January 28th, 2009 13:35 EST
What are the Boundaries for a Successful Competitor?
My good friend and attorney colleague, Steven A. O`Rourke http://www.calcorplaw.com is a very sharp corporate and business lawyer. He is a guy that other attorneys go to when they want to debate the law. But he is also a guy that entrepreneurs and business owners should go to when they are concerned that they are thorough and accurate because Steve strives to be both. We often kick around concepts that affect the entrepreneurial community and below, I want to share one piece of work that Steve produced as a result of a recent conversation that we had.
Beginning of Contributor Comments:
Business leaders have a passion to compete and win. How-to books tell them, Make it happen ?. But, like a roughing-the-passer penalty, there are limits. Last week, C. S. Chung pled guilty and got a 7-month stretch at Club Fed. Chung had been V.P. of Monitor Sales (including flat-screen TVs) for LG. Last month, LG company agreed to pay a $400 million criminal fine. The next day, Sharp Corp. pled guilty (a $120 million criminal fine) to fixing prices of display panels sold to Dell, Apple and Motorola. Another company and 3 other execs were also nailed. And the Justice Department says there`s more to come.
So, if you`re an exec or shareholder, do learn the boundaries set by competition law. It comes from both federal and state law. It`s enforced by the Justice Department, the FTC, by the states and by your customers and competitors in private lawsuits. That means you, in any sized business, should talk to an expert business lawyer before your competitor does. And if you act illegally with your competitor, he might be the best witness against you.
Competitor collaborations ? involve one or more business activities, such as R&D, production, marketing, distribution, sales or purchasing. Firms also may be in a buyer-seller or other relationship, but that does not eliminate the need to examine the competitor relationship, if present. A firm is treated as a potential competitor if, for example, entry by that firm is reasonably probable in the absence of the relevant agreement.
Under federal law, agreements of a type that almost always tend to raise price or to reduce output are per se illegal ?, meaning illegal without any proof of actual harm. These include agreements among competitors to fix prices or output, rig bids, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce. Be sure never to agree, even implicitly, to any such arrangement with a competitor or with a supplier or customer who might be ready to compete with you.
In many cases, agreements are not illegal per se or anti-competitive. These agreements are evaluated under the rule of reason ?, which the Supreme Court describes as involving a factual inquiry into an agreement`s overall competitive effect and varies in focus depending on the nature of the agreement and market circumstances. The central question is whether the relevant agreement likely harms competition by increasing the ability or incentive profitably to raise price above or reduce output, quality, service, or innovation below what likely would prevail in the absence of the relevant agreement.
Some competitor collaborations are permitted by law, such as labor agreements (in which competing workers agree to fix the price of their labor), baseball teams (who agree to drafts ? of players rather than outright bidding wars), and certain R&D directed to particular new or improved goods or processes (like curing cancer).
It`s a complex area of law but it does apply to you. As Judge Selden said in the 1600`s, Ignorance of the law excuses no man. ?
NOTE: This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that neither the author nor the publisher is thereby engaged in rendering legal or other professional services. If legal advice is required, the services of a competent professional should be sought.
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1. Keep control of your need for greed ? because if you cross the line, the long arm of the law will catch up with you.
2. Don`t use the arm chair approach to law when civil penalties could apply " but be even more careful when criminal action could be brought to bear. And,
3. If you have any questions on these complex issues, don`t hesitate to call on Steve O`Rourke.
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About Joel G. Block, President of Growth-Logic, Inc.
Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and faculty member of the iLearningGlobal community. To bring Joel into your company, please visit http://www.joelblock.com or http://www.growth-logic.com. Also, be sure to check out our newest project: a blog to organize the blogs that cover entrepreneurship - http://www.entrepreneur-hub.com. And finally, for film makers: http://www.filmfundingblog.com - our newest project.