SIA Antitrust Policy Statement
The Security Industry Association (SIA) is an association of manufacturers, integrators, and distributors, many of which compete with each other. As an association of competitors in the security products industry, SIA’s policy is to comply fully and strictly with federal and state antitrust laws.
The U.S. antitrust laws of primary concern to associations are Sections 1 and 2 of the Sherman Act and Section 5 of the Federal Trade Commission Act. The goal of the antitrust laws is to preserve and promote competition. SIA’s policy is to conduct its affairs to avoid potential antitrust exposure in the first instance. Full compliance with the antitrust laws is a requirement for SIA membership, and each member, director, officer, and employee is responsible for compliance. The Sherman Act, for example, imposes criminal penalties for significant violations of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison.
Prohibited Agreements and Discussions
Under the antitrust laws, competitors are prohibited from agreeing to engage in conduct that unreasonably restrains trade. As a general rule, the antitrust laws require each competitor to make its own independent decisions on terms and conditions of providing services. Most antitrust offenses have at their core some form of “agreement” among otherwise independent companies, such as price-fixing, bid-rigging, or group boycotts.
- Price fixing is an agreement among competitors which tends to standardize (to raise, maintain or even to lower) prices or price levels. Agreements which go even to individual elements of price such as discounts, credit terms, warranties or profit margins are violations of the antitrust laws and are not permitted.
- Agreements to limit production are viewed as the equivalent of price fixing because the end result is the same. Since price is a result of supply and demand, agreements to limit production (to restrict supply) result in price increases if demand remains constant.
- Agreements to divide customers or market areas also eliminate price competition. For example, it is inappropriate to discuss who will serve a particular geographic market, who will sell to a particular dealer or group of dealers, or who will bid on particular projects or solicitations.
- An unlawful group boycott occurs when competitors, suppliers, or customers agree with each other (or pressure another person) not to deal with others.
An agreement does not need to be in writing to be illegal under the antitrust laws. Agreements can be oral or written, formal or informal, express or implied. In fact, agreements can be inferred from similar behavior following even a general discussion of a particular matter such as prices or output. For this reason, mere discussion of certain topics must not be permitted at SIA meetings. Topics which should not be discussed during association meetings include those that could be construed as an agreement even tending to (a) raise, lower or stabilize prices or price levels, including credit terms, (b) regulate production or the availability of products or services, (c) allocate markets or customers, or (d) encourage boycotts or dealing only on certain terms.
Should an improper discussion be initiated, it is staff's responsibility to advise that it be terminated and to move on to another, appropriate topic. Should those present not heed staff's advice, it is the responsibility of staff to terminate the meeting and recommend that all persons leave.
To summarize, when attending a formal or informal association meeting or activity, your personal red flag should go up when any of the following is mentioned or the conversation seems to be headed in that direction:
- Member-specific prices, fees, costs, reimbursement rates, or the like.
- What constitutes a “fair” profit level.
- Possible increases or decreases in prices.
- Standardization or stabilization of prices, price levels, or price points, including elimination of products in any price range.
- Pricing procedures. While a discussion of cost accounting methods is appropriate, discussion of pricing formulas is potentially inappropriate.
- Cash discounts. Warranty terms.
- Manufacturer return policies.
- Credit terms or rejection of customers.
- Individual company market share, sales or production information.
- Production limits or quotas.
- Allocation of markets or customers.
- Refusal to deal with a customer or to deal only on certain terms.
- Whether or not the pricing practices of any industry member are unethical or otherwise inappropriate.
Finally, it is important for all to understand that antitrust liability may arise other than at an SIA meeting. It is equally unlawful for two competitors to talk about pricing trends over the telephone, completely independent of an SIA event.
Information Exchanges and Benchmarking
Under certain circumstances, the collection and dissemination of information and other data collection and statistical reporting will not run afoul of the antitrust laws. Nevertheless, association statistical reporting programs have the potential for antitrust violations unless properly structured and operated. General guidelines include the following:
- Participation in the program should be absolutely voluntary.
- The survey should be managed by a third party (such as a consultant or SIA staff).
- The shared data should be more than three months old.
- There should be at least five members reporting data, no individual member’s data should represent more than 25 percent of the data collected, and any information disseminated should be aggregated such that it would not allow recipients to identify the data provided by a particular member. In other words, individual company data should not be revealed or discernible from the final report.
- The purpose of the program (for example, “to foster competition by providing members of the industry with historical market information for their individual use”) should be set forth in the minutes of the Board of Directors meeting authorizing the program.
- In general, joint discussion and analysis of the data by association members should be avoided. Each participant should separately analyze the data and make independent business decisions. Any joint discussion of the data should be approved in advance by legal counsel.
Certification, Standard Setting, and Industry Self-Regulation
While certification, standard setting, and the development of industry best practices can serve valuable procompetitive purposes, any program that unreasonably restrains trade or furthers the interests of certain members to the exclusion of others may raise antitrust concerns. SIA’s policy is to take appropriate precautions when engaging in certification, standard setting, or the development of industry best practices. These programs should be based on sound, objective justifications; reasonably related to the goals they intend to achieve; no more extensive than necessary to accomplish those goals; and incorporate reasonable procedural safeguards to ensure compliance with the antitrust laws.
Public Policy Advocacy / Lobbying
Under the Noerr-Pennington doctrine of immunity, joint action by an association or its members to influence legislative policy, litigation in the courts, and proceedings before administrative bodies generally does not violate the antitrust laws. Under certain circumstances, however, there is no immunity for making false or misleading statements when petitioning the government.
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Participants in SIA meetings have an obligation to terminate any discussion, seek legal counsel’s advice, or, if necessary, terminate any meeting if the discussion might be construed to raise antitrust risks. All meetings and activities of SIA must be conducted in a manner consistent with this policy. Violations of this policy may result in disciplinary action.