Antitrust Training for
Your Sales Team
Jill Jacobson, Husqvarna
Erika Ahern, CNA National
J. Paul Allen, Contech Engineered Solutions
Session Goals
• This session targets communicating key Antitrust topics to your
Sales Team.
– For that reason, the focus is on spotting issues, recognizing potential problems
and escalating those situations within the company (ABC Corp.) to be
addressed by appropriate personnel (legal, management, etc.)
• The session is not designed to be an in-depth analysis of specific
Antitrust issues for the Legal Department.
– Our materials include “A Primer on Antitrust Fundamentals” by Howard Feller
of McGuire Woods. This was prepared for an ACC presentation in Charlotte,
NC on March 8, 2016.
• Audience participation (taking on the role and asking questions
your Sales Team may ask) is highly encouraged.
– The “shell” of this presentation, with presenter notes, is provided in
PowerPoint format with our materials. Feel free to customize for your own
situation from the template.
Resale Price Maintenance Agreements
• Resale Price Maintenance (“RPM”) agreements (post-Leegin) are
likely beyond the scope of basic training for your Sales Team.
–
–
–
–
History prior to Leegin was complex.
Leegin provided rule of reason treatment for RPM but is not a “silver bullet.”
Many state courts and legislatures (e.g., CA) have expressly rejected Leegin
Other states have not yet responded
• Typical approach is to use “belt & suspenders”
– First, make price directive unilateral so no agreement can be shown
– Second, defend RPM structure under a rule of reason analysis as opposed to
the prior per se violation treatment it received (pre-Leegin)
• See p. 12 of H. Feller materials provided
Mergers & Acquisitions
• Antitrust implications of mergers and acquisitions are likely beyond
the scope of basic training for your Sales Team.
– Fun with the cable industry
– Usually beyond Sales Team
– Part of a larger project
Session Goals
• Any questions about structure before we start?
• If not, let’s use the improv comedy mantra of “Yes, and” and get
involved as opposed to the “No, but” mantra you might be tempted
by during the last session of ACC AM 2016
Antitrust Training for the
ABC Corp. Sales Team
In-House Lawyer
Federal Antitrust Statutes
Sherman Antitrust Act (1890) - First federal statute to limit cartels
and monopolies. Purpose: to prohibit agreements in restraint of
trade and unfair monopolization
Clayton Antitrust Act (1914) - Modification to the Sherman Act
• Prohibits sellers from forcing buyers not to deal with the seller’s
competitors.
• Prohibits sellers from “Tying “ (forcing buyers to buy a product on
the condition they buy another product offered by the Seller)
Robinson-Patman Act (1936) aka “Anti-price discrimination Act”
• Requires sellers to sell to everyone at the same price.
• Prohibits buyers from knowingly receiving a better price than others
• Prohibits sellers and buyers from using brokerage, allowances, and
services to accomplish indirectly what the Act prohibits.
Why do we care?
• Business ethics and acumen
• Antitrust violations are CRIMINAL offenses
– Corporations can be fined up to $100 million
– The individuals involved can be fined up to $10 million
– The individuals involved can be imprisoned for up to 10 years
• There is significant civil liability as well
• Customers or competitors injured by anticompetitive
conduct can sue for damages
– Damages can be automatically tripled
– Attorney fees can be awarded
– Antitrust litigation is intrusive, costly, and burdensome
Why do we care?
Restraint of Trade
• The antitrust laws prohibit agreements between competitors
that restrain trade
– What’s a “restraint of trade?”
• An agreement or joint action between competitors that has
an adverse effect on competition or the market (e.g. higher
prices, lower output, fewer competitors)
What’s an “agreement”?
• What is an agreement under the antitrust laws?
– Proposal/offer and acceptance
– It doesn’t take a formal contract
• It does not have to be written down
– It can be verbal
– It can even be unspoken/visual
• Even body language can be dangerous – Wink, wink
• Drawing, etc.
Scenario #1 – Agreement or not?
• Suppose you run into one of your competitors. He says, “You know,
it would be better if you took the projects north of the river and I
take the ones on the south side. It’d be easier and cheaper for
everyone, including the customers.” You make a comment about
the weather and walk away.
• Is this an “agreement” under the antitrust laws?
– No, not by itself
– Obviously it is illegal if you agree to it
– Even if you don’t explicitly agree to it, you will create the
appearance of illegality if you don’t bid on projects in on the
other side of the river
The ABC Corp Professional – How do you react?
• The point here is that someone else’s mistake can put you in a bad
situation too:
– Tell your competitor you can’t discuss it and you won’t act on
their suggestion. No need to give in-depth explanation.
