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FTC: Professional Associations' Ethical Codes Restrict Competition
On Dec. 16, 2013, the FTC announced consent decrees settling charges that two professional associations, the Music Teachers National Association (MTNA) and the California Association of Legal Support Professionals (CALSPro), had violated Section 5 of the FTC Act by using their respective codes of ethics to restrain competition among association members. (Agreements Containing Consent Orders for In the Matter of Music Teachers National Assoc., File No. 131-0118 and In the Matter of California Association of Legal Support Professionals , File No. 131-0205). Specifically, the Commission charged both organizations with banning members from engaging in core competitive activities, such as soliciting or offering discounts to other members' clients, or recruiting other members' employees without first notifying the competing member.
Interested in-house counsel should take note that there is a long history of antitrust enforcement against professional associations that attempt to restrict their members' ability to compete effectively in the marketplace in the name of maintaining ethical standards. Courts have upheld (or at least refused to condemn short of full rule of reason analysis) association codes that arguably have some connection to procompetitive benefits, such as improving quality or protecting customers. Yet courts and agencies have not hesitated to condemn rules that limit price competition or the “poaching” of clients. The FTC's actions against MTNA and CALSPro, for instance, serve as a reminder that counsel who advise professional or trade associations or individual association members should carefully consider the antitrust risks posed by overly restrictive provisions of association ethical codes, and take some simple precautions that can help members achieve their goals while avoiding antitrust problems.
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