Antitrust Policy and Guidelines

THIS POLICY IS APPLICABLE TO ALL NAMM EVENTS AND ACTIVITIES

This Antitrust Policy Statement ("Policy") is applicable to all NAMM, the International Music Products Association ("Association"), events, activities and programs. It is required to be read and followed by all Members of the Association, the Association Staff, Association Agents, Board, Chairs and Members of all NAMM Committees, Councils and Divisions and all participants in NAMM-sponsored activities.

NAMM is committed to adhering to the antitrust laws and all of NAMM's activities must be conducted strictly in accordance with U.S. federal and state antitrust laws (including NAMM's obligations under the Federal Trade Commission's Decision and Order in In re National Assoc. of Music Merchants, Inc., Docket No. C-4255, available at http://www.ftc.gov/os/caselist/0010203/index.shtm (hereinafter "FTC Order")) and foreign antitrust laws. This Antitrust Policy will familiarize you with the basics of antitrust law, but it is not a complete or definitive statement. Any specific questions related to antitrust compliance not addressed in this Policy should be forwarded to NAMM's counsel or to your company's legal counsel.

NAMM's Antitrust Counsel and Compliance Officer:

Paul C. Cuomo, Esq.
Baker Botts LLP
1299 Pennsylvania Ave. NW
Washington, DC 20004
202.639.7923
paul.cuomo@bakerbotts.com

OVERVIEW OF THE ANTITRUST LAWS

Antitrust laws are intended to promote and protect competition, which benefits consumers. Competition leads to lower prices, higher quality, and increased output of goods and services. Associations like NAMM can promote competition by engaging in a variety of activities, including standard-setting, educating the public, conveying information to the government, and collecting and disseminating certain information about the industries in which they operate. On the other hand, associations like NAMM often bring competitors together in person and through information sharing, and the antitrust laws are always suspicious that competitors might agree to engage in behavior that hurts consumers. For that reason, NAMM has developed this Policy to help ensure that its activities are conducted consistently with the antitrust laws.

The United States, the individual states and many foreign countries have antitrust laws. The main antitrust laws at the federal level are the Sherman Act, the Clayton Act, the Robinson­Patman Act, and the Federal Trade Commission Act. The Department of Justice prosecutes some violations of the Sherman Act criminally. Criminal antitrust violations are felonies, and an individual is subject to as much as ten years in prison and a $1 million fine per violation. Almost all of the individual states have their own antitrust laws. More than 100 countries have their own antitrust laws (often referred to as "competition laws"). In addition, the European Union has its own antitrust laws and enforces them vigorously. Almost everywhere that people make music, there's an antitrust law governing business conduct.

IMPROPER ACTIVITIES AND PROGRAMS

Before covering particular circumstances and conduct that raises concerns under the antitrust laws, it is useful to set out a few very basic concepts.

Some conduct is considered unlawful under the antitrust laws of most countries regardless of (a) the reasons why it is undertaken, (b) the revenues or assets of the parties involved in the conduct or (c) the justifications that can otherwise be made for the conduct. Examples of such "per se" or "hard core" unlawful activities include: (1) price fixing with competitors, (2) bid rigging, (3) allocating customers or markets and (4) certain group boycotts of customers. These "per se" violations are illegal regardless of the circumstances.

  1. Agreements on Prices or Output (Price or Output Fixing)

Agreements among competitors on price or output are per se unlawful, meaning that the agreements cannot be defended or justified. The agreement itself is illegal, even if it has no effect on price or output. "Price" is interpreted very broadly and includes:

    • wholesale, retail and suggested prices for goods and services (including salaries, benefits and wages for employees or independent contractors)
    • price ranges
    • pricing formulas
    • discount, rebate, warranty and credit terms
    • minimum advertised prices ("MAP")
    • reference prices (e.g., using one price as a take-off point for other prices)
    • price increases or decreases
    • margins

Antitrust violations can be based on circumstantial evidence and thus evidence of an explicit agreement is not needed. Therefore, comments that "signal" to competitors on these issues or that could otherwise result in exchanges of competitively sensitive information also must be avoided. For example:

    • "If we don't come to our senses and rationalize prices, we're going to destroy the industry."
    • "We're going to put each other out of business if we keep producing at this rate."
    • "I don't care what others do, but we're raising prices next week."

