Closed-End Fund Association Antitrust Policy

The antitrust laws are intended to ensure free and open competition. These laws—the Sherman Act, Clayton Act, and Federal Trade Commission Act at the federal level and similar laws in many states—prohibit contracts, combinations, conspiracies, and other agreements in restraint of trade, as well as monopolization and attempted monopolization.

An “agreement” among trade association members in antitrust terms is a very broad concept and it may be oral or written, formal or informal, express or implied. Because the penalties for violating the antitrust laws are severe, the purpose of this Antitrust Policy is to alert members of the Closed-End Fund Association (CEFA), including its executive committee and staff to the kinds of activities most likely to raise antitrust concerns and to the precautions that must be taken to avoid antitrust problems.

Trade associations by their very nature must be particularly sensitive to avoiding antitrust violations. This is because, in bringing competitors together into an association, one element of a possible antitrust violation may already be present—a combination of competitors.

Trade association members and staff should refrain from any discussion that could provide the basis for an inference that the members agreed to take any action that might restrain trade. To avoid questionable activity, the following topics may not be discussed at Association-sponsored meetings or social gatherings incidental to Association-sponsored meetings, conferences, conventions, or training sessions:

• Current or future fees or factors relating to fees, including management fees, IPO sales concessions, and/or IPO structuring fees.
• Future business plans, strategies, or arrangements, which might be considered to involve competitively sensitive information.
• What constitutes a “fair profit level.”
• Possible increases or decreases in fees.
• Standardization or stabilization of fees.
• Limitation of sales.
• Allocation of customers or geographic division of markets.
• Salaries and commissions.
• Refusal to deal with a corporation because of its pricing or distribution practices.
• Whether or not the pricing practices of any industry member are unethical or constitute an unfair trade practice.
• Information concerning any individual company’s specific costs, profits, market share, or other commercial information of a non-public nature.
• Agreements with the purpose or effect of requiring a customer to buy an unwanted product or service in order to obtain the product or service desired (“tying” agreements).
• Agreements with the purpose or effect of refusing to deal with competitors, customers, suppliers, or other third parties (often called “group boycotts”).
• Disputes involving trade practices, trade agreements, and/or fee arrangements.

To minimize the possibility of antitrust problems at association gatherings, the following guidelines and procedures should be followed at all Association meetings:

• A written agenda will be prepared.
• In case of doubt about the propriety of a topic of discussion, seek advice from legal counsel.
• If a member has a reservation concerning remarks or discussion at a meeting, state the reservation.
• Avoid rump sessions involving the discussion of business matters. Stick to the agenda.