Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials A NTITRUST E SSENTIALS

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials W ELCOME This training course was developed by WeComply, a leading provider of ethics and compliance training since The course is also available online from any Internet-connected computer. WeComply offers 60+ courses on a wide range of business ethics and compliance topics. Each course helps employees spot key compliance issues and respond appropriately. This course is designed and licensed for classroom use in parallel with WeComply's online course on the same topic. This course may not be hosted on a learning management system or distributed to employees individually by electronic or other means without WeComply's prior authorization. For more information about this course or others, whether for classroom use or online access, please or call WeComply.

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials I NTRODUCTION Thank you for participating in our Antitrust Essentials training course. This course will provide an overview of antitrust law and help you recognize and deal with "red flags" — situations that present a risk of antitrust violations and legal liability. We'll start with a summary of the most important laws and legal principles. Then we'll discuss some facts and situations that should trigger red flags in a number of different contexts. Keep in mind that this material is provided for informational purposes only and is not intended as legal advice. If you have questions or need legal advice about how any of this material applies to your job responsibilities, please direct them to your supervisor or the Legal Department. 1 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials O VERVIEW OF U.S. A NTITRUST L AW Fundamental objective of antitrust laws is to protect and promote free and fair competition in the marketplace for the benefit of consumers Antitrust laws prohibit conduct that reduces competition by unfair means U.S. antitrust laws are the most developed Criminal and civil penalties are among the most severe Enforcement efforts are vigorous You should consult legal counsel to ensure compliance with all global antitrust laws 2 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials O VERVIEW OF U.S. A NTITRUST L AW (C ONT ’ D ) Three primary federal antitrust laws: Sherman Act Clayton Act Federal Trade Commission Act State and international antitrust laws Ignorance of the law is no defense Challenged conduct is judged by two standards: Some conduct is illegal per se — i.e., prohibited regardless of effect on competition Most conduct is subject to rule of reason — i.e., permitted if it enhances competition 3 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials O VERVIEW OF U.S. A NTITRUST L AW (C ONT ’ D ) Three primary federal antitrust laws: Sherman Act Clayton Act Federal Trade Commission Act State and international antitrust laws Ignorance of the law is no defense Challenged conduct is judged by two standards: Some conduct is illegal per se — i.e., prohibited regardless of effect on competition Most conduct is subject to rule of reason — i.e., permitted if it enhances competition 4 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials O VERVIEW OF U.S. A NTITRUST L AW (C ONT ’ D ) Three primary federal antitrust laws: Sherman Act Clayton Act Federal Trade Commission Act State and international antitrust laws Ignorance of the law is no defense Challenged conduct is judged by two standards: Some conduct is illegal per se — i.e., prohibited regardless of effect on competition Most conduct is subject to rule of reason — i.e., permitted if it enhances competition 5 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials P ENALTIES FOR A NTITRUST V IOLATIONS Violation of Sherman Act is a felony Many foreign jurisdictions have also criminalized antitrust violations Penalties: In U.S., individuals may be imprisoned for up to 10 years and fined up to $160 million per violation In U.S., companies may be fined $100 million or more In EU, companies may be fined up to 10% of worldwide turnover Private lawsuits can result in judgments for three times the amount of damages plus attorneys' fees 6 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials S PECIAL N OTE … Current Antitrust Trends: Enforcement The Antitrust Division of the U.S. Department of Justice announced that it will continue to emphasize prison terms for individuals who participate in price-fixing conspiracies. Offenders are being sent to prison with increasing frequency and for longer periods of time. For example, in 2007 the Division obtained criminal sentences for 34 individuals totaling a record 31,391 days of prison time — more than twice the number of prison days imposed in any previous year. During 2007 the average sentence for jailed defendants charged with antitrust violations reached an all-time high of 31 months. Criminal and corporate fines are also increasing, with over half a billion dollars in fines imposed in each of the last four years. The Division has also increased the number of foreign nationals prosecuted and sent to jail in connection with cartel investigations. 