
SMI Antitrust Compliance Guidelines
The federal and state antitrust laws of principal concern to associations such as SMI are designed to promote competition by prohibiting contracts, combinations and conspiracies that unreasonably restrain trade. Although associations such as SMI are generally recognized as serving important and procompetitive purposes, they raise antitrust concerns simply as a consequence of the fact that their activities involve bringing competitors together. The purpose of this Antitrust Compliance Policy is to confirm the commitment of SMI and its members to maintaining compliance with applicable antitrust laws, and to emphasize the types of prohibited activities to be avoided.
Penalties for antitrust violations are potentially severe, including injunctions, fines and criminal prosecution. Further, private lawsuits by parties who can demonstrate harm from unlawful actions may result in an award of treble damages. Importantly, proving an antitrust violation of the types described further below does not require the existence of a documented agreement. Courts can infer the existence of an unlawful agreement from circumstantial evidence. Comments or even nonverbal expressions of assent made in an informal environment at an association meeting can be used as one form of proof of a prohibited agreement. Accordingly, SMI members and staff should remember the importance of avoiding not only unlawful activity of the types described below, but even actions that may give the appearance of such impropriety.
Several specific antitrust concerns deserve particular attention from organizations such as SMI and its members:
Price Fixing. An agreement between competitors (a “horizontal” agreement) to fix, alter or stabilize prices is considered unlawful under the antitrust laws regardless of the reasons why it is undertaken or the effect on competition (i.e., it is per se unlawful). This prohibition is not limited to an agreement on final prices themselves, but extends to pricing strategies and methods and to agreements on terms affecting price such as discounts, rebates, costs (e.g., input costs for labor and equipment), margins, price increases, credit terms, warranties, and other contractual terms and conditions of sale. A price-fixing violation could be inferred if a price-related discussion among an association’s members is followed by parallel pricing conduct by such members, even in the absence of an oral or written agreement.
“Vertical” price fixing between parties at different levels in the supply chain (such as a manufacturer’s agreement with a distributor, as opposed to a competitor, on the minimum price at which a product will be resold) also presents antitrust issues. Such vertical arrangements are not unlawful per se under federal law; rather, they are subject to antitrust scrutiny through the “rule of reason” under which the procompetitive and anticompetitive effects of an action are assessed to determine whether it represents an unreasonable restraint of trade. (In at least two states, vertical price fixing such as resale price maintenance may remain subject to per se analysis under the antitrust laws of that particular state.)
Allocation of Customers or Territories. It is per se unlawful for competitors to agree to refrain from competing for customers (potential or existing) or to divide territories or markets within which each competitor will operate.
Boycotts/Refusals to Deal. “Horizontal” agreements between competitors not to deal with a third party (e.g., an agreement not to buy from a particular supplier or not to sell to a particular customer) are in many cases considered per se unlawful. “Vertical” agreements between parties at different levels of the supply chain that restrict a party’s commercial options (such as exclusive dealing contracts between a manufacturer and a distributor, or “requirements” contracts between a manufacturer and supplier) are common and generally lawful if supported by procompetitive purposes; they are analyzed under the “rule of reason” antitrust standard.
Information Exchanges; Data Collection and Dissemination. Information exchanges and “best practices” programs can serve important procompetitive purposes. Antitrust concerns can arise if the information is susceptible to use for an unlawful purpose, such as price fixing or wage suppression. Accordingly, the solicitation or sharing of competitively sensitive information such as prices, salaries/bonuses, costs, production volumes, and strategic business plans creates antitrust risk and should not be undertaken without the advance involvement and approval of SMI executive leadership and legal counsel to ensure the adoption of appropriate risk-limiting processes and restrictions.
“No-Poach” Agreements; Wage Fixing. An agreement between parties not to hire or attempt to hire each other’s employees (a so-called “no-poach” agreement) is considered by federal regulators to be per se unlawful. Agreements among competitors to fix salaries or other terms of compensation at specific levels or within ranges also are considered per se unlawful based on a nexus to price fixing.
Standardization/Certification Practices.  An association’s development of industry standards can offer important benefits in terms of safety and quality. Adoption of standards can raise antitrust issues if the purpose is to limit competition from parties not involved in the standard-setting process, or to restrict entry into the industry. Similarly, a certification program confirming compliance with a set of standards or ethics may raise concerns if it appears intended to obtain a competitive advantage for those who developed it. Accordingly, such programs should be related to objectively reasonable procompetitive goals, no more extensive than is necessary to achieve those goals, and not applied in a manner that discriminates against non-members.
Membership. To the extent that membership in an association is necessary for a party to compete effectively in the industry, exclusionary membership practices may raise antitrust issues. Criteria for membership should clearly relate to the association’s express purposes, and should not appear to be intended to restrict competition.
In accordance with the principles and rules described above, the following are basic guidelines to be followed by SMI and its members when participating in any SMI activity:
DO NOT:
Discuss prices, price trends, fees, margins, discounts, rebates, costs, warranties, credit terms, or prospective production plans, Discuss wage-related information, including salaries and bonus structures.
Agree to refrain from soliciting or hiring another party’s employees.
Agree with competitors to divide up territories, markets or customers.
Engage in data collection/information exchanges that relate to the proscribed discussion topics above unless the process for such exchange and its subject matter have been specifically reviewed and approved by SMI executive leadership and legal counsel.
Agree with competitors not to deal with certain parties in the supply chain.
Agree to standard setting, certification practices or membership restrictions that have not been reviewed and approved by SMI executive leadership and legal counsel.
DO:
Recognize your responsibility as an SMI member or as SMI staff to comply with the antitrust laws and the terms of this policy.
Leave any meeting (formal or informal) where improper subjects are being discussed, letting the others present know why you are leaving.
Inform SMI’s Executive Director of any conduct at SMI events that you believe raises concerns under the antitrust laws or this policy.
Direct any question you have about this policy to SMI’s Executive Director.
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