What if you only had 1 hour to teach your employees about antitrust laws?
I usually reserve at least 25% of the time for questions and conversation, so now you're down to 45 minutes.
Given the complexity of antitrust laws, it's not immediately apparent which topics corporate counsel should include in their legal training presentation. Realistically, it might take 4-5 hours to give employees a presentation covering every inch of US antitrust laws. Unfortunately, antitrust training often doesn't get the full attention from companies that other compliance topics receive - e.g., employment law and anti-corruption.
Okay, you have 45 minutes. How do you decide what to present? Aren't all the topics equally important?
In order to answer these questions, corporate counsel need to get back to basics. What do employees need to know? And when do they just need to spot a red flag and report back?
Think about it, do employees really need to know the nitty gritty details? Will they remember the definition of "rule of reason" the minute they walk out of the training room? (no, they absolutely will not)
Corporate counsel need to focus on teaching employees to (1) spot red flags and (2) respond appropriately in risky situations.
By focusing on these 2 principles, you will give employees the confidence to identify antitrust risks, avoid problematic behavior and refer any issues to the legal department for a more detailed analysis.
One other question: which employees should get training on antitrust laws?
Let's start with the policy (and you should have an antitrust policy). Whenever the company has a complex policy in place, all employees should receive at least enough training to understand its general prohibitions. So in short, all your employees should receive some training to understand your antitrust policy. Even the new hire in customer service.
But there are 2 functional groups (in addition to executive officers) who need to receive most of your focus for this training: salespeople (and the department who controls pricing & promotions) and supply chain employees. These are the 2 highest risk groups for potential antitrust issues, and are the main focus of this article. I don't expect you to train a mixed group of engineers, operations managers and customer service reps for 45 minutes.
Attempting to create legal training following these guidelines, I vetted a large number of resources to create the following Ultimate Guide. No doubt, there are areas of antitrust that affect companies differently, and corporate counsel will need to adapt the guide accordingly.
Please note: where a specific antitrust topic (such as minimum advertised price policies) only impacts one department, you may need to schedule follow-up training with a smaller group. I will note where this is most likely to occur throughout the guide.
Also please note: I'm not going to go deep into each antitrust concept. This is an antitrust Training Guide - I'm going to give you the training structure, timing and the most important points you need for effective training. That said, I am going to link to resources to help you with the content. Also, given the complexity of price discrimination (Robinson-Patman, Clayton Act), the low prosecution rate and the very few employees who are involved with its compliance (I assume you don't have a lot of employees determining pricing and promotion schedules), it is not built into the 45 minute time limit. That said, I have included a training summary at the end for your use.
Without further ado, here are the most important topics to focus on during antitrust training, presented in order.
1. Antitrust laws apply to everyone
Antitrust sounds like such a huge concept, your employees likely think it doesn't apply to them. The public usually only hears about antitrust these days in the context of monopoly - e.g., the EU suing Google or United States. v. Microsoft. Only the savviest employees will understand that antitrust applies to product pricing, negotiations with suppliers and customers and conversations with Joe the salesperson who works at your competitor.
Now, your employees aren't dumb. Clearly they've been "chosen" to listen to your presentation because the laws apply to them. That said, it's important corporate counsel make it 100% clear that antitrust laws apply to your company.
PRACTICE NOTE: You can make this as easy as telling employees about the applicability at the outset, or you can ease into it with hypotheticals showing that it applies. With more time, I usually prefer the latter, but since this is the 45 minute version, stick to the former.
Suggested time: 5 minutes - 1 slide
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2. Antitrust laws were created to protect small businesses and consumers
Because of this (no pun intended), it's important for corporate counsel to tell employees why antitrust laws exist. Without getting into an economics lecture, it's as simple as showing employees how antitrust laws can protect small businesses and consumers from the actions of large companies.
Additionally, I've found that when employees understand why the laws exist, they're more likely to understand what conduct is appropriate under the circumstances.
For example, Jill Salesperson may not remember the nuances of Robinson-Patman, but she may remember that it exists to protect small mom & pop shops against the Wal-Marts of the world. Now when Jill designs her pricing programs, she understands that if her pricing negatively impacts mom & pop, she needs to talk to her legal department.
Suggested time: 5 minutes - 1 slide
3. What are the big risks employees need to know?
Here's where the rubber really meets the road. Can you design your legal training so employees know how to identify the "red flags" and react appropriately during those risky situations that can come up in a second - e.g., competitor's salesperson walks up to your salesperson at a trade show.
