Anti-trust Policy
I. INTRODUCTION
Since its formation in 1953, Texas Chemical Council has engaged primarily in the consultation and cooperation with state and federal officials and agencies on matters having industry-wide significance within the State of Texas and in the dissemination of facts calculated to create a better understanding of the role of the chemical industry within the State. Such activities typically do not raise serious problems under the antitrust laws.
However, certain antitrust dangers are inherent in any trade association such as TCC. By bringing together representatives of chemical companies which actively compete in their everyday business affairs, TCC presents an institutionalized opportunity for such representatives to engage in conduct inconsistent with the antitrust laws. Accordingly, TCC, primarily through its staff and general counsel, has monitored the activities of the organization to ensure that they always are consistent with the lawful purposes for which TCC was founded.
This Guide has been prepared for the purpose of formalizing TCC's existing program of compliance with the antitrust laws. Part II of the Guide sets forth the organization's directive policy regarding antitrust compliance. The remainder of the Guide then provides a brief overview of the federal antitrust laws and suggests specific guidelines for compliance by all TCC members. Each member company should conduct its TCC-related activities in strict compliance with the policy and procedures set forth in the Guide.
II. STATEMENT OF DIRECTIVE POLICY
A. No member company or any of its representatives shall, in connection with the activities of TCC, enter into any understanding, agreement, plan, or conspiracy with any other member company or its representatives that might have the effect of limiting or restricting competition with respect to prices, terms or conditions of sale, customers, suppliers, production, distribution, or territories.
B. No representative of any member company, during or in conjunction with any meeting of TCC or its committees, shall give to, accept from, or discuss with a representative of any other member company prices, price levels, terms and conditions of sale, production statistics, specific cost information, or other information of competitive significance.
C. Each representative of any member company shall give appropriate notification of any item, topic, or subject to be introduced for discussion at a scheduled meeting so that an agenda may be prepared. Such notification with regard to any Committee Meetings shall be made to the Committee Vice Chair or Chair. Such notification with regard to all other TCC meetings shall be made to the President of TCC or the Board Chair. A formal agenda shall be prepared before every meeting of TCC or any committee thereof. Agendas for Committee Meetings shall be submitted to the Committee Vice Chair or Chair. Agendas for all other TCC meetings shall be submitted to the TCC President or the Board Chair.
D. At all meetings of TCC or any committee thereof, the agenda shall be strictly adhered to, and no subject not approved by the Chair shall be presented for discussion.
E. Minutes accurately reflecting all discussions had and any actions taken at each Committee Meeting shall be submitted to the Committee Vice Chair or Chair; and minutes accurately reflecting all discussions had and any action taken at all other TCC meetings shall be submitted to the President of TCC or the Board Chair. The TCC staff will then insure the accuracy of such minutes and confirm that the discussions and actions reflected in such minutes related to matters set forth in the agenda.
F. No representative of any member company shall attend, participate in, or tolerate rump meetings — i.e., unscheduled, splinter gatherings held apart from but in conjunction with a regular meeting of TCC or any of its committees.
G. TCC's antitrust policy is mandatory. No member company or its representatives should (1) act contrary to the provisions of this policy; (2) authorize, direct, or condone violations of the policy; or (3) take any action or engage in any conduct or discussion that has been disapproved by counsel. Any representative of a member company who has knowledge of facts which he believes might constitute a violation of this policy should, promptly after learning of such facts, review the matter with the TCC President and General Counsel.
