THE RULES OF THE GAME: Intro to Antitrust Law Robbyn Wysocki www.concrete-pipe.org

2 What’s the game? Capitalism www.concrete-pipe.org

What are the rules? Play Fair. 3 What are the rules? Play Fair. www.concrete-pipe.org

Antitrust Laws Protect Competition Consumers benefit from lower prices, higher quality „When competitors agree to fix prices, rig bids or allocate customers or territories, consumers lose the benefits of competition.„ The result is higher prices. www.concrete-pipe.org

Agreements Monopolies Trade Associations www.concrete-pipe.org

AGREEMENTS Sherman Act Section 1 Every contract, combination, or conspiracy, in restraint of trade is illegal. www.concrete-pipe.org

AGREEMENTS Need not be in writing „Can be implied „MOST inferred from circumstantial evidence. „ www.concrete-pipe.org

MANUFACTURERS DISTRIBUTOR/WHOLESALERS RETAILERS CONSUMERS Relationships matter MANUFACTURERS DISTRIBUTOR/WHOLESALERS RETAILERS CONSUMERS www.concrete-pipe.org

HORIZONTAL RESTRAINTS Agreements among competitors most feared www.concrete-pipe.org

Agreements on Price Price Fixing Price discounts ‰Hold on prices ‰Eliminate or reduce discounts Standard formula for computing prices ‰Specific price differentials between 2 products ‰Minimum fee or price schedule; ‰Fix credit terms ‰Not advertise price

Customer or Territorial Allocations An agreement in which competitors divide markets among themselves: ‰ Competitors agree to allocate customers among themselves; or Competitors agree to allocate sales territories or geographic markets www.concrete-pipe.org

12 Bid Rigging An agreement among competitors to conspire to raise prices when purchasers seek to acquire goods or services by soliciting competing bids. www.concrete-pipe.org

Bid Rigging Schemes Bid suppression Complementary bidding Bid rotation 13 Bid Rigging Schemes Bid suppression Complementary bidding Bid rotation Subcontracting www.concrete-pipe.org

Bid-rigging: Subcontractors Agreements between GC and SC to work together to submit a bid is OK. Agreement between GC and GC on who gets to be SC „„ www.concrete-pipe.org

15 Bid Rigging Red Flags Last minute changes to bid documents at time of submission ‰Discussions with competitors immediately prior to submitting bids ‰Statements that a contract “belongs” to a particular bidder www.concrete-pipe.org

VERTICAL RESTRAINTS Restrictive agreements made between firms at different levels of the production-distribution-supply chain. manufacturer/distributor Manufacturer/retailer www.concrete-pipe.org

Vertical Restraints Agreements to: ‰Set minimum prices ‰Set maximum prices ‰Suggest or promote resale prices ‰Restrict or allocate sales territories „ www.concrete-pipe.org

Bad Vertical Agreements Fixing specific or minimum resale prices. „Cutting off a reseller that prices below a prescribed level. „Cutting off a reseller at the request of a competing reseller. „Unlawful tying agreements www.concrete-pipe.org

Acceptable Vertical Agreements Exclusive territories for resellers „Bundling or tying where company name has no market power or where the products are offered separately. „Suggesting or promoting reseller-advertised resale prices www.concrete-pipe.org

What are the danger zones? Review of Agreements What are the danger zones? www.concrete-pipe.org

MONOPILIZATION Sherman Act Section 2 The intentional acquisition or maintenance of the power to control prices or exclude competition. Requires: 1. Market Power 2. Abuse of monopoly position www.concrete-pipe.org

Combine or conspire with any other person or persons, to monopolize It is illegal to: Monopolize, Attempt to monopolize, Combine or conspire with any other person or persons, to monopolize www.concrete-pipe.org

Unlawful Monopolization requires monopoly power and the willful acquisition or maintenance of that power NOT from growth or development as a consequence of a superior product, business acumen, or historic accident. www.concrete-pipe.org

Abuse of Monopoly Position The existence of monopoly power is not illegal - abuse of that power is. „ Abuse = predatory or exclusionary conduct. www.concrete-pipe.org

Predatory Conduct Lowering Prices Below Cost Short term = less competitors Long term = higher prices www.concrete-pipe.org

Tying Agreements Can’t require the purchase of one product in order to purchase a second product where: ‰Your company has market power (usually a very large market share and the ability to raise prices) in the first product. ‰The products can be and are sold separately. ‰There is no legitimate business justification for requiring that they be purchased together. www.concrete-pipe.org

Attempted Monopolization anticompetitive conduct, a specific intent to monopolize, and a dangerous probability of achieving monopoly power. www.concrete-pipe.org

MONOPOLIZATION REVIEW www.concrete-pipe.org

SO WHAT CAN WE DO TOGETHER? www.concrete-pipe.org

COOPERATIVE ACTIVITY Trade associations: Benefits outweigh the risks of anticompetitive behavior www.concrete-pipe.org

QUALITY Cooperative Research betters the industry as a whole Technical Committee AASHTO NCHRP UT Arlington www.concrete-pipe.org

EDUCATION ACPA educational programs Pipe Schools Webinars Calculation Tools Annual convention Press releases www.concrete-pipe.org

INDUSTRY PROMOTIONS Marketing Committee Fly-ins Lunch-n-learns “Got Milk?” White papers www.concrete-pipe.org

LOBBYING Anticompetitive but allowed under the First Amendment as free speech. “Noerr-Pennington Doctrine” www.concrete-pipe.org

Noerr-Pennington Doctrine N-P renders the antitrust laws inapplicable to individual or group action intended to influence legislative, executive, administrative, or judicial decision-making. Lobbying efforts okay regardless of intent to limit economic competition. www.concrete-pipe.org

“Sham Exception” Must be in “good faith” Applies where petitioning is a mere sham to cover an attempt to interfere directly with business of competitor Abuse of the process www.concrete-pipe.org

Antitrust immunities are limited to specific behavior. 37 Antitrust Immunity Noerr-Pennington immunity Seeking government action – First Amendment basis State action and “implied” immunity Complying with government requirement Government officials performing non-commercial duties Antitrust immunities are limited to specific behavior. www.concrete-pipe.org

Trade Association Meetings 38 Trade Association Meetings Good meeting practices Agenda Transparency Minutes Civility Awareness of antitrust issues www.concrete-pipe.org

Penalties are Severe ‰Companies fined hundreds of millions 39 Penalties are Severe ‰Companies fined hundreds of millions ‰Companies can lose its right to do business with state and federal agencies. ‰Companies may lose its opportunity to bid for federal or state contracts. „Individuals can receive prison sentences. Trade associations can be fined,and lose their charter. www.concrete-pipe.org

Antitrust Risk Management 40 Antitrust Risk Management Always comply with the law Avoid ambiguous contacts with competitors Understand your competitive position Use antitrust analysis in strategic planning When in doubt, contact your legal counsel www.concrete-pipe.org

INTRO TO ANTITRUST LAW Robbyn Wysocki Wysocki Legal Group 972-702-6061 rwysocki@wysockilegal.com www.concrete-pipe.org