implied) among competitors that raises,
lowers, or stabilizes prices or competitive terms
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“Restraint of trade” = unreasonable
per se unreasonable (did the incident occur?);
or
in violation of the “rule of reason” (judged by
actual or potential effect on competitive
marketplace).
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“Combination / Conspiracy”--4 elements:
1. Knowledge
2. Common purpose
3. Actual restraint, not merely facilitating
4. Intent to restrain trade
“Conspiracy” = unity of purpose, common
design, meeting of minds re: unlawful
purpose
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Discussion beyond a “mere announcement”
 Agreement to maintain prices, with an
enforcement mechanism (mfr./distrs.)
Agreement to fix or set payment terms
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Price fixing relates not only to prices
Antitrust scrutiny (by the FTC) may occur when
competitors discuss the following topics:


◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
Present or future prices
Pricing policies
Promotions
Bids
Costs
Capacity
Terms or conditions of sale, including credit terms
Discounts
Identity of customers
Allocation of customers or sales areas
Production quotas
R&D plans
NACM GREAT LAKES CONFERENCE 2016
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Catalano Inc. v Target Sales
(Supreme Court 1980)
“Extending interest-free credit for a period
of time is equivalent to giving a discount
equal to the value of the use of the
purchase price for that period of time.
Thus, credit terms must be characterized
as an inseparable part of the price”
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11/3/2016
 08/1/2012 – Plea Agreement – Crowley Liner
– conspiracy to fix prices in the coastal water
freight transportation industry. Meetings and
discussions to fix base rates to be charged to
non-governmental purchasers of water
transportation of certain freight and to monitor
and enforce adherence to the agreed-upon
rates. Crowley criminal fine - $17 million. Sea
Star Line - $14.2 million criminal fine. Five
executives have plead guilty. Frank Peake,
former president of Sea Star sought trial rather
than pleading guilty
NACM GREAT LAKES CONFERENCE - 2016
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Frank Peake - the former president of Sea Star
Line - trial began January 14, 2013.
Convicted by federal jury
 conspiracy to fix rates and surcharges for water
transportation of freight and rigged bids
 agreed during meetings and communications to
allocate customers and met to monitor and
enforce adherence to agreed-upon rates
 sold PR freight services at collusive and
noncompetitive rates
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9
11/3/2016
 Frank Peake sentenced on December 6, 2013
 Five years in prison
 $25,000 fine
 As a result of Peake's trial, Thomas Farmer,
former vice president Sea Star indicted and was
scheduled to go to trial in January, 2015
Multiple motions to dismiss or limit testimony &
evidence – denied
18 day jury trial began on April 15, 2015
Thomas Farmer found NOT guilty
NACM GREAT LAKES CONFERENCE - 2016
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06/29/2010 – HannStar Display plead guilty to
global conspiracy to fix the prices of TFT-LFD
panels and pay $30 million criminal fine
 HannStar executive plead guilty on 10/27/2010

09/20/2010 – Panasonic & Whirlpool agreed to
pay $140.9 million in criminal fines for
international conspiracy to fix prices of
refrigerant compressors
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 03/18/2011 - Samsung SDI Company plead
guilty and agreed to pay $32 million in criminal
fine for its role in global conspiracy to fix prices
 Charge stated that conspiracy began as early as
January, 1997 and continued through March, 2006
 Price fixing, reducing output, allocating market shares
10/13/2005 – Samsung charged with
conspiracy to fix prices of DRAM
NACM GREAT LAKES CONFERENCE - 2016
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09/20/12 – AU Optronics et al were charged with
engaging in a 5 year price-fixing conspiracy
involving LCD panels. The conspirators met once
a month at “Crystal Meetings” The parties
exchanged production, shipping, demand &
pricing information as well as implementing,
monitoring and enforcing adherence to the fixed
prices.
 Asst AG Baer said “These international price-fixers caused
consumers to pay inflated prices for their computer
monitors, notebook computers and televisions”
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11
11/3/2016





