Professional Associations Settle FTC Charges by Eliminating Rules That Restricted Competition Among Their Members

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Settlement Orders Designed to End Restraints Contained in Codes of Ethics

Two professional associations, of music teachers and legal support services providers respectively, have agreed to eliminate provisions in their codes of ethics that limited competition among their members, according to the FTC. These settlements are the latest in a long line of antitrust cases addressing restraints on competition that are incorporated into the ethics codes of professional associations.

“Competing for customers, cutting prices, and recruiting employees are hallmarks of vigorous competition. Agreements among competitors not to engage in these activities injure consumers by increasing prices and reducing quality and choice. Absent a procompetitive justification, these types of restrictions on competition are precisely the kind of unreasonable restraints of trade that the Sherman Act was designed to combat,” the Commission wrote in a statement accompanying the settlement.

The FTC’s complaint against the Music Teachers National Association, Inc. (MTNA), which represents over 20,000 music teachers nationwide, alleges that the association and its members restrained competition in violation of the FTC Act through a code of ethics provision that restricted members from soliciting clients from rival music teachers. The provision, which the MTNA added to its code in 2004, stated: “The teacher shall respect the integrity of other teachers’ studios and shall not actively recruit students from another studio.”

The proposed order settling the FTC’s charges requires MTNA to stop restricting or declaring it unethical for its members to solicit teaching work from other music teachers.  The order also requires MTNA to maintain an antitrust compliance program.

In addition, MTNA is an umbrella organization for more than 500 state and local music teaching association affiliates throughout the country. Some of these affiliates have codes of ethics that restrain their members from charging fees that are lower than the average in the community, offering free lessons or scholarships, or advertising free scholarships or tuition. The proposed settlement requires MTNA to, among other things, stop affiliating with any association that MTNA knows is restricting solicitation, advertising, or price-related competition by its members.

In a separate complaint, the FTC charged that the California Association of Legal Support Professionals (CALSPro), which represents companies and individuals that provide legal support services in California, violated the FTC Act through code of ethics provisions that restrained its members from competing against each other on price, disparaging each other through advertising, and soliciting legal support professionals for employment.  Specifically, its code of ethics stated: 1) “It is unethical to cut the rates you normally and customarily charge when soliciting business from a member firm’s client”; 2) “It is not ethical to . . . speak disparagingly of another member”; and 3) “It is unethical to contact an employee of another member firm to offer him employment with your firm without first advising the member of your intent.” 

The proposed order settling the FTC’s complaint against CALSPro requires the association to cease and desist from such practices in the future.  The order also requires CALSPro to maintain an antitrust compliance program.

The Commission vote to accept each consent agreement package containing the proposed consent orders for public comment and approving the Commission statement was 4-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through January 15, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments can be filed electronically on the MTNA and CALSPRO matters.

NOTE:  The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

News Source : Professional Associations Settle FTC Charges by Eliminating Rules That Restricted Competition Among Their Members

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