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Legal Update

Legislative Issue Update - January 2010

Proposed Rule Would Require Employee Notification of Employee Rights Under Federal Labor Laws

One of President Obama’s first acts after being sworn into office on January 20, 2009 was to sign an Executive Order (Executive Order 13496), the affect of which is to require all Federal contractors and subcontractors to post notices that inform their employees of their rights under Federal labor laws. The rule applies to prime contracts at or above $100,000 and all subcontracts necessary to the performance of the prime contract, regardless of the dollar amount. Subsequently, the Department of Labor promulgated a notice of proposed rulemaking to implement the Executive Order (74 Fed. Reg. 38488, Aug. 3, 2009).

Of particular interest in the proposed rule:

  • The requirement that notices include certain language inaccurately positing that the National Labor Relations Act (NLRA) favors a collective bargaining environment.
  • The proposed notice is neither accurate nor unbiased in presenting an overview of employee rights under the NLRA.
  • The proposed rule’s assignment of enforcement authority to the Office of Federal Contract Compliance Programs (OFCCP) is both inappropriate and in conflict with the exclusive jurisdiction of the National Labor Relations Board granted by the NLRA.

NAW has submitted comments in this rulemaking proceeding. The view the NAW comments, go to: http://www.naw.org/files/Comment.pdf

Maryland Bans Minimum Resale Price Agreements

The Maryland Antitrust Act was amended, effective October 1, 2009, to declare any “contract, combination, or conspiracy that establishes a minimum price below which a retailer, wholesaler, or distributor may not sell a commodity or service is an unreasonable restraint of trade or commerce”, and will be a violation of the Maryland Antitrust Act. The law does not prevent a seller from suggesting a minimum resale price; however, it does prohibit a seller from requiring or coercing adherence to the minimum resale price on entering into minimum resale price agreements with a customer in Maryland.

The Maryland law conflicts with federal antitrust law. However, the federal antitrust laws do not preempt state antitrust laws. Further, the Maryland law could apply to an interstate sale as well as an intrastate sale. In June 2007, the U.S. Supreme Court narrowly ruled that minimum resale price agreements are not automatically illegal under the federal antitrust laws because they can have either pro-competitive or anticompetitive effects, depending on the circumstances in which they are formed. Thus, minimum resale price agreements can pass federal antitrust scrutiny yet violate a state’s antitrust laws. (Leegin Creative Products, Inc. v. PSKS, Inc.).

NAW, in its advisory FAQ’s on Minimum Resale Price Agreements, specifically addressed this state law issue:

Q.13 Does federal antitrust law [and the Leegin decision] preempt state antitrust laws concerning the legality of minimum resale price agreements?

A. No. A practice may be OK federally and unlawful under state antitrust law. Some states interpret their antitrust laws to be consistent with federal law and others do not. It remains to be seen whether state courts will follow the Leegin decision when interpreting state statutory and common law applicable to minimum resale price agreements. It should be noted that 37 states urged the Supreme Court (without success) to keep minimum resale price agreements illegal.

Other States May Follow Suit

As noted above, 37 states (including Maryland) urged the Supreme Court to keep minimum resale price agreements illegal. It is possible that other states could join Maryland in making similar changes to their state antitrust laws. Minimum resale price agreements have not seen widespread adoption by suppliers, given the uncertainty of the legality of these agreements under state law and the fact that many state enforcement agencies view these arrangements unfavorably.

 

FTC Bars Association From Facilitating Collusive Strategies

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 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