New York Paint And Coatings Association

The original membership of this Association, conscious of the antitrust problems inherent in trade association
activities, provided in the Association Bylaws that the new organization “shall not directly or indirectly restrict
free and lawful competition.” Since its formation, the Association has maintained a consistent, aggressive, and
proper observation of both the letter and the spirit of the law in this area on behalf of its membership. To ensure
continued strict compliance with the antitrust laws, this re-statement of NPCA Antitrust Policy has been prepared for the membership. These clear statements of conduct must always be kept in mind, and all Association meetings and other activities must be conducted in accordance therewith.

Section I of the Sherman Antitrust Act and Section 5 of the Federal Trade Commission Act prohibit “contracts,
combinations or conspiracies in restraint of trade and unfair methods of competition in commerce....”
One of the clearest antitrust violations an association can commit is an agreement by its members to set prices at a fixed level. Such an agreement is a per se violation of the antitrust laws, even if the prices set are reasonable or the ends sought are worthy. Similarly, terms and conditions of sale which affect the buyer should not be discussed. These include discounts, freight allowances, terms of product warranties and other individual policies followed in dealing with customers. Informal understandings and planned courses of action on these subjects by competitors also clearly are forbidden.

Administrative or disciplinary action against member companies, or the expulsion of member companies, may
result in economic injury to the affected members and, thus, may constitute an illegal boycott or restraint of trade. Therefore, these sensitive areas must be discussed in accordance with strictly-defined legal guidelines and only in the presence of counsel.

Frequently, an association engages in the voluntary development of a product specification or industry standard of quality. Antitrust problems can arise if the standard developed advances the economic interests or operates as a marketing advantage for some members to the detriment of others. Statistical reporting is another common association sponsored activity. However, since some other associations and their members have used these activities in the past to further price-fixing and monopolistic schemes, statistical reporting projects must be conducted with great care in order to conform with clearly defined rules regarding the collection, protection, and dispersal of confidential product information. Antitrust problems also may arise when associations become involved in industry-wide research and development programs. When pooling of results exists, association-sponsored joint research and development activities may injure competition by diluting the competitive pressure to innovate.

A potential antitrust infraction can also involve normally protected association-sponsored efforts to petition government agencies for action. A delicate balance always must be maintained between the First Amendment right to petition government and the antitrust laws’ prohibition against restraint of trade. The First Amendment does not protect parties which seek to prod government agencies into imposing trade restrictions by misleading them or by engaging in other dishonest activities. Any effort designed to injure industry competitors clearly is prohibited.

The proper conduct of association meetings requires an understanding and conscious awareness by all of antitrust implications. Your non-participation in the discussion (pro or con) may not protect you if, out of such discussions at a meeting you attend, any agreement in restraint of trade originates. However, no imputed unlawful purpose can arise if conscious independent and individual judgment is exercised and no illegal common course of action is pursued. From time to time, NPCA member companies might solicit the support of the Association in circumstances involving government administrative actions directed against that company. In such situations, the appropriate role of the Association is to act in a manner consistent with the interests of the membership as a whole.

Accordingly, any assistance provided individual association members shall be done solely with a view

NPCA ANTITRUST POLICY
1500 Rhode Island Avenue, N.W.
Washington, DC 20005
202/462-6272
toward protecting or advancing the interests of the industry and shall seek, where appropriate, to promote
favorable government policies or foster precedent advantageous to the entire industry.
To assist in avoiding antitrust problem at Association meetings, a list of nine don’t’s and do’s has been provided.
You should study, remember, and refer to these important guides.
Be Alert and Keep Informed Antitrust laws are wide-ranging, complex, and subject to changing interpretations. Consult your company’s lawyer or an Association counsel immediately if you have any questions about the legality of any proposed Association action.
Thomas J. Graves
General Counsel
July, 1994

AVOIDANCE OF LIABILITY
(Reprinted from Antitrust Advisor, 3rd Edition, 1985 by permission of Shepard’s/McGraw Hill, Inc. Further
reproduction of any kind is strictly prohibited.)

Nine Don’t’s
1. Do not attend rump sessions. The suspicions of the authorities are always aroused when they learn that following an association meeting the members commonly gather at some motel or local bar to discuss matters of concern to the industry.
2. Do not even discuss with competitors activities that will: a. allocate markets, b. initiate boycotts, c. fix prices, d. limit production, e. hinder nonmembers, or f. coerce members.
3. Do not attend meetings where procedural rules are not followed and counsel is not present. If agenda is uncertain, the meeting is not chaired, and the counsel is not present, the potential for abuse is great.
4. Do not exchange data concerning fees, prices, production, sales, bids, costs, customer credit, or other business practices unless the exchange is made pursuant to a well-considered plan that has been approved by antitrust counsel.
5. Do not ratify the actions of an association or of an association officer where counsel has not opined on the legality of the action.
6. Do not engage in advertising programs where the purpose or effect is to stabilize prices or mislead the public. If an advertising program is proposed and accepted by the association, be certain that it has been approved by counsel to insure that the program will not adversely affect price competition or have a predatory or coercive effect on nonmembers.
7. Do not discriminate against competitors when: a. setting ethical standards, b. revealing customer credit information, c. developing a seal of approval program, or d. developing standards or specifications for products.
8. Do not continue membership in an association if the activities are questionable. Do not rely on initial governmental sponsorship.
9. Do not accept an official position in the organization unless your authority is commensurate with your apparent responsibility.

Nine Do’s
1. Do retain private counsel to advise you concerning the possible risks involved in your association activities.
2. Do request Federal Trade Commission advisory opinions if there is doubt concerning the objectives and effects of the proposed activities of the association.
3. Do periodically review the decision to join an association, particularly if it becomes subject to a restraining order or other governmental prohibitions.
4. Do cooperate with government investigations.
5. Do insist that an attorney attend all association meetings, review the agenda in advance and the minutes following the meetings; and do compare your notes, recording, or recollection with the reported minutes.
6. Do object to questionable activities, and make sure your objection is recorded.
7. Do resign in writing if the association is acting in a manner that disregards antitrust risks and ignores objectives to such activity.
8. Do insist that the association share market data and statistical information (for a reasonable fee) with nonmember competitors if such data is necessary to their competitive actions.
9. Do ask that the association obtain a periodic independent review of its bylaws and procedures for potential antitrust problems.