MITEK ANTITRUST COMPLIANCE
MITEK ANTITRUST COMPLIANCE POLICY
It is the policy of MiTek Industries, Inc. and its subsidiary companies (collectively referred to as the “Company”) to comply with all laws applicable to their operations. An important corollary of this policy is our commitment to strictly obey the antitrust laws. Violations of the antitrust laws can result in enormous damage to the resources and reputation of the Company and of the individuals involved. Given the pervasive influence and effect of federal and state antitrust laws on all phases of the Company’s operations and the potential ramifications of their violation, it is imperative that all Company officers and employees not only adhere to the letter of the antitrust laws, but also avoid the appearance of anti-competitive conduct in their business activities and dealings with customers, suppliers and competitors of the Company.
The attached Guidelines, which update the Company’s long-standing policy, are designed to educate you about the requirements of U.S. antitrust laws most directly applicable to the Company’s business. Unlike many other laws, U.S. antitrust laws have extensive application to activities taking place outside of the United States, whether or not the individual or corporate participants are of American nationality. While there are limits to the extraterritorial application of the U.S. antitrust laws, they are so ill-defined that it should be assumed, in the absence of advice of counsel to the contrary, that the U.S. antitrust laws do apply to international transactions and operations.
The general managers of subsidiary companies within MiTek that operate wholly outside of the United States, with the assistance of counsel, are expected to adopt and promulgate similar guidelines based upon the competition or antitrust laws of the countries in which they operate.
The Guidelines are not a complete explanation of the U.S. antitrust laws, but they will assist you in your day-to-day business activities and help you recognize when antitrust issues arise so you can obtain timely legal advice. Whenever you encounter a situation that you believe raises antitrust concerns, you should promptly consult with your superior and/or the legal department.
I want to reaffirm that it is the obligation of every Company officer and employee to adhere to this Policy and the Guidelines. Moreover, each officer, department head and manager throughout the Company has the responsibility to ensure that our Policy is implemented and the enclosed Guidelines are followed since the proper handling of these important issues is critical to our continued success.
Mark A. Thom
Chairman and Chief Executive Officer
ANTITRUST COMPLIANCE GUIDELINES
The purpose of these Antitrust Compliance Guidelines is to assist Company employees in avoiding conduct which is potentially problematic or illegal under U.S. antitrust laws. It is not intended state the whole of the U.S. antitrust laws nor to list all conduct which may be problematic thereunder.
Competition is an economic process that results in the efficient allocation of our free society’s resources. Competition requires that buyers and sellers be given the freedom to buy and sell their products or services without having unreasonable restraints imposed on them by other buyers or sellers. The U.S. antitrust laws — the Sherman, Clayton, Robinson-Patman and Federal Trade Commission Acts — have all been enacted to protect and enhance competition, protect consumers, and prohibit, among other things, unfair, predatory and deceptive business practices.
The importance that our American political and economic system places on competition is reflected in the penalties that can be imposed for violations of the antitrust laws. The most serious antitrust violations — agreements between competitors on pricing, bid-rigging, and division of markets — can subject an individual to imprisonment for up to ten years and a fine of up to $1,000,000. The Company itself can be fined up to $100 million for such violations. These amounts can be even greater depending on the loss to the victim or the gain realized by the Company from the unlawful activity. Collusion among competitors may also constitute violations of the mail or wire fraud statutes, the false statements, statute, or other federal felony statutes.
In addition, private parties such as customers and suppliers who are injured because of a violation of the antitrust laws can sue and recover an amount (against both individual violators and their employer corporations) equal to three times the actual loss sustained. Even a government investigation or a lawsuit, without finding any violation or liability, can be extraordinarily disruptive of the Company’s business and very costly in terms of out-of-pocket expenses and lost business opportunities.
Because of the important role antitrust laws play in safeguarding the efficiency of our economic system and the serious consequences of any violation of these laws, any failure to follow these guidelines can result in termination of your employment.
Although interpretation and application of the antitrust laws is sometimes a complicated job, some relatively straightforward standards can be provided. If you follow these principles, the chances that the Company — or you — will be accused of violating, or found to have violated, antitrust laws will be minimized.
3.0 RELATIONS WITH COMPETITORS
3.1 Prohibited Communications and Agreements
The greatest potential for exposure to antitrust problems results from contact with competitors. Virtually every communication between competitors, no matter how seemingly unrelated to business operations, is suspect under the U.S. antitrust laws. The mere exchange by competitors of information relating to prices, costs, methods, customers or geographic markets can lead to serious consequences. Accordingly, the Company’s employees shall not discuss or enter into any agreements or understandings, including “gentlemen’s agreements” or unspoken tacit understandings, with any competitor concerning prices, pricing policies, discounts, allowances, credit, mark-ups, terms or conditions of sale, costs, choice of customers, market territories, production quotas, production restraints, allocation of customers, allocation of territories, bidding of jobs, new technologies or applications, or business plans.