AU paid $500 million in criminal fines.
Principal Hsiun sentenced in 2012 each to 3 yrs in prison &
$200,000 in criminal fines.
Principal Leung sentenced on April 29, 2013 to 2 yrs in
prison & $50,000 in fines
To date 22 executives have been indicted - 13 executives
have been convicted and are serving prison sentences
ranging from 6 to 36 months
Principal Andrew Chen (Chien Chung Chen) entered a Plea
Agreement
◦ $25,000 FINE
◦ COMMUNITY SERVICE
◦ PROBATION
NACM GREAT LAKES CONFERENCE - 2016
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Appeal was taken to the 9th Circuit Court of Appeals –
claiming that Sherman Act did not control
Decision was rendered in July 2014 – held that Sherman Act
applied to the conspiracy, despite its foreign origins,
because it involved U.S. import commerce
Motion for rehearing was denied in January 2015
Opinion amended January 30, 2015 to hold further that
Sherman Act also applied because the conspiracy had a
direct effect on U.S. import commerce
These holdings reaffirm prior court rulings that price-fixing
cartels that involve and significantly affect U.S. commerce
cannot escape the reach of U.S. antitrust enforcement by
operating overseas.
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 114 companies have paid fines in excess of $10 million
 All involving conspiracies that spanned the U.S. and
international
 U.S. companies in the past 10 years include:
 Embraco North America (2011- compressors - $91.8m)
 Dupont Dow Elastomers L.L.C. (2005– chloroprene rubber $84m )
 Crompton (2004 – rubber chemicals - $50m)
 Maxzone Vehicle Lighting Corp. (2012–auto lighting-$43m)
 Northwest Airlines, LLC (2010– air cargo transportation $38m)
 Irving Materials, Inc (2005 – ready mix concrete - $29.2m)
 Polar Air Cargo LLC (2011) Crowley Liner Services, Inc. (2012)
Horizon Lines, LLC (2011) Sea Star Line LLC (2012) – air cargo
transportation – total 63.6m)
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Nearly $1.3 Billion in criminal fines
All criminal fines obtained by the Division are
deposited into the Crime Victims Fund, which
provides support to victims and families whose
lives have been impacted by crime throughout
our nation.
Victim Services
Victim Compensation
Victim Expenses
NACM GREAT LAKES CONFERENCE - 2016
26
13
11/3/2016
 U.S.
v Apple, Inc., Hachette Book Group,
Inc., HarperCollins Publishers L.L.C.,
Verlagsgruppe Georg Von Holtzbrinck
GmbH, Holtzbrinck Publishers, LLC d/b/a
Macmillan, The Penguin Group, A Division
of Pearson PLC, Penguin Group (USA),
Inc., and Simon & Schuster, Inc. -
NACM GREAT LAKES CONFERENCE - 2016
27
 resulted
from the “explosion” in sales of
“e-books”
 Asserted that the Publisher Defendants
conspired to raise retail e-book prices and
other limit competition in the sale of ebooks
 Asserted that Publisher Defendants
teamed up with Defendant Apple sharing
the same goal of restraining retail price
competition in the sale of e-books
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14
11/3/2016

Allegations include:
 Apple and the Publisher Defendants jointly
agreed to alter the business model governing
the relationship between publishers and
retailers
 Replaced “wholesale” model with more
controlling “agency model”
NACM GREAT LAKES CONFERENCE - 2016
 Allegations
29
include:
 Apple facilitated Publisher Defendants
collective efforts to end retail price
competition
 Steve Jobs quoted “We’ll go to agency model,
where you set the price, and we get our 30%,
and yes, the customer pays a little more, but
that’s what you want anyway”
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15
11/3/2016

Allegations include:

Each Publisher Defendant entered into a functionally
identical agency contract with Apple effective
simultaneously in April 2010 which would “change the
industry permanently”

These Apple Agency Agreements granted Apple
assurance that Publisher Defendants would raise retail
prices at all e-book outlets enabling substantial price
increases for e-books.

