Antitrust Law Basics Note to Trainer:

Antitrust Law Basics Note to Trainer:
This Training Module provides all of the materials needed to conduct an effective classroom-training course: 1. PowerPoint slides with suggested narration (though you should feel free to customize the narration to be specific to your organization’s culture and/or to highlight issues that your organization has encountered in the past). Interspersed throughout are “In the news…” clippings and “Pop-Quiz” questions and answers pertaining to this topic. A link at the end to an interactive quiz/game that you can use to assess your audience’s understanding of the material. (You will need an Internet connection to access the quiz/game.) You can add your organization’s logo to the slides by inserting it in the “Slide Master” and “Title Master” layouts. Search for “slide master” in PowerPoint’s help guide for instructions. The course is also available online for those who cannot attend the classroom session(s). The online version includes exactly the same content (including the quiz/game) in an interactive format, so you can be sure that online attendees receive the same information as those you train in the classroom. The online version includes full tracking and reporting of employee participation, as well as automated “reminder” s to ensure high completion rates. For more information or to set up the online version, visit

HISTORY OF ANTI-TRUST ACT:

Introduction 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 The fundamental objective of the antitrust laws of the U.S., the European Union, Canada and other countries is to protect and promote free and fair competition in the marketplace for the benefit of consumers. The antitrust laws reflect the view that competitive markets provide consumers with the highest quality goods and services at the lowest prices. To further this, the antitrust laws prohibit conduct that reduces competition by unfair means. The U.S. antitrust laws are the oldest and most developed of the global competition laws. The criminal and civil penalties associated with violations of the U.S. antitrust laws are among the most severe in the world, and U.S. enforcement authorities exercise their jurisdiction as vigorously and as far as they globally can. Accordingly, this course will focus primarily on U.S. antitrust laws. But remember: Each country in which you do business may have its own particular antitrust enforcement policy, and you should consult legal counsel to ensure compliance with all antitrust laws.

Overview of U.S. Antitrust Law
Three primary federal antitrust laws: Sherman Act Robertson-Patman 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 In the U.S., three federal laws define and prohibit the main forms of anti-competitive conduct: The Sherman Act; The Clayton Act; and The Federal Trade Commission Act. There are also state and international antitrust laws that are similar to these federal laws. Violations of any of these laws can lead to severe penalties for individuals and companies. Ignorance of the law is no defense. When business conduct is challenged as being anti-competitive under U.S. antitrust laws, courts apply either of two standards. Some conduct is considered illegal "per se," meaning that it is prohibited regardless of its actual effect on competition. Most conduct, however, is subject to the "rule of reason," meaning that it is permitted if its overall effect is to enhance competition for the benefit of consumers.

SHERMAN ACT The Sherman Antitrust Act Passed in 1890, the Sherman Antitrust Act was the first major legislation passed to address oppressive business practices associated with cartels and oppressive monopolies. The Sherman Antitrust Act is a federal law prohibiting any contract, trust, or conspiracy in restraint of interstate or foreign trade. Even though the title of the act refers to trusts, the Sherman Antitrust Act actually has a much broader scope. It provides that no person shall monopolize, attempt to monopolize or conspire with another to monopolize interstate or foreign trade or commerce, regardless of the type of business entity. Penalties for violating the act can range from civil to criminal penalties; an individual violating these laws may be jailed for up to three years and fined up to $350,000 per violation.

Relationships with Competitors (cont’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 Unlawful Conspiracy The Sherman Act provides that an individual violator may be imprisoned for up to ten years and fined up to $1 million for each violation of the U.S. antitrust laws; a corporate violator may be fined up to $100 million for each violation. In addition, alternative federal sentencing laws provide for even higher fines based on the profits or damage caused by the violation. In fact, one firm was fined $500 million for its role in an international cartel – the highest U.S. antitrust fine ever levied. Recently, U.S. enforcement authorities extracted a $400 million fine from a South Korean electronics company for its involvement in a global price-fixing conspiracy.