The Company’s employees are also prohibited from engaging in any discussions or communications concerning these subjects with any competitor, and from attending any meeting or assembly of competitors during which these subjects are mentioned or discussed, whether or not the employee is a participant in such discussions. The Company’s employees shall not send or receive price information to or from a competitor. Information concerning competitor pricing activities, including price lists, may be obtained from the Company’s customers or other noncompetitive sources. 1
1Where a competitor is also a supplier to or customer of the Company, it is permissible, in the ordinary course of business, to discuss or agree upon prices charged to or by the Company on the actual product to be sold to or from that competitor.
3.2 Evidence of Unlawful Conduct
An agreement can be found to exist even where there is no direct evidence, such as a written signed document. Most agreements which are found to be antitrust violations are based on much less — usually on circumstantial evidence. For example, a meeting of competitors followed by each competitor raising its price can be evidence that those competitors agreed with each other to raise prices jointly. Even raising the subject of prices in discussions with a competitor can have serious antitrust consequences. In recent years, the Antitrust Division of the Justice Department and the Federal Trade Commission have taken the position that even the mere suggestion by one competitor to another that the latter’s prices are too low, or that the other competitor’s pricing structure is “ruining the market”, warrants an antitrust action — even where there is no other evidence of an agreement on pricing.
3.3 Determination of Prices and Terms and Conditions of Sale
The Company’s prices must be determined independently, in view of the Company’s cost, market conditions and other competitive prices. While competitive prices can be legitimate bases for determining the Company’s prices, information on competitive prices should be obtained from published lists previously circulated to the trade, invoices or quotes obtained from our customers, or from other third-party sources which previously received the price information from the competitor. Even in these otherwise permissible situations, the method of obtaining the price data should be documented so that it not appear that the information was obtained directly from a competitor. The Company will neither seek nor accept offers of price information from competitors.
3.4 Price-Fixing Arrangements
Price fixing is the most frequently prosecuted type of antitrust violation. Generally, any agreement or understanding by which two or more competitors raise, lower, peg, or stabilize prices would be considered price fixing. Similarly, any arrangement whereby competitors fix the prices which they will pay for raw material is illegal. It does not matter whether the aim is to fix maximum or minimum prices, or whether there is an agreement on a specific price or a pricing system (i.e., cost plus a certain mark-up, all prices quoted F.O.B., a certain city, etc.).
Agreements or understandings by or between competitors that indirectly affect prices may also be considered unlawful. These could include:
Understandings regarding other terms of sale or purchase to be offered, such as credit terms or shipping charges.
Arrangements among competitors to limit production or production capacity because a likely consequence would be an increase in price.
Agreements among competitors to appoint a common exclusive sales or purchasing agent because this could permit a single agent to determine prices for otherwise competitive products.
Understandings among competitors which affect the amount or placement of competitive bids.
Also, the exchange of information with competitors regarding price, costs, or pricing practices is risky. Indeed, enforcement authorities now claim that the concept of price fixing embraces conduct called “signaling” or “conscious parallelism” which involve no direct contact between the competitors (e.g., a pattern of press releases concerning future prices).
The Company’s prices must be determined independently, based on costs, market conditions, and competitive prices. While competitors’ prices may be considered, they should be obtained only from sources other than competitors, such as customers, or public sources such as newspapers and trade publications.
When a competitor is also a customer or supplier of the Company, discussion of or agreement upon prices to be charged to or by the Company ought to be confined solely to the transactions with that competitor and limited to the products being sold or purchased.
Employees dealing with a competitor as a customer should be careful to limit all discussions and understandings to only the specific details of the particular transaction.
It has been the enforcement policy of the Department of Justice to seek prison sentences in criminal prosecutions for price fixing. In many of these prosecutions, the jury is asked to infer an agreement to fix prices from a pattern of general conversations among competitors about “the state of the market”, “the need for responsible pricing”, the impact of “discounting”, and similar topics bearing some relationship to price.
Accordingly, conduct and conversations suggestive of improper collusion must be avoided. It is the responsibility of employees to be sensitive to the implications of their remarks and the way they might be interpreted out of context.
3.5 Dividing Markets or Allocating Customers
Agreements or understandings with competitors to divide markets or allocate customers are prosecuted vigorously. These agreements may take any of several forms, but the following are illustrative:
A division of geographic markets where one competitor agrees not to sell in particular territories in return for assurances from another competitor not to sell in other territories.
A division of product markets where one competitor agrees to limit or cease its production for marketing of a given product in return for a competitor’s agreement to limit or cease production or marketing of another product.
A division of customers whereby one competitor agrees to sell only to certain designated buyers, while the other competitor agrees to sell only to others.