All Publisher Defendants signed Apple Agency
Agreements within 3 days of each other
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Allegations include:
All retailers forced to accept Agency Agreement
(hundreds of phone calls to compel)


Limited price competition among themselves

Other price and non-price competition among
e-book publishers and e-book retailers
unlawfully eliminated to detriment of U.S.
consumers
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16
11/3/2016


March 2009, Macmillan CEO John Sargent met with Amazon
and said he was concerned about $9.99 pricing and that all
the “pubs” were talking about it.
August 2009 Financial Times Article - Hachette Livre CEO
Arnaud Nourry put it in an August “there are very recent
books, bestsellers at $9.99, which means that all the rest
will have to be sold at between zero and $9.99. . . . Amazon
is not in the business of losing money.
◦ Nourry admitted this was intended to “invite” others to
join with Hachette
NACM GREAT LAKES CONFERENCE - 2016
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33
Throughout 2009, Publisher Defendants engaged
in a series of attempts to induce Amazon to raise
its consumer prices for e-books.
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17
11/3/2016


CEOs of all or most of Publisher Defendants met
for dinners in the private dining rooms of New
York restaurants, without counsel present, to
discuss business matters. – allegedly to welcome
new CEO of Random House – Markus Dohle
“Executive Minutes,” of that dinner said Dohle
was educated on “how decisions get made” in the
publishing industry.
NACM GREAT LAKES CONFERENCE - 2016
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35
Random House and Simon & Schuster AGREED
◦ this was a “disruptive” time for the “industry,” and there
was a “need to change the model” under which e-books
were sold


July 2009 meeting of CEO’s of Simons & Schuster,
MacMillan, Harper Collins – agreed they do not
want Amazon’s low prices
E-Communication to Hachette’s CEO filling him in
on agreement
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18
11/3/2016

GET ENOUGH PUBLISHERS TOGETHER TO FORCE
AMAZON TO CHANGE ITS PRICING POLICIES
Simon & Schuster - “we’ve always known that
unless other publishers follow us there’s no
chance of success in getting Amazon to change its
pricing practices”
Macmillan and Harper “we must stop Amazon”
NACM GREAT LAKES CONFERENCE - 2016
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AUGUST 2009 – Penguin
“Competition for the attention of readers will be most
intense from digital companies whose objective may be
to disintermediate traditional publishers altogether. This
is not a new threat but we do appear to be on a collision
course with Amazon, and possibly Google as well. It will
not be possible for any individual publisher to mount an
effective response, because of both the resources
necessary and the risk of retribution, so the industry
needs to develop a common strategy.”
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19
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

January 13, 2010 - Executives from Simon &
Schuster, Random House, Macmillan, Penguin and
Hachette met to discuss an e-book joint venture
and to discuss how best to engage with Apple
Apple relented in meetings later that day and
agreed it would increase the price caps.
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 April
11, 2012 – Hachette, HarperCollins
and Simon & Schuster
 December
18, 2012 – The Penguin Group
 February
8, 2013 – Holtzbrinck
Publishers LLC d/b/a Macmillan
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11/3/2016
 Apple
lost at trial – decision July, 2013
Apple conspired to raise the prices of ebooks
Injunctive Relief Ordered
Special Monitor for Antitrust Compliance
appointed – 5 years
 Judgment
Entered 9/5/13
 Apple filed its Appeal on 10/3/13
2nd Circuit Affirmed the lower court on
6/30/2015
Apple sought certiorari from the US Supreme
Court and was denied
NACM GREAT LAKES CONFERENCE - 2016
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Iron Works and all others
similarly situated against Arcelormittal;
Arcelormittal USA, Inc.; United States
Steel Corporation; Nucor Corporation;
Gerdau Ameristeel Corporation, Steel
Dynamics, Inc.; AK Steel Holding
Corporation; SSAB Swedish Steel
Corporation; and Commercial Metals, Inc.
 Standard
NACM GREAT LAKES CONFERENCE - 2016
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21
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
Alleged that the Defendants and their coconspirators engaged in a continuing
contract, combination or conspiracy with
respect to the production and sale of steel
products in the United States in
unreasonable restraint of interstate trade
and commerce, in violation of Section 1 of
the Sherman Act, 15 U.S.C. §1.
NACM GREAT LAKES CONFERENCE - 2016
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