Penalties for Antitrust Violations
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 A violation of the Sherman Act is a felony. Likewise, many foreign jurisdictions are treating serious antitrust violations criminally, including Japan, Canada, South Korea, Brazil, Austria, Germany, France, Belgium, Ireland and the United Kingdom. In the U.S., an individual who violates the antitrust laws may be imprisoned for up to ten years and fined up to $1 million for each single violation. A company that violates the U.S. laws may be fined up to $100 million; alternative U.S. sentencing laws provide for even higher fines based on the profits or damage caused by the antitrust violation. Under EU competition law, a company may be fined up to 10% of its worldwide turnover for a violation. Private lawsuits in the U.S. can result in companies having to pay three times the amount of damages and attorneys' fees if found liable. Moreover, each individual and each corporation that participates in a U.S. antitrust violation is liable for 100% of the resulting damages or overcharges, even if the company only has a small share of the market.

Relationships with Competitors
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 Section I of the Sherman Act prohibits any agreement between competitors that unreasonably restrains competition. Competitors cannot agree or have any understandings or arrangements concerning prices, output or supply, markets or customers. The antitrust laws require that each competitor independently make its own commercial decisions about price, output, customers and geographic areas of activity. An agreement among competitors may take any form — it does not have to be formal or written. Any understanding — spoken or unspoken — or even a nudge and wink, is enough to infer an unlawful conspiracy. Responding to the pressures of a competitor, or doing what you know the competitor expects of you, can be enough to suggest an agreement. An agreement may be inferred from conduct, speeches, statements to the press, informal discussions in a social setting, etc. Thus, you should avoid the types of conduct that could give rise to an inference of an agreement. Avoid contacts with competitors that could be seen as an invitation to collude.

Relationships with Customers
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 The antitrust laws prohibit certain agreements between companies at different levels of the distribution chain (e.g., a supplier and its customers) while allowing others. The concept of a company acting alone is important in customer relationships. Our company's commercial decisions must be unilateral; there can be no discussions or agreements with anyone — a customer, competitor or supplier. We may decide which customers and suppliers we want to deal with or not deal with in nearly every case without antitrust risk, as long as we make our decisions independently. We may consider whether certain business is likely to be profitable, its impact on our ability to serve our customers, and the likely reactions of our competitors or other customers. In sum, we may adopt a business strategy designed to protect our self-interest. Because the rules in this area require a careful analysis of market conditions, have the Legal Department review business arrangements that raise any of the red flags discussed below.

FEDERAL TRADE COMMISSION
The Federal Trade Commission (FTC) is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anticompetitive business practices, such as: coercive monopoly. The Federal Trade Commission Act was one of President Woodrow Wilson's major acts against trusts.

Special Note… 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.

Recognizing "Red Flags" 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 Now that you are familiar with the general principles and penalties of the antitrust laws, it is important to learn how to recognize and deal with potential antitrust issues in the real world. These issues typically arise in the following contexts: Relationships with competitors; Relationships with customers; Mergers and acquisitions; Monopolistic behavior; Discrimination in pricing and promotions; Exemptions from antitrust laws; and Special industries.

Red Flag #1 — Price-Fixing Agreement between competitors to set price is the most serious type of anti-competitive conduct 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 Red Flag #1 — Price-Fixing The most serious type of anti-competitive conduct is an agreement between competitors to set the price of something they sell. Likewise, an agreement to set discounts, freight charges or payment terms — any element of price — will be considered price-fixing. Bid-rigging is also a form of price-fixing. Price-fixing agreements are always ("per se") illegal and, under U.S. law, almost always criminal. Never discuss prices, price levels, price trends or pricing policies with competitors. It is no defense that the conduct did not lead to high prices or other anticompetitive effects. And because prices can be inferred from cost information, do not exchange past, present or future price or cost information with competitors. Price-Fixing Agreements It's worth repeating that even the most informal exchange of price-related information can result in the imposition of criminal sanctions and substantial monetary penalties. It is thus imperative that you avoid any discussion of price-related subjects with your competitors. Conversations with competitors on sensitive subjects (for example, prices, costs, bids, discounts, customers, territories, marketing strategies, inventories, production, future product plans, profits or margins) can result in agreements that are illegal under the antitrust laws, even if those discussions are completely innocent.

