Wanda Borges Explains Anti-Trust Issues and Why CMA Industry Credit Groups Exist

Those who attended a past CMA webinar learned some valuable information on how to steer clear of possible violations of anti-trust laws. The session, 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 CMA 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. 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. “CMA runs 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 bankruptcy.

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.”

Ninth Circuit Court of Appeals Finally Hears the Credit Card Surcharging Argument, by Wanda Borges, esq.

By: Wanda Borges, Esq.
Borges & Associates, LLC

Those companies which are still following credit card anti-surcharging litigation know that the case of Italian Colors Restaurant v. Harris (as Attorney General of the State of California) has been sitting still before the 9th Circuit Court of Appeals for more than two years. The United States District Court for the Eastern District of California, on March 23, 2015 ruled against the California statute which prohibits the pass-through of credit card surcharging. The pertinent statute (California Civil Code section 1748.1) says: No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means. A retailer may, however, offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.

The U.S. District Court found the statute to be unconstitutional and permanently enjoined its enforcement. The California Attorney General filed an appeal to the 9th Circuit Court of Appeals and there the case has sat. It is this writer’s impression that the 9th Circuit was waiting to see what would happen with the New York case of Expressions Hair Design which was to be heard by the United States Supreme Court.

On March 29, 2017, the U.S. Supreme Court vacated the decision of the 2nd Circuit Court of Appeals which left the New York statute to be deemed unconstitutional as District Court Judge Rakoff had determined. On August 17, 2017, the 9th Circuit Court of Appeals finally heard oral argument on the Italian Colors v. Becerra (the current Attorney General of California substituted for Harris). What was most interesting was the Attorney General’s statement that California permits dual pricing as long as it is clear and conspicuous. He said that the statute means a merchant cannot post a single price and then add on a surcharge.

A strict reading of the statute would not agree with that statement. The 9th Circuit panel often referred to the Supreme Court decision in the Expressions Hair Design case and seemed to be leaning towards mimicking the Supreme Court in declaring the California statute to be unconstitutional and allowing a surcharge to be added provided it is clearly and conspicuously noticed. It was also interesting to note that both sides consistently argued that the surcharge prohibitions exist to protect consumers. This supports the opinion that the passing through of credit card surcharges is perfectly permissible for business-to-business transactions. It may take several months for a decision to be handed down but at least the 9th Circuit has moved forward on this matter.

WANDA BORGES, ESQ. is the principal member of Borges & Associates, LLC, a law firm based in Syosset,
New York. For more than thirty years, Ms. Borges has concentrated her practice on commercial
litigation and creditors’ rights in bankruptcy matters, representing corporate clients and creditors’
committees throughout the United States in Chapter 11 proceedings, out of court settlements,
commercial transactions and preference litigation. She can be reached at 516-677-8200.

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 www.CreditManagementAssociation.org/events

Legal Issues in Credit

A company’s credit department is often one mired in legal issues and while many of them relate to reducing legal exposure and getting money when a customer goes delinquent, many others are problems that could penalize the debtor due to inadvertent unfair practices. Laws like the Fair Credit Reporting Act (FCRA), multiple antitrust statutes and the Equal Credit Opportunity Act (ECOA) are all geared toward preventing discriminatory, anticompetitive and unsafe privacy practices and credit professionals up and down the corporate ladder need to be
aware of them to prevent legal woes.

In a recent CMA-sponsored webinar entitled “Legal Issues in Credit: An Update,” Wanda Borges, Esq.  of Borges & Associates, LLC led listeners through these potential problems and offered advice on how best to avoid these issues. “It is a way of being fair in the extension of credit,” said Borges of the ECOA, adding that many companies
who think they’re exempt from ECOA requirements are not in many instances. “Those of you with large companies may think to yourself ‘you never have to deal with this because you’re dealing with Fortune 500 companies, etc.’ Well, yes and no. Anytime you make a credit decision that is ‘no,’ you need to stop and think if ECOA applies to you.”

The ECOA deals with discrimination in terms of credit and the issue of when a vendor needs to notify a customer when denying them credit or when reducing their current level of credit, referred to in the law as “adverse actions.” Borges went through what constitutes an adverse action and noted the times when the law’s stipulations do not apply. “The ECOA means an individual,” said Borges. “That’s also your personal guarantor. So perhaps you’re dealing with a large company and ask for a personal guarantee. Then you need to think of the ECOA.”