43
5/16 – 17/ 2005 - Steel executives convened at
an annual meeting of the American Iron and Steel
Institute (“AISI”)
6/20 – 22/2005 – executives convened against in
NY for a trade conference known as Steel Success
Strategies
Mid-2005 – a series of high-level discussions and
agreements regarding supply took place followed
by a curtailment of production by several steel
mills
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22
11/3/2016


6/2/2007 Arcelormittal executive Louis Schorsch
addressed competing executives and praised the
industry’s “disciplined” supply strategy
allegation that “competition in the sale of steel
products was restrained, suppressed and
eliminated in the U.S….as a direct and proximate
result of the illegal combination, contract or
conspiracy. Plaintiff and members of the Class
have been insured and financially damaged in
amounts presently undetermined.
NACM GREAT LAKES CONFERENCE - 2016
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Plaintiffs in the various lawsuits include:
Standard Iron Works
REM Systems, Inc.
Gulf Stream Builders Supply, Inc.
Supreme Auto Transport LLC
CAPOW, Inc. d/b/a Eastern States Steel
Wilmington Steel Processing Co., Inc.
Alco Industries
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23
11/3/2016




Arcelormittal S.A. and Arcelormittal USA LLC – first to settle
- June, 2014
Settling defendants to date – US Steel, Commercial Metals
Company, AK Steel Holding, and Gerstau Ameristeel
Corporation
Class Action Status as to remaining Defendants granted on
September 9, 2015
Distribution of $103,930,547.36 approved on October 19,
2015
NACM GREAT LAKES CONFERENCE - 2016
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Class Action against remaining Defendants ongoing
Motion filed on October 17, 2016 for Preliminary Approval of
Settlements by
 Nucor Corporation,
 Steel Dynamics, Inc. and
 SSAB Swedish Steel Corporation,

Hearing on Preliminary Approval Motion set for November 3,
2016
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24
11/3/2016

Complaint filed on April 21, 2011
 Seeking monetary damages of approximately $135 million
 Seeking Injunction

Allegations:
 Unreasonable restraint of trade

Trial commenced October 24, 2016
 Scheduled to continue through December, 2016
 Blog note: At trial on October 25th, an email purportedly showed that
Klein, now CEO of Sabre intended to “bury U.S. Airways so deep in the
display” in the system that U.S. Airways would not receive a fair share of
bookings.
NACM GREAT LAKES CONFERENCE - 2016
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Complaint filed in December, 2015
 by Spencer Meyer and all others similarly situated
 Against Travis Kalanick (CEO and co-founder of Uber)

Allegations:






Conspiracy among Uber, Kalanick and Uber drivers
provide a standard fare formula, the Uber pricing algorithm.
Stifles competition among Uber drivers
Compels customers/consumers to accept a fixed price
Uber drivers have agreed to fix prices using Uber’s pricing algorithm
Classic anticompetitive behavior
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25
11/3/2016

Seeking
 Money damages for all Uber customers
 Injunction
 Elimination of “surge pricing”

Class Action Status has been sought
All matters stayed pending appeal

Motion to compel arbitration has been denied

 Appeal taken to the 2nd Circuit Court of Appeals is pending
NACM GREAT LAKES CONFERENCE - 2016

