How Antitrust Laws Affect Your Credit Functions, by Michael C. Dennis

Penalties for violations of applicable federal or state antitrust laws can include fines, imprisonment, and liability for up to triple damages. How do antitrust laws affect day-to-day credit decision making and business activities? To what extent is pricing and payment terms subject to U.S. antitrust laws? Is it a violation of one or more antitrust laws to offer Customer A payment terms of Net 30 days and a direct competitor of Company A payment terms of Net 60 day? Are cash discounts an element of price? In other words, if we offer a 2% early payment discount to Company A, must we offer that same discount to its competitors?

It’s time to do a self quiz. I think the answer to one or more of these questions may surprise you. Did they? As always, I welcome your feedback.

Michael C. Dennis is the author of the Encyclopedia of Credit, a free, fast, internet resource for credit and collection professionals. He is a frequent instructor at CMA-sponsored educational events. His most recent book, “Happy Customers, Faster Cash,” is available at He can be contacted at 408-204-0129.

Antitrust Issues in Troubling Economic Times

Despite the relatively old body of law governing competition, antitrust issues still beguile credit grantors regularly and violations of those laws can be easily made and painfully costly, especially in a recession. “This topic becomes more and more important everyday especially in today’s economy,” said Wanda Borges, Esq. of Borges & Associates LLC. In a recent CMA-sponsored teleconference, Borges offered listeners all they needed to know about what they can and cannot do, what can and cannot be discussed, when and how credit terms may be adjusted and what is covered under the various antitrust statutes.

In an economic downturn, many credit-granting companies will turn to their competitors for information on a particular customer’s past payment behavior. “Your natural fear is, ‘well, I need credit information, I want credit information, I want to reach out, how can I do that safely?'” said Borges, noting that, despite the sometimes vague regulations, “You can do that many ways, completely safely.”


First and foremost, Borges recommended that credit professionals looking to others in their industry for information learn to make a record of their communications, in order to maintain their innocence should things get legally troublesome. “Put everything in some form of writing, either email or faxes,” she said. “I would recommend no longer picking up the phone and asking your fellow competitor ‘hey what are you doing with this customer? Are you selling to them?’ The next statement will be ‘what are you going to do when they get caught up?'” she added, noting that this type of forward-looking statement is exactly the sort of thing that could get credit professionals and their companies in trouble.


“Having that kind of conversation can lead you right to a Sherman Act violation,” said Borges.


Still, she urged attendees to put their trust in the exchange of credit information for the sake of their business. “The exchange of valid, good credit information is not only permissible, but is more and more on a daily basis essential to you,” said Borges. “It has become commonplace for me to hear stories, but I just heartily suggest having those conversations in writing and not having them on the phone.”


Borges used three true scenarios to educate listeners about what was permissible and what was not and also discussed the various antitrust statutes and what actions constitute illegal business practices. For more information on CMA’s education program, visit

Advice from CMA’s Legal Workshop on Credit Agreements

On January 24th and 25th, attorneys Bruce Nathan, Esq., Lowenstein Sandler PC,
and Wanda Borges, Esq., Borges & Associates LLC, hosted the first of three
sessions in CMA’s 2008 Legal Workshop series. The two attorneys are familiar
faces in the association’s educational programs, and teamed up to speak in-depth
about credit applications and guaranties and the information that should and
should not be included in them.

The two-day session provided a wealth of information and advice on topics
ranging from references, stoppage of delivery, reclamation, compliance with
federal law and the “Battle of the Forms” to navigating antitrust violations,
and oft overlooked protections.

First and foremost, both agreed that every credit application should include
language, in bold, that verifies that the grantor adheres to the provisions of
the Equal Credit Opportunity Act (ECOA) and that there must be some reference to
the grantor’s standard terms and conditions, either by including them in the
credit application or noting that they are posted on the creditor’s website.

“Your terms and conditions have to be prevalent,” said Borges. “If the first
time your customer sees them is on the back of an invoice, you’ve got a problem.
More and more companies are putting the data on their website. If you’re going
to put your terms and conditions on your website, you have to make them readily

Under Article II of the Uniform Commercial Code (UCC), the failings of which
took centerstage, if the first time a customer sees terms and conditions is on
an invoice, it won’t always serve as confirmation or agreement to those

“The thing I love about Article II is that everybody is right,” said Nathan.
“There are court cases that say the invoice serves as confirmation of terms and
conditions, there are others that disagree. Do something such as posting them on
a website to lock in the terms and conditions.”

In terms and conditions, grantors want to make sure that the laws of the state where they are headquartered are recognized to rule in any legal proceedings. The two also suggested that interest rate charges and the
reimbursement of at least a portion, such as 25%, or all legal fees are included in the terms and conditions or on the credit application as well. Credit executives need to be wary though that if they do include interest charges on
invoices they must make their best effort to collect on them. If they are only collecting the charges from certain customers and not all, they may find themselves facing antitrust violations of the Robinson-Patman Act.

Common practices, such as asking for the social security numbers and home
addresses of board members, officers and other executives may not always end in
results, as most credit executives will know. The new privacy laws provide
individuals protection against having to submit these on a credit application,
and denying credit because an application is without these pieces of information
may lead to violations. Though the majority of attendees of the workshop
included sections on their applications asking for the social security numbers,
they all agreed that it was irregular for those to be given.

Other basic measures Nathan and Borges discussed were the importance of
verifying a company’s legal name before granting credit, as well as verifying
that the individual signing the application or a personal guaranty has the
authority to do so. They suggested checking the Secretary of State records and
website, and touted a subscription with court document websites such as PACER as
a must.


For more information on CMA’s education program, visit

Antitrust Issues for the Credit Professional

While the laws governing antitrust practices have been around decades, issues as to what constitutes a violation of these statutes still come up on a regular basis for business credit professionals. The Robinson Patman Act of 1936, The Clayton Act of 1914 and even the Sherman Antitrust Act of 1890 still beguile creditors today about what constitutes a violation of these laws and what the laws allow.

“I keep getting calls from creditors asking when must they adhere strictly to Robinson Patman [or] when can they change their terms,” said Wanda Borges, Esq. of Borges & Associates, LLC. Robinson Patman makes it illegal for any person engaging in commerce to “discriminate in price between different purchasers of commodities of like grade and quality” and was designed to prevent discriminatory practices that adversely affect competition. In essence, this means that credit terms are required to be a condition of price and charging different customers different prices is legally questionable.

However, credit professionals do this all the time and it’s become common business practice to offer better terms to some customers and other terms to the less worthy ones. Antitrust law also governs the exchange of information, particularly at industry meetings and trade groups. Borges noted that, for the most part, credit professionals at trade groups have become pretty stable in regard to what can and cannot be said. “However,” she said, “the issue still comes up as to who may be a member of a credit group.”

Borges noted that, for credit professionals, these antitrust issues could have “a real impact on their companies.”