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MODULE C - LEGAL. SUBMODULES C1. Conflict Of Interest/Code Of Ethics C2. Antitrust C3. Torts C4. Intellectual Property C5. Speaking For The Society. C2. Antitrust. OBJECTIVES. This submodule will Explain how antitrust laws affect ASME

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module c legal
MODULE C - LEGAL

SUBMODULES

C1. Conflict Of Interest/Code Of Ethics

C2. Antitrust

C3. Torts

C4. Intellectual Property

C5. Speaking For The Society

ASME C&S Training Module C2

objectives
OBJECTIVES

This submodule will

  • Explain how antitrust laws affect ASME
  • Provide guidelines for avoiding antitrust violations in:
    • Codes and standards development
    • Conformity assessment

ASME C&S Training Module C2

agenda
AGENDA
  • The Antitrust Laws
  • A Brief History of ASME and Antitrust Cases
  • Related Antitrust Cases
  • General Guidelines
  • Basic Do’s and Don’t’s

ASME C&S Training Module C2

i the antitrust laws
I. THE ANTITRUST LAWS

ASME C&S Training Module C2

antitrust legislation
ANTITRUST LEGISLATION
  • The Sherman Act (1890)
    • Regulates certain business activities in interstate commerce
    • Forbids “every contract, combination or conspiracy in restraint of trade or commerce”
    • Prohibits monopolization
    • Basis of most antitrust laws of today

ASME C&S Training Module C2

antitrust legislation1
ANTITRUST LEGISLATION
  • Federal Trade Commission Act (1914)
    • Prohibits “unfair methods of competition” and “unfair or deceptive acts or practices”
  • The Clayton Act (1914)
    • Forbids specific kinds of business transactions, e.g. exclusive dealing and tying arrangements, and certain mergers, acquisitions, joint ventures

ASME C&S Training Module C2

penalties government action
PENALTIES - Government Action
  • Sherman Act violations considered a felony
  • Justice Department criminal prosecution can

result in

    • Corporations
      • Up to $1 million fine
    • Individuals
      • Up to $100,000 fine
      • Up to 3 years imprisonment

ASME C&S Training Module C2

penalties government action1
PENALTIES - Government Action
  • Justice Dept civil injunctive relief can result in
    • Sale of business or prohibition of conduct
  • For FTC Act violations
    • Administrative proceedings
    • Cease-and-desist order

ASME C&S Training Module C2

penalties damaged parties
PENALTIES - Damaged Parties
  • Private Right of Action
    • Lawsuit for damages or injunctive relief
    • Three times actual damages proved

ASME C&S Training Module C2

the costs of antitrust actions
THE COSTS OF ANTITRUST ACTIONS
  • Potential Costs
    • Conviction and/or damage award
    • Plaintiff’s attorneys’ fees and costs
  • Unavoidable Costs
    • Litigation expenses e.g. legal fees, expert witnesses
    • Lost productivity
    • Tarnished reputation

ASME C&S Training Module C2

slide12

INTERPRETING THE SHERMAN ACT

  • Section 1 forbids all joint action that affects interstate or foreign commerce.
  • Interpretations by the courts:
    • Most joint actions found to be legitimate when
      • The motive deemed worthy
      • Trade not unreasonably restrained
    • Arrangements between competitors relating to prices, volumes of production and sales territories—clearly forbidden

NOTE: Proof of formal agreement not required

ASME C&S Training Module C2

interpreting the sherman act
INTERPRETING THE SHERMAN ACT
  • “Unreasonable” business activities
    • “Per se” violations are those that, if successful, seriously damage competition, for example:
      • Price-fixing between competitors
      • Agreements to divide sales territory, customers or products
      • Agreements to limit production
      • Acts that drive competitors out of market

ASME C&S Training Module C2

slide14

INTERPRETING THE SHERMAN ACT

  • The “Rule of Reason”
    • Requires examination of all facts and circumstances to determine:
      • Intent to restrain competition
      • Public unreasonably deprived of access to competing goods or services
    • Makes compliance difficult to determine

ASME C&S Training Module C2

interpreting the sherman act1
INTERPRETING THE SHERMAN ACT
  • Section 2
    • Forbids monopolization and any attempts to monopolize
    • Monopolization = deliberate acquisition or maintenance of power to control prices or foreclose access to a market

ASME C&S Training Module C2

pop quiz 1
POP QUIZ #1

Which of the following would most likely be allowed under the Sherman Act?

  • A friendly agreement between all competitors to put no more than two competing stores in any area.
  • Any joint action that has a worthy motive.