Agreements by companies to refrain from competitive conduct, such as an understanding that a company will not enter a new geographic market or manufacture a new product in exchange for another company’s staying out of other geographic or product markets, or an arrangement that a company will not bid for one customer’s business if another company will refrain from bidding on the business of another customer.
Particular care must be taken in transactions in which the Company is a supplier to or a customer of a competitor. The sales agreements should not restrict either party’s freedom to sell to customers or in such market as each may independently choose.
3.6 Agreements Limiting Supply, Quality or Improvements and Joint Business Activity
Any agreement or understanding between two or more persons which may restrict the volume of goods that a competitor will produce or make available for sale is also illegal. Likewise, any agreement or understanding between competitors which may suppress technological development or limit the quality of products is also illegal (e.g., any agreement to limit research expenditures). While permissible if appropriate in scope and application, proposals for joint research with competitors or potential competitors must be reviewed by legal counsel. Similarly, agreements among competitors establishing product standards or guidelines may also present difficulties and should be reviewed with counsel when appropriate. The legal principles governing joint operations are complex and sometimes ill-defined and necessarily require an assessment of the structure of the industry, the position of the participants in the industry, and the business purpose and likely competitive effect of the joint operations.
3.7 Refusals to Deal
The Company may decide unilaterally to sell to or to buy from whomever it wishes. However, any understanding or agreement with competitors to refrain from dealing with designated buyers, traders, or suppliers is to be avoided. It is no excuse that there is a sound business reason for the joint refusal to deal. For example, the fact that a buyer is a ‘credit risk’ would give each supplier, acting independently, a right to refuse to sell to him. However, it would be illegal for a group of competitors to take collective action to boycott the buyer. Each company must decide its own course of action independently.
4.0 TRADE ASSOCIATIONS AND PROMOTION GROUPS
4.1 Risk of Membership in Trade Associations and Promotion Groups
Although many trade associations and promotion groups (“trade associations”) conduct activities which are perfectly lawful and beneficial to the Company, they often create antitrust risks because they involve meetings among competitors. This is because the contacts with competitors that occur in such settings, both formal and informal, business and social, can easily be misconstrued. At all times, employees must be sensitive to the implications of contacts with competitors. Participation in trade association activities has been the basis for finding antitrust liability on the part of trade association members, both individuals and companies, when those activities have been found to violate the antitrust laws. For example, several significant antitrust cases have focused on cement industry trade associations and activities sponsored by those organizations.
Most trade organizations are fully aware of the antitrust risks created by attendance at trade association meetings and have adopted procedures designed to minimize those risks, including attendance at meetings by antitrust counsel. The Company’s employees authorized to attend trade association meetings should only participate in those events officially sponsored by the association. Even at organized events, if discussions about price or markets or business conditions arise, you should — diplomatically, but firmly — point out the antitrust implications of the discussions, renounce the conversation in a manner that will leave no doubt as to your objections to the conversation and withdraw immediately. Additionally, you should not participate in informal gatherings of competitors before, during or after any trade association meeting and you should refrain from socializing with any competitor representatives.
Any conduct which is improper when engaged in by corporations and their representatives will not become proper merely because it occurs in the context of, or is otherwise sanctioned by, a trade association. You must not engage in conversation with a competitor concerning general business matters, including topics such as price trends, sales territories, market shares, new products, production costs, production levels and product quality. If a competitor attempts to engage you in a business-related conversation, you should firmly and definitively conclude or withdraw from the conversation. You should also make a follow-up report to your superior or the Legal Department, so that appropriate steps may be taken to eliminate the appearance of any agreement between the Company and the competitor on the attempted subject.
These guidelines apply to any gathering of, or communication with, competitors. They apply to conversations at any trade association events, but also to regular business meetings and informal conversations in setting such as a bar, on the telephone, on the golf course, or during a social dinner. It must always be remembered that because even the most innocent of remarks can be misinterpreted or misconstrued, there is no such thing as an “off the record” conversation between competitors.
The Company’s employees shall not, without prior written approval of the Company attend trade association meetings where trade association or special counsel is not in regular attendance.
4.2 Lawful Activities and Pitfalls
Legitimate trade association activity — such as communicating with government agencies, engaging in cooperative research and promoting industry products — is perfectly lawful. Nonetheless, if you intend to participate directly in these kinds of activities (such as by serving on a committee or task force or working group), you should obtain advance approval from your superior and advise the Legal Department. While a great deal of trade association work is lawful, activities such as product certification, standard setting and political and legal efforts can raise sensitive issues which should have legal review. Similarly, a trade association may undertake, and request its members to participate in, a program of collecting and sharing statistical information. If conducted properly, these programs are lawful. However, since they involve the exchange of information and data among competitors, such exchanges must be limited to certain types of information and there must be safeguards to protect against anti-competitive use or consequences. Do not participate — or commit the Company to participate — in a data exchange program until the program has been cleared by your superior and the Legal Department.
