Trade Associations with Power and Their Danger to Competition
The trade association necessitates a delicate balancing act between anticompetitive conduct condemned by the antitrust laws and pro-competitive information-sharing and best practices that ultimately help consumers.
Trade associations should have antitrust policies and should consistently consult with an antitrust attorney. Antitrust law reserves its greatest scorn to the horizontal agreements—the deals between and among competitors. And a trade association is, by definition, an entity created to bring these competitors together.
Competition Policy International (CPI) published an Antitrust Chronicle this week about trade associations and industry information sharing and I was fortunate that they invited me to publish an article in this issue. My article is called “’But the Bridge Will Fall’ is Not a Valid Defense to an Antitrust Lawsuit.” I discuss one of my favorite Supreme Court cases of all time: National Society of Professional Engineers v. United States.
There are a couple of ways that trade associations—and, really, any group of industry competitors—harm competition and risk antitrust liability. The first and most obvious concern is that the competitors will conspire against their customers or suppliers (don’t forget that buying conspiracies may be illegal too).
For example, a group of competitors may reach agreements on price, output, geographic or product and service markets, contractual terms, etc. These are per se antitrust violations, condemned with little analysis other than whether there was, indeed, an agreement.
The other conspiratorial harm that trade associations or groups of industry competitors can inflict is on competitors from another industry or profession. In my view, this harm is underrated and under-considered. I discussed this concern in a law review article a couple years ago.
Here is what happens: A group of professionals will spend a lot of time with other professionals of the same type. Dentists, for example, probably have a lot of dentist friends. They see each other at trade association meetings, may have been classmates, know what each other is going through, and have a similar belief system—that dentistry does great things. Nothing wrong with that, in the abstract.
But there is another group, let’s call them teeth-whitening technicians. They don’t have the history that dentists do, and may be a relatively new group that isn’t organized quite as well. And their trade association—this is hypothetical, that is, I am making it up—exists, but nobody really knows about it. So they don’t have much power.
It turns out that dentists whiten teeth for their customers. They typically do a good job and charge a lot—dental school was expensive. And dentists have similar cost structures with each other relative to other professionals or businesses and there are great barriers to entry for dentistry, so the teeth-whitening price is both stable and high.
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