Document gD7Gwkb66R7Dzedpw97g2pwk9

C&K Ficc CHEMICAL MANUFACTURERS ASSOCIATION RECEIVED JUL 0 9 J3S2 A. E. GREECE July 1,1982 TOj Occupational Safety and Health Committee Task Groups and Work Groups SUBJECT; Committee Guide The CMA booklet "General Principles Applicable to The Structure and Operations of Committees" was revised recently* I am enclosing a copy oiT the latest version and urge you to become familiar with its contents. Sincerely, MF:er Milton Freifeldw' Associate Director Health, Safety, and Chemical Regulations Formerly Manufacturing Chemists Association--Serving the Chemical Industry Since 1672. 2501 M Street, NW Washington, DC 20037 Telephone 202/687-1100 Telex 89617 (CMA WSH) AP00004786 COMMITTEE GUIDE AP6bb04787 GENERAL PRINCIPLES APPLICABLE TO THE STRUCTURE AND OPERATIONS OF COMMITTEES* Preamble. The Association's Bylaws, in Article V, Section 6. authorize the Board of Directors or the Executive Committee to appoint such committees with such duties and functions as may from time to time be determined. The Bylaws further permit the adoption of regulations for the conduct of committee affairs consistent with Association policy and subject to review and approval by the Board or Executive Committee as appropriate. To assist the committees in carrying out their functions consistent with the Bylaws, certain gener al principles applicable to the structure and opera tions of all committees are formalized in this Resolution. No committee or other group operating under CMA auspices on CMA business shall deviate from these general principles, except where specifically authorized by the Executive Committee or the Board (or as determined to be necessary by the President or Secretary of the Association). As used in this Resolution, unless otherwise indicated, the term "committee" includes all CMA standing committees and such special committees as may be authorized from time to time, but does not include the Executive Committee or other committees composed of members of the Board. 1. Functional v. Product Committeea. The Association's committees shall continue to be organized primarily along functional rather than product tines. No committee having to do with a particular chemical product or product segment shall be formed without approval of the Board (or in an emergency by the President of the Association). Before agreeing to the establishment of any such committee, the Executive Committee shall deter mine whether the existing committees are adequate to handle the problem, and if not, whether the problem is of such general concern as to call for a new standing or special committee. All committees dealing with a particular product segment of the Industry and all other committees formed for a temporary purpose shad be deemed ad hoc. Unless otherwise specified, the term of such committee shall be no longer than two years, subject to 'As approved by the Board of Directors on March 12. 1663, and amended by the Executive Committee on March IS, 1971; duty 11, 1976. and June 3,1981. renewal for additional periods of one year or less by specific action of the Board. ft. Purposes. Each committee shall operate in accordance with PURPOSES setting forth its authorized activities which have been approved by the Executive Committee. Each committee's PUR POSES shall be printed in the Associations annual Directory. 3. Organization. All committees shall, unless otherwise authorized, be subject to the following rules in respect to their organization; (a) Members. Each committee normally shall be limited to not more than 15 members. The members shall be recommended by the President of the Association and appointed by the Executive Committee from qualified full time personnel of member companies in terested in supporting such activities. To the maximum extent practicable, appointments should be reasonably representative of all interested member companies, taking into account such factors as their size, geog raphical location, chemicals manufactured, and differences in the general nature of their operations. Normally, a member company may have only one representative on any given committee. Membere of any necessary task groups shall be appointed by the committee on the same basis- The member* ship of each committee should be composed of persons well qualified in the committee's field of activity, normally having primary responsibilities within that field in their respec tive companies. Nominations tor committee membership will be made by member com pany Executive Contacts and shall include name, company affiliation and personaf title, background relevant to committee's field of activity, and description of major responsibili ties within the company. A committee may nominate for consideration by the President and Executive Committee one or more associ ate members representing governmental bodies or scientific or trade associations where such representation on a continuing basis will 1 AP00004788 f [ t t facilitate significantly the oommittee's pro grams. Associate members shall have non voting status and be subject to review and Executive Committee confirmation annually. (b) Task Groups. A committee may form such task groups as may be necessary to assisl it in conducting Ms authorized activities. The Executive Committee shall be promptly advised of the formation of each such task group, and terms of reference m each case shall be established in writing by the parent committee subject to review and approval by CMA staff and the President of the Associa tion. (c) Officers. The chairman of each com mittee to serve as its chief executive officer, and a vice chairman, shall be appointed annually by the Executive Committee. The heads of task groups shall be appointed by the respective chairmen with