Concept of sufficient market power

Hallmarks of illegal group boycott:
51
1. Denial of access to a competitively useful
commodity or service
2. Collective refusal to deal

Group boycotting can exist even through action
of only one party
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
CAN BE DEEMED A GROUP BOYCOTT

MUST NOT BE DISCUSSED BEFOREHAND
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

Petitioning Creditors must not have claims
which are subject to bona fide disputes as
to dollar amount or liability
Petitioning Creditor(s) can be penalized
(fees & costs) for an improper involuntary
petition in bankruptcy
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27
11/3/2016

MAKE INDEPENDENT DECISION

GET COMPANY AUTHORIZATION

RETAIN ATTORNEY

SEEK OTHER CREDITOR(S)
NACM GREAT LAKES CONFERENCE - 2016
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The Robinson-Patman Act of 1936 makes it
◦ Unlawful to “discriminate in price between different
purchasers of commodities of like grade and quality”…
where the
◦ Effect of such discrimination may be substantially
 to lessen competition – or
 Tend to create a monopoly – or
 To injure, destroy or prevent competition with any
person who either grants or knowingly receives the
benefit of such discrimination, or with the customers of
either of them
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28
11/3/2016



A single party can violate.
Robinson-Patman -- illegal to discriminate
in prices between different purchasers of
like goods, incl. credit and shipping terms
C.O.D. vs. Open credit can be deemed
discriminatory
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No necessity for agreement, combination,
association or conspiracy – only needs one
entity
 At least two transactions must have
occurred
 Price Discrimination includes:

 different price to different purchasers of
commodities
 differences in terms and conditions of sale
 preferential credit terms [Credit Terms
Equals Price]
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29
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


Only applicable to sale of tangible goods
Not applicable to services or other intangible
items
NOT applicable to transportation or broadcast
since neither transportation nor broadcast
services are tangible goods and therefore not
commodities
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
If a credit application is in place, remind
customer that it agreed to your terms and
conditions

Advise customer that you are not willing to accept
extended terms

Consider your own cost of carrying past due
accounts’ receivable
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
Financial impact to your company of accepting the
slower pay or fighting back

Your profit margin on sales to this customer

Your flexibility with other customers
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
Review what, if any, kind of contract you have in
place with this customer that can compel customer
to pay according to your terms
◦ Credit Application
◦ Long term purchase order
◦ Contract
62
NACM GREAT LAKES
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
If this is just a temporary pushback to fit customer’s
current needs
◦ Monitor customer’s activity carefully
 but a rigid insistence on absolute adherence to payment terms
may not be in your best interest
◦ Watch for increasing slow pay
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
Run a credit report

Check with your credit group to ascertain what is
happening with other vendors

Review customer’s financials
◦ Determine if this pushback is due to some more serious
financial issue of the customer
64
NACM GREAT LAKES
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11/3/2016

Offer a discount for prompt pay

Charge and collect interest for slow pay

Switch to electronic payments

Accept credit card payments

Customers with contracts must adhere to contract
terms or be in breach
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


Common tact by customer
Customer claims EVERYONE has said
“yes”
Customer claims it will stop buying from
you unless you accept extended terms
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A
Seller can rebut a prima-facie case of
price discrimination by
 Showing that the same price/credit terms are
offered to all customers


buying the same goods
who are identical
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SAMPLES
Differentiate by type of customer
Differentiate by products purchased
Differentiate by locale/market
Differentiate by quantity of goods purchased
Differentiate by whether or not a contract is in
place
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A
Seller can also rebut a prima-facie case of
price discrimination by
 Showing that his lower price to any purchaser
or purchasers