4.3 Factors to Consider Prior to Joining a Trade Association
Trade associations may be joined only when supported by legitimate and meritorious business purposes. Specific consideration shall be given to the type of association, its objectives, membership eligibility rules, its history, activities and methods of operation. Company employees shall consult with the Legal Department before submitting Company statistics or other information to any new trade association. Records should be kept by participating Company employees of their attendance at trade association activities and the general nature of subjects discussed at any meetings involving competitor representatives.
5.0 RELATIONS WITH CUSTOMERS
5.1 Independent Selection
As a general rule, the Company is free to select its own customers, but it must do so independently. Company employees shall not enter into any understandings, including “gentlemen’s agreements” or unspoken tacit understandings, with a competitor, customer or another party to do or refrain from doing business with a third party. Normal and customary noncompetitive credit sources, such as a credit bureau, may be consulted in reaching an independent decision to deal with or not to deal with another company. However, involvement in any discussion with a competitor or customer to restrict competition must always be avoided.
5.2 Refusal to do Business
Similarly, the Company is generally free to refuse to do business with another company when it so desires. Nonetheless, it is illegal to refuse to purchase from a particular supplier or to sell to a potential customer in order to force such supplier or customer to enter into an agreement that would violate the antitrust laws. One such scenario can arise in the refusal to sell to a customer unless it agrees to purchase all of its requirements of a given commodity from the seller. Because refusals to deal frequently lead to litigation, you should consult with your superior and the Legal Department before the Company refuses to sell to any customer or prospective customer (whether or not the Company has done business with the party in the past) except where such refusal to deal is based solely upon credit considerations. In those instances where the refusal to deal is based solely upon credit considerations, a written record should be maintained stating the reasons for those decisions.
While the Company has the right to make unilateral decisions regarding selection and termination of those with whom it wants to do business, once the relationship of customer or supplier is created, termination, or even threatened termination of the existing relationship, oftentimes presents a serious threat of antitrust, as well as tort and contract litigation. Accordingly, legal counsel should always be consulted before terminating or “threatening” to terminate any such existing relationship, except when: (a) there are valid credit reasons for the termination; (b) the Chief Financial Officer of the Company has approved the termination; and (c) there have been no threats or “hints” of termination in the past, other than legitimate warnings concerning failure to adhere to objective criteria.
5.3 Sales of Products
The Company’s products must be sold on their own merits. You should not condition the sale of any Company product on the customer’s purchase of another Company product, or the purchase of any other company’s product, or the customer not purchasing the product of a competitor. No agreement which requires a customer to buy all or a substantial portion of its requirements from the Company may be entered into before consulting your superior and the Legal Department.
One significant area, a tie-in arrangement, bears specific mention. A tie-in arrangement occurs when a manufacturer with a strong market position with respect to one product conditions the sale of that product on the buyer’s agreement to purchase other product(s) which the buyer may not want. Similarly, using the leverage of one product in scarce supply or of unique quality to persuade a customer to buy an additional product is risky. The essence of the offense is a requirement that a customer purchase a product or service he does not want in order to obtain one he wishes to purchase. It is against Company policy to engage in tie-in sales, without a careful assessment by senior management.
5.4 Resale Prices and Marketing Areas
Company employees shall not enter into any agreements or understandings, including “gentlemen’s agreements” or unspoken tacit understandings, concerning the resale prices or terms and conditions of resale of a customer’s products. It makes no difference whether the agreement or understanding is aimed at higher, the same as or lower prices.
The Company, as a matter of corporate sales policy, does not suggest or recommend resale prices and generally does not establish any exclusive territories for its customers–any such proposed arrangement must be reviewed in advance by legal counsel in advance. These kinds of policies would have to be carefully planned and implemented to avoid antitrust problems. As a result, as a matter of Company policy and to avoid antitrust concerns, you should not pressure, threaten, coerce or strongly suggest that a customer sell its product at a specific price or into a designated area or only to particular customers.
Complaints directed to the Company by a customer about the marketing practices of another customer should be promptly reported to management or the Legal Department. You should not communicate, either orally or in writing, with either customer concerning such practices without prior involvement of your superior and the Legal Department.
5.5 Coercive Practices
Understandably, the Company wants customers to buy from us and not from our competitors. It must be remembered, however, that the antitrust laws are designed to protect “competition”, not individual competitors. If a practice deprives one of the Company’s competitors of an opportunity to compete on the merits —that is on the basis of price or quality of their product — the practice could be unlawful. Conditioning the sale of one product which the customer needs or wants on the customer’s purchase of another product which it may neither need nor want, could be construed as an unlawful tying arrangement. Another example is threatening a customer that the Company will not sell to that customer if it continues purchasing any part of its product requirements from another supplier. If the customer thereafter reduces purchases from the other supplier, the threat and acquiescence could be construed as an agreement to refuse to deal with the other supplier and a violation of the antitrust laws may be deemed to exist.
