Wisconsin Lawyer
Vol. 83, No. 12, December 2010
Can I and another attorney simply discuss prices we charge for a particular legal service so long as we avoid entering into any sort of agreement?
Competitors should not discuss prices. Although an agreement is a necessary element to a price-fixing claim, a written or verbal agreement can be inferred from circumstantial evidence. An agreement may be inferred from the mere discussion of prices by competitors followed by changes in prices charged by some or all of those competitors. Similarly, exchanging price information may be used as evidence of an agreement on prices. United States v. Container Corp. of America is an apt example.16 In this case, the defendants were found to have violated the antitrust laws in a situation in which there was “an exchange of price information but no agreement to adhere to a price schedule….”17 The companies requested – infrequently and irregularly – from one another the price each charged its customers when that information was not otherwise available.
What if I and another attorney limit our discussion to the amount we require for a retainer or a maximum contingency fee we charge or would charge? Does that pose a risk under the antitrust laws?
Yes. These are all elements of prices charged to clients, and the same concerns applicable to discussions about prices in general are warranted here.
Can I charge the same rate for providing legal services as a competitor?
Competitors are not precluded from charging the same price; they are precluded from agreeing to charge that price. Competing gas stations’ prices are transparent to anyone. Grocery store owners can visit each other’s stores, determine how much the other is charging for peanut butter, and meet that price. But, when prices are normally not transparent, such as for legal services, an agreement can be inferred from circumstances that are sometimes called “plus factors,” which are essentially instances of circumstantial evidence of collusion. Plus factors include competing attorneys charging the same price for the same service after an exchange of information; price changes that are implemented at the same time; opportunities – including bar association meetings – to discuss and reach an agreement; and a price that is irrational if charged by one firm but is beneficial if two (or more) competitors charge that price.18
If an attorney is told by a client or potential client that a competitor charges $200 less – or $200 more – for preparing a will, for example, the attorney receiving that information can reduce – or increase – her price for preparing a will to match the other attorney’s price or fee. Suspicion may arise if a price change occurs alongside other circumstances that together suggest collusion. Attorneys should document their own conduct just as they would advise clients: record the information received, from who, how, and why. This will help answer any questions that may subsequently arise.
Is it lawful to exchange price information if the intent or result is to lower the price of providing a particular service?
Assuming all other elements of proving an antitrust violation are met, liability cannot be avoided simply because the resulting price is a lower one. Whether the price is increased, decreased, or stabilized, the key is whether it is a restriction on competition.19 It is the role of a free market to set the price of legal services, not competitors.
Is there any risk if I announce to other attorneys that I have posted my prices online?
In general, the posting of prices or fees, without more, ought not raise an antitrust issue. The issue becomes much more cloudy if the posting is preceded or followed by a discussion among competitors about those prices.
Are the antitrust laws implicated by discussions between myself and competing attorneys on the types of services we provide?
It depends. It is of course lawful for competitors to discuss the kinds of work in which they are involved and on what areas they focus. The risk comes into play if competing attorneys agree to provide, or not provide, certain services either collectively or individually. Businesspeople – attorneys or otherwise – may not agree to refuse to provide certain services, to divide the market (here, legal services) by agreeing to not compete with one another in certain areas, or to charge different prices.
Do the labor laws protect attorneys jointly seeking higher fees?
In short, no. There are labor exemptions – statutory and nonstatutory – to liability under the Sherman Act. However, the exemptions would not apply to attorneys agreeing on or acting together to fix the prices charged to clients.
The statutory exemption to the antitrust laws stems from sections 6 and 20 of the Clayton Act and section 52 of the Norris-LaGuardia Act.20 The exemption represents an intent to make clear that “antitrust laws must not be applied to vitiate congressional intent to permit organized labor activity.”21 Accordingly, the statutory exemption only applies to “labor organizations” or “labor groups.”22 In general, union activity is exempted “[s]o long as [the] union acts in its self-interest and does not combine with non-labor groups.”23 The nonstatutory labor exemption also does not apply to the context of competing lawyers acting collectively. Although the nonstatutory exemption sought to broaden the scope of labor activity immune from antitrust scrutiny, it is still aimed at collective-bargaining activity.24 As the Second Circuit has explained, “The exemption exists not only to prevent the courts from usurping the NLRB’s function of ‘determin[ing], in the area of industrial conflict, what is or is not a ‘reasonable’ practice,’ but also ‘to allow meaningful collective bargaining to take place’ by protecting ‘some restraints on competition imposed through the bargaining process’ from antitrust scrutiny.”25
Why does the State Bar take an interest in whether its members are engaged in conversations that may implicate the antitrust laws?
