The Security Industry Association (SIA) is an association of suppliers, many of which compete with each other. As an association of competitors in the security products industry, SIA must act cautiously to ensure against violations of federal and state antitrust laws.
Topics which should not be discussed during association meetings include those that could be construed as an agreement even tending to (a) raise, lower or stabilize prices or price levels, including credit terms, (b) regulate production or the availability of products or services, (c) allocate markets or customers, or (d) encourage boycotts or dealing only on certain terms.
Even if you are not an active participant in a discussion which could violate the antitrust laws - that is, if you are merely present while others engage in such a discussion and you neither attempt to stop it nor leave the room - you personally could be convicted of a felony and fined as much as $350,000 and/or imprisoned for up to three years. If your company or SIA is convicted, each could be fined up to $10 million.
First, an agreement does not need to be in writing to be illegal under the antitrust laws. Agreements can be oral or written, formal or informal, express or implied. In fact, agreements can be inferred from similar behavior following even a general discussion of a particular matter such as prices or output. For this reason, mere discussion of certain topics must not be permitted at SIA meetings. Should an improper discussion be initiated, it is staff's responsibility to advise that it be terminated and to move on to another, appropriate topic. Should those present not heed staff's advice, it is the responsibility of staff to terminate the meeting and recommend that all persons leave.
Price fixing is an agreement among competitors which tends to standardize (to raise, maintain or even to lower) prices or price levels. Agreements which go even to individual elements of price such as discounts, credit terms, warranties or profit margins are violations of the antitrust laws and are not permitted.
Agreements to limit production are viewed as the equivalent of price fixing because the end result is the same. Since price is a result of supply and demand, agreements to limit production (to restrict supply) result in price increases if demand remains constant.
Agreements to divide customers or market areas also eliminate price competition. For example, discussion among manufacturers of who will serve a particular geographic market, or of who will sell to a particular dealer or group of dealers, or of who will advertise in the newspaper serving the north side of town and who will advertise in the newspaper serving the south side of town, is inappropriate at an SIA meeting.
Boycotts involve agreements among manufacturers not to sell to a particular dealer or group of dealers, or to sell only on certain terms.
Association statistical reporting programs are ripe with the potential for antitrust violations unless properly structured and operated. General guidelines include the following:
- Participation in the program should be absolutely voluntary.
- Non-members should be permitted to participate in the program. Non-members' participation need not be solicited, but, if a non-member asks to participate, that request should not be denied without first consulting with legal counsel. All participants, members and non- members alike, should have access to the aggregate data prepared by the independent accounting firm. Participating non-members may be charged a higher fee for the final report than participating members. The final report should also be available to distributors and dealers desiring it.
- The purpose of the program (for example, “to foster competition by providing members of the industry with historical market information for their individual use”) should be set forth in the minutes of the Board of Directors meeting authorizing the program.
- Individual company data should not be revealed or discernible from the final report. It is generally accepted that at least three companies should be reporting in any product/price range in order to avoid disclosure of individual company data.
- Most importantly, there should be no discussion of the information in the report either in writing or in association meetings. The information is generated solely for the individual use of those participating.
To summarize, when attending an association meeting, your personal red flag should go up when any of the following is mentioned or the conversation seems to be headed in that direction:
- Current or future prices. Great care should also be taken in discussing past prices. Rarely are such discussions appropriate.
- What constitutes a “fair” profit level.
- Possible increases or decreases in prices.
- Standardization or stabilization of prices, price levels, or price points, including elimination of products in any price range.
- Pricing procedures. While a discussion of cost accounting methods is appropriate, discussion of pricing formulas is potentially inappropriate.
- Cash discounts. Warranty terms.
- Manufacturer return policies.
- Credit terms or rejection of customers.
- Individual company market share, sales or production information.
- Production limits or quotas.
- Allocation of markets or customers.
- Refusal to deal with a customer or to deal only on certain terms.
- Whether or not the pricing practices of any industry member are unethical or otherwise inappropriate.
If any of these subjects are raised and SIA staff does not terminate the discussion, SIA members should first ask that the matter not be further discussed and, failing that, should leave the room.
Finally, it is important for all to understand that antitrust liability may arise other than at an SIA meeting. It is equally unlawful, for example, for two competitors to talk about pricing trends over the telephone, completely independent of an SIA event.
-SIA Antitrust Policy Statement