Agreements among competitors on output or production are also per se unlawful. "Output" includes factors like:

    • actual or proposed production or changes in production
    • down-time at manufacturing facilities
    • hours of operation (e.g., agreements to close on Sundays)
  1. Agreements to Allocate Customers or Territories

Agreements among competitors to allocate, divide or assign customers, territories, products or services are also per se illegal. Agreements between a manufacturer and a dealer to limit that dealer to certain customers or a defined territory are treated differently under the antitrust laws; however, dealers cannot agree on allocations among themselves and have the manufacturer adopt them.

  1. Boycotts and Refusals to Deal

Agreements among competitors to boycott certain suppliers, customers or competitors are per se unlawful in some circumstances. In the trade association context, restrictions on membership and participation in shows or exhibitions, disciplinary proceedings and standard-setting activities generate most boycott issues. In particular, NAMM members should not engage in any discussion about whether to refuse to do business with any other entity or whether to limit or terminate any existing relationship.

  1. Information Exchange

The exchange of competitively sensitive information among competitors can lead to price fixing and other antitrust violations. NAMM members should not discuss any competitively sensitive information, including:

    • individual company actual, suggested or proposed wholesale or retail prices; proposed price changes; discounts; warranty policies; credit terms; mark-ups; margins; costs; minimum advertised prices; price ranges; pricing formulas; and allowances
    • actual production levels; plans to increase or decrease production
    • costs for goods purchased for resale
    • wages, salaries and benefits for employees and independent contractors

With appropriate safeguards, trade associations may collect some competitively sensitive business information from their members and provide members with data compilations and survey results. These safeguards may include the use of a third party vendor to collect and process the submissions, limiting access to the raw data, masking the identities of the submitters (even from association personnel) and aggregating data so that the identity of the submitters is not disclosed and cannot be inferred. Under no circumstances can an association ever provide one member with another's competitively sensitive business information.

CONDUCT OF ASSOCIATION BUSINESS

All officers, directors, employees and agents of NAMM will receive a copy of this Policy and acknowledge in writing (electronic acknowledgement is acceptable) that he or she has read and understands the Policy. A copy of this Policy will also be available to all NAMM members (and the general public) on NAMM's website and it will be printed in NAMM trade show directories.

A copy of this Policy will also be provided to all speakers and presenters at any conference or meeting sponsored by or affiliated with NAMM; presentations on commercial topics must be made available in advance for review by NAMM's legal counsel. Notices and agendas of NAMM meetings shall be prepared and distributed in advance. Agendas should not include any subjects which are identified as improper for consideration or discussion under this Policy and should conform to rules established or approved by NAMM's legal counsel. At NAMM's direction, minutes of certain NAMM meetings will be prepared and certain NAMM events will be recorded (by audio and/or video).

Discussion that appears to be leading to a violation of this Policy should be discontinued until legal counsel determines whether any limitations and/or safeguards should be implemented. In addition, if any questions arise regarding the legality of any discussions or other activity, you should consult with counsel before acting.

COMPLIANCE WITH FTC ORDER

In addition to the obligation to follow and comply with the antitrust laws, NAMM also has specific obligations under the FTC Order. The obligations under the FTC Order apply to all officers, directors, representatives, committees, subcommittees, boards, divisions, employees and agents of NAMM. Participants at NAMM shows and events must also be aware of and comply with the terms of the FTC Order.

The FTC Order requires that NAMM refrain from certain activities including:

  • Urging, encouraging, advocating, suggesting, coordinating, participating in, or facilitating in any matter the exchange of information between or among musical product manufacturers or musical product dealers relating to: (1) the retail price of musical products; or (2) any term, condition or requirement upon which any musical product manufacturer or musical product dealer deals, or is willing to deal, with any other musical product manufacturer or musical product dealer, including, but not limited to, price terms, margins, profits, or pricing policies, including but not limited to minimum advertised price policies or resale price maintenance policies.
  • Entering into, adhering to, enforcing, urging, encouraging, advocating, suggesting, assisting or otherwise facilitating any musical product manufacturer or musical product dealer to enter into, adhere to or enforce any combination, conspiracy, agreement or understanding between or among any musical product manufacturers or musical product dealers relating to: (1) the retail price of any musical product; (2) any term, condition or requirement upon which any musical product manufacturer or musical product dealer deals, or is willing to deal, with any other musical product manufacturer or musical product dealer, including, but not limited to, price terms, margins, profits, or pricing policies, including but not limited to minimum advertised price policies or resale price maintenance policies; or (3) the refusal to do business, or the reduction of business, with particular musical product manufacturers or musical product dealers.