– Report it to your supervisor or someone else in the company
– Record what happened without emotion, hyperbole or opinion
and emphasize your refusal to discuss it or act on it
Automatic Violations
•
Some agreements between competitors are automatically illegal – it doesn’t
matter why the agreement was made:
– Price-fixing - any agreement between competitors on pricing, terms of sale,
credit terms, etc.
– Bid-rigging - any agreement between competitors on how much to bid or
which jobs to bid
– Output/production agreement - any agreement between competitors on how
much either or both of them will produce
– Territory or customer agreements - any agreement between competitors on
the territories or customers each will serve
– Boycotts / refusals to deal - any agreement among competitors not to do
business with a supplier or customer
These are the types of agreements likely to result in criminal prosecution
Discussions with Competitors
•
Discussions with competitors can create risk. Some topics can easily lead
to an antitrust violation or create an appearance of illegal conduct:
Discussing the following are dangerous areas:
» Prices with competitors
» Delivery terms, credit terms, conditions of sale with
competitors
» Bid practices
• Bid suppression
• Complementary / cover / courtesy bidding
• Bid rotation
» Customers and/or Suppliers with competitors
» Strategies or tactics with competitors
» Market conditions with competitors
Trade Associations
•
Today’s trade associations typically serve many legitimate purposes, and
from an antitrust perspective, most trade association activities are
procompetitive or benign.
 Providing data to trade associations that is aggregated and distributed
to members is OK
 Engaging in trade association lobbying efforts is OK
 Offering other members discounted rates is not OK
 Recent FTC actions against trade associations took issue with trade
association rules that prohibited members from:




using comparative ads
offering discounted rates to another member’s clients
recruiting other member’s employees without giving prior notice
soliciting clients from a rival
 Be careful while engaged in seemingly benign conversation at trade
association meetings and (especially!) social activities after the
meeting
Discussions with Competitors
What can I talk about?
• Efforts to benefit the entire industry through safety
innovations, new research, industry-wide promotional efforts,
standard-setting
• Work with competitors to lobby government
Best to discuss these topics through an established trade
association
Antitrust Decision Tree
Discussions with Competitors
Discussions With Competitors
You are having a
conversation
with a competitor
What can you
discuss?
YES
But…
NO
Efforts to benefit
the entire industry
PRICING
Safety
Delivery Terms
Research
Credit Terms
Common Standards
Conditions of Sale
Lobbying
Government
Bid-rotation or
Bid Suppression
Note about Market Conditions: Think it all the way through. If
competitors want to discuss the current “market conditions,” what are
they likely to follow up with? “Times are tough, so we are going to have
to idle 1 of our plants next month.” That clearly goes to future supply and
could impact pricing in the market. “Times are tough, so we are going to
have to cut price to maintain the same market share.” That obviously
goes to price which is a “no-no.” “Times are tough, so we have laid off 2
salespersons and my geographic area is much larger. I probably won’t
even get to ND this quarter.” Without competition in ND from ABC, the
competitor may raise prices or otherwise effect the market. Do not
discuss Market Conditions with a competitor – it is a slippery slope.
Complementary
Bidding
Strategies or Tactics
Market Conditions
Competitive Information
• It is perfectly legal under the antitrust laws to get information about
your competitors, including their prices, from your customers
• It is helpful to make a record that you obtained the
information from a customer
• It’s risky to get information about your competitors directly from
your competitors (e.g. pricing, bid amounts)
– The danger is that this will be viewed as a way for you and your
competitor to agree (on pricing, customers, territories, etc.)
– It is very risky for competitors to exchange information directly
with each other about current or future pricing
Antitrust Decision Tree
Acquiring Competitive Information
Acquiring Competitive Information
I need to get information
about competitors
What is the
source?
Public
Resources
Customers
Dealers
Competitors
Unacceptable
Acceptable
Are you & your
Competitor using
the customer
as a “clearinghouse”
for competitive
information?
Are you & the
dealer providing
quotes for the same
project?
NO
YES
NO
YES
Acceptable
Unacceptable
Acceptable
Unacceptable
Working with Distribution
Dealers who are your customers AND your competitors
– OK to discuss issues about the supply of ABC products to a
dealer, even though the dealer also competes with you
– Avoid discussion with the dealer about the areas on which you
are competing (i.e., your price to contractors or what you are
bidding on a project).
– Ask yourself – “Is the dealer I am working with right now acting
as a customer or a competitor?”
– When in doubt ask your manager!
Antitrust Decision Tree
What to do if You Suspect a Violation
What to do if You Suspect a Violation
You are having a
conversation
with a competitor
Do you suspect
a possible antitrust
violation?