committee approval. (d) Rotation. The term of individual com mittee members shall be three years, onethird of the membership being rotated annual ly. Initial committee membership terms will be scaled to accommodate this rotation. Upon the expiration of one term of committee membership, a waiting period of at least one year must lapse before a former member becomes eligible for reappointment. For this purpose, a term will be regarded as three years or any fraction thereof according to the member's latest appointment to that commit tee. A committee member appointed chairman in the third year cf his committee tenure may be appointed to a second year as chairman In which case he would serve in this post outside of the member limit on committee member ship. A chairman cannot be extended in this manner for mors than one additional year. (e) Staff Executive and Committee Secretary. Each committee shall have as Its staff executive and secretary a hill-time CMA staff employee who shall function as the Board's administrative repesentative for such committee and as Hs chief administrative officer. It shall be the staff executive's duty and responsibility to see that all operations and proceedings of the committee, and of ail Its task groups, and conducted in full conformi ty with their purposes and this Resolution, consulting with General Counsel as neces sary. On ail procedural questions arising within any committee, including matters relat ing to established Association policy, the staff executive's decision shall be accepted, pend ing appropriate review. 4. Meetings. The business of each committee shall be conducted in executive sessions attended by its members and by others who have a leading rote In matters to be considered at the particular meeting. Each lask group meeting shall be an executive session of assigned members of the task group plus any members of the parent committee who wish to be present. . (a) Frequency. Each committee and task group will meet only as necessary to perform authorized committee business as determined by the chairman in consultation with the CMA staff. Meetings should not be held where the subject matter can be adequately and practic ably handled by correspondence or telephone between the appropriate staff executive and individual members. (b) Location. To the extent practicable and in the absence of cogent reasons for being elsewhere, all committee and task group meetings should be held in Washington, DC, preferably at the Association's office. Other locations, such as major city airports, may be considered in Instances when they would afford greater convenience and cost savings to attendees. (c) Agenda. Following consultation with the committee chairman, the staff executive assigned to each committee shall prepare written agenda prior to each of Its meetings, which agenda shall be cleared in advance with General Counsel. (d) Attendance of Staff Executive. No CMA committee meeting shall be held without the attendance of the staff executive assigned to it or other full-time CMA staff employes. General Counsel or his designate should also 2 * fi r i AP00004789 attend any meeting whenever in his option the nature of any subject on the agenda makes his presence desirable. (e) Minutes. The staff executive assigned as secretary to the committee shall keep accurate and complete minutes of ail business transacted at each meeting, which are to be subject to review and approval by General Counsel. (f) Discussions Limited to Agenda. All substantive discussions at any CMA commit tee meeting are to be limited to authorized aspects of subjects on the agenda, except where additions to the agenda are specifically approved by the staff executive assigned to the committee. The staff executive's decision as to the propriety of any subject matter raised for discussion at any meeting shall be accepted, pending appropriate review. Any discussions or occurrences on the occasion of any meeting which ere contrary to CMA's policies or rules and which come to the staff executive's attention shall be reported prompt ly by him to his supervisor and to General Counsel. (g) Task Groups. The foregoing rules on meetings are applicable to all committees, task groups, and any other working groups meeting under CMA auspices, except that subparagraphs (c), <d). and (e) may be modified as indicated below in those cases where the group must meet in order to carry out a limited and specific written assignment from the parent committee and it is impractical for a staff executive to be present. In each such case, (0 the specific assignment must be set forth in the parent committee's minutes; (li) the CMA staff executive assigned as secretary to the parent committee must be satisfied that the meeting in question is necessary and that tha subject matter Is not sueh as to require staff presence; (Hi) the chairman of the group is to be responsible for carrying out tha duties of the CMA staff executive, including particu larly those specified in subparagraph (f) above; and (iv) the chairman must promptly make an accurate and complete written report to the parent committee and to the CMA staff executive as lo everything occurring at such meeting. (h) General Meetings. Apart from execu tive sessions, each committee shall schedule meetings, al least two per year, to which designees of Executive Contacts whose com panies are not represented in the membership of the committee shall be invited and other interested representatives of member com panies may attend. Such meetings shall be scheduled and notices issued amply In adv ance as often as appropriate to keep the designees and others informed about the committee's activities' and provide opportuni ties for offering suggestions. S. Policy Statement*. Statements of Asso ciation policy or position developed by any CMA committee or other group for submission to toe Congress or any governmental or other external agency shall, unless otherwise authorized, be transmitted by the President or other appropriate officer of the Association. . Reports. An account of the significant program activities of each committee shall appear in the Annual Report of the Association. The President and Executive Committee shall be kept informed on a current basis by communication from the chair man and the assigned staff executive. Presentation of reports to toe Board shall be made as determined by the Executive Committee. 