NAMM also must implement certain policies and practices regarding its activities and events, including having antitrust counsel present at and reciting an antitrust statement before certain NAMM events. Finally, all scheduled speakers at NAMM events must certify in writing that they received antitrust guidance and agree to abide by NAMM's antitrust policies and obligations.

ANTITRUST COMPLIANCE REPORTING PROCEDURES AND DISCIPLINARY POLICY

NAMM is committed to adhering to the antitrust laws and its obligations under the FTC Order. The purpose of this section of the Antitrust Policy is to implement procedures for reporting potential violations and disciplining individuals that fail to comply with NAMM's Antitrust Policy, its obligations under the FTC Order and/or with the antitrust laws generally.

At the outset it should be noted that these reporting procedures only apply to conduct as it relates to NAMM's events and activities and/or NAMM's obligations under the FTC Order. To the extent information relates to individual companies or the industry generally, that information should be reported to your individual company counsel in the first instance.

INTERNAL REPORTING PROCESS

NAMM encourages prompt reporting of any incidents involving potential violations of NAMM's Antitrust Policy, the FTC Order and/or the antitrust laws generally so that corrective action may be taken. Any potential violations (including by any NAMM member, member of NAMM's Board of Directors, NAMM employee or NAMM agent) should be reported immediately by telephone to NAMM's Antitrust Counsel and Compliance Officer, Paul C. Cuomo, Esq. of Howrey, LLP, at (202) 383-6547, who is responsible for investigating these complaints.

It cannot be emphasized strongly enough that ALL COMPLAINTS OR INCIDENTS OF POTENTIAL VIOLATIONS OF NAMM'S ANTITRUST POLICY, THE FTC ORDER OR THE ANTITRUST LAWS GENERALLY MUST BE PROMPTLY REPORTED. NAMM cannot resolve a potential violation unless it knows about it. Moreover, in certain circumstances NAMM may avoid punishment under the antitrust laws if it promptly notifies the government of a suspected violation. Prompt notification could be the difference between no liability and paying significant fines and other criminal sanctions. Therefore, it is the responsibility of any NAMM member, member of NAMM's Board of Directors, NAMM employee or agent of NAMM who has information that gives rise to a belief of potential violations to bring the information to the attention of NAMM's Antitrust Counsel as promptly as possible.

Every reported potential violation will be investigated thoroughly and promptly. Depending on the facts and circumstances, the investigation may include the following steps: an interview of the person who reported the alleged violation to obtain complete details regarding the alleged violation; interviews of anyone who is alleged to have committed the acts of alleged violation to respond to the claims; and interviews of any employees who may have witnessed, or who may have knowledge of, the alleged violation. The investigation will be handled in as confidential a manner as possible consistent with a full, fair and proper investigation and subject to any applicable legal requirements.

NON-RETALIATION

NAMM takes all reports of potential antitrust issues seriously and will not penalize or retaliate against anyone in any way for providing information to NAMM's Antitrust Counsel. NAMM will not tolerate retaliation against anyone for reporting a potential violation of NAMM's Antitrust Policy, the FTC Order and the antitrust laws generally, or any other unlawful conduct, or for cooperating in an investigation. Any incidents of retaliation should be reported immediately to NAMM's Antitrust Counsel.

CORRECTIVE ACTION

NAMM does not consider conduct in violation of NAMM's Antitrust Policy to be within the course and scope of employment and does not sanction such conduct.

If, as a result of the investigation, NAMM concludes that a violation of NAMM's Antitrust Policy, the FTC Order, the antitrust laws generally or retaliation occurred in violation of this Policy, NAMM will take prompt and effective remedial action, including appropriate corrective action against the person or people involved in the violation and the retaliating party. The corrective action will depend on the particular facts and circumstances. Corrective action may include, for example: training, disciplinary action ranging from verbal or written warnings to termination of employment or membership, depending on the circumstances. The treatment of employees involved in questionable conduct will be decided on a case-by-case basis, depending on the degree of the involvement. "Self reporting" may weigh in an employee's favor depending on the actual facts and circumstances. If a member of NAMM's Board of Directors, a NAMM employee or an agent of NAMM engages in conduct in violation of the antitrust laws or NAMM's obligations under the FTC Order and is convicted or found civilly liable for such conduct and all appeals have run, that person shall be terminated or discharged, provided that such termination or discharge does not violate any applicable U.S. laws. With regard to violations by members, visitors, customers, vendors, suppliers or independent contractors, appropriate corrective action will be taken after consultation with the pertinent management personnel, and may include revocation of membership, denial of access to NAMM premises or personnel or termination of their business relationship with NAMM.