NOTES FROM THE OFFICE
Antitrust 101: How to Stay Above the Fray
Katie Bodiford, CAE; NWIR Executive Director

You’ve probably noticed that, as an organization, NWIR has focused more on educating its members about the potential antitrust hazards in our industry. Why is this? Because we represent members in all facets of the roofing business, it’s important that we make sure that the networking opportunities we create don’t open doors where grey areas and antitrust discussions can creep in.

So what is antitrust and how does it apply to NWIR members? Antitrust conversations typically revolve around discussions and actions related to preventing monopolies, promoting fair competition, and ensuring consumer protection in markets. Here are some examples of antitrust conversations:

1. Price Fixing: Discussions among competitors to fix prices, allocate customers, or restrict output are illegal under antitrust laws. Conversations about such practices often lead to investigations and legal actions.
2. Market Dominance: Antitrust regulators may examine whether a company has gained too much market power through practices like exclusive contracts, tying arrangements, or predatory pricing.
3. Merger Reviews: When large companies propose mergers or acquisitions, antitrust authorities may review these transactions to assess whether they would substantially lessen competition in a particular market.
4. Intellectual Property and Antitrust: Conversations may involve the intersection of intellectual property rights and antitrust, such as whether a company’s patent is being used to stifle competition rather than encourage innovation.
5. Vertical Integration: Discussions about the implications of vertical integration, where a company owns different stages of production or distribution within an industry, can raise antitrust concerns, particularly if it forecloses competitors from access to necessary inputs or customers.
6. Monopoly Behavior: Conversations about whether a dominant firm is abusing its market power through practices like discriminatory pricing, bundling, or refusing to deal with competitors.

Ok, so that was a lot of legal speak. Let’s look at a fictional example of a conversation between two roofers that crosses over into antitrust territory:

Scenario: Bid-Rigging Discussion

Location: A local coffee shop

Roofer 1: “Hey, I noticed we’re both bidding on that new commercial project downtown.”

Roofer 2: “Yeah, I’ve been looking into it. It’s a big one.”

Roofer 1: “It is. Say, how about we work something out so we both get a piece of the pie without driving prices down too much?”

Roofer 2: “What are you thinking?”

Roofer 1: “Well, what if we agree to take turns winning bids? We can rotate who gets the project and keep our prices up. That way, we both make good money without undercutting each other.”

Roofer 2: “Hmm, that could work. We should also make sure not to go too low on the bids we do submit. We don’t want to start a price war.”

Roofer 1: “Exactly. Let’s keep our bids competitive enough to look good but not so low that it hurts our margins.”

Roofer 2: “Sounds like a plan. We’ll both benefit this way.”

Antitrust Violation Analysis:

In this conversation, Roofer 1 and Roofer 2 are discussing bid-rigging, which is a clear violation of antitrust laws. By agreeing to rotate winning bids between themselves and to avoid aggressive competition on pricing, they are attempting to eliminate or reduce competition in the bidding process. This behavior harms consumers and project owners by inflating prices beyond what would result from a competitive market.

Antitrust Implications:

• Bid-Rigging: Agreeing to rotate winning bids or otherwise allocate projects among competitors eliminates competitive pricing and violates the fundamental principle of fair competition.
• Price Fixing: Discussing not to go too low on bids also suggests an agreement to fix prices at a certain level, which artificially inflates costs.
• Concerted Action: Any agreement, formal or informal, among competitors to allocate markets or fix prices is illegal under antitrust laws.

Legal Consequences:

If discovered, Roofer 1 and Roofer 2 could face serious legal consequences, including fines and potential imprisonment. Antitrust authorities, upon investigation, could also impose injunctions preventing them from engaging in such conduct in the future. It’s crucial for businesses to understand and comply with antitrust laws to ensure fair competition and avoid severe penalties.

Sometimes, what might seem like an innocent way to going about organizing your business could lead to trouble. Contractors may agree to divide the market geographically or by type of project. For example, one contractor might agree to exclusively bid on residential projects in a specific neighborhood, while another focuses on commercial buildings in another part of the city. This division limits competition and can lead to higher prices for consumers and project owners.

Another example could be larger contractors using their market power to impose exclusivity agreements with suppliers or subcontractors, thereby limiting smaller competitors’ access to essential resources or subcontracting opportunities. Thisscenario highlights how antitrust laws aim to promote fair competition, prevent collusion, and protect consumers from artificially inflated prices in the roofing sector.

If you find yourself in a conversation that appears to be violating antitrust laws, it’s important to take immediate action to protect yourself and mitigate legal consequences. Here are some recommendations:

1. Stop the Discussion Immediately: Politely but firmly disengage from the conversation that involves any form of price fixing, bid rigging, market allocation, or other anticompetitive behavior. Make it clear that you cannot participate in such discussions.

2. Compliance Training and Policies: Encourage your organization to implement or reinforce antitrust compliance training programs and policies. These initiatives help educate employees about antitrust laws and the severe consequences of violations.

3. Seek Legal Advice: Contact a qualified antitrust attorney. Explain the situation and provide them with all relevant details. Antitrust violations can have serious legal consequences, and an attorney can provide guidance on how to proceed.

National Women in Roofing is committed to increasing awareness of what antitrust laws are and how to keep you and your company above board as you interact with others in the industry – whether it’s in the course of normal business or through one of our many networking opportunities. Staying above the fray will not only protect you and your company but will lead to a healthier industry as well.