Standard Oil. Ma Bell. Microsoft.
These companies, along with the word monopoly, most often come to mind when we hear “antitrust.” Large national and international companies may make the news, but antitrust issues can be just as important for small or medium-sized businesses. In fact, a large company may have the resources to fight and survive an antitrust suit; a smaller company might not.
Any company that sells anything can be involved in — or accused of — an antitrust violation. The two most common areas of concern involve pricing practices and collusion.
Buying in bulk often costs less. That’s as true for business products as it is for groceries.
But if you provide favorable pricing based on volume, and only one company in a particular industry can afford your volume discount, smaller competitors of that large company may feel unfairly disadvantaged by your pricing. The Robinson-Patman Act of 1936 forbids companies from price discrimination when the effect would be to lessen competition or create a monopoly.
While there are a number of defenses available under this statute, it generally takes an attorney to decipher them. Without understanding this law, even though it may not have been your intention to violate its prohibitions, those smaller companies could file suit against you for unfair pricing.
Communication vs. collusion
Many industries have trade groups or associations. When they meet, owners and workers discuss trends, share ideas and network.
That’s communication, and it’s all well and good. But if that conduct turns into an agreement on fixing prices, types of customers or sales territories, that’s collusion. There are steep fines for companies and jail sentences of 18 months to three years for employees and company owners found guilty of collusion.
The federal government does not just prosecute big companies, and state attorneys general can bring similar suits against companies that do business within their state.
Top to bottom issues
It’s obvious that two business owners who get together and fix prices purposefully are doing something wrong. It’s bad for competition and for customers.
But what about line-level employees? Imagine that one of your salespeople talks with a peer from a competitor’s company. They get together and essentially say, “I won’t call on prospects who are your customers if you don’t canvass my customers. It’ll just make things easier for us both.”
That’s illegal collusion, and it can put your company in jeopardy. And it certainly isn’t in the best interests of customers.
Drawing the line
There are several ways to protect your business.
* Education Make sure that employees involved in marketing, pricing and sales are aware of the difference between healthy competition and illegal antitrust activity.
* Policy Include a section on antitrust issues in your written employee policies. That can help show the government that a violation may have been an individual issue, rather than a companywide problem.
* Early detection Keep an eye out, both in your company and in your industry, for signs that something fishy is going on. The federal government has an amnesty policy for the first company that comes forward with information about an antitrust violation.
Your attorney can help in several ways, by drafting your educational materials and policy documents, by explaining the antitrust issues that are most likely to arise in your business and by letting you know what your rights are. If one of your competitors engages in illegal practices, going on the offensive may be your only defense against surrendering to unfair, predatory pressures. James A. Wilson is a partner in the litigation group of Vorys, Sater, Seymour and Pease LLP. Reach him at (614) 464-5606 or www.vssp.com.