Reversing the coin, it is conceivable that on occasion a Company customer, particularly a large customer, might try to obtain an advantage over his competitors by threatening to switch suppliers, or cut back on purchases from us unless we stop selling to one or more of his competitors, or sell only at a price or on other terms and conditions that are less favorable.
Acquiescence in such “persuasion” could be construed as an unlawful agreement and, therefore, all instances of such tactics must be reported by Company employees to their supervisor and Legal Department.
Our corporate sales policy is that the Company always makes unilateral decisions concerning to whom it will sell and on what terms and conditions it will sell. To implement this policy and to avoid any implication that the Company entered into an agreement with one of its customers to sell to other customers only on less favorable terms if at all, you must disregard these kinds of efforts. Any attempts by a customer to “persuade” you should be dealt with —diplomatically but firmly — by making clear that our policy is to always decide independently to whom and on what terms we will sell our product.
5.6 Price Discrimination
The Robinson-Patman Act generally prohibits selling the same Company products at different prices or with different terms, services or allowances to different customers who compete or whose customers compete in the distribution of Company products.
Although the Robinson-Patman Act provides several defenses to claims of price discrimination, the only practical defense that is usually available is the “meeting competition” defense. This defense permits the Company to charge one customer a lower price (or offer more favorable terms and conditions of sale) in order to meet the price or terms and conditions offered to that customer by a competitor. To qualify for this defense, the Company must have a good faith belief that one or more of its competitors is offering that customer a better price or more favorable terms and conditions of sale.
A good faith belief requires some plausible evidence that a better price or more favorable terms have in fact been offered. The best type of such evidence is an actual invoice or other document from the competitor showing the more favorable price or other terms. If the customer declines to provide documentary evidence, you may be entitled to rely on other evidence, such as a written statement from the customer or your general knowledge of conditions in the market, provided they support the customer’s assertion. You may consider, in deciding whether plausible evidence of the more favorable price exits, how well you know the customer and your appraisal of the customer’s truthfulness. UNDER NO CIRCUMSTANCES SHOULD YOU CONTACT A COMPETITOR TO VERIFY THE EXISTENCE OF A BETTER PRICE OR THAT OTHER TERMS HAVE BEEN OFFERED TO THE CUSTOMER.
5.7 Assurances and Representations
The antitrust laws do not impose upon the Company an affirmative obligation to further the competitive success of any customer. You should be very cautious about making statements to customers that could become the basis for a customer asserting that the Company acquired an obligation to insure the commercial success of a customer in order to induce that customer to buy from us.
Words which could imply such an obligation — such as “we’ll keep you competitive” or “you’ll get the best price in the market” — should absolutely be avoided. Although these kinds of statements alone do not create any potential liability under the antitrust laws, they can subject the Company to a civil action for breach of contract or for misrepresentation if the customer does not in fact receive the “best price” the Company has made available to the market. Statements like this can provide a way for the customer to shift his competitive or commercial failures —whatever their cause — to the Company by way of litigation. You should alert your superior if any customer persistently complains that he is being treated unfairly or that another customer is receiving a better price or other preferential terms.
5.8 Risk of Carelessness and Improper Appearances
In the conduct of the Company’s business, it is important to avoid not only actual antitrust violations, but also the mere appearance of conduct which is or may be unlawful under the antitrust laws. For example, Company employees must avoid being present during discussions of an improper nature, and shall immediately and unequivocally disassociate themselves from such discussions when they arise. Also, communications or correspondence should never be conducted in a concealed or surreptitious manner.
The Company’s sources of competitive information and the basis of its business decisions should be clearly documented. Misunderstanding and innuendo should be avoided and when discovered, immediately corrected. Company employees should be careful to record accurately what transpired and not use ambiguous words which may have an unintentional and unfortunate meaning or implication. The Company’s files, as well as the personal records of any individual employee, may be subpoenaed and subjected to intensive analysis by government authorities or private litigants.
Even the best and most scrupulously followed antitrust compliance policy can be defeated through careless origination of documents that create the false impression that improper behavior has occurred.
For instance, a document discussing pricing practices of a competitor which refers to “rules of the game” may have a perfectly innocent meaning — but can easily be interpreted as suggesting that pricing decisions have been made in accordance with “rules of the game” agreed upon by competitors. Similarly, a report that “competitor XYZ has stated an intention to increase prices in the Baton Rouge market” may create the impression that you have learned that information directly from the competitor. Because Company policy prohibits such discussions with competitors, the source of that information would in fact have been a third party. More properly, the report should reflect the identity of the source, such as “according to our customer ABC, our competitor XYZ has stated an intention to increase prices in the Baton Rouge market.”
