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NAW Legal Advisory

FTC Bars Association From Facilitating Collusive Strategies

Updated July 2009

The Federal Trade Commission has issued a final consent order settling charges that the National Association of Music Merchants (NAMM), a trade association with more than 9,000 members nationwide, violated Federal law by enabling and encouraging the exchange of competitively sensitive price information among its members.

The FTC alleged that the association organized meetings at which its members were encouraged to communicate, and did in fact share, information about prices and business strategy. The Commission claimed that the association enhanced the members’ ability to coordinate price increases for musical instruments to the detriment of consumers. In settling the complaint, NAMM agreed to stop engaging in such conduct.

Between 2005 and 2007, according to the Commission, the association organized various meetings and programs at which competing musical instrument retailers were encouraged to discuss strategies for implementing manufacturers’ minimum advertised pricing (MAP) policies, restricting retail price competition and securing higher retail prices. Association representatives allegedly determined the scope of the discussion and information exchange by selecting moderators and setting the agendas for these programs. At these NAMM-sponsored events, the FTC contended, competitors discussed retail prices and margins, how to enforce MAP policies, strategies for raising retail prices and other competitively sensitive issues.

The FTC consent order bars the association from coordinating the exchange of price information among musical instrument manufacturers and dealers, or coordinating certain discussions concerning the conditions under which any manufacturer or dealer will buy or sell products. The order also prohibits NAMM from aiding musical instrument manufacturers or retailers to form an anticompetitive agreement, such as agreements among competitors relating to price, minimum advertised price, and terms of dealing.

In addition, the order requires NAMM to implement an antitrust compliance program and requires that antitrust counsel review written materials and prepared remarks by any member of the association’s board of directors, employees, or others related to price terms and MAP policies. Antitrust counsel must also provide guidance to the association and its staff on complying with competition laws. The order will expire in 20 years.

The complaint, consent order, and an analysis to aid public comment can be found on the Commission’s Web site at www.ftc.gov/os/caselist/0010203/index.shtm