How antitrust laws impact nonprofit organizations

How antitrust laws impact nonprofit organizations

On Behalf of | Feb 23, 2024 | Non-Profit Organizations

Nonprofit organizations are subject to the same antitrust laws as for-profit businesses. This means that nonprofits need to know their obligations under the U.S. antitrust laws.

Antitrust laws prohibit contracts, conspiracies or other activities that restrain trade. They also forbid activity that does or can monopolize trade. Mergers, acquisitions, price discrimination or exclusive dealing are other activities that could be found to violate antitrust laws.

A nonprofit that attempts to monopolize trade or illegally exclude competition may find itself under scrutiny for violating antitrust laws.

The non-commercial activity exception

There is an exception to antitrust laws for non-commercial activity. Some examples of non-commercial activity include political fundraising and soliciting charitable donations.

This exception is narrow. A court will typically find commercial activity if something of value is exchanged for goods and services.

One way to establish best practices and avoid antitrust violations in a nonprofit organization is to develop an antitrust code of ethics. When adopting an ethics code, there are steps that should be taken to minimize the risk of an antitrust violation.

What to include an antitrust policy

Implementing an antitrust policy is a good idea. A formal antitrust policy should include an overview of the antitrust laws with clear explanations of prohibited types of conduct.

Some other important provisions in an antitrust policy include a statement of the associations’ intent to comply with federal and state antitrust laws and a requirement that the policy is distributed to all the association’s key stakeholders.

Writing a nonprofit code of ethics

When drafting a nonprofit code of ethics, it is important to remember that the code cannot exclude competitors from the market or limit the supply of goods or services provided. Objective reasons should be given for each piece of the ethics code and the language should be fair, reasonable and unambiguous.

Antitrust law can be complex and nuanced for nonprofit organizations. Therefore, nonprofit organizations must be careful when engaging in commercial activities.