In most respects, trade associations are pro-competitive organizations: they join together competitors to advance worthwhile goals and to learn from one another. Their societal value is why they are recognized as non-profits. Many trade association activities, in particular safety standard-setting efforts, provide the public with valuable benefits. But these cooperative activities can open trade associations and their members to antitrust liability as well as potential tort liability.
Although it could very well be dismissed, the recent complaint filed against the power tool industry by SawStop LLC reminds us of the critical need for associations to develop sound legal policies and procedures to avoid—or successfully defend against—antitrust lawsuits, whether from government or private actors.
Stephen Gass, inventor of “SawStop” and a patent attorney, reportedly has unsuccessfully tried to sell his SawStop technology to major power tool companies for nearly 15 years. Sawstop’s “active injury mitigation technology” purportedly includes a safety system that detects skin contact with a spinning table saw blade and stops the blade quickly enough to prevent or minimize injury (see video demonstration here).
In February 2014, SawStop filed a lawsuit alleging that about two dozen table saw manufacturers conspired through their industry organization, the Power Tool Institute, Inc. (PTI), not to license SawStop’s safety technology. According to the complaint, in 2000, Gass began licensing negotiations with several companies now named as defendants in the suit. As a result, the companies allegedly held a vote on how to respond to SawStop and shortly thereafter ended their individual licensing negotiations with Gass.
The complaint further asserts that during a 2010 product liability trial, a company executive testified that the table saw manufacturers voiced concerns that if one of them adopted the SawStop technology, then they would all be subject to greater liability in future product liability lawsuits. The complaint also alleges the companies conspired to alter voluntary standards to prevent SawStop technology from becoming an industry standard.
As of June 17, 2014, the defendants had vigorously denied liability and over half had filed an answer to the complaint. Motions to dismiss by several defendants are pending.
Antitrust Tips for Trade Associations
Recognizing that plaintiffs can make any allegation in a complaint, this lawsuit still serves as a reminder that companies and associations engaged in safety standards activities, even when the standards are set by an independent organization, risk being subject to antitrust actions and should therefore keep in mind some general guidelines when developing or giving input for collaborative safety standards:
- Set: clear antitrust policies and procedures and adhere to them at all times. The procedures should specifically address safety activities and make explicit what actions and communications are proper and not proper.
- The key is that the collective work and all communications should focus on technical, consumer, and safety aspects instead of economic and market impact.
- Draft: all documents keeping in mind they could be accessible through discovery.
- Keep written meeting agendas and presentations limited to the meeting unless there is a good reason to depart.
- Minutes of the meetings should be prepared to concisely reflect the discussions.
- Encourage: a transparent safety standards process that gives all parties with a stake in the standard a meaningful opportunity to participate.
Contributing to safety standards is a legitimate and socially beneficial trade association activity. A robust antitrust compliance system ensures a safe environment for these activities and a full and strong defense against potential allegations of anticompetitive conduct.