Was made in good faith
To meet an equally low price of a competitor
NACM GREAT LAKES CONFERENCE - 2016
 Defense
69
is available
 payments or services offered on an areawide basis
 to new as well as old customers
 whether or not the discrimination has
been caused by a decrease or an increase
in the payments or services offered
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 Criteria
which must be met
Price being met by seller is lawful (not
predatory or the result of collusion)
defense not available if seller knew or should
have known “as a reasonably prudent
businessman” that price was unlawfully
discriminatory under the Act
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
Legitimate business reasons

History of late payments

Financial difficulty

Superior credit records

Meeting Competition
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



Discriminatory price allowed when offered “in
good faith” to meet an equally low price of a
competitor
Verify existence of competitor’s offer
Do not exceed competitors in size, duration or
scope
Refuse to meet the competitor’s offer if illegal
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Great Atlantic & Pacific Tea Company, Inc. –
FACTS

1.
A&P asked Borden to submit an offer to supply
private label milk
 2.
Borden submitted an offer which A&P did not
like
 3.
A&P solicited offers from other dairies
 4.
Bowman Dairy submitted an offer which was
lower than Borden’s

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 Great
Atlantic & Pacific Tea Company, Inc. –
FACTS cont’d

5.
A&P told Borden “I have a bid in my pocket. You
are so far out of line it is not even funny. You are
not even in the ball park”

6.
No further details were given except that a
$50,000 improvement in Borden’s bid “would not
be a drop in the bucket”

7.
Borden submitted a new offer stating that it
needed to get A&P’s business and was making
the new offer to meet Bowman’s bid

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 Great
Atlantic & Pacific Tea Company, Inc.
– Decision - 1979 –
 The U.S. Supreme Court reversed a
judgment by the FTC
Actually a case against the Buyer for “receipt of
unlawful discriminatory prices”
 (1)
Buyer could not be liable if …seller has an
affirmative defense
 (2)
Buyer only accepted the lower of two prices
competitively offered and seller has a meetingcompetition defense
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 Great
Atlantic & Pacific Tea Company, Inc.
– Decision cont’d
 (3)
Buyer acted reasonably and in good faith

(a)

(b)
relied on A&P’s statements that the
first bid was “not even in the ball park”
it was necessary to make another bid
offering substantial concessions to avoid
losing its account with the chain

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Test for determining when a Seller has a valid
meeting-competition defense

“Show the existence of facts which would lead a
reasonable and prudent person to believe that the
granting of a lower price would in fact meet the equally
low price of a competitor” [FTC v. A.E. Staley]

“A good faith belief, rather than an absolute certainty,
that a price concession is being offered to meet an
equally low price offered by a competitor is sufficient”
[U.S. v. United States Gypsum Co.]

Seller can assert the defense even if it has unknowingly
made a bid that in fact not only met but beat his
competition [US Gypsum]
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 Water
Craft management LLC v. Mercury
Marine – 5th Circuit Court of Appeals –
2006
 The
Court of Appeals held that
manufacturer’s lower pricing to dealer’s
competitor was made in a good faith
attempt to meet manufacturer’s
competitor’s prices, as required to
establish meeting competition defense.
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Focused on Mercury’s motivation for
discriminating since “[a] good faith belief,
rather than absolute certainty, that a price
concession is being offered to meet an
equally low price offered by a competitor
is sufficient to satisfy the … defense
(relying on US v US Gypsum)
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 The
concept of “good faith” should be
‘flexible and pragmatic, not technical or
doctrinaire”
 “Rigid
rules and inflexible absolutes are
especially inappropriate in dealing with
the … defense; the facts and
circumstances of the particular case; not
abstract theories or remote conjectures,
should govern its interpretation and
application. (US Gypsum)
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

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Reasonable belief the situation is of
competitive necessity
Belief that granting a lower price would
meet the lower price of a competitor
Substantial efforts must be made to verify
actual price
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

Casual reliance on uncorroborated reports of
buyers or sales representatives without further
investigation may not be sufficient to make the
requisite showing of good faith
Defense can be satisfied by efforts falling short of
interseller verification
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 Seller
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must show
particular payments were made – or
services were furnished
in good faith
to meet equally high payments or equivalent
services offered or supplied by a competing
seller
 Reasonable belief that its offers are
necessary to meet a competitor’s offer