7 Periodic Reminder to Committee Members. A copy of this Resolution, as It may be amended from time to time, shall be furnished to each member of each CMA committee and task group thereof at the beginning of his duties as a member, and at least once a year thereafter so long as he remains a member. 3 AP00004790 6rl_______________________ RULES OF PROCEDURE FOR COMMITTEES* 1. Purposes. The purposes of each committee shall be as set forth in the CMA Directory. ft. Membership* Nominees, In addition to competence In the subject area, should have the perspective to recognize which matters are truly significant to the chemical manufacturing industry, and have the talents and personal Inclination to be dynamic workers. The nominee's position In the company should provide ready access to the Executive Contact so as to authoritatively reflect corporate views and also assure company backing in devoting a considerable portion of time and associated company resources to committee activi ties. 3. Officers 3.1 The officers of a committee will be a chairman and a vice chairman. 3.2 The officers will serve for a term of one year commencing June 1. 3.3 Chairman 3.3.1 The chairman will preside at meet* ings and exercise general supervi sion over affairs of the committee within the general framework of CMA policies. 3.3.2 The chairman will be responsible for full reporting at regular meetings of all committee activities not pre viously reported. 3.3.3 The chairman wilt familiarize the vice chairman with all of the func tions of the chairman in order to provide for proper and effective continuity in the chairman's ab sence. 3.3.4 Wilh tiie concurrence of the com mittee. the chairman may establish task groups, define their purpose and scope, appoint their member ship, and designate the chairman. 3.3.5 The chairman will designate from the membership of the committee liaison assignments to various CMA standing committees and task groups as necessary. "As approved by the Executive Committee on July 11, 1978, and amended by the Executive Committee June 3, 1961. 3.4 Vice Chairman In the absence of the chairman, the vice chairman shall fulfill all the functions of the chairman. 4. fteeretary/Staff Executive 4.1 The secretary shall be the CMA staff executive assigned to the committee. 4.2 The staff executive shall exercise those authorities and responsibilities prescribed by the "General Principles Applicable to the Structure and Operations of Commit tees." 4.3 The staff executive shall prepare and distribute notices of meetings, agenda, and minutes, and have custody of the official records of the committee. 8. Meetings 5.1 Meetings of the committee will be held at the call of the chairman. 5.2 A majority of committee members shall constitute a quorum at any meeting. 5.3 Task groups shall arrange separate meet ings as justified by their assignments, subject to call by their respective chair men and advance notice to the members from the staff executive. 5.4 The staff executive shad issue advance notices lor ail meetings of the committee and task groups, an no meetings may be held in toe absence thereof. 5.5 It shall be the responsibility of the chairman of a task group to submit a timely request to the staff executive concerning any desired modifications of subparagraphs 4(c), (d). or (e) of the `General Principles Applicable to the Structure and Operations of Committees* under the provisions of subparagraph 4(g). 5.6 Actions shall be decided by a majority of members present. The presiding officer may vote only to break a tie. The staff executive is not entitled to vote. 6 Task Groups 6.1 Designations of task groups for special assignments, as to their membership, purpose, and scope shall be recorded in committee minutes. All task groups shall i ! v ! . | ! ! AP00004791 be reviewed annually by the committee. Unless recommended for continuance by the committee end authorized by the President of the Association they shad terminate. $.2 Committee membership is not a prere quisite to serving on ta9k groups. 6.3 The chairman and vice chairman shall be ex officio members of all task groups and shall be furnished notices of their meet ings. They, together with the staff execu tive, shall be furnished copies of all reports and correspondence pertaining to task group activities. 6.4 Task group chairmen shall be responsible for keeping their members informed re garding progress of activities and assigned tasks. 6.5 Task group chairmen shall furnish written reports to the committee chairman, vice chairman, and stall executive in advance of each regular meeting of the committee oonoemlng activities, plans and recom mendations. 6.6 The term task group" as used in these rules is defined to include any other committee sub-units. 7. Administration 7.1 The committee may consider matters from any source provided they fall within the scope of the declared PURPOSES. 7.2 An agenda of matters to be considered at meetings shall be prepared and furnished to those involved, at least one week in advance whenever practicable. 7.3 Minutes of meetings shall be prepared and distributed promptly. Corrections or additions shall be considered at the next meeting. In addition to normal distribution, such minutes shall be furnished to other member company representatives desig nated by their Executive Contact to receive them. 7.4 Voting may be conducted by letter ballot when, in the judgment of the staff executive, circumstances warrant. 7.5 Appearance before any legislative or regulatory body or other organization on CMA's behalf shall be made only as officially authorized. If, in any such appearance other than as a duly autho rized representative, a person identifies hfmself with CMA in any way, he shall also make clear that he is not represent ing CMA in such participation. 6. Legal Assistance. Requests for legal assistance shall be directed by the committee chairman or staff executive to the CMA General Counsel. Assistance of the CMA General Counsel, staff counsel, or member company will normally be provided. Outside counsel, If required, will be selected and supervised by the General Counsel and will be engaged only after approval by the President or Executive Committee. ft. Primary Requirement. These rules are designed to supplement CMA's "General Principles Applicable to the Structure and Operations of Committees,'' originally approved March 12,1963, as subsequently amended. Nothing in these rules shall be interpreted or applied in such manner as to conflict with that document. I 5 AP00004792 ANTITRUST GUIDE FOR CMA COMMITTEE MEMBERS This is designed to be a layman's guide on how the antitrust laws apply to trade association activities, with particular reference to CMA committee work. It is written both for the guidance of those CMA committee members who have no particular knowl edge of this complicated subject, and to provide a useful reminder or "refresher course" for those who have had the benefit of antitrust advice from their own company counsel. The Chemical Manufacturers Association is a non-profit industry association representing about 200 chemical producers. Like other industry asso ciations, CMA is composed of member companies (many of whom are competitors of one another) representatives of which serve on its Board of Directors and on its committees. Whenever competitors meet together problems can arise under the antitrust laws, if the meeting or other activities among competitors is conducted by or ihrough a trade association, it is just as vulnerable to antitrust attack aa if the same companies were meeting or acting together without the medium of an association. Trade associations generally seek, quite properly, to promote under standing and cooperation among their members. But if this "cooperation" restrains competition, both the aesoei&tion and its members will be in trouble under the antitrust laws. Antitrust enforcement is being emphasized as never before. The number of criminal and civil antitrust actions is steadily increasing. Congress has greatly increased both criminal and civil antitrust penalties, has made important procedural changes, and has substantially increased the budgets for the Antitrust Division of the Department of Justice and the Federal Trade Commission, the two agendas charged with antitrust enforcement. The courts are expanding the scope of antitrust prohibitions which may especially affect trade association activities, and such associations are mors frequently becoming the objects of FTC and Antitrust Division Investigations. In view of these developments, increased awareness of the applica tion of the antitrust laws to association activities is essential. Like most reputable trade associations, CMA has objectives and programs that are well within the law. it also makes every effort to prevent possible antitrust abuses from arising. But a large responsi bility also rests upon its member companies--and particularly upon their individual representatives who serve on CMA committees. This means that committee members should know enough about this subject to be able in their CMA work to avoid actiona or discussions that might raise antitrust questions. The main purpose of this guide is to help all committee members to recognize what is, or might become, an "antitrust question." Some actions or discussions by members of a bade association are dearly illegal; many others are wholly legal and proper; and there Is a sizeable "grey area" or danger zone in between. This grey area between legal and illegal association activity is often vague and uncertain, and CMA's policy has always been to keep far away from the doubtful zones. The Association's aim is not.only to avoid actual violations of law--ft wants to prevent even any appearance of violation which might invite suspicion or investigation on the part of the enforcement authorities. To protect itself and its members in this respect, CMA has adopted and observes several basic policies: 1. it has well-defined, constructive objectives and programs which are designed to promote the overall interest of the industry and the public. 2. its organizational structure consists primarily of standing committees with specific and limited functional purposes; any activities concerned with pricing or marketing chemical products are scrupu lously avoided, and limitations are also imposed on the subject matter and duration of ad hoc commit tees dealing with specific chemical products or product segments. 3. it maintains various procedural safeguards-- particularly those set forth in the "General Principles Applicable to the Structure and Operations of Committees" which appears in the Association's annual Directory. 4. U retains counsel to help insure full observ ance of the above policies and procedures, and to provide guidance and protective advice as to alt CMA's operations from an antitrust standpoint. 