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 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 Red Flag #2 — Allocating Markets or Customers An agreement between competitors to divide up or allocate customers, territories or business opportunities is always illegal. This type of agreement unfairly limits or restricts competition, reduces the number of products available to consumers and increases prices. Thus, competitors cannot agree that one of them will not sell in certain areas or to certain customers. Nor may a company agree with a competitor that one of them will not bid on a certain contract, or not compete for customers. Red Flag #3 — Boycotts The antitrust laws permit a company — acting independently — to choose the customers and suppliers with whom it will do business. However, an agreement between two or more competitors that they will not do business with a certain supplier or customer, or that they will do business only with certain suppliers or customers, may be an illegal boycott, depending on the circumstances. Group boycotts are illegal if they are aimed at enforcing requirements established by the group or if they tend to inhibit the ability of the boycotted firm to compete in the marketplace. You should never discuss such matters with competitors or customers.

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 Red Flag #4 — Other Improper Competitor Contacts Again, as a general but important rule, you should never discuss matters such as prices, terms, distribution, customers, territories and profit margins with competitors. This is equally true for informal meetings or discussions and at regular trade association meetings or trade shows. If you find yourself in a situation where these subjects are being discussed in your presence, it is not enough merely to remain silent. You should ask those involved in the discussion to stop, and — if they do not — you should immediately protest and announce to the meeting that you do not want to be a part of such a discussion, and request that the minutes of the meeting reflect your departure. Report the incident to the Legal Department as soon as possible.

Relationships with Customers (cont’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 Red Flag #5 — Price-Related Restrictions Agreements between a supplier and its customers regarding the price at which the customers will resell the supplier's products or services are known as resale-price maintenance. Although long considered per se illegal, resale-price-maintenance agreements are now assessed under the rule of reason. In order to pass muster under the antitrust laws, sellers must provide a reasonable, pro-competitive justification for the price restriction to show why it is good for competition. Red Flag #6 — Geographic or Customer Restrictions An agreement between a manufacturer and distributor that the distributor may sell only in certain territories or to certain types of customers could be illegal, depending on the facts and circumstances. Territorial restraints imposed by a supplier on its resellers are generally legitimate, as long as the supplier's decision is made unilaterally and the restraints are intended to enable the supplier to better compete with other suppliers of like products. Resale-Price Maintenance Minimum-resale-price maintenance is an agreement between a seller and its customers on a resale price or a price level that the resale price will not go below. Maximum-resale-price maintenance is an agreement between a seller and its customers on a resale price or price level that prices may not go above.

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 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 No Longer Per Se Illegal An agreement setting maximum or suggested retail prices, or requiring customers to pass on discounts to end users, is allowed under certain circumstances (since setting a maximum price is usually good for consumers). But an agreement that sets the actual or minimum prices was for most of the twentieth century considered "per se" illegal — that is, illegal under all circumstances. In 2007, the U.S. Supreme Court struck down the minimum-resale-price rule, finding that an agreement between suppliers and their distributors or retailers to fix a minimum resale price now are to be judged under the "rule of reason" analysis, meaning that such arrangements may be allowed under certain circumstances. States in the U.S., however, may still follow the "per se" rule, and non-U.S. jurisdictions may also abide by a stricter standard. Even prior to the 2007 decision, suppliers were (and still are) allowed under federal law to adopt pricing policies on a "take it or leave it" basis and deal with only those retailers who independently decide to accept the policy. (Continued on next slide)