ASME C&S Training Module C2

asme and antitrust
ASME AND ANTITRUST
  • Scrutiny under the antitrust laws
    • Natural to societies and associations like ASME
    • ASME work less suspect than trade association efforts

ASME C&S Training Module C2

asme and antitrust1
ASME AND ANTITRUST
  • Vulnerable ASME activities include codes & standards development and conformity assessment.
    • Legal, recognized as beneficial, often required by regulation
    • BUT may affect competition by
      • Limiting competition to those products that meet the standards
      • Increasing the cost of producing a product
    • Have enormous economic importance

ASME C&S Training Module C2

asme and antitrust2
ASME AND ANTITRUST
  • The keys to avoiding antitrust problems are:
    • Ensuring a principled and controlled impact on competition
    • Reasonable, impartial, open programs that safeguard the rights of individual manufacturers and users
    • Commitment of volunteers and staff to participation consistent with antitrust laws

ASME C&S Training Module C2

pop quiz 2
POP QUIZ #2

Why are ASME’s codes & standards and conformity assessment activities potentially vulnerable to antitrust suits? _____

ASME C&S Training Module C2

pop quiz 3 extra credit
POP QUIZ #3(Extra Credit)
  • Name two ways in which C&S and conformity assessment activities can affect competition.
  • ____
  • _____

ASME C&S Training Module C2

u s v asme 1972
U.S. v. ASME (1972)
  • Complaint
    • ASME accreditation available only to companies with plants in the U.S. and Canada
    • Foreign companies effectively prohibited from selling products in the U.S. and Canada
  • Outcome
    • ASME B&PV accreditation extended to manufacturers worldwide

ASME C&S Training Module C2

asme v hydrolevel
ASME v. HYDROLEVEL
  • Complaint
    • Two Standards Committee members issued an interpretation on ASME letterhead that effectively barred a competitor from marketing his product.
  • Outcome
    • ASME found liable under the antitrust laws for consequences of actions taken by individual volunteers acting with “apparent authority”

ASME C&S Training Module C2

asme v hydrolevel1
ASME v. HYDROLEVEL
  • ASME’s response to the Supreme Court Decision
    • Enhanced due process and appeal rights
    • Interpretation committees
    • Publication and reconsideration of interpretations
    • “Agree to Adhere” form and Engineering Ethics material for new members
    • Leadership and training sessions for committee leaders and staff
    • “Conflict of Interest” policy

ASME C&S Training Module C2

iii related antitrust cases
III. RELATED ANTITRUST CASES

ASME C&S Training Module C2

indian head v allied tube conduit corp
INDIAN HEAD v. ALLIED TUBE & CONDUIT CORP
  • Complaint
    • Metal conduit manufacturers packed 1980 NFPA conference and voted down proposal to revise Fire Code to allow plastic conduit for building wiring
    • Proposal recommended by NFPA panel of experts

ASME C&S Training Module C2

indian head v allied tube conduit corp1
INDIAN HEAD v. ALLIED TUBE & CONDUIT CORP
  • Outcome—Findings were
    • No “balance” of interest groups was observed.
    • All members of the association were allowed to vote on a proposal.
    • The recommendation of an unbiased panel of experts was unjustifiably ignored.
    • A proposal was allowed to fail without valid and objective criteria.
    • A manufacturer was precluded from selling its product on the open market.

ASME C&S Training Module C2

sessions tank liners v joor manufacturers
SESSIONS TANK LINERS v. JOOR MANUFACTURERS
  • Complaint
    • A manufacturer used his position as an NFPA Code Committee member to defeat a proposed revision allowing a competitor’s process.

ASME C&S Training Module C2

sessions tank liners v joor manufacturers1
SESSIONS TANK LINERS v. JOOR MANUFACTURERS
  • Outcome: Findings of a member’s misconduct
    • Misrepresented data
    • Sent anonymous letters opposing the revision
    • Questioned the safety of the competitor’s process
    • Warned of legal implications
    • Called for a vote after the competitor had left the meeting, even though vote not on agenda

ASME C&S Training Module C2

iv general guidelines
IV. GENERAL GUIDELINES

ASME C&S Training Module C2

codes and standards development
CODES AND STANDARDS DEVELOPMENT
  • Things to keep in mind
    • Adoption or revision may:
      • Increase the cost of a product
      • Make nonconforming products unacceptable to buyers.
    • If the standard or revision is reasonable and objective, and does not discriminate unfairly between products, it should not be found to be unlawful.
    • Every volunteer is responsible for ensuring that all provisions of codes and standards can be justified.

ASME C&S Training Module C2

codes and standards development1

(cont’d)

CODES AND STANDARDS DEVELOPMENT
  • Ask yourself these questions:
    • Does the code or standard have a proper objective (e.g., safety or quality)?
    • Is the form the code takes suitable for the industry in question?
    • Is the code or standard based upon valid and objective criteria?
    • Is it the least restrictive standard possible?