7 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ECOGNIZING "R ED F LAGS " It is important to learn how to recognize and deal with antitrust issues in the real world Antitrust issues typically arise in these contexts: Relationships with competitors Relationships with customers Mergers and acquisitions Monopolistic behavior Discrimination in pricing and promotions Exemptions from antitrust laws Special industries 8 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C OMPETITORS Section 1 of Sherman Act prohibits agreement between competitors that unreasonably restrains competition Each competitor must make its own decisions about price, output, customers and areas of activity An agreement among competitors may take any form — it does not have to be formal or written Unlawful conspiracy may be inferred from conduct Avoid conduct that could give rise to an inference of an agreement Avoid contacts that could be seen as invitation to collude 9 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C OMPETITORS (C ONT ’ D ) Section 1 of Sherman Act prohibits agreement between competitors that unreasonably restrains competition Each competitor must make its own decisions about price, output, customers and areas of activity An agreement among competitors may take any form — it does not have to be formal or written Unlawful conspiracy may be inferred from conduct Avoid conduct that could give rise to an inference of an agreement Avoid contacts that could be seen as invitation to collude 10 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C OMPETITORS (C ONT ’ D ) Red Flag #1 — Price-Fixing Agreement between competitors to set price is the most serious type of anti-competitive conduct Includes agreement to set discounts, freight charges or payment terms Includes bid-rigging Price-fixing agreements are "per se" illegal Never discuss prices, price levels, price trends or pricing policies with competitors Do not exchange past, present or future price or cost information with competitors 11 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C OMPETITORS (C ONT ’ D ) Red Flag #2 — Allocating Markets or Customers Agreement to allocate customers, territories or business opportunities is always illegal Competitors cannot agree that one will not sell in certain areas or to certain customers Competitors cannot agree that one will not bid on a certain contract or not compete for customers Red Flag #3 — Boycotts Agreement not to do business with a supplier or customer, or to do business only with certain suppliers or customers, may be illegal boycott 12 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C OMPETITORS (C ONT ’ D ) Red Flag #2 — Allocating Markets or Customers Agreement to allocate customers, territories or business opportunities is always illegal Competitors cannot agree that one will not sell in certain areas or to certain customers Competitors cannot agree that one will not bid on a certain contract or not compete for customers Red Flag #3 — Boycotts Agreement not to do business with a supplier or customer, or to do business only with certain suppliers or customers, may be illegal boycott 13 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C OMPETITORS ( CONT ’ D ) Red Flag #4 — Other Improper Competitor Contacts Never discuss prices, terms, distribution, customers, territories or profit margins with competitors Applies to informal meetings/discussions, trade-association meetings, trade shows If these subjects are discussed in your presence — Ask those involved in the discussion to stop Announce that you don't want to be part of the discussion Request that minutes reflect your departure Report incident to the Legal Department as soon as possible 14 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C USTOMERS Antitrust laws prohibit certain agreements between companies at different levels of distribution chain Our commercial decisions must be unilateral — there can be no discussions or agreements with a customer, competitor or supplier We may decide which customers and suppliers we want to deal with as long as we make our decisions independently We may adopt a business strategy designed to protect our self-interest Legal Department should review business arrangements that raise any red flags 15 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials P OP Q UIZ ! A pricing agreement between a supplier and a customer is always ("per se") illegal. A.True. B.False. 16 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C USTOMERS (C ONT ’ D ) Red Flag #5 — Price-Related Restrictions Resale-price-maintenance agreements between supplier and customers set prices at which the customers will resell supplier's products or services Assessed under rule of reason Seller must provide a reasonable, pro-competitive justification for price restriction Red Flag #6 — Geographic or Customer Restrictions Legality of agreement between manufacturer and distributor that distributor may sell only in certain territories or to certain types of customers depends on facts and circumstances 17 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C USTOMERS (C ONT ’ D ) Red Flag #5 — Price-Related Restrictions Resale-price-maintenance agreements between supplier and customers set prices at which the customers will resell supplier's products or services Assessed under rule of reason Seller must provide a reasonable, pro-competitive justification for price