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 Red Flag #7 — Exclusive Dealing Agreements that require a customer to buy all or some of its requirements from one supplier — or not to buy from other suppliers — can raise antitrust concerns. The legality depends on whether competitors are foreclosed from essential sources of supply or significant outlets for their products for an unreasonable period of time. Red Flag #8 — Tying Agreements in which a supplier offers to sell a customer a desirable product or service only if the customer also agrees to buy a second, less desirable product or service are called tying arrangements and are unlawful under certain circumstances. The legality of these arrangements depends on a detailed analysis of the supplier's market power in the desirable product. An arrangement may be illegal if the seller can, in effect, "force" the customer to purchase the less desirable product in circumstances where the customer would not normally do so. Antitrust Concerns The anti-competitive potential of exclusive-dealing arrangements increases with market power; thus, as a company grows and is more successful, the effects of the same contracts may become very different. Again, the legality of such arrangements depends on a detailed inquiry into various market conditions and business justifications. These arrangements should not be entered into without prior review by legal counsel. Tying Issues Tying issues arise in a wide variety of situations, including the bundling of separate products in a single package, restrictions imposed by franchisors on franchisees, and requirements that dealers carry a manufacturer's complete line of products.

CLAYTON ACT The purpose of the Clayton Act was to give more enforcement teeth to the Sherman Antitrust Act. Passed in 1914, the Clayton Act regulates general practices that may be detrimental to fair competition. Some of these general practices regulated by the Clayton Act are: 1. price discrimination, 2. exclusive dealing contracts, 3. tying agreements, o 4. requirement contracts; 5. mergers and acquisitions; 6. and interlocking directorates. The Clayton Act is enforced by the Federal Trade Commission (FTC) and the Department of Justice (DOJ).

Mergers and Acquisitions
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 #9 — 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 The Clayton Act prohibits mergers or acquisitions that could substantially lessen competition or create a monopoly. Antitrust issues may arise in any acquisition, merger or joint venture involving substantial amounts of stock or assets of a competitor, potential competitor, or substantial customer or supplier. Transactions that meet certain size criteria must be reported to government agencies and undergo government review before they may be consummated. Red Flag #11 — Pre-Merger Reporting The parties to a merger or acquisition must submit documents to the government agencies from their officers so that the agencies may evaluate the competitive effects of the transaction. This includes all reports, studies, projections or analyses with respect to the particular transaction that are prepared by or for an officer or director. If these documents were written without regard to the antitrust significance of their contents, they may include language that can jeopardize the transaction if the government challenges it as anti-competitive.

Mergers and Acquisitions (cont’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 Red Flag #12 — Pre-Closing Information-Sharing Until the closing of a merger or acquisition, the companies involved must remain separate, and the rules prohibiting price-fixing must be followed. Under no circumstances may any steps be taken to coordinate pricing, purchasing or other competitive practices, decisions or strategies. Coordination is only permitted once a merger or acquisition is concluded. Negotiations between competitors are especially tricky. During the due-diligence process prior to closing, there is bound to be some competitively sensitive information exchanged. This can give rise to antitrust concerns, regardless whether the transaction is ever consummated. To minimize antitrust risk, the parties must limit the disclosure and exchange of non-public, competitively sensitive information. The parties should only disclose or exchange information that is reasonably necessary to analyze or consummate the transaction. In addition, the disclosure should be on a "need-to-know" basis only and protected by a written confidentiality agreement.

Monopolistic Behavior
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 The Sherman Act prohibits monopolization — that is, unreasonable business behavior designed to achieve or maintain monopoly power as well as attempts and conspiracies to monopolize. In order to monopolize, a company must have "monopoly power," which generally means the ability to control prices, drive competitors out of the market, or prevent them from entering the market. The usual indicator of monopoly power is a high market share — over 60%. Because monopolization of "any part" of trade or commerce is prohibited, violations can occur in narrow geographic areas and in small segments of a broad product market. In addition, there is an element of "deliberateness" required — some sort of conduct or behavior that shows monopolistic intent — such as predatory conduct, engaging in "tie-in" sales, requirements, output and supply contracts, or foreclosing small competitors from the market by controlling sources of supply or distribution. The red flags discussed below can supply the "deliberateness" element needed to prove a monopolization case.