Avoid the use of words in written reports which might be misunderstood. Do not suggest or direct that a report be destroyed after it is read. This conveys the impression that the activity described in the report is somehow improper. Do not exaggerate or express conclusions that certain activity is unlawful or unethical. Do not exaggerate the Company’s position in the market. Statements such as “we dominate” or “we have the power to control” competition or in market raise undesirable inferences – whether they are accurate or not. Reports should be objective and complete, and you should always avoid the use of language that is misleading and ambiguous.
5.9 Government Investigations and Litigation
It is the policy of this Company to cooperate with every reasonable request of federal and state investigators seeking information concerning the Company’s operations for antitrust enforcement, or other purposes as well. At the same time, the Company is entitled to all the safeguards provided by law for the benefit of persons under investigation, including particularly the representation of counsel. Consequently, if any government or private agency, including the Department of Justice, Federal Trade Commission, Federal Bureau of Investigation, or any similar state agency, as well as any foreign government agency or private investigator requests an interview with a Company employee, seeks data or copies of documents, or seeks access to files, the representative should be told that the Company cannot make any statements or provide any information until the matter has been referred to the Company’s legal counsel for instruction. All requests, written or oral, must be reported to counsel immediately. Counsel will provide advice as to appropriate response.
6.0 EMPLOYEE OBLIGATIONS
In order to ensure compliance with both the letter and spirit of the antitrust laws, all employees receiving the Antitrust Compliance Policy and these Antitrust Compliance Guidelines are required to do the following:
Study the Policy and these Guidelines carefully, and review them, at least, on an annual basis.
Seek advice from legal counsel whenever you suspect a particular situation might pose a problem under the antitrust laws.
Never engage in any conduct inconsistent with the antitrust laws, the Policy or these Guidelines; never direct, authorize or condone such conduct by any other person.
Promptly report to management known or suspected violations of the antitrust laws, the Policy or these Guidelines, regardless of whether the violator is an employee of the Company (to the fullest extent possible, the name of the employee reporting the information will be kept confidential).
7.0 COMPANY SANCTIONS
Because there is no such thing as a “minor” violation of the antitrust laws, an intentional violation may result in the most severe sanction the Company can impose — immediate discharge. In those rare occasions were a violation is attributable to inexperience or excusable lack of information, corrective action short of discharge may be appropriate.
Disciplinary action will be taken not only against those individuals who authorize or participate in a direct violation, but also against any other employee who may have willfully and deliberately withheld relevant and material information concerning a violation, and in appropriate instances, against the violator’s management superiors (to the extent the circumstances of the violation reflect inadequate leadership or lack of diligence).
8.0 SUMMARY AND CONCLUSION
If you remember and observe the key points of the Antitrust Compliance Policy and these Guidelines, the chances of running afoul of the antitrust laws will be reduced significantly:
Always determine a competitor’s prices unilaterally and from only legitimate third-party sources.
Do not enter into any agreement, understanding or discussion with a competitor concerning prices, discounts, allowances, terms of sale, costs, choice or allocation of customers, territories, markets, production restraints, competitive information or bidding of jobs.
Only participate in trade association activities that serve lawful and meritorious business purposes. Do not attend meetings with competitors where prices or any of the subjects listed in 8.0b are discussed. Leave the meeting if these subjects come up and to the extent you have been involved in a conversation which begins to shift its focus to these topics, immediately renounce the conversation and withdraw therefrom.
Always select customers independently. Exercise care and good judgment when refusing to sell to a customer or prospective customer and contact the legal department if any action or decision seems questionable.
Do not condition the sale of any product on the customer’ s purchase of another product.
Do not enter into any agreement, understanding or discussion with a customer or supplier concerning resale prices.
Contact the legal department before entering into any agreement, understanding or discussion with a customer or supplier concerning any restrictions on market territories for the customer’s or our products.
Do not pressure a customer to refrain from purchasing from other suppliers.
Always obtain competitive price information from published lists, invoices or quotes furnished by customers or other noncompetitive sources.
Always use care and be objective and accurate in preparing written reports, correspondence, electronic communications, computer files or other documents.
If meeting a competitive price offered to a customer, record the basis for your good faith belief that the customer has been quoted a more favorable price by one of our competitors. Do not, however, contact the competitor to verify the better price.
The Policy and these Guidelines are intended to set forth the Company’s policy on antitrust compliance and as an aid to assist employees in fulfilling their responsibilities in connection with this important objective. The obligation to follow the law applies to each employee as well as to the Company. Each employee’s responsibility includes: being alert to situations which present antitrust risks, knowledge of our policy, and seeking the advice of legal counsel where there is any doubt as to the legality of any action. The fulfillment of these responsibilities is basic to the satisfactory performance of every employee’s job. There is no commercial objective which is more important than obeying the law.
