How to Structure and Operate a Lawful Buying Group

• Pages: 16-34

A Primer on the Law of Joint Purchasing

gal where the group has market power or

exclusive access to an element necessary

to effective competition, and the group

members are acting to eliminate a com-

petitor from the market. Absent such cir-

cumstances, the rule of reason applies to a

group’s membership policies, and courts

clearly recognize that buying groups are

entitled to adopt reasonable rules in order

to function effectively. Excluding a firm

from membership for reasons related to the

efficiency-enhancing or pro-competitive pur-

poses of the group creates no antitrust prob-

lem. For example, excluding a firm for

failure to satisfy the group’s reasonable

credit policies would generally be lawful.

Similarly, it is generally permissible to re-

quire late joiners to make the same finan-

cial contribution as the group’s founders.

On the other hand, excluding a firm for an

anticompetitive purpose—for example, try-

ing to disadvantage a competitor by rais-

ing its costs, or retaliating against a

competitor for offering discounts or start-

ing or joining a rival buying group—could

be found unlawful.

III. How t o Structure and Operate a

Lawful Buying Group

A. Avoiding Per Se Illegality. While joint

16

A Primer on the Law of Joint Purchasing

purchasing groups are only rarely found per se

illegal, certain elementary antitrust precautions

should be observed.

1. Be wary of informal discussions and agree-

ments with competitors about purchasing.

An “informal” agreement or understanding

among competitors fixing purchase prices

is extremely risky. Price-fixing agreements

unaccompanied by efficiency-enhancing in-

tegration are likely to be per se illegal, and

such agreements can sometimes be inferred

merely from “casual” discussions and infor-

mation exchanges. Business managers

should therefore avoid discussing with com-

petitors the company’s purchasing plans and

prices or reaching agreements with competi-

tors concerning these subjects. Antitrust is-

sues may exist whether the agreement

among competing buyers relates to ordinary

business supplies, capital goods, items to

be acquired at auction, or even employee

salaries. For example, alleged salary fixing

by competing employers has fueled a num-

ber of government prosecutions and private

lawsuits. Competitors may discuss purchas-

ing issues in the course of creating a formal

buying group, but the parties should enter

into an appropriate confidentiality agree-

ment, and discussions should be confined

to matters “reasonably necessary” to the cre-

17