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New FTC Settlement with Music Industry Trade Association Provides Important Guidance For Associations That Conduct Industry-Wide Meetings

Mar.04.2009

On March 4, 2009, the Federal Trade Commission issued a consent order to settle charges that the National Association of Music Merchants (NAMM) violated Section 5 of the FTC Act by facilitating manufacturers' discussions of minimum advertised pricing (MAP) policies and related strategies. The FTC focused almost entirely on the association's role in "selecting moderators and setting the agenda" for association meetings that addressed the topic of minimum resale price maintenance in the musical instrument industry. The FTC's focus on the role of the association, and the remedies sought by the FTC, provide important new guidance for associations and requirements for association antitrust compliance programs. Associations that hold industry-wide meetings should review their antitrust compliance policies and update them in light of this order.

NAMM, a 9,000-member trade association for music manufacturers, distributors and dealers, was accused by the FTC of organizing meetings and other programs at which members were "permitted and encouraged to discuss strategies for implementing [MAP] polices, the restriction of retail price competition, and the need for higher prices." According to the FTC's complaint, between 2005 and 2007, NAMM sponsored events at which competitors discussed the adoption, implementation and enforcement of MAP policies as well as retail prices and margins and other competitively sensitive issues. Even though the FTC complaint did not allege that NAMM itself was involved in any anti-competitive agreements among its members, the FTC's primary focus was on the conduct of NAMM representatives at association meetings, who "helped set the agenda and steer the discussions." This focus has major implications for how an association should set its antitrust compliance program.

The consent order bears this out. In the order (which does not constitute an admission of wrongdoing by NAMM), the FTC requires the trade association to implement an antitrust compliance program that includes the following elements:

  1. Appoint Antitrust Counsel and an Antitrust Compliance Officer (they are the same person for the first three years);
  2. Conduct in-person annual antitrust training for the association's Board;
  3. Conduct annual antitrust training for the association's employees and staff;
  4. Antitrust Counsel must review and approve all final agendas and materials prior to distribution at association meetings;
  5. Antitrust Counsel must review and approve all written materials and prepared remarks relating to pricing or MAP policies;
  6. Antitrust Counsel must be present at all association events and meetings;
  7. Antitrust Counsel must participate in all events in which the Board or Executive Committee of the association participate; and
  8. An antitrust compliance statement must be read at the beginning of every association meeting.

The consent order expires in 20 years.

The NAMM consent order thus serves as an important roadmap of what the FTC expects from a trade association regarding antitrust compliance. While the FTC values trade associations' "numerous valuable and pro-competitive functions," the Commission clearly will focus on the association and its role as the provider of the forum and selector of moderators and speakers, as opposed solely to the actions of the individual members. Trade associations that hold industry-wide meetings on topics involving competitive issues (such as retail prices) should examine and, if necessary, update their antitrust compliance programs in light of this consent order.

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