There are two primary reasons the State Bar should actively monitor its sponsored activities and forums. First, a component of the State Bar’s mission is to advise its members. That includes helping prevent anticompetitive conduct. The second reason is liability. The inherent structure of a trade or professional association – it is comprised of competitors – heightens the risk that price fixing will occur when information is exchanged among members. In part because of that risk, trade and professional associations have been subject to numerous antitrust actions over the years.26
Liability under the antitrust laws extends to more than directed, official action by an association, including the State Bar. An association may be liable for direct involvement in the collusion; for being complicit; or for the actions of its members acting within their apparent authority even if the association did not approve the conduct, was not even aware of it, and the actions did not benefit the association.27
The FTC recently sued a trade association comprised of manufacturers, distributors, and dealers of music instruments and related products, the National Association of Music Merchants Inc.28 The suit primarily alleged that the trade association “organized various meetings and programs at which competing retailers of musical instruments were permitted and encouraged to discuss strategies for implementing minimum advertised price policies, the restriction of retail price competition, and the need for higher retailer prices. Representatives of NAMM determined the scope of discussion by selecting moderators and setting the agenda for these programs. At these NAMM-sponsored events, competitors discussed the adoption, implementation, and enforcement of minimum advertised price policies; the details and workings of such policies; appropriate and optimal retail prices and margins; and other competitively sensitive issues.”29
The parties entered into a consent decree imposing a variety of policing requirements on the association.30 In the FTC’s analysis, the agency explained that it is “imperative that trade associations not serve as a forum for rivals to disseminate or exchange competitively sensitive information, particularly where such information is highly detailed, disaggregated, and forward looking.”31
Does the calculus of risk change if the intent of sharing the information is to help improve services for clients?
No. If it is determined that price fixing has occurred, the parties’ intent does not matter, regardless of how “innocent” or “guilty” they perceive themselves to be. The following are examples of scenarios in which the attorneys have no intent of causing or being party to a collusive scheme, but in which there is, nonetheless, a high risk of violating the antitrust laws and possibly being subject to the severe penalties discussed above.
Scenario #1. At a criminal defense seminar hosted by the State Bar, some Dane County private attorneys who take appointments from the public defender’s office lament the current rate for which they are reimbursed by the state for their services. They express particular angst about the rate applying to complex cases such as homicide. The discussion – among the seminar participants and speakers – escalates, spiraling into a collective call for change. Realizing that together they may be able to effectuate that change, the attorneys create an organization to collectively bargain for higher reimbursement rates from the state. The group subsequently meets to discuss the rate at which the participants would be willing to take homicide and similarly complex appointments and agree they will refuse to take appointments if their demand for the rate increase is not met.
Scenario #2: Stephanie decides to leave a large Los Angeles firm and open up her own law office in her hometown in Wisconsin. To create a budget, Stephanie investigates the prices charged by other attorneys. She sends several emails to former classmates practicing in Wisconsin and to attorneys practicing in her hometown. She asks what prices they charge for a variety of different services and whether they believe her draft price list is reasonable. She posts the same question on a State Bar e-list. Many of the attorneys respond and answer her questions with information on their own prices and with feedback on hers.
Scenario #3: After an all-day seminar on developments in estate planning, several seminar attendees go out for dinner. Part of the seminar discussion focused on a recently enacted law affecting how wills must be drafted. The attorneys agree that the new law imposes requirements that will increase the time needed to prepare a will. One attorney, Bob, is particularly upset. He announces to the dinner party that, starting the next day, he will increase the fee he normally charges for preparing a will and he specifies the new amount he will charge. No one at the dinner responds to Bob or indicates plans to implement a similar price hike. However, over the course of the next month, it turns out that not only does Bob increase the amount he charges for preparing a will but many of the other attorneys who attended the dinner also impose the same price hike for their services.
Despite the participants’ intent, each of these scenarios raises the specter of violating the antitrust laws because they involve facts that could be construed as inferring an agreement among competing attorneys to fix the price of legal services.
Do all exchanges between competitors of competitive information pose a risk under the antitrust laws?
Any communication between competitors about competitively sensitive information – especially prices – poses some risk. The amount of risk varies according to the context. The antitrust laws do not prohibit the acquisition of the information. Competitors often lawfully acquire information on a competitor’s prices from a client, an industry analyst, or other noncompetitor sources. What attorneys cannot do is agree with one another on those prices.
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