National Academy of Arbitrators Settles Charges That it Restrained Competition by Restricting Advertising, Solicitation

The Federal Trade Commission today entered into a proposed consent order with the National Academy of Arbitrators (NAA), which would require the group to remove restrictions on truthful advertising and solicitation from its Code of Professional Responsibility.

NAA is a professional association for arbitrators who hear and decide disputes between labor unions and employers. Many NAA members arbitrate such disputes for a fee. According to the Commission complaint announced today, NAA violated the FTC Act by restricting advