Trade associations as conduits of illegal acts?

During my two recent presentations on the recently enacted Philippine Competition Act (PCA), I was asked how the new law could affect trade or business associations.

Trade associations are varied and many. An industry may have one or more associations. Examples of these associations are the Bankers Association of the Philippines (BAP), Export Confederation of the Philippines (Ecop), Financial Executives Institute (Finex), Fund Managers Association of the Philippines (Fmap), Management Association of the Philippines (MAP), Philippine Chamber of Commerce and Industry (PCCI), Philippine Association of Brokers and Dealers Inc. (Pasbadi), Shareholders’ Associaion of the Philippines (SharePHIL) and many others.

Trade or business associations are not exempt from the coverage of the new law even if they are basically formed to advance the interests of members. Neither are they outlawed even if they are used, wittingly or unwittingly, to commit illegal acts (e.g., price-fixing and bid rigging). In fact, the PCA expressly states “[n]othing  contained in this Act shall be construed to prohibit the existence and operation of trade associations.” (Section 48)

What then is the standard of conduct for trade or business associations and their members?

The PCA sets the standard by stating that “these associations shall not in any way be used to justify any violation of this Act.” Furthermore, while the new law provides that “it shall not be illegal to use the association as a forum to discuss or promote quality standards, efficiency, safety, security, productivity, competitiveness and other matters of common interest involving the industry,” these should be “done without any anti-competitive intent or effect.” (Section 48)

Legitimate topics

Since the PCA is just new, there is neither an implementing guideline nor a Philippine case law governing topics that can or cannot be discussed by these trade groups.

My research from foreign jurisdictions with similar competition laws indicates that the following topics can be safely discussed by trade associations and their members: (1) legislative  initiatives at the local or national levels and recent legal developments; (2) technology in general, such as characteristics and suitability of a particular technology (but not a particular company’s adoption of specific technology solutions); (3) non-confidential technical issues relevant to the industry such as safety and health standards; (4) industry public relations; (5) collective lobbying initiatives (e.g., product concerns, industry image, etc.);  (6) advertising the merits of the industry’s products as a whole;  (7)  common training programs; (8) market developments affecting the industry; (9) representation of the trade association as participant or observer at other trade association meetings and activities; and (10) displays of the trade association at trade fairs and shows.

Prohibited  topics

Of course, trade or business associations cannot be used as laundering machines for acts or practices that violate the new competition law.

For example, association members should not discuss, much less agree on, price-fixing or bid rigging (bid suppression, bid rotation, market allocation and other forms of bid manipulations).

Likewise, association members should not agree or even discuss with their competitors allocation of markets or customers between or among them and even adherence to certain production or output levels.  Although these acts are non-per se violations of the law which the groups can even justify, they  merit not only administrative or civil liabilities but also criminal liabilities.

It is  also illegal for association members to agree or even discuss with their competitors boycotting a competitor or dealing with certain suppliers or customers only. Although these  are also non-per se violations, they may merit administrative and civil penalties. In this regard, the administrative fine can be as high as P100 million for the first violation and up to P250 million for the second violation, which can be raised if the case involves basic necessities and prime commodities.

The next question is whether there are topics which, although do not directly violate the PCA when discussed, are nevertheless risky topics from a competition law perspective.

What should you do if, in the course of your association’s meeting or in the course of your membership in a trade or business organization, a competitor or its representative discusses an inappropriate topic and/or provides you with commercially sensitive information?

Well, these are topics that are worth discussing in a future  column.

(The author is a senior partner in the Angara Concepcion Regala & Cruz Law Offices and a law professor in the Ateneo Law School. The views in this column are exclusively his and may not be attributed to any other person or entity.  He may be contacted through [email protected].)