restriction Red Flag #6 — Geographic or Customer Restrictions Legality of agreement between manufacturer and distributor that distributor may sell only in certain territories or to certain types of customers depends on facts and circumstances 18 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C USTOMERS (C ONT ’ D ) Red Flag #5 — Price-Related Restrictions Resale-price-maintenance agreements between supplier and customers set prices at which the customers will resell supplier's products or services Assessed under rule of reason Seller must provide a reasonable, pro-competitive justification for price restriction Red Flag #6 — Geographic or Customer Restrictions Legality of agreement between manufacturer and distributor that distributor may sell only in certain territories or to certain types of customers depends on facts and circumstances 19 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C USTOMERS (C ONT ’ D ) Red Flag #7 — Exclusive Dealing Agreements that require customer to buy all or some of its requirements from one supplier raise antitrust concerns Red Flag #8 — Tying Agreements in which a supplier offers to sell a customer a desirable product only if customer agrees to buy less desirable product are unlawful under certain circumstances Legality depends on analysis of supplier's market power in desirable product 20 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials R ELATIONSHIPS WITH C USTOMERS (C ONT ’ D ) Red Flag #9 — Reciprocal Dealing Agreement to buy a supplier's products on the condition that supplier buys your products is reciprocal dealing Avoid appearance of an agreement that links your purchases from suppliers to their purchases from you Red Flag #10 — Dual Distribution Manufacturer that uses its own distribution channels and independent distributors must assure that independent distributors are treated fairly 21 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials M ERGERS AND A CQUISITIONS Clayton Act prohibits mergers or acquisitions that could substantially lessen competition or create a monopoly Antitrust issues may arise in acquisition, merger or joint venture involving stock or assets of a competitor, potential competitor, or substantial customer or supplier Red Flag #11 — Pre-Merger Reporting Parties must submit documents to government agencies to evaluate competitive effects of transaction Documents should be written with regard to antitrust significance of their contents 22 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials M ERGERS AND A CQUISITIONS (C ONT ’ D ) Clayton Act prohibits mergers or acquisitions that could substantially lessen competition or create a monopoly Antitrust issues may arise in acquisition, merger or joint venture involving stock or assets of a competitor, potential competitor, or substantial customer or supplier Red Flag #11 — Pre-Merger Reporting Parties must submit documents to government agencies to evaluate competitive effects of transaction Documents should be written with regard to antitrust significance of their contents 23 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials P OP Q UIZ ! Companies considering a merger are allowed to share information with each other so that they can accurately evaluate their prospective business opportunity. A.True. B.False. 24 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials M ERGERS AND A CQUISITIONS (C ONT ’ D ) Red Flag #12 — Pre-Closing Information-Sharing Until the closing of a merger or acquisition, companies involved must remain separate Coordination of pricing, purchasing, etc., is only permitted once transaction is concluded Negotiations between competitors are especially tricky Parties must limit disclosure and exchange of non-public, competitively sensitive information Disclosures should be on "need-to-know" basis only and protected by written confidentiality agreement 25 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials M ONOPOLISTIC B EHAVIOR Sherman Act prohibits monopolization: Unreasonable business behavior designed to achieve or maintain monopoly power Attempts and conspiracies to monopolize Applies where a company has power to control prices, drive competitors out or prevent them from entering market Usual indicator of monopoly power is market share over 60% Can occur in narrow geographic areas and small segments of broad market Requires deliberateness — conduct or behavior that shows monopolistic intent 26 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials I N T HE N EWS … 27 of 37 Mill Logs Predatory Practices An Oregon sawmill accused a competitor of engaging in predatory practices in violation of the Sherman Act by bidding up the price of sawlogs to prevent the plaintiff from being profitable. In ruling in favor of the competitor, the U.S. Supreme Court held that the test should be the same for predatory pricing and predatory billing claims — that is, the plaintiff must show that the defendant had considerable market power and wielded it to drive its competitors out of the market. The Court reversed an $80 million jury verdict for the plaintiff, finding that there might have been legitimate reasons for the defendant's bids, such as increased consumer demand and a hedge against future price increases. Supreme Court Clarifies Predatory Pricing/Bidding Claims