5. tt has approved the issuance of this "Antitrust Guide' to help member company representatives on CMA committees avoid problems under Ihe antitrust laws. AP0000479J Tht Pt^cral Antitrust Laws Beginning in 1890, Congress has enacted a series of statutes which are known collectively as the lederal antitrust laws. These laws are designed to promote and preserve our competitive private enterprise system by encouraging free and open competition in open markets. The lederal antitrust laws give the force of law to the philosophy underlying our economic system, namely, that a free market in which supply and demand operate to determine the conditions and terms of production, distribution and sale, and where each seller and buyer deals Independently, serves to achieve the most equitable allocation of high quality goods and services at the lowest possible prices. The central core of federal antitrust legislation is formed by the Sherman Act (1690) and the Clayton end Federal Trade Commission Acts (1914). Most states have also enacted antitrust laws similar to the federal statutes but no attempt is made to discuss them in this brief manual. Similarly, there is no discussion herein of other areas of federal antitrust law (such as the Robinsori-Patman Act and many parts of ihs Clayton Act) which may bear directly on the activities of individual companies but are usually not involved in association activities. The primary focus here is on horizontal conduct, l.e., conduct Involving relationships between competitors, rather than vertical relationships such as those between a company and its customers. Section 1 of the Sherman Act prohibits 'con tracts," "combinations" or "conspiracies" in restraint of trade or commerce. These are terms of collective action or conduct by two or more persons, and they include agreements and understandings o! all kinds--whether written or oral, formal on Informal-- which unduly restrain competition. Because of the collective nature of most trade associations activi ties, this section is the principal weapon used by the Department of Justice in antitrust suits against trade associations or their members. Such suits are usually based upon an alleged conspiracy or agreement among competitors to restrain trade. (The Federal Trade Commission also can, and does, challenge trade association activity which Is alleged to lessen competition under Section 5 of the Federal Trade Commission Act which prohibits "unfair methods of competition.") Although the language of the antitrust statutes Is deliberately general in Its coverage, prohibiting leveryj contract, combination or conspiracy in restraint of trade* and "unfair methods of competi tion," the courts have defined a number of specific activities as inherently unlawful, the so-called "per se"offenses (see "Prohibited Activities*infra), the legality of other activities Is determined by the "rule of reason," La., whether the activity It ancillary to the achievement ol a legitimate business objective and Is no more restrictive of competition than necessary to achieve that objective. Although this necessarily involves difficult questions of interpreta tion, even here useful guidelines for antitrust compGance have evolved from the courts' deci sions. The importance of obtaining legal counsel in any area of uncertainty cannot be overemphasized, for the sanctions imposed for violations of the antitrust laws are severe. Antitrust Enforcement The Federal antitrust laws we enforced by the Department of Justice (Antitrust Division) and the Federal Trade Commission and frequently provide the basislor suits by private parties. All of the following penalties can be imposed for violations of antitrust laws: 1. Imprisonment Violations which are criminal offenses, including most prohibited collusive activi ties ere felonies, and each individual participant is subject to e prison sentence of up to three years. Prison sentences are becoming increasingly com mon, particularly in price-fixing cases. Convicted felons may also be denied citizenship, the right to vote and other privileges and rights. 2. Finee. Fines of up to $1,000,000 for corpora tions and up to $100,000 for individuals may be imposed for each criminal ottense. An individual may not be reimbursed by hie corporation for fines paid by him and fines are not deductible for income tax purposes. 3. Injunctive Court and Federal Trade Com mission Orders. Orders (injunctions) which pro hibit future violations or activities can be imposed as a result of eivii action brought by the Department of Justice, the Federal Trade Commission, or private parties, with far-reaching consequences. Such injunctions may contain sweeping prohibitions which go welt beyond the scope of the violations charged and prohibit conduct which is not itself considered contrary to the antitrust laws. Such orders can seriously limit freedom of corporate or association action, require burdensome and time-consuming reporting obligations, cause dayto-day activities to be supervised by a court or AP00004794 agency, and even require dissolution of a trade association. Violation of an injunctive order issued by a court can result in contempt proceedings with attendant fines, while failure to comply with an injunction ("cease and desist order") issued by the Federal Trade Commission carries penalties of up to $10,000 for each day the non-compliance continues. 4. Treble Damages. A sanction which has been applied with increasing frequency as private anti trust suits have rapidly increased in recent years is the "treble damage* provision of the antitrust laws which allow persons or businesses injured by an antitrust violation to recover three times the amount of actual damages sustained. Such cases have resulted in hundreds of millions of dollars of damages being paid to private litigants. Thus, an antitrust violation could impair the financial re sources of any corporation and significantly weaken Its competitive position. Prohibited Activities As noted above, many antitrust violations--and particularly those involving bade associations-- result from concerted or collusive activity, that is. from Bn "agreement* between or among competi tors which result in a restraint of trade. An illegal agreement may be proved in a number of ways. It need not be written, and seldom is. Rather, the term "agreement" in antitrust parlance may mean no more than knowing adherence to or participation in a common scheme. Explicit promises, commit ments, or assurances are not necessary to estab lish a violation, nor must the parties actually carry out the agreement. (This definition of "agreement" is assumed throughout.) Convictions for collusive activities can be based on a series of seemingly isolated facts which have been linked to present a chain of circumstantial evidence from which an agreement or conspiracy-- a meeting of the minds--can be inferred; for example, identical price Increases by competitors following shortly after a trade association meeting at which "business conditions" and the need of the industry for higher prices were discussed. For this reason it is important when participating in CMA oommittee work or other association activities, which involve contact with other members of the industry, to avoid doing or saying anything which might even give an appearance of agreement with others in areas which may involve a lessening of competition. (a) Agreements Involving Prloes. Pricing is the most sensitive subject under the antitrust laws. "Price" in this context includes all the elements of the terms of sale: sales prices, discounts, allowances, freight, credit terms, container deposits, and all other services or conditions integrally related to a sale. Any agreement between competitors which fixes, stabilizes, maintains, bolsters, depresses, or tampers in any way with price is unlawful `per se,m that is. the activity is indefensible and illegal without further analysis of its reasonable ness, good intentions, arguable benefits to the public, or extenuating circumstances. In short, there is no defense. "Price-fixing" encompasses not only agree ments with competitors on a selling price. It may also include, for example, agreements to buy up surplus goods, to adhere to a formula for determining prices, to standardize dis counts, to control raw material prices, and any other agreement which has the net result of affecting the price structure of a given product. Moreover, it Is just as unlawful for competitors to agree on the prices at which they will offer to buy from their suppliers, as on those at which they sell. As previously noted an agreement can be shown in a number of ways. Thus, even the mere exchange of price lists between competitors on a regular basis may in some circumstances serve as evidence ol an illegal price-fixing agreement. The essentia! rule is that each sailer must determine on its own the prices at which it purchases and sells. To avoid inferences of agreement or collusion--and there can be no exceptions--CMA members must not engage in any direct or indirect discussions with any competitors regarding prices, pridng policies, or any other marketing policy which may affect pricing. The following are a few examples of activities which have been found by the courts to constitute evidence of illegal prefixing. 1. Some supermarket executives were held to have violated the Sherman Act on the basis of evidence which Included a trade association meeting where one participant made remarks to (he general affect that it was time to stop passing lower wholesale meat prices on to the consumers and keep some of it for themselves. After viewing this and other evidence in light of i I AP00004795 the article pricing practices, the court upheld a jury verdict that the attendees at the trade association meeting had engaged in an illegal conspiracy to keep wholesale prices low and retail prices high. (The jury awarded plaintiffs a verdict for over 32 million dollars, plus the plaintlfls' attorneys' fees.) 2. In another case, the sales manager of the leading company in a market invited the sales managers of the other major companies in the market to a meeting at which he described a proposal for reclassifying distributors and changing discount schedules. No one present openly agreed to reclassify his distributors and change his discount schedules. Subsequent to the meeting, however, the leading company instituted the changes proposed at the meeting and the other companies, one by me, adopted the same distributor classifications and dis count schedules. All of (he companies and their ales managers were convicted of engaging In an unlawful conspiracy. The fact that all of the Individual defendants were at the meeting, heard the discussion, and subsequently reclas sified their distributors and changed their discount schedules, supported a Jury finding that they had unlawfully conspired to fix prices. 