Antitrust Issues Explained In NACM Teleconference

Those who attended an NACM teleconference September 20th
learned some valuable information on how to steer clear of possible violations
of anti-trust laws. The teleconference entitled, "Navigating the Antitrust
Rules: Myths To Dispel And Realities To Understand," was presented by Wanda
Borges, Esq., of Borges and Associates, LLC, who is an advisor to NACM on a
range of legal issues relevant to business credit.

Borges discussed the three main federal statutes that pertain
to antitrust and restraint of trade practices. They are the Sherman Antitrust
Act of 1890, the Clayton Act of 1914, and the Robinson-Patman Act of 1936. She
said the Sherman Antitrust Act prohibits contracts, combinations and
conspiracies in restraint of trade in interstate commerce or with foreign
nations. The act makes it a felony to conspire to restrain trade; or to
monopolize (or attempt to monopolize). The Clayton Act was passed, she noted, to
correct defects in the Sherman statute and further makes it unlawful to enter
into any of several specified types of prohibited transactions whose purpose or
effect would be to restrain trade or injure a competitor. Robinson-Patman was
partially an amendment to The Clayton Act, making it unlawful to "discriminate
in price between different purchasers of commodities of like grade and quality"
or knowingly to induce or receive a prohibited discrimination in price. She
added that violations of this act could result in civil or criminal penalties.

Credit terms are tantamount to price, Borges noted, according
to a 1980 Supreme Court decision. "Anytime you fix or adjust credit terms you
are fixing a price," Borges said. She pointed out that allowing a customer to
pay in 30 days gives that customer the use of that money for that period and is
of monetary value. "There is a big difference between C.O.D. and credit terms."

In determining if an action constituted a conspiracy to commit
an action that resulted in a restraint of trade, Borges pointed to four elements
that must exist. There must be knowledge of all the parities, a common purpose,
an actual restraint of trade and intent to restrain trade. She presented an
actual example—where a movie distributor, in a written communication to 7 movie
theaters, required a $2 increase in movie ticket prices in order to continue
getting first-run movies. She noted that six of the theaters complied by raising
their prices while the seventh resisted and sued the other theaters and
distributor for restraint of trade. The argument presented to the court by that
theater was that the economic status of the neighborhood in which the
plaintiff’s theater was located could not sustain a ticket price increase.
Therefore, the ticket price increase would render the theater incapable of
presenting first-run movies. The court ruled that the arrangement was a
restraint in trade by the defendants. "You have to watch very carefully you
don’t get roped into a conspiracy…," Borges advised.

"You always have to keep in mind what price fixing is all
about," she said. "You have to charge the same prices to same quality
customers." She noted that different terms could be set for customers of
differing qualities, however: "If one customer has a superior credit history you
can give them a discount."

The exchange of credit information is perfectly legal, she
added. "You may exchange information—and today you are exchanging more
information electronically. I heartedly recommend that when you exchange
information you do not do so on the telephone, because that information can be
misinterpreted." Another way that credit information can be shared is through
credit (industry) group meetings, many of which are managed by NACM Affiliates.
However, she noted that these meetings must be run under strict guidelines that
prevent the exchanging of information or comments that could be a violation of
antitrust laws. "NACM Affiliates run credit group meetings exactly by the book,"
she noted.

One of the critical things participants must observe during
such a meeting is that any remarks relating to a customer be confined only to
completed transactions. Any comments relating to intended future actions are not
allowed under antitrust laws, she noted, such as saying, "I will never sell to
that customer again."

"You can’t say that," Borges said. All you can say is
"I’ve cut them off’. I’ve placed them on a credit hold.’"

Credit group meetings should have a written agenda that is
followed, she said, and noted that the agenda and the minutes of the meeting
should be kept on file. She also cautioned against holding any meetings outside
the scheduled credit group meetings: it would even be illegal to discuss future
price or credit terms with other competitors regarding a customer in Chapter 11

A new rule in federal court requires complete disclosure
of all electronic data pertaining to cases. Borges noted that even if an e-mail
or other electronic document has been deleted on a computer it may still be
retrieved. "What we think is gone, a forensic computer examiner can find," she
advised. "Be extremely careful what you transmit electronically."
NACM and Wanda Borges, Esq.

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