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials M ONOPOLISTIC B EHAVIOR (C ONT ’ D ) Red Flag #13 — Predatory Pricing Company sells its products below cost with intent to severely damage competitors Most problematic where company setting prices has significant market power in relevant product market Red Flag #14 — Refusals To Deal Refusal to deal with customers/suppliers by company with monopoly power violates Sherman Act if company had no legitimate business purpose Dominant firm that controls an essential facility may have duty to share facility with competitors on non-discriminatory basis 28 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials P RICE D ISCRIMINATION 29 of 37 Robinson-Patman Act prohibits a seller from discriminating between customers on price, terms or promotional services if it substantially lessens competition or creates a monopoly It is illegal to charge different prices for similar products to competing customers at the same time if price difference lessens competition Intent of the Act is to prevent large buyers from obtaining unfairly low prices or extra services to detriment of smaller buyers Seller can defend price differentials based on cost justification, changing market conditions or the need to meet competition

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials P RICE D ISCRIMINATION (C ONT ’ D ) Robinson-Patman Act prohibits a seller from discriminating between customers on price, terms or promotional services if it substantially lessens competition or creates a monopoly It is illegal to charge different prices for similar products to competing customers at the same time if price difference lessens competition Intent of the Act is to prevent large buyers from obtaining unfairly low prices or extra services to detriment of smaller buyers Seller can defend price differentials based on cost justification, changing market conditions or the need to meet competition 30 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials P OP Q UIZ ! Which of the following is not a type of price discrimination addressed by U.S. antitrust laws? A.A supplier sells widgets to stores owned by people who are over 40 for $100 each but charges $200 to stores owned by people under 40. B.A supplier sells widgets to "big-box" chain stores at $100 each but charges $200 to small, independent stores. C.A supplier sells widgets to all its customers at $150 each but includes promotional materials free of charge for orders by its largest customers. 31 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials P RICE D ISCRIMINATION (C ONT ’ D ) Red Flag #15 — Meeting Competition "Meeting competition" defense permits seller to charge lower price to buyer if done in good faith to meet (but not beat) equally low price offered by seller's competitor Seller must make good-faith effort to verify lower price before giving price cut Seller should not call competitor directly to verify lower price Red Flag #16 — Promotional Services Company that offers promotional services or allowances must make offers available to all competing customers on proportionally equal terms 32 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials E XEMPTIONS FROM THE A NTITRUST L AWS Red Flag #17 — Lobbying Activities Company can engage in activities seeking governmental or judicial action, even if activities are anti-competitive Action aimed at a non-governmental body is not immune from antitrust laws Red Flag #18 — Labor-Related Activities Statutory labor exemption enables workers to organize to eliminate competition among them and to pursue legitimate labor interests Non-statutory exemption applies to agreements that further objectives of national labor policy and do not have unwarranted anti-competitive impact 33 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials E XEMPTIONS FROM THE A NTITRUST L AWS (C ONT ’ D ) Red Flag #19 — State Action State governments may show that a regulatory scheme precludes antitrust liability Challenged conduct must be clearly expressed as state policy and actively supervised by state Red Flag #20 — Regulated Industries Some industries are so pervasively regulated that they are exempt from U.S. antitrust laws These include agricultural cooperatives, sports broadcasting, rail transportation and ocean shipping Consult Legal Department for questions about exemptions 34 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials S PECIAL I NDUSTRIES Insurance "Business of insurance" is exempt from antitrust law, as long as conduct is subject to state regulation and is not agreement to boycott, coerce or intimidate Healthcare U.S. enforcement agencies have issued guidance on nine types of allowed joint activity Guidance provides safety zone within which activity is unlikely to raise competitive concerns 35 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials O THER C ONTEXTS Government Contracting Companies bidding on public contracts must know rules prohibiting bid-rigging, market allocation and predatory pricing Government may permit a teaming agreement between competitors for purpose of keeping costs down Foreign Trade Conduct by foreign companies and individuals that has substantial effect on U.S. imports or exports may be subject to antitrust law U.S. companies doing business internationally may be subject to antitrust laws of other countries or EU 36 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials F INAL Q UIZ F INAL Q UIZ 37 of 37

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials WeComply A BOUT W E C OMPLY WeComply is a leading provider of customized ethics and compliance training solutions. We are committed to providing the best-of-breed training content, technology and customer service. Specializing in ethics and compliance training since ethics and compliance training courses in 42 languages Content partners include the Association of Corporate Counsel (ACC), Proskauer Rose and White & Case 500+ clients of all sizes and in all industries

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials Online – available 24/7 from any computer Mobile – tablets and smartphones Offline options when Internet access is unavailable:  PowerPoint with presenter notes for classroom training  PDF booklets with tear-off certifications  CD-ROM/intranet with tracking via  Phone-based training and certification WeComply C OURSE -D ELIVERY O PTIONS WeComply offers training courses in multiple delivery formats to reach all employees -- not just those with computers:

Copyright © 2011 WeComply, Inc. All rights reserved. Antitrust Essentials Blended Benefits Get the best of both worlds by providing classroom training where feasible and online training elsewhere – all centrally tracked and organized for easy monitoring and reporting. Blended Benefits Get the best of both worlds by providing classroom training where feasible and online training elsewhere – all centrally tracked and organized for easy monitoring and reporting. O NLINE T RAINING B ENEFITS While classroom training has certain advantages, it can be challenging to implement in large and/or geographically dispersed companies. Consider these advantages of online training: Better Attendance Higher Completion Rates Less Impact on Productivity Perfect for New Hires Convenient for Remote Locations Available in 42 Foreign Languages Easy Access to Courses Periodic Refreshers