“Creditor [as defined by the ECOA] is anyone in your company that makes the credit decision. It’s not just the director of credit, it’s not just the CFO; it can be a credit analyst and they need to be sure to know the ECOA and abide by its rules and regulations,” she added.

Borges also discussed how to comply with the ECOA without having to keep a list to check over and over again, and went on to address compliance with the FCRA, the Uniform Commercial Code (UCC) and several antitrust statutes.


Bankruptcy Point/Counterpoint Discussion

Two of CMA’s most popular legal minds went head-to-head during the recent “Bankruptcy Update: Point/Counterpoint” teleconference, where they discussed several BAPCPA protections for trade creditors, along with the most current related case law and the administrative ambiguities that accompany some creditor
defenses. Bruce Nathan, Esq. of Lowenstein Sandler PC acted as the voice of the courts, while Wanda Borges, Esq. of Borges & Associates LLC acted as the voice of the trade creditor.

Several topics were discussed throughout the program, most notably the 503(b)(9) 20-day administrative claim and the increasing use of executory contracts among trade creditors. Speaking about the 20-day administrative claim,
Nathan noted, “This is one of the biggest amendments of the BAPCPA,” adding, “This has become a safety net for suppliers.” He then discussed how trade creditors have to go about getting the actual claim. “This 20-day priority is
not automatic,” he said. “The Bankruptcy Code requires that this priority be granted after a notice and a hearing.”

Problems arise with the 20-day administrative claim in terms of when the claim is actually supposed to be paid. “There’s nothing in the statute that talks about when this claim is paid,” said Nathan, noting that payment times
differ from district to district. “It’s the court that makes the decision.”

Borges responded with her opinion of when the claim should technically be paid. “The Code is silent, but I think it should be paid now and should be paid in full,” she said, offering advice to trade creditors when filing this claim.
“You’ve got to move, you’ve got to move fast, and you’ve got to move furious.”

Later, Borges discussed her own personal experiences with executory contracts and their idiosyncrasies. “In the last six months, I have seen more issues with executory contracts with my clients and with trade creditors,” she said. “It’s effectively a contract where something has to be done on both sides. In order to have a Chapter 11 debtor agree to stay in the executory contract, the debtor has to pay, in full, all arrearages or provide adequate insurance that you’re going to get paid.” After hearing that, trade creditors might find the prospect of an executory contract quite alluring, but Borges and Nathan discussed the other issues and prerequisites that complicate the issue.

Other topics discussed included preferences, changes in the ordinary course of business defense and issues associated with the contemporaneous exchange for new value defense.

Credit Applications and Related Legal Issues

After a number of years in the industry, it might be easy for a credit professional to overlook the credit application as something that’s more a part of the landscape than anything else. However, if an account goes bad, a haphazard credit application could make the collection process a lot more difficult. “Credit executives seem to have an attitude of ‘I’ve been around for a long time, I know everything there is to know about credit applications,’”
said Wanda Borges, Esq. of Borges & Associates, LLP in a recent CMA webinar.

Borges noted that while this may be the case, she’s noticed seasoned credit professionals in other presentations obviously being reminded, enlightened and refreshed about some easily overlooked and commonly forgotten credit application strategies. “I hope today for all of you on the line I will either refresh you as to some things you forgot about or teach you some things you never thought about with credit applications,” she added.

Borges delivered on this wish in her teleconference, entitled “Credit Applications and Related Legal Issues,” by offering attendees a quick and effective guide to all the ways a company should protect itself from customer
default and legal exposure using its credit application.

One of the first considerations to make when constructing a credit application is what information needs to be collected. “My primary rule of credit is ‘know thy customer,’” said Borges, who offered a thorough list of what
details should be collected up front to put the creditor in a more advantageous position. Specifically, Borges discussed the importance of getting corporation details, ownership details and to include stipulations about references.

Ownership details, Borges noted, can be of great use should a collection effort be necessary. “You want that information so you can go find them,” she said, adding that every application should require home addresses and ownership interest information for each owner of the business entity. For references, Borges suggested that credit grantors require at least three trade references and also stipulate that they can get references from the customer’s bank. “The trade credit reference is actually going to be the best of their trade credit references,” she said. “You are not limited to the references they give you.”

Borges’ presentation also offered participants text to include in a credit application to protect a creditor from exposure to laws like the Fair Credit Reporting Act, the Equal Credit Opportunity Act and the Fair and Accurate Credit Transactions Act’s disposal rule. She also offered tips on how to clearly organize the application to make sure the customer understands it and can’t reasonably plead ignorance in a court case.

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 www.CreditManagementAssociation.com/events

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.”