APPENDIX TO GUIDELINES
9.0 SUMMARY OF KEY STATUTORY PROVISIONS
The principal federal antitrust laws are:
9.1 Section 1 of the Sherman Act, which prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce …”
Section 1 of The Sherman Act prohibits contracts, combinations and conspiracies in restraint of trade. Attempts to restrict free pricing of competing products (‘price-fixing’) are frequently assailed under this law. Although this provision requires participation of two or more parties, the plaintiff does not have to prove that the parties formally agreed to the alleged activity in order to win its case. Indeed, the conscious commitment by two or more parties to achieve an unlawful objective may be all that is needed to establish a conspiracy in violation of the Act. The existence of the conspiracy often may be established from circumstantial evidence.
Section 1 has been interpreted by the courts as prohibiting only those arrangements which “unduly” or “unreasonably” restrain interstate or foreign trade or commerce. Certain arrangements, however, are deemed to be so indefensible under any circumstances that they are presumed to be unreasonable and, therefore, illegal. Commonly referred to as per se violations, they are the following agreements between competitors: price fixing, allocation of markets, limitation of supply, and boycotts. Further, tying arrangements can be deemed presumptively illegal. Also, other types of business conduct may be considered “unreasonable” restraints of trade and, therefore, illegal under Section 1, depending on the surrounding facts and circumstances. These are known as “rule of reason” cases and examples are refusals to deal and reciprocal dealing arrangements.
9.2 Section 2 of the Sherman Act, which prohibits monopolization, attempts to monopolize and combinations or conspiracies to monopolize any part of trade or commerce.
Monopolization requires possession of power to control prices, to drive competitors out of the market, or to prevent them from entering the market. The mere possession of such power is not a violation. The law intervenes only when monopoly power is achieved or maintained through an abuse of power. An attempt to monopolize can be committed by a company that does not have monopoly power. The offense involves both an intent to monopolize a market and a specific effort to accomplish such an end. If the attempt is participated in by two or more concerns, it becomes a combination or conspiracy to monopolize.
It is impossible to catalog all business practices that may form the basis for a charge of monopolization or an attempt to monopolize. Among such practices, however, are: (1) sharp price reductions or sales below cost in a limited market area for the purpose of crippling one or more local or regional competitors or other competitors in the relevant market; (2) a systematic attempt to exclude competitive products from a market by means of exclusive agreements, boycotts, tying arrangements or other “power” tactics; (3) the acquisition or pooling of blocks of patents so as to “fence out” competitors; (4) prematurely announcing products to be marketed in the future and, thus, hindering a competitor from selling products presently available; (5) harassment of competitors with threats of patent infringement suits; and (6) limitation of a competitor’s access to raw materials.
9.3 Section 3 of the Clayton Act, which prohibits contracts for the sale of goods on condition that the purchaser not deal in the goods of a competitor of the seller where the effect of such contract may be substantially to lessen competition or tend to create a monopoly.
9.4 The Robinson-Patman Act, which prohibits discrimination in price between different purchasers of commodities of like grade and quality where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly or to injure, destroy or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them, except where any differential may be cost justified or made in good faith to meet a competitor’s price.
Discrimination in price may occur when competing customers are charged different prices for the same goods or goods of like grade and quality. To violate Section 2(a) the discriminatory pricing must result in competitive injury to a one or more disfavored competitors or customers. Goods of like grade and quality normally have substantially similar physical and chemical characteristics. The like grade and quality distinction cannot be circumvented on the basis of insignificant product differences.
There are, however, several possible defenses to price discrimination, including: (a) cost justification; (b) meeting competition; (c) changing conditions; and (d) functional discounts.
Section 2(f) prohibits under certain circumstances buyers’ requests for discriminatory prices from suppliers. If a buyer knows, or has sufficient information about the market that he should know that the price he induces or receives is lower than his competitors are able to obtain from the same supplier for the same basic commodity, and if the lower price adversely affects competition and none of the justifications outlined above can be shown to exist, the buyer has violated Section 2(f) of the Robinson- Patman Act.
Section 2(a) of the Robinson-Patman Act also prohibits under certain circumstances discriminatory prices intended to injure a competitor or drive it out of business. Sales below average variable cost are generally considered unreasonably low prices.