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 Defense
is available
 payments or services offered on an areawide basis
 to new as well as old customers
 whether or not the discrimination has
been caused by a decrease or an increase
in the payments or services offered
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Criteria which must be met


Price being met by seller is lawful (not predatory
or the result of collusion)
Defense not available if seller knew or should
have known “as a reasonably prudent
businessman” that price was unlawfully
discriminatory under the Act
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 Good
Faith Criteria
 Seller must prove that it had good reason to
believe in good faith that it is meeting an
equal price (or credit term)
 Standard or proof is that of a prudent business
person responding simply and fairly to what is
reasonably believable
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 Good
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Faith Criteria
 Existence of sufficient facts concerning the
nature, time and duration of the lower
competitive offers which “would lead a
reasonable and prudent person to believe that
the granting of a lower price would in fact
meet the equally low price of a competitor”
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 Verifying





Competitive Offers – some bases
reports from other customers of similar
discounts
Threats to terminate purchases if the
discounts were not met
Efforts to corroborate by seeking documentary
evidence
Appraising its reasonableness in terms of
available market data
Past experience of the seller with the buyer
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 Verifying
Gypsum]

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Competitive Offers [U.S. v.
Casual reliance on uncorroborated reports of buyers or
sales representatives without further investigation may
not be sufficient to prove “good faith”
 DO
NOT CONTACT YOUR COMPETITOR FOR
VERIFICATION
 In extremely Limited Circumstances (first resort to all
other reasonable means of corroboration without
success) may be permissible
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Documentation which may support “good faith”







The date of competitor’s offer
Name of competitor making offer
Name of the Customer
Terms and conditions of the offer
Source of the Information
A statement as to why you believe your source
Details as to what investigation was
conducted
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Documentation which may support “good
faith”



Website or other medium where offer is stated
Terms and conditions of the offer
Investigation into customer to determine that
it meets requirements for offer
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Documentation which may support “good
faith” cont’d.





Any and all records relating to threats to cut
off the business
Reports from other customers of similar
discounts
Efforts to corroborate by seeking documentary
evidence
Documentation as to an appraisal of the
reasonableness of the competitor’s offer in
terms of available market data
Past experience of the seller with the buyer
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

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Cost Justification – based on differences in the
cost of manufacturing, sale or delivery
Market Conditions – e.g. deterioration of
products, seasonal goods, discontinued items
Superior Credit History or Records
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



Proportionally equal terms
Dollar volume or quantity purchased
during specific period of time
Equal rate per unit or amount purchased
Specified part or percentage of local
advertising
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“Procuring and dissemination” of credit data is
legal [Cement Mfrs Protective Assn. v. U.S. 1925]
– citing
Creditors are not restrained “from establishing
and maintaining rules for the giving of credit to
dealers where such rules in good faith are
calculated solely to protect the defendants
against dishonest or irresponsible dealers.”
[Swift & Co. v. U.S. 1905]
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

“…the dissemination to competitors of
information concerning the credit-worthiness of
customers aids sellers in gaining information
necessary to protect themselves against
fraudulent or insolvent customers.” [Michelman
v. Clark-Schwebel 3rd Cir. 1976]
Exchanging information regarding the
creditworthiness of customers does not violate
the Sherman Act. [Burtch v. Milberg [ 3rd Cir.
2011 citing Cement, Michelman & Catalano]
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
Credit terms.