Here are the big risks that all employees should know:
A. Dealing with competitors (horizontal conduct)
I like to keep things simple by dividing each section into 2 subsections: (1) the completely illegal actions employees should never take and (2) the not completely illegal but really risky issues employees need to discuss with the legal department. Each section will highlight best practices for making the training "stick".
From a top down level, employees should understand that it is almost always risky to discuss any part of the company's business with competitors. This means that employees need to be on alert when topics like mutual customers, suppliers, or pricing (among many others) comes up at a trade show, customer meeting or a talk with friends.
i. Illegal horizontal conduct - Need to know
While corporate counsel should never confuse fact with opinion and lose their employees' trust, there are times when you need to stress that certain conduct is absolutely prohibited. The US government treats certain conduct as per se illegal under antitrust laws. This includes (1) price fixing, (2) bid rigging, and (3) collaborating with your competitors to (a) limit output, (b) divide territories or (c) allocate customers.
Note: cartels are also per se illegal, but it's likely your employees will never encounter the issue. Move on unless you work in a special industry.
In order to get this training done in 45 minutes, corporate counsel should advise blanket prohibitions on speaking with your competitor's employees about company pricing, margins, delivery terms, suppliers, discounts, advertisements, fees, customer acquisition, bidding and other confidential business strategies.
This tactic will allow you to focus on the content that requires a bit more nuance. That said, it's key to emphasize how easy it is for employees to fall into these sorts of discussions at trade shows and outside of work. What if you have a friend or good acquaintance who just started working at your competitor? Can you not speak with that person any longer? (no)
For these cases, it's important to provide employees with (1) hypotheticals and (2) quick reference resources. The training hypotheticals give employees a good feel for what types of situations may give rise to prohibited discussions. If you want a big list of antitrust training hypotheticals, get it free by signing up for our Tuesday Training Tips.
The quick reference resources (such as a wallet card or electronic resource) will allow employees to refresh their recollection before they go into an event where discussion with competitors is likely.
Suggested time: 15 minutes - 1-2 slides on rules, 1 slide on hypotheticals
ii. Risky horizontal conduct - need to spot red flags
Moving away from the absolutely prohibited conduct, you should briefly touch base with employees on conduct the government will analyze under the "rule of reason".
Be careful not to get too bogged down in this section. It's likely that you've already scared your employees into contacting the legal department if there are any conversations with competitors, and most employees won't have any involvement with deals that will be evaluated under the rule of reason.
But if you're training executive level employees, you'll want to be sure to address the following issues concerning doing business with competitors: (1) research and development agreements; (2) joint ventures; (3) licensing agreements; and (4) creating industry groups or setting standards.
In order to get this training done in 45 minutes, corporate counsel should consider their audience. Again, you will likely not need to go into detail on these topics with lower level employees. It's extremely unlikely they will ever be making decisions on R&D or joint ventures with competitors.
Not only that, since each of these decisions will likely require substantial legal analysis by outside counsel, employees really only need to know how to issue spot.
Once the idea of joining an industry group with a competitor or licensing a competitor's patent/trademark/etc. has been discussed, employees simply need to know to alert corporate counsel immediately.
Suggested time (if at all): 5 minutes - 1 slide on rules
B. Dealing with supply chain & distribution (vertical conduct)
From a top down level, employees should understand that antitrust laws play a key role in regulating conduct between your company and its suppliers and distributors. Most of the key concepts in this area revolve around pricing, which will give you the opportunity to limit or expand these sections depending on your audience.
If your audience is a group of salespeople who have substantial control over promotions, advertising and pricing (or a group of supply chain employees making decisions about pricing and choosing suppliers), then these sections must be expanded. If your audience is a mixed group of employees, it can be pared down, but keep in mind that a lot of your support team will be involved in conversations with suppliers and customers. Don't forget about training those "less risky" groups of employees - antitrust laws apply equally to everyone.
I. ILLEGAL vertical conduct - need to know
Unlike horizontal conduct, there aren't a lot of absolutes involving vertical conduct (though the area is still a minefield).
In the past, resale price maintenance (RPM) agreements, used to fall into this category. Now, in a post-Leegin Creative Leather Products, Inc. v. PSKS, Inc. (Kay’s Closet) world, RPM agreements (including minimum and maximum resale price restraints) are now evaluated under the rule of reason, which again, means your employees need to know how to issue spot. However, it's still important to emphasize that RPM agreements could still be interpreted as per se illegal under some state laws (California, North Carolina, etc.)
In order to get this training in 45 minutes, corporate counsel should simply comment to employees to keep their eyes out for any distributor and supplier pricing conflicts where unfair pricing with other distributors/suppliers is alleged. This should be an immediate red flag for the employee to get corporate counsel involved.