9.5 Section 5 of the Federal Trade Commission Act which prohibits “unfair methods of competition” and “unfair or deceptive acts or practices.” The Federal Trade Commission Act is more inclusive than the Sherman and Clayton Acts. The following are examples of practices prohibited by the broad scope of the Act when marketing products or services:
(1) harassment of competitors by fictitious inquiries or unfounded lawsuits; (2) inducing a breach of contract between a competitor and his customer or supplier; (3) tampering with competitors’ products, collecting and destroying competitors catalogs or sales literature; (4) theft or misappropriation of competitors’ trade secrets; (5) disparagement of competitors or their products or services by making false, inaccurate or deceptive comparisons with them, or by misrepresenting their performance capability or financial status commercial bribery or payoff; (6) coercion or intimidation of customers or suppliers; (7) shipment to customers of unordered goods, or the substitution of goods differing from those ordered without the customers consent; (8) mislabeling of products or services; (9) passing off a firm’s products or services as those of another firm; (10) simulation of competitors’ advertising, name, or marks; (11) misleading advertising or unfounded representations concerning a firm’s own products; (12) failure to disclose the foreign origin of a product; and (13) excessive “pre-ticketed” prices.
The antitrust laws have extensive application to activities taking place outside the United States, whether or not the individual or corporate participants are of American nationality. While there are limits to the extraterritorial application of the antitrust laws, they are so ill-defined that it should be assumed, the absence of advice of counsel to the contrary, that the antitrust laws do apply to international transactions and operations. Generally, transactions which have some appreciable, albeit small, impact on any domestic line of commerce will be subject to the antitrust laws.
The antitrust laws of the 50 states can also have an impact on the Company’s business and provide the basis for liability. Many are similar to federal law, but others have provisions which are quite different. Consequently, in some limited situations conduct lawful under federal antitrust law may violate the antitrust laws of a particular state. Increasingly, antitrust enforcement activities in some states are being pursued by state officials more vigorously than their federal counterparts.
10.0 GLOSSARY OF TERMS
“Concerted refusals to deal,” or “group boycotts” refer to agreements under which competitors agree not to deal with a third party or to deal only upon certain terms or conditions. These agreements are generally considered to be violations of Section 1 of the Sherman Act.
“Exclusive dealing” or “requirements” contracts refer to arrangement under which a buyer commits to take all he needs of a given product for a specified period from the seller, or where a seller commits to supply all of a buyer’s needs, or both. Exclusive dealing arrangements are generally judged under Section 1 of the Sherman Act and Section 3 of the Clayton Act. The legality of these arrangements depends upon their precise nature and especially upon the competitive effects of the particular arrangement.
“Market allocation” refers generally to agreements among competitors to divide markets between or among themselves. Market allocation is a violation of Section 1 of the Sherman Act. Market allocation can also result from an agreement between parties in the chain of distribution, i.e., between a manufacturer and distributors. Vertical market allocations are also judged under Section 1 of the Sherman Act, but are usually not considered to be as anti-competitive as market allocation agreements between competitors and, as a result, are analyzed under the rule of reason. Thus, vertical market allocation agreements are not as likely to be found to violate Section 1.
“Monopolization” (see “Section 2 of the Sherman Act” above) generally refers to a possession or acquisition of “monopoly power.” Monopoly power is described as the ability to control prices in or exclude competitors from a “relevant market” by other than superior skill, foresight or business acumen. Generally speaking, any acts or practices that are intended to obtain a business advantage not through the superiority or quality of products or services being sold — but instead through coercive, abusive or inequitable practices – can have the potential to be labeled as “monopolistic” practices.
“Price-fixing” refers to agreements to fix, stabilize, increase or decrease prices. Price-fixing amongst competitors is a per se violation of Section 1 of the Sherman Act. (See also “Resale Price Maintenance” below.)
“Predatory pricing” refers to pricing below a specified level of cost, usually average variable cost. Predatory pricing can be a form of unlawful monopolization or an attempt to monopolize under Section 2 of the Sherman Act, or a violation of Section 2(a) of the Robinson-Patman Act.
“Price discrimination” can be a violation of the Robinson-Patman Act, depending on the circumstances.
“Reciprocal dealing” refers to a practice under which one party uses its purchasing power over a particular supplier to induce that supplier to purchase products or services from the first party. Reciprocal dealing is most likely to be judged unlawful, under either Section 1 of the Sherman Act or Section 3 of the Clayton Act, where it results from the use of coercion to force a supplier to purchase from the first party.
“Resale price maintenance” or “vertical price-fixing” refers to an agreement between entities in a chain of distribution (for example an agreement between a wholesaler and a retailer) establishing the price at which the retailer will resell goods that the wholesaler sells to the retailer. This practice may be a violation of Section 1 of the Sherman Act, and is per se illegal under certain states’ laws.
“Tying” arrangements are agreements by one party to sell one product but only on the condition that the buyer also purchases a different product. “Tying” arrangements are generally considered unlawful under Section 1 of the Sherman Act.
I have read and understand the MiTek Antitrust Policy, had the opportunity to ask questions, and agree to comply with it.