The U.S. Federal Trade Commission ("FTC") has settled two, unrelated cases alleging that the ethical codes of professional associations violated the antitrust laws. These settlements are a reminder that the antitrust agencies and private plaintiffs are active in reviewing the activities of professional associations and will challenge agreements among members that may restrict competition among the members to recruit or provide services to customers. The trade associations involved are the Professional Lighting and Sign Management Companies of America, Inc. ("PLASMA") and the Professional Skaters Association ("PSA").
Background
PLASMA is a non-profit professional association of licensed
electricians with approximately 25 member firms located across the
country. PLASMA member firms specialize in commercial lighting and
electrical installation and maintenance. The FTC alleged that
PLASMA's Member Bylaws violated antitrust laws by (1)
prohibiting members from servicing customers in the designated
territory of another member unless that member first declined the
work, (2) implementing a price schedule for work done by one member
in another member's designated territory, and (3) prohibiting
terminated members from soliciting customers of current members for
one year after termination.
PSA is a non-profit professional association for ice skating
coaches, as well as patrons, judges, skaters, families, and fans,
with approximately 6400 members worldwide. PSA member coaches train
skaters at all levels of the sport. The FTC alleged that PSA's
Code of Ethics violated antitrust laws because it prohibited member
coaches from soliciting other member coaches' students,
including through the use of social media; offering free lessons or
equipment; or comparing themselves to other member coaches.
In both cases, the FTC alleged that the associations' rules at
issue discouraged its members from competing in serving their
customers.
The proposed settlements require PLASMA and PSA to eliminate the
offending provisions from their respective rules and notify members
of the FTC settlement. In addition, the proposed settlement with
PSA requires that it provide in-person annual antitrust compliance
training for five years at its annual conferences and governing
board meetings. Likewise, the proposed settlement with PLASMA
requires it to provide annual antitrust compliance training for
three years to its leaders and employees. The FTC will decide
whether to make final the proposed settlements following a 30-day
public comment period.
Implications
These cases are the latest examples of the FTC's recent
focus on professional association bylaws and ethics codes. Within
the last year the FTC has entered similar settlements with the
National Association of Residential Property Managers, Inc., the
National Association of Teachers of Singing, Inc., the Music
Teachers National Association, Inc., and the California Association
of Legal Support Professionals. (Read the previous Jones Day
Antitrust Alert covering the Music Teachers and California
Legal Support Professionals investigations.)
In light of the FTC's heightened activity involving
professional associations, in-house counsel should review their
company's professional and industry association memberships and
assess their organizations' compliance. The following types of
provision should raise red flags if included in a professional
association's code or bylaws:
- Provisions forbidding "poaching" or solicitation of other members' employees or customers.
- Provisions regulating or restricting association members' prices.
- Provisions limiting the geographical and / or service areas in which association members may conduct business.
Even if association members never follow (or perhaps are not even
aware of) rules that restrict recruiting or pay or allocate
territories, companies might find themselves involved in an
antitrust investigation or litigation about these practices.
The FTC's issued press releases announcing the PLASMA and PSA settlements on December 23, 2014.
Ashley M. Howlett, an associate in the Washington Office,
assisted in the preparation of this Alert.
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