Antitrust Alert: New FTC Settlements of Professional Associations’ Restrictions on Fees and Solicitation Highlight Need for Continuing Oversight of Association Participation
On December 16, 2013, the Federal Trade Commission (FTC) settled two unrelated cases alleging that the ethical codes of professional associations – the Music Teachers National Association, Inc. (MTNA) and the California Association of Legal Support Professionals (CALSPro) – violated the antitrust laws. The settlements in these cases are a reminder that the antitrust agencies and private plaintiffs are active in reviewing the activities of professional associations and will challenge activities that result in agreements among members that restrict competition, recruiting, or pay.
Background
MTNA is a non-profit professional association of music teachers with over 20,000 members and over 500 state and local affiliate organizations. Many of MTNA’s members provide music-teaching services for a fee or are employed at schools or private music studios. MTNA’s Code of Ethics encouraged its members “not to actively recruit students from another studio” and to “respect the integrity of other teachers’ studios.” According to the FTC, MTNA also established a process for resolving disputes under its Code of Ethics that included private dispute resolution and sanctions for violations. The FTC also found that a number of MTNA affiliate organizations had adopted restrictions on advertising, charging less than the community average, or offering scholarships or free lessons.
CALSPro is a non-profit professional association of over 350 companies and individuals that provide support services in the legal field, including serving process, copying documents, filing court documents, preparing subpoenas, searching court records, conducting investigations, and other services. According to the FTC, CALSPro Code of Ethics prohibited members from (1) offering discounts from normal rates when soliciting business from a member firm’s client, (2) speaking disparagingly of another member, (3) discussing the bad points of a competitor, or (4) contacting employees of another member firm to offer employment, without first advising the firm. The FTC also alleged that CALSPro established a Dispute Resolution Committee to uphold its Code of Ethics, encouraged members to resolve ethical disputes privately, and established a mechanism for sanctioning members for ethical breaches.
In both cases, the FTC alleged that the codes of ethics reduced competition for the services that the members provide, and in the case of CALSPro, harmed competition to recruit employees.
The proposed settlements require MTNA and CALSPro each to change its codes of ethics to eliminate the challenged provisions at issue and to notify members or affiliate organizations of this action. The proposed settlements also require that MTNA and CALSPro provide in-person antitrust compliance training for five years. In addition, MTNA’s settlement prohibits it from affiliating with any organization that restricts student or job solicitations, advertising, or price competition, and requires potential affiliates to certify its compliance. The proposed settlements require final FTC approval following a 30-day public comment period.
Implications
Allegedly unlawful agreements related to recruitment, employment, and pay have received much attention from the antitrust authorities and private plaintiffs in recent years. Examples include the DOJ’s investigation and subsequent class action litigation into alleged "no poaching" agreements among high tech companies, class action litigation regarding nurse pay in Albany, Chicago, Detroit, Memphis, and San Antonio, the DOJ’s investigation and class action ligation concerning agency nurse pay in Arizona, the DOJ settlement on nurse pay allegations in Utah, and pending class action litigation challenging modeling agency commissions.
The two FTC settlements reached this week highlight the need for continuing oversight of trade/professional association activities. Companies must ensure that the professional associations in which they participate are sensitive to antitrust issues. Some industry organizations have implemented codes of ethics that may contain restrictions on competition. Even if association members never follow (or perhaps are not even aware of) professional association guidelines that restrict recruiting or pay, employers might find themselves involved in an antitrust investigation or litigation about these practices.
The start of the new year is a good time for in-house counsel to review their company’s professional and industry association memberships and should assess each organization’s antitrust compliance.
The FTC’s press release can be found here.