YES
Avoid the
conversation
and change
the subject
NO
Tell the
competitor
you cannot
discuss it
Record the
incident and
your refusal
to discuss
Tell your
manager about
the incident
Remain alert for
possible risks
Scenario #2
Competing with your Dealer
• ABC and one of our dealers are quoting the same contractors
on the same project.
– The dealer currently is buying from ABC at a 10% discount
from our published List Price / MSRP
• Is it okay for ABC to quote the dealer a price for a project on
which ABC is also quoting?
– YES – here the dealer is in the role of ABC’s customer
Scenario #2 (cont.)
Competing with your Dealer
• ABC chooses to quote List Price to the contractors who are bidding
the job.
– The dealer knows from previous projects that we typically quote
at List Price.
• Can ABC still quote List Price even though that means the dealer is
likely to quote the job about 1% below List Price and get the order?
– YES, as long as ABC and the dealer have not agreed on their
quotes for the project
• Can ABC and the dealer agree on the amount of either ABC’s OR
the dealer’s submitted bid price?
– NO! In this context ABC and the dealer are competitors
Antitrust Decision Tree
Discussions with Dealers or Distributors
Discussions with Dealers or Distributors
You are having a
conversation with
a dealer or distributor
Are you quoting
a price?
YES
NO
Acceptable
Are you competing
with the dealer or distributor
in this situation?
* Acceptable
but avoid risky
topic areas
YES
NO
Do NOT Discuss
OK to Discuss
Contractors
Other areas
of competition
Selling
price
Strategies
Selling
strategies
Joint
promotions
Can ABC refuse to sell to someone?
• YES
• You do not have to quote everyone who asks for a price.
– You can pick and choose to whom you want to quote
– You do not have to sell your products just because
someone wants to buy them
– You can sell to anyone you like, and refuse to sell to
anyone you like
Antitrust Decision Tree
Selling to Customers
Selling to Customers
Are we selling a
product to all
customers?
NO
Picking
& choosing
which customers
to quote?
YES
Refusing to
sell to a particular
customer?
Not part of larger
boycott or refusal to sell
decision with others
Acceptable – you do
not have to sell your
products just because
someone wants to buy
Acceptable – no
antitrust risk in
selling to all buyers
Can ABC tie or bundle products?
• “Tying” means refusing to sell a customer a product unless it also
buys another, different product
• Tying may be illegal, but only if the seller has a high market share so
that the customer really has no choice but to buy the second
product as well
• “Bundling” – offering a package of products at a reasonable
discount is usually okay
• You should seek legal advice before entering a contract that could
be considered tying – i.e. one where the customer might be
reluctantly buying a second product
Antitrust Decision Tree
Bundling Products: Is it Unlawful Tying?
Bundling* Products: Is it unlawful tying*?
Am I grouping
our products?
YES
NO
Is the
bundled discount
reasonable?
Is there a
business
reason?
NO
YES
YES
Raises concerns
of unlawful tying
Return to
Start
NO
Review potential
missed opportunity
Must customer
buy one product to
obtain another?
Discuss with
counsel
Note: Yes means a buyer
must buy Product A or we
will not sell Product B
NO
YES
Unacceptable –
raises concerns
of unlawful tying
No, buyer is free to
choose to buy one or
more of our products
Acceptable
Discuss with
counsel
*Tying – refusing to sell
a customer a product
unless it also buys
another, different
product. Tying may be
illegal, but only if the
seller has a high market
share so that the
customer really has no
choice but to buy the
second product as well.
*Bundling – offering a
package of products at
a reasonable discount is
usually okay
Can we set any price we want?
• YES, but there are some important limitations
– Contractual commitments
– Price-discrimination laws (Robinson-Patman)
Robinson-Patman Act - Price Discrimination
• Good Business Acumen! – Robinson-Patman Act provides a good
foundation & general guideline to follow
• “Price discrimination” means charging one customer a different
price than another customer for the same product
Robinson-Patman Act - Price Discrimination
A violation requires that there actually be two sales, from the same
seller, to two different purchasers made at different prices around
the same time.
