Recent interchanges in a national compensation publication serve to remind me that few HR professionals (including many compensation specialists) are aware that the conduct of both formal and informal compensation surveys is regulated by the Sherman Antitrust Act of 1890. The purview of this law extends to as simple an act as calling another employer to find out what they pay their customer service representatives - through the participation in more formal and sophisticated pay surveys. For this reason, and in the spirit of keeping unnecessary litigation at bay, I thought it might be worth another post.
First, a little history. The Sherman Antitrust Act, named for its author, Senator John Sherman of Ohio, was original passed to limit monopolies and other restraints on commerce. It is the Act's provisions on pricing and competition which impact those seeking information on compensation practices via salary surveys. The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC), which have primary responsibility for enforcing our nation's anti-trust laws, have determined that organizations conducting their own salary surveys could be seen as practicing illegal price-fixing.
To guide HR and compensation professionals seeking to determine competitive pay levels while avoiding antitrust violations, the DOJ and the FTC have jointly published a series of Anti-Trust Safety Zone Statements, which have been interpreted (through not extensively tested in court) to provide a "safe harbor" for organizations involved in this exchange of information.
The DOJ/FTC Antitrust Safety Zone Statements are as follows (note that these were initially developed with health care organizations and activities as their focus):
Antitrust Safety Zone: Exchanges of Price and Cost Information Among Providers That Will Not Be Challenged, Absent Extraordinary Circumstances, By The Agencies
The Agencies will not challenge, absent extraordinary circumstances, provider participation in written surveys of (a) prices for health care services, or (b) wages, salaries, or benefits of health care personnel, if the following conditions are satisfied:
- The survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
- The information provided by survey participants is based on data more than 3 months old; and
- There are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data represents more than 25% on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider
The conditions that must be met for an information exchange among providers to fall within the antitrust safety zone are intended to ensure that an exchange of price or cost data is not used by competing providers for discussion or coordination of provider prices or costs. They represent a careful balancing of a provider's individual interest in obtaining information useful in adjusting the prices it charges or the wages it pays in response to changing market conditions against the risk that the exchange of such information may permit competing providers to communicate with each other regarding a mutually acceptable level of prices for health care services or compensation for employees.
Forewarned is forearmed, my friends!
Image: Creative Commons Photo "Gavel" by walknboston.