ASME C&S Training Module C2

codes and standards development2
CODES AND STANDARDS DEVELOPMENT
  • Ask yourself these questions (cont’d):
    • Is the Standards Committee broadly based?
    • Are any potential conflicts of interest in the group considered and publicized?
    • Have opposing views been considered?
    • Are the procedures followed in developing or referencing a code or standard fair?

ASME C&S Training Module C2

fairness
FAIRNESS
  • Means the following:
    • Adequate public notice of the proposed adoption of a standard
    • An accurate record of the considerations available
    • A formal and publicized appeals process
    • Periodic review and revision of standards to reflect current technology
    • All industry members have an opportunity to conform to the standards

ASME C&S Training Module C2

issuing interpretations
ISSUING INTERPRETATIONS
  • Special consideration
    • Interpretations do not revise standard’s requirements; limited involvement by general public
  • Guidelines
    • Interpretations should not appear to have an unreasonable effect on competition.
    • Objectivity and technical accuracy are essential.
    • They must be supported by specific wording in the code or standard.
    • Volunteer should avoid even the appearance of conflict of interest.
    • Report doubts to next highest level.

ASME C&S Training Module C2

accreditation
ACCREDITATION
  • Guidelines
    • Decision criteria must be objective, non-discriminatory and technically justifiable.
    • Safeguards against conflicts of interest are critical.

NOTE: ASME procedures are in place for appeal upon denial of accreditation.

ASME C&S Training Module C2

v basic do s and don t s
V. BASIC DO’S AND DON’T’S

ASME C&S Training Module C2

slide39

BASIC DO’S AND DON’T’S

Don'tattend any meetings under ASME auspices that do not a have a fixed agenda of matters to be covered.

ASME C&S Training Module C2

slide40

BASIC DO’S AND DON’T’S

Don't take part in any "rump" sessions at which matters before a committee or other body as a whole are to be discussed.

ASME C&S Training Module C2

slide41

BASIC DO’S AND DON’T’S

Don't discuss prices of competing or potentially competing products and don't disparage any particular product--whether or not it meets ASME standards.

ASME C&S Training Module C2

slide42

BASIC DO’S AND DON’T’S

Don't attempt to influence ASME standards activities and programs to benefit your own business activities or those of your employer in a manner not available to the public.

ASME C&S Training Module C2

slide43

BASIC DO’S AND DON’T’S

Don't discriminate against nonmembers of ASME or give preferential treatment to ASME Committee members.

ASME C&S Training Module C2

slide44

BASIC DO’S AND DON’T’S

Do make your company's interest in the subject clear to other members of your committee, when revising or interpreting a code or standard.

ASME C&S Training Module C2

slide45

BASIC DO’S AND DON’T’S

Do bring to the attention of ASME's officers or staff immediately any actual harm or potential harm related to a code, standard, revision, or interpretation.

ASME C&S Training Module C2

in conclusion
IN CONCLUSION
  • Points to remember
    • The antitrust laws are complicated. Compliance is largely a matter of common sense and fairness. Ask:
      • Does any action taken by ASME or its volunteers lead to an unreasonable restraint of trade?
      • Is any particular business hurt by a code, standard, or interpretation, when it need not be to achieve a justifiable technical or public interest objective?

ASME C&S Training Module C2

pop quiz 4
POP QUIZ #4

Which of the following could lead to antitrust problems?

  • An acquaintance mentions that a recent interpretation will have a devastating effect on a certain company. You say ho-hum and forget it.
  • A committee chairman uses his office to delay the approval of a revision to a standard
  • A committee member’s request for interpretation is moved up on the agenda, causing other items to be delayed due to lack of time.

ASME C&S Training Module C2

pop quiz 5 extra credit
POP QUIZ #5(Extra Credit)

Which of the following could lead to antitrust problems?

  • You are having lunch with two other members of your committee and you get into a serious discussion regarding the accreditation of a company under consideration by the committee.
  • You are under pressure to get your committee together and decide to dispense with a formal agenda. “Everyone knows what we have to talk about, anyway,” you think to yourself.

ASME C&S Training Module C2

summary
SUMMARY
  • The Antitrust Laws
  • A Brief History of ASME and Antitrust Cases
  • Related Antitrust Cases
  • General Guidelines
  • Basic Do’s and Don’t’s

ASME C&S Training Module C2

slide50

REFERENCES

Legal Implications of Codes and Standards Activities:

“A Guide to Antitrust Compliance for ASME Volunteer and Staff Members,” adopted by CCS March 23, 1982

ASME C&S Training Module C2