Antitrust Alert: U.S. FTC Challenges Professional Associations' Codes of Ethics and Bylaws
The U.S. Federal Trade Commission ("FTC") has settled two, unrelated cases alleging that the ethical codes of professional associations violated the antitrust laws. These settlements are a reminder that the antitrust agencies and private plaintiffs are active in reviewing the activities of professional associations and will challenge agreements among members that may restrict competition among the members to recruit or provide services to customers. The trade associations involved are the Professional Lighting and Sign Management Companies of America, Inc. ("PLASMA") and the Professional Skaters Association ("PSA").
PLASMA is a non-profit professional association of licensed electricians with approximately 25 member firms located across the country. PLASMA member firms specialize in commercial lighting and electrical installation and maintenance. The FTC alleged that PLASMA's Member Bylaws violated antitrust laws by (1) prohibiting members from servicing customers in the designated territory of another member unless that member first declined the work, (2) implementing a price schedule for work done by one member in another member's designated territory, and (3) prohibiting terminated members from soliciting customers of current members for one year after termination.
PSA is a non-profit professional association for ice skating coaches, as well as patrons, judges, skaters, families, and fans, with approximately 6400 members worldwide. PSA member coaches train skaters at all levels of the sport. The FTC alleged that PSA's Code of Ethics violated antitrust laws because it prohibited member coaches from soliciting other member coaches' students, including through the use of social media; offering free lessons or equipment; or comparing themselves to other member coaches.
In both cases, the FTC alleged that the associations' rules at issue discouraged its members from competing in serving their customers.
The proposed settlements require PLASMA and PSA to eliminate the offending provisions from their respective rules and notify members of the FTC settlement. In addition, the proposed settlement with PSA requires that it provide in-person annual antitrust compliance training for five years at its annual conferences and governing board meetings. Likewise, the proposed settlement with PLASMA requires it to provide annual antitrust compliance training for three years to its leaders and employees. The FTC will decide whether to make final the proposed settlements following a 30-day public comment period.
These cases are the latest examples of the FTC's recent focus on professional association bylaws and ethics codes. Within the last year the FTC has entered similar settlements with the National Association of Residential Property Managers, Inc., the National Association of Teachers of Singing, Inc., the Music Teachers National Association, Inc., and the California Association of Legal Support Professionals. (Read the previous Jones Day Antitrust Alert covering the Music Teachers and California Legal Support Professionals investigations.)
In light of the FTC's heightened activity involving professional associations, in-house counsel should review their company's professional and industry association memberships and assess their organizations' compliance. The following types of provision should raise red flags if included in a professional association's code or bylaws:
Provisions forbidding "poaching" or solicitation of other members' employees or customers.
Provisions regulating or restricting association members' prices.
Provisions limiting the geographical and / or service areas in which association members may conduct business.
Even if association members never follow (or perhaps are not even aware of) rules that restrict recruiting or pay or allocate territories, companies might find themselves involved in an antitrust investigation or litigation about these practices.
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