3. Sales officials of corrugated cardboard box manufacturers in the Southeast followed a practice of occasionally calling each other to determine quotes given on specific and current sales to identified customers. The Supreme Court held the practice Illegal because It had the effect of stabilizing prices (i.e., it tended to limit price reductions and the range of price changes). The decision was reached in spite of an express finding that the calls did not result in an actual agreement on prices. Rather, each defendant, on receiving a request for pricing ^Information, usually furnished the data with the Expectation that reciprocal information would be furnished to him. This simple exchange ol information was held to establish an unlawful combination or conspiracy under the Sherman Act. (b) Agreements to Control Production or Sales. Competitors may not agree to limit or control production or sales. Any limitations on output by direct or indirect agreement are illegal per se and cannot be justified, even where the purpose is to preserve the industry or conserve natural resources. (c) Division of Territories and Allocation of Customers. Any agreement between com petitors to divide or allocate either sales territories or customers is unlawful per se. Exchanges of information with competitors relating to customers or territories can create the appearance of such collusion or agreement and must be strictly avoided. (d) Refusals to Deal. Any agreement among competitors which results In a refusal to deal with suppliers or other competitors--for exam ple, a blacklist or boycott--is Hlegal per $e. For this reason exchanges of information <e.g., credit information) concerning particular cus tomers which might lead td parallel decision not to deal should be avoided. Application of Antitrust Lows to Trod* Association Activities The valuable and proper activities of CMA and its committees can be accomplished effectively if participating members are alert to the prohibited types of behavior described above and react quickly when danger signals appear. Obviously, CMA activities should be conducted in such a way as to avoid any possible inference ol agreement among its members with respect to prices, controlling production or sales, division of territories, or refusals to deal In any lorm whatso ever. Further guidelines are given here to highlight potential danger zones to be avoided. When a danger zone appears, counsel should be consulted for specific guidance. In reviewing the following guidelines there are a few general points you should bear in mind: 1. As indicated above, an otherwise lawful act may become unlawful H done for an improper purpose, or if it is part of a larger unlawful scheme. For example, a product standardization program might be justifiable considered by itself, but not if it is combined with other activities to facilitate the fixing of uniform prices, in other words, the courts may look at the cumulative effect of several activities--not at each one separately. 2. Good motives are not an excuse for doing things that are otherwise unlawful, either because they fall within one of the "per se" 9 AP00004796 categories discussed previously or because they are more restrictive of competition than necessary to accomplish their legitimate objec tives. Thus, even though a product standard ization program may be intended to increase competition by providing consumers with im portant information, it may nevertheless be found unlawful if conducted in a manner more restrictive than necessary to achieve its legiti mate purpose. 3. An ostensibly lawful program or activity runs a greater risk of getting into vulnerable areas if conducted by a group of competitors making the same product. That is the main reason why CMA operates primarily through functional committees, and imposes limitations on the subject matter and duration of any ad . hoc. committees dealing with matters concern ing a specific chemical product or product segment 4. As a member of a CMA committee, you and your company can be held responsible for any improper acts that may occur which you know about (or should know about), and if you fall to protest or disassociate yourself from them. Participation in CMA Committee Meeting# All meetings of CMA committees must be con ducted in strict compliance with the procedures set out in the "General Principles Applicable to the Structure and Operations of Committees." These General Principles provide for agendas, attendance of staff representatives, and for the keeping of accurate and complete minutes--ell of which are designed to avoid antitrust risks. If you participate In a CMA task group meeting held without a staff member being present (pur suant to the special circumstances set for in subparagraph 4(g) of the General Principles), be sure that the meeting complies with the require ments of that subparagraph 4(g), including an "accurate and oomplete written report... as to everything occurring at such meeting.' Note: The attitude of enforcement personnel will be governed by what committee or task group "As approved by the Board ot Directors on March 12, 1963, and amended by the Executive Committee on March 19,1971; July 11,1976, and June 3,1961. members actually do, not by what is said in reports or minutes that may be incomplete or inaccurate. CMA committee members participating in activi ties involving advocacy before governmental en tities should be familiar with and carefully observe the guidelines set out in the memorandum, "General Principles and Guidelines for MCA Advocacy," dated May 14, 1976. In general, advocacy should be conducted in lawful ways and directed solely at efforts to influence that policy. It should not be used ae a sham or as a means to affect competition directly and independently of what would be the effect of the government policy which is sought to be influenced. While committee agendas will have been cleared in advance with CMA counsel, it is the obligation of all committee members to make sure that their own . participation In committee meetings will not give rise to even an inference of antitrust wrongdoing. Thus, even when carrying out approved end legitimate activities members must be careful to avoid discussions or exchanges of information with thair competitors on any subject relating to the per se~ restraints listed above since such discussions or information