Monopolistic Behavior (cont’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 Red Flag #13 — Predatory Pricing If a company sells its products at a price below its cost with the intent to severely damage its competitors or drive them out of business, the company may be guilty of monopolization. In some cases, a company's anti-competitive intent was proved from statements in messages or other informal communications. Predatory pricing is most problematic where the company setting the prices has significant market power in the relevant product market. Red Flag #14 — Refusals To Deal Although the general rule is that a company unilaterally can refuse to deal with customers or suppliers, this may not be the case for a company that holds significant market power. A refusal to deal by a company with monopoly power violates the Sherman Act if the company had no legitimate business purpose other than to create or maintain a monopoly. A dominant firm that controls an essential facility may have a duty to share the facility with its competitors on a non-discriminatory basis. Sharing of "Essential Facility" However, a monopolist generally does not face liability for refusing to license a patent that it has acquired lawfully.

Price Discrimination 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 The Robinson-Patman Act prohibits a seller from discriminating between customers regarding price, terms or promotional services, if the effect is to substantially lessen competition or create a monopoly. This means that it is illegal to charge different prices for similar products to competing customers at the same time if the price difference lessens competition. The intent of the Act is to prevent large buyers from obtaining unfairly low prices or extra services to the detriment of smaller buyers — in effect, to require a seller to treat all competing purchasers equally without discrimination based on price. A seller can defend price differentials based on cost justification, changing market conditions or the need to meet competition.

Price Discrimination (cont’d)
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 Robinson-Patman Act The Robinson-Patman Act applies only to sales of goods or commodities, and it does not apply to transactions in services, including licenses or leases. It also does not apply to sales of different grade or quality products, to sales outside the U.S., to sales between divisions or subsidiaries of the selling company, or to sales directly to the government. Cost Justification A "cost justification" defense permits a seller to charge a different price to a customer if it reflects an actual difference in the cost of serving that customer. Changing Market Conditions If market conditions have changed such that a product is now obsolete or no longer can be sold at market price, a seller may charge a different price.

Price Discrimination (cont’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 Red Flag #15 — Meeting Competition The "meeting competition" defense permits the seller to charge a lower price to a buyer if done in good faith in order to meet (but not beat) an equally low price offered by the seller's competitor. If a buyer asks a seller to meet a competitor's price, the seller must make a good-faith effort to verify the lower price before giving a price cut to the buyer. But the seller should not call its competitor directly to verify the lower price; this could lead to a finding of price-fixing. Red Flag #16 — Promotional Services A company that offers promotional services or allowances with its sales must make those offers available to all of its competing customers on proportionally equal terms. This means that each customer must receive the promotional offers in the same proportion as its competitors. All competing customers must be notified that the allowances are available and must be able to take advantage of them, whether they choose to or not.

SPORTS AND ANTITRUST LAW
Curtis Charles Flood (January 18, 1938 – January 20, 1997) was a Major League Baseball player who spent most of his career as a center fielder for the St. Louis Cardinals. A defensive standout, he led the National League inputouts four times and in fielding percentage twice, winning Gold Glove Awards in his last seven full seasons from 1963 to Flood became one of the pivotal figures in the sport's labor history when he refused to accept a trade following the 1969 season, ultimately appealing his case to the U.S. Supreme Court. Although his legal challenge was unsuccessful, it brought about additional solidarity among players as they fought against baseball's reserve clause and sought free agency. In areas where governments have adopted economic or social policies that conflict with free and open competition, legislatures and courts have resolved these conflicts by creating certain exemptions from the antitrust laws: Red Flag #17 — Lobbying Activities A company can engage in activities seeking governmental or judicial action, even if the activities are anti-competitive. Joint action by competitors to influence the government is immune from antitrust law, but action aimed at a non-governmental body (such as a trade association) is not. Red Flag #18 — Labor-Related Activities A statutory labor exemption enables workers to organize to eliminate competition among them and to pursue their legitimate labor interests, as long as they do not combine with a non-labor group. A non-statutory labor exemption applies to agreements between employees or their labor organizations and employers or other non-labor entities that further the objectives of national labor policy and does not have an unwarranted anti-competitive impact.