– Basic rule – a price, discount, or rebate must be “reasonably
available” to all buyers for products of “like grade and quality”
– There’s no violation, for example, if an unaccepted bid or offer is
higher or lower than the price someone else actually paid
– This means that the rules for general market pricing (where
there are many sales made) are different than the rules for a
particular project (where only one sale will be made)
– The sales at issue must be “reasonably contemporaneous” –
that is, they must occur around the same time
2006 Supreme Court Decision – Interpretation Changes
A 2006 decision of the U.S. Supreme Court significantly limited the application
of the Robinson-Patman Act in bidding situations - Volvo Trucks North
America, Inc. v. Reeder-Simco GMC, Inc. After the Volvo Trucks decision:
 It would be difficult to ever show a violation based on different prices being
offered in different bidding situations
 Bidders for different projects are not in direct competition with each –
each project is an individual competition
 It would also be difficult to ever show a violation based on a different prices
being offered to different bidders for the same project
 A violation requires overall injury to competition, which is very unlikely
to result from discriminatory pricing for a single project
 A single project results in a single sale of the product at issue, and a
violation requires two sales at different prices
 It is possible that a violation could be shown if the same bidder
was given worse pricing for every project over a significant period
of time
Robinson-Patman Exceptions
• Quantity discounts if “reasonably available”
• Meeting your competitor’s price
• Different costs to serve the customer
• Customers not in competition with each other
• Distributors vs. end users
Exception – Quantity Discounts
• Quantity discounts are permitted, so long as they are
reasonably available to other customers
• A quantity discount can be challenged if the
quantities required for the discount are so high that
only a few customers can realistically earn the
discount
Exception – “Meeting Competition”
•
Price discrimination is permitted if the price or discount is offered to meet
a price or discount offered by your competitor
– Suppose a competitor offers your customer a price 10% less than the
ABC quoted price.
– You can give the customer a 10% discount without making
that discount available to other customers.
– This exception allows you to match a competitor’s price, but
not to beat that price
– If ABC beats the competitor’s price, then that price must be
reasonably available to other customers
– This exception applies only when there is an actual competitive
situation – it doesn’t apply just because you are worried about losing
the customer’s business
Exception – Cost Justification
•
Price discrimination is also permitted if the cost of serving different
customers has variables.
– Some examples:
• Large volume orders
• Bundled orders
• Handling costs can vary from order to order
– Nesting of materials can reduce freight costs
• Manufacturing costs can vary from Plant to Plant
• Customer credit history (payment history)
•
•
The discount given can not be higher than the cost savings associated with
that customer
The discount must be based on real, quantifiable cost savings
Exception – Distributors vs. End Users
• Many territories have multiple dealers and/or distributors
– The partnership will justify different pricing structure
• Functional Discounts
– Dealers do more to help drive the business
• Marketing and promotion
• Stocking material – inventory
• Serving smaller potential customers
• Important to handle these consistently
– Do you have strategies and tactics to go to market?
Antitrust Decision Tree
Setting Prices
Setting Prices & Robinson-Patman
Can I set any
price I want?
Transactional
Quotes
Is there a
contract?
Project-based
Quotes
(single sale)
(multiple future
sales)
Are you charging different
customers different prices for the
same product at the same time?
YES
Apply contract
pricing
Different costs to
serve different
customers
Acceptable
Are you charging different
customers different prices for the
same product at the same time?
Acceptable
YES
NO
WHY?
Acceptable
Customers not
competing
with each other
Acceptable
Meeting
competition
Quantity
discount
Other
Acceptable
Reasonably
available to all
customers?
Check with
Counsel may violate
RobinsonPatman
YES
Acceptable
NO
Unacceptable –
may violate
Robinson-Patman
Scenario # 3 - Preferred Dealer
• ABC has several dealers that service a particular market.
• One of those dealers is much more successful and purchases
significantly more material from us than the other dealers.
• ABC quotes each of the dealers the exact same price when
they are quoting on the same project.
• Is there any problem with quoting each dealer the same price
for the same project?
– NO – It is always okay under the antitrust laws to offer the
same price across the board
Scenario # 4 (cont.) - Alternative Quotes
• Does the use of these alternative quotes violate the RobinsonPatman Act?
NO, for two reasons:
1. A violation requires two sales of the product at different
prices
• In the context of a single project, there will only be one
sale
2. The better price is reasonably available to all of the bidders
• If the customer gets a higher price, it is because of the
customer’s own decision
Scenario # 4 - Alternative Quotes
• ABC has a large private project bidding on a new commercial
development. There are multiple products specified on the
project and the opportunity could be worth more than $1.5
million in revenue.
• The pre-bid strategy is to create two different quotes. The
Salesperson will visit with each bidder and offer a lower price
before bid time if the contractor will sign our quote and
commit the order to ABC (subject to being awarded the
contract). If the contractor will not commit the order to the
Sales Engineer then the contractor will get a higher priced
quotation.
If you are in doubt, ask!
• This presentation can’t possibly tell you how to act in every
situation that raises antitrust concerns
• Our goal is to help you spot situations that may have the potential
for risk, so you can seek legal advice when these situations arise
• If you have a concern, contact your manager.
When in Doubt, Ask
You are dealing with
competitors, dealers,
distributors, or customers
Are you in
doubt about whether
an antitrust issue
is present?
YES
Look at
ABC
resources
(Intranet)
Helpline
NO
Always keep
Call an
expert
Manager
alert for risks!
Legal
Department
Questions ??