Production limits or Pricing

Group Boycott

Price fixing (key phrases could be misconstrued)

Market or Territory Allocation

Future Intention
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◦ Whether or not to do business with a particular customer
◦ Involuntary Petition in Bankruptcy
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






Delinquent account reports –NO
discussion of future (i.e., intent).
Exchange of factual credit information
Reports of placement for collection
Reports of initiation/continuation of
lawsuit
Reports of judgment obtained
Reports of other factual information
provided by customer
Exchange of contact information
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

Antitrust Rules still apply
◦ Request for references
◦ Giving references
Electronic data lasts forever
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
RECOMMENDED LANGUAGE ON
ELECTRONIC TRANSMISSIONS
This Credit Reference is provided at the request
of and is based upon information maintained in
my filed as a result of my company’s experience
with ______.
No judgment or recommendation concerning
credit decisions is given or implied by this
information. The recipient must determine its
own credit decision. The data contained in this
report is for information purposes only.
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REQUIRE AFFIRMATION IN ADVANCE
The credit information you are about to view
electronically is accurate information contained
in my records and you are requesting same in
order to determine the creditworthiness of
____________.
You may make one printed copy of this
Electronic Information for your own use. You
may not distribute, transmit or otherwise
circulate the Electronic Information to anyone
else.
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


CREATE MANDATORY CONSENT
I have read and understand this Use
Agreement and Agreement to be bound by
its terms
Lock mechanism to disable anyone from
proceeding without accepting restriction
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
Credit Term Changes

Refusal to Deal

Price Changes to Meet Competition, etc.

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Placement of account for collection or suit
– if internal records merit this (NOT
because others are doing so)
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
Refusal to deal with a particular customer
◦ Must be unilateral
◦ Must be independent decision
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Price or credit term changes to meet
competition
◦ As explained above, must be well-documented
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
Compete vigorously

Consider your market power


Consult with counsel when specific
problems occur
Maintain your records
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WANDA BORGES, ESQ. is the principal member of Borges & Associates, LLC, a law firm based in Syosset, New
York. For more than thirty years, Ms. Borges has concentrated her practice on commercial litigation and
creditors rights in bankruptcy matters, representing corporate clients and creditors’ committees
throughout the United States in Chapter 11 proceedings, out of court settlements, commercial
transactions and preference litigation. She is a member and Past President of the Commercial Law
League of America and has been an Attorney Member of its National Board of Governors, a Past Chair of
the Bankruptcy Section, a past member of the executive council of its Eastern Region and is currently the
Chair of the Creditors’ Rights Section of the CLLA . She is a member of the American Bar Association,
the American Bankruptcy Institute, the Hispanic National Bar Association, the International Women’s
Insolvency and Restructuring Confederation, the Turnaround Management Association, New York
Institute of Credit and is an associate member of the International Association of Commercial Collectors.
She is a nationally recognized lecturer and author on various legal topics including Bankruptcy Issues
such as 503(b)(9) claims and preferences, the Uniform Commercial Code, ECOA, FCRA, antitrust law, and
current legal issues such as the Credit Card Surcharge litigation and proposed legislation such as the
Marketplace Fairness Act. Ms. Borges has authored, edited and continues to contribute to numerous
publications including Thomson West’s Enforcing Judgments and Collecting Debts in New York, NAB’s
book Out of the Red and into the Black, the BCCA’s Credit & Collection Handbook, The Financial Manager,
the CLLA’s Commercial World Magazine and has authored the treatise “Hidden Liens, Who is Entitled to
What?” and NACM’s Antitrust, Restraint of Trade and Unfair Competition: Myth Versus Reality, Manual of
Credit and Collection Laws and its Principles of Business Credit. She has co-authored The Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005 – An Overhaul of U.S. Bankruptcy Law, also
published by the NACM. In November, 2010, Ms. Borges received the “Robert E. Caine Award for
Leadership” from the Commercial Law League of America. . In April 2015, Ms. Borges received a “Woman
of Distinction” award from St. Catharine Academy, her high school alma mater. Ms. Borges has been
included in the New York Super Lawyers – Metro Edition list (Bankruptcy & Creditor/Debtor Rights) each
year since 2009.
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