Baseball and Antitrust Law: Flood v. Kuhn
With the backing of the Players Association and with former U.S. Supreme Court Justice Arthur Goldberg arguing on his behalf, Flood pursued the case known as Flood v. Kuhn (Commissioner Bowie Kuhn) from January 1970 to June 1972 at district, circuit, and Supreme Court levels. Although the Supreme Court ultimately ruled against Flood, upholding baseball’s exemption from antitrust statutes, the case set the stage for the 1975 Messersmith-McNally rulings and the advent of free agency. Red Flag #19 — State Action State governments may show that a particular regulatory scheme precludes antitrust liability. The state-action doctrine comes into play when the conduct of state or private actors undertaken pursuant to a state regulatory program is challenged under the antitrust laws. To be exempt, the challenged conduct must be clearly expressed as a state policy and must be actively supervised by the state itself. Red Flag #20 — Regulated Industries Some industries are so pervasively regulated by federal or state law that they are exempt from the U.S. antitrust laws. These include agricultural cooperatives, sports broadcasting, rail transportation and ocean shipping, among others. If you have any questions about whether our company is exempt or is claiming an exemption, ask the Legal Department.

Curt Flood Remembered The financial and emotional costs to Flood as a result of his unprecedented challenge of the reserve clause were enormous. Flood’s major league career (his 1970 salary would have been $100,000) effectively ended with his legal action. At the memorial service for Curt Flood, who died of throat cancer in 1997 at the age of 59, dozens of former ballplayers gathered at the First African Methodist Episcopal Church in Los Angeles to pay tribute to a man whose sacrifice made him not merely a hero, but a martyr. One mourner compared Flood’s social legacy to that of Rosa Parks. If you work in either of the following areas, you may need additional training to recognize and respond to antitrust issues as they arise in your industry: Insurance Conduct that constitutes the "business of insurance" is exempt from antitrust law, as long as the conduct is subject to state regulation and is not an agreement to boycott, coerce or intimidate. Thus, many of the antitrust principles discussed in this course do not apply to the insurance industry. Healthcare While there are no special antitrust exemptions for the healthcare industry, U.S. enforcement agencies have issued guidance on nine types of joint activity in which competitors are allowed to engage. For each such joint activity, the guidance provides a safety zone within which the activity is unlikely to raise competitive concerns. Safety Zone Healthcare providers are nonetheless subject to the antitrust laws and face many of the same issues as do firms in other industries. They need to consult counsel before they can be confident that any joint conduct with their competitors falls within a "safety zone."

Click the “Final Quiz” link to open the quiz/game in a browser window.
Quiz Rules The quiz is penalty-scored – that is, students must answer a question on their first attempt in order to move ahead in the game. If they answer incorrectly, they’ll be stuck in a loop until they answer correctly. Then they’ll be asked another question on the same topic. Only when they’ve answered one question correctly on each of the major topics in the course will they reach the end of the game.

Thank you for participating!
This course and the related materials were developed by WeComply, Inc. and the Association of Corporate Counsel. If any employees who need this training were unable to attend the classroom session(s), you can offer them the course online using WeComply DIY. As noted earlier, the online version includes exactly the same content (including the quiz/game) in an interactive format, so you can be sure that online attendees receive the same information as those you trained in the classroom. The online version includes full tracking and reporting of employee participation, as well as automated “reminder” s to ensure high completion rates. For more information or to set up the online version, visit

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