exchanges may give rise to inferences of agreement. As examples, you should avoid any discussion with competitors of the following: (a) Individual company prices, price changes, price differentials, mark-ups, discounts, allowances, credit terms, etc. (b) Individual company figures on costs, production, capacity, inventories, sales, etc. (c) Industry pricing policies, price levels, price changes, differentials, etc. (d) Changes in industry production, capac ity, or inventories. (e) Transportation rates or rate policies for individual shipments or particular pro ducts, including basing point systems, zone prices, freight equalization, etc. Note: This was an alleged factor In the 1962 FTC charges against MCA (now CMA) in the TSP (trisodium phosphate) case. MCA denied the charges, but joined the producers in signing a consent order prohibiting the practices charged. Standardization of TSP containers was another principal factor in the TSP case; these charges pertained to an activity in 1939-40 which has long since been abandoned. MCA denied that this activity was illegal, but joined the respondent TSP 10 AP00004797 producers in signing a consent order prohibiting the various practices charged, in order to avoid costly and time-consuming litigation. (f) Bids on contracts for particular products; procedures for responding to bid invita tions. (g) Plans of individual companies concern ing the design, production, distribution or marketing of particular products, includ ing proposed territories or customers. (h) Matters relating to individual suppliers or customers that might have the effect of excluding them from any market. (I) Any matter relating to TSP as a specific product. Regardless of subject matter, you should not attend ortolerate any meeting with your competitors in connection with CMA business which has no agenda, or which is concerned with matters outside your committee's terms of reference, or which otherwise fails to conform with the procedures in the General Principles. Informal Qnlhorlnse it is important to avoid discussions of me above subjects, not only at formal CMA or committee meetings, but also in connection with social or other gatherings on those occasions. If any Improper discussion should start in your presence, you should protest; if the discussion continues, you -should promptly excuse yourself from the group and communicate your protest to the appropriate CMA staff mamber. Even if you do not take part in any improper discussion, your presence without parti cipation could still get you and your company into trouble. Any individuals who participate in such improper discussions, whether deliberately or in nocently, are doing their companies, and CMA, a real disservice, and subjecting themselves to possible Nability. in case of doubt as to whether a particular subject may properly be discussed with your competitors, you should consult your own company counsel. Documents Care must be taken to avoid wording any written documents Including reports or notes from commit tee meetings in a way that might be interpreted as indicating, contrary to fact, the existence of an antitrust violation. Every memorandum, letter, or other document dealing with prieas, competition, or the other danger areas specified in this guide should be written with the assumption that It will one day be examined for antitrust implications. An antitrust case may be based on documents which are in reality innocent or innocuous but have been written in -such a way as to create suspicion and require explanation. Such documents may include personal notes based on recollection, or taken at committee or other meetings, which record personal impressions rather than the foots of what transpired, Conclusion It is hoped that this guide will help you to understand how the antitrust laws bear upon trade association activities, and to carry out your CMA work in full compliance with these laws and with CMA policies. Again, please remember that this is a limited outline and is not intended to be a complete description of the application of the antitrust laws---for answers to specific problems, you should consult CMA counsel and your own company counsel. 11 AP00004798 CMA AND ADVOCACY* Advocacy maans pleading or defending a cause, hence advocacy is implicit in CMA's representation of the chemical manufacturing industry, and should be conducted forthrightly and forcefully, concentrat ing on matters which affect a number of Its members or which broadly ooncem the chemical manufacturing Industry even though not immediate ly affecting many members. To be beneficial, advocacy must be persuasive. SoHd evidence and reasoned interpretation coupled with effective presentation are needed. Enlightened and progressive advocacy Is directed to the common good rather than being merely self-serving. Bearing in mind the pervasive As approved by the Executive Committee on July 11, 1976. significance of chemicals, H is vital that CMA advocacy so qualify. Advocacy on behalf of a collective industrial group must heed antitrust limitations. For this reason and because of the fact that certain chemicals compete with others in the marketplace lor similar purposes, CMA normally limits fts advocacy to matters having general applicability, as contrasted with those involving particular chemical substances or companies, if an important prece dent-setting principle is involved, however, CMA may elect to advocate regarding the principle alone. The foregoing precepts underlie CMA's advocacy role. Each member company should recognize this in no way diminishes its responsibility to protect its own interests, nor is Intended to restrict independ ence in so doing. Each member company fs encouraged to express Hs Individuals views. ; f [ 1 I- 12 AP00004799