Suggested time: 5 minutes - 1 slide on rules
II. RISKY vertical conduct - NEED TO SPOT RED FLAGS
Vertical restraints of trade involve a host of risky issues that employees need to know. These restraints are generally divided into 2 groups: price and non-price restraints with distributors and suppliers.
Vertical Price Restraints
Vertical price restraints generally refer to RPM agreements where your company sets minimum prices for distributors to resell its products. However, it can also refer to minimum advertised price (MAP) policies, which are not agreements about resale price, but restrictions on advertised price. Since RPM agreements and MAP policies deal exclusively with your company's sales and pricing team, you don't need to address this issue with supply chain groups.
Vertical price restraint training is extremely specific to your company's pricing policies, but there are some best practices which apply to all policies. For example, if your company maintains a MAP policy, you must train your employees (1) to treat all policy enforcement decisions equally; (2) to never talk to distributors about policy enforcement against other distributors; and (3) to always be fair.
To do this, you need to train employees to recognize the "sensitive situations" where these issues could arise, such as: (1) distributors who want to argue about the policy; (2) distributors who want to talk about other distributors' compliance with the policy; (3) distributors who have thoughts about enforcement penalties; (4) distributors who want to talk to multiple individuals at the company about the policy (the "I want to talk to your boss" approach); and (5) distributors who want to talk about your promotional schedule.
Once these situations arise, employees should consult the legal department as soon as possible to discuss how to proceed.
You can also help employees by creating standard forms and scripts they can use post-training when dealing with these sensitive issues.
Vertical Non-Price Restraints
Vertical restraints can also involve territory, dividing customer bases among your distribution, tying purchase of one product on the purchase of another and refusal to deal with suppliers and customers.
While this may seem like a lot of information (which is difficult to fit into 45 minutes) here's how you condense it:
Territory/Customer Base - No distributor may be given exclusive rights without first consulting the legal department.
Tying - Whenever a promotion involves a condition of sale of multiple products (or packaged products) that are already sold separately, first consult the legal department. Note: packaged products which are not sold separately should be vetted separately.
Refusal to Deal - Never tell a supplier or customer to stop selling, licensing or interacting with a third party without first consulting the legal department.
Suggested time: 10 minutes - 2 slides on rules
C. (OPTIONAL) Price Discrimination
Price discrimination laws are technically vertical restraints, but since most of your employees don't have any involvement with promotions or pricing, you won't need to include them in most training presentations. That said, if you are presenting to a team of sales executives, price discrimination can be an important topic.
Even though analyzing whether certain conduct violates the Robinson-Patman Act is complex, there are some key concepts you should discuss in training:
Definition of Price - "Price" can include free goods, waiver of inventory requirements, rebates, discounts, promotional services, payment terms, return policies, and credit terms. Employees may not be able to offer bigger and better pricing terms to your big customers. If the company is going to make a better offer to a certain distributor, the employee should first notify the legal department.
Defense to claim - Functional Availability - The company can offer different pricing to different customers if discount pricing is truly available to everyone. E.g., you can offer better terms if a customer increases its amount of purchases with your company by 10%, but generally not by $10 million, as not all companies can buy $10 million in products.
Defense to claim - Bids - You can offer better terms on a temporary basis to meet the lower price offered by a competitor for the same project.
Defense to claim - De minimus or Introductory Offers - You can generally offer better terms on a temporary basis for new product or new distributor introductory offers as long as it's not maintained long enough to cause competitive damage.
Please note: depending on your industry, you may need to present more information on one of these defenses or the other Robinson-Patman defenses.
4. Q & A
Even though I've placed questions and answers at the end of the outline, making your antitrust training interactive is extremely important. If your audience is not engaged, you might as well not do the training. Remember, the federal sentencing guidelines require compliance programs to be "effective".
In order to do this, I encourage you to allow Q&A throughout the training presentation. Let employees interrupt you when they don't understand a concept. I realize this makes staying on schedule much more difficult, but it's important to make sure concepts are understood before you move on. You may never get another chance as I'm sure most of your employees aren't writing down a list of questions to ask you at the end.
This is obviously not the end of antitrust training. Nor is it the complete picture. Antitrust laws are incredibly complicated, but so is employee training. The goal of this training guide is to allow corporate counsel to focus on what employees truly need to know about antitrust laws. Where they don't need to know the law, teach them the red flags so the legal department can do the analysis.
Let me know in the comments what other areas corporate counsel should address!