III. GENERAL PRINCIPLES OF ANTITRUST LAW
The federal antitrust laws, a body of statutes enacted by Congress over a period of time beginning in 1890, are intended to preserve the free enterprise system by ensuring that competition is the prime regulator of our economy. Many political and economic freedoms which Untied States citizens enjoy depend significantly on this free enterprise system characterized by unimpeded business competition. The main statutory provision which applies to trade association activity is Section 1 of the Sherman Act, which prohibits "[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce among the several States." There are two important points to remember regarding Section 1: (1) it prohibits only joint conduct, that is, conduct involving more than one party; and (2) it has been interpreted by the courts to outlaw only "unreasonable" restraints of trade. However, the courts have held that certain types of joint activity are so destructive to competition that they are inherently "unreasonable" and thus always illegal under Section 1. Certain of these so-called "per se violations" of Section 1 are described briefly below:
A. Agreements Among Competitors Controlling Price (Horizontal Price-Fixing). Any agreement or understanding among competitors to raise, lower, stabilize, or affect prices, discounts, or terms governing sales of products or services to or purchases from third parties is strictly illegal. The agreement need not be as to a specific price; the law is violated by agreements on maximum or minimum prices, on a common sales agent, on terms or conditions of sale (such as credit terms or discounts), or even on the mere exchange of price information if there is a stabilizing effect on prices.
Under the applicable court decisions, the terms "agreement" or "understanding" cover far more than written contracts. In most cases, agreements are inferred from a course of conduct; for example, a history of telephone calls or meetings among competitors followed by uniform price action can give rise to the inference of an "agreement." A "knowing wink" can be just as illegal as a formal document.
B. Agreements Among Competitors Controlling Production. Any agreement or understanding among competitors to increase, decrease, stabilize, or otherwise control the production of a commodity will have virtually the same effect on competition as an agreement or understanding to control the price of the commodity. Therefore, the above discussion regarding price-fixing agreements applies with equal force to agreements to control production.
C. Agreements Among Competitors To Divide Markets. Competitors may not divide territories — that is, they may not agree as to geographic areas in which each will or will not sell. A similar prohibition applies with respect to division of customers; competitors may not agree that each will sell to a particular customer or class of customers and not to another, nor may they agree on which will make a specific sale.
D. Collective Refusals To Deal. Two or more persons may not agree that they will not do business with — i.e., boycott — a third person. Sellers may not agree among themselves not to sell to a particular consumer or reseller, whatever the reason; and, a seller generally may not agree with a consumer or reseller not to sell, or to cease to sell, to another consumer or reseller.
E. Price-Fixing Agreements Between Suppliers and Customers (Vertical Price-Fixing). It is illegal for a company and its customers to agree or to reach an understanding concerning the prices at which those customers may resell the company's products. Such illegal arrangements may be in the form of an actual agreement, a condition of sale, a threat, or coercion. The control over a customer's prices necessary to establish a violation may amount actually to fixing the resale price or merely to setting maximum or minimum resale prices. As with horizontal price-fixing, an "agreement" or "understanding" may be inferred from the circumstances; complaints to a supplier from one of its customers about another's prices may, if not handled properly, support the inference of a vertical price agreement. NOTE: Price-fixing, in whatever form, is the antitrust violation most frequently resulting in criminal prosecutions.
The criminal penalties for violation of the antitrust laws are severe, and the present enforcement trend is to prosecute individual corporate employees as well as the company for alleged violations. A conviction for violation of the Sherman Act is a felony, for which a corporation can be fined up to $10,000,000 for each offense. An individual can be fined up to $350,000 and imprisoned for up to three years for each offense.
In addition to criminal penalties, the antitrust laws provide civil penalties for violations. For example, any person or business injured by a violation of the antitrust laws may recover three times the amount of his damages, plus the costs of litigation. Such treble damage awards frequently run into many millions of dollars; even the successful defense of a civil antitrust lawsuit can represent an enormous drain on the defendant's resources. These penalties provide a very practical incentive for strict antitrust compliance.
IV. GUIDELINES FOR COMPLIANCE
The guidelines for TCC-related activities set forth below are necessarily general. If a particular TCC or committee action or topic of discussion does not clearly fit within one of the enumerated categories of legitimate TCC activity, the action or discussion should be deferred until approval of counsel has been obtained.
A. PERMISSIBLE ACTIVITIES
1. Joint Efforts To Influence Legislative or Administrative Action. Joint efforts to influence public officials do not transgress the antitrust laws, provided the efforts are genuinely aimed at governmental action and are not undertaken for the sole purpose of injuring a competitor or a prospective competitor. Such joint efforts are permissible only where they are designed to influence policy decisions of a governmental body. Based upon this principle, the joint activities of TCC and its committees in attempting to influence industry-related legislation and administrative action generally will not pose a significant antitrust risk.
2. Public Dissemination of Industry Information. Public distribution of facts relating to TCC and the chemical industry in Texas generally is permissible, provided the information is not anticompetitive and serves merely to educate the public regarding the role of the industry, its economic impact upon the State, and safety and environmental considerations relating to the industry. However, prior to the dissemination of any such information from TCC or its committees, the approval of President of TCC should be secured.
3. Joint Research. Cooperative research undertaken under the auspices of a trade association often presents no significant antitrust risk. However, there are situations where such joint research efforts can raise antitrust problems. Therefore, any TCC-related cooperative research activities should be approved in advance by counsel.
B. DANGER AREAS
1. Price and Marketing Information. Since both price-fixing and restriction of production are per se violations of the Sherman Act, any discussions relating to pricing or production levels should be avoided entirely. The same blanket prohibition applies to the distribution or exchange of any other information relating to marketing, including but not limited to terms and conditions of sale, customers, territories, suppliers, costs, and distribution. Exchange of any information regarding these subjects may affect the price of the product involved or otherwise result in some lessening of competition in the relevant product and geographic market. It is important to note that a formal agreement is not a prerequisite to an antitrust violation; if similar action by each competitor follows on the heels of an exchange of questionable information, an unlawful conspiracy may be inferred even absent any formal agreement.
2. Boycotts. Any agreement between two or more companies to refuse to sell to or do business with a particular customer(s) or supplier(s) is an unlawful group boycott. No sanctions of this nature should be discussed in conjunction with any activity of TCC. Furthermore, denial of membership or the benefits of membership to an applicant company meeting the qualifications set forth in the TCC by-laws may be construed as an unlawful groups boycott and should thus be avoided.
3. Unnecessary Concerted Action. A basic premise of both the free enterprise system and the antitrust laws is that competition between individual firms in the same industry is beneficial. Conversely, joint activity by competitors is generally disfavored. With the exception of the legitimate areas of joint activity set forth above, each member company of TCC should remain free to structure its business and make its own business decisions on an individual basis, completely apart from the activities and decisions of its competitors and other TCC members. Any agreement or exchange of information in conjunction with TCC activities that has the effect of limiting a member's freedom to act as it deems best is suspect from an antitrust standpoint and should be avoided until it has been approved in advance by counsel.
C. PROCEDURES TO MINIMIZE ANTITRUST RISKS
1. Submission and Approval of Agendas. Prior to each Committee Meeting, members wishing to introduce topics for discussion or proposals for action should notify the Committee Vice Chair or the Chair regarding the matter to be introduced for discussion at the meeting. Prior to any other TCC meeting, members wishing to introduce topics for discussion or proposals for action should notify the President of TCC or the Board Chair. A formal, written agenda should then be prepared and submitted to the Committee Vice Chair or the Chair in the case of a Committee Meeting, or the President of TCC or the Board Chair in the case of any other TCC meeting. No deviation from the approved agenda should be permitted at any meeting of TCC or any committee thereof, and no member of TCC or any committee, should attend, participate in, or tolerate any informal meetings at which topics not on the approved agenda are presented for discussion.
2. Submission and Approval of Minutes. Discussions had and actions taken at each meeting of TCC or a committee thereof, should be recorded accurately by a person in attendance at the meeting. After the meeting, formal minutes should be promptly prepared and, in the casse of a Committee Meeting, such minutes shall be submitted to the Committee Vice Chair or the Chair, and, in the case of any other TCC meeteing, such minutes shoull be submitted to the President of TCC or the Board Chair. Such minutes will then be reviewed and approved prior to distribution. This procedure will insure that the minutes accurately reflect the nature of discussions had and actions taken at each meeting, and confirm that the discussions and actions reflected the minutes were consistent with the agenda for the meeting.
V. CONCLUSION
Any questions relating to this Guide or to the general antitrust compliance program of TCC should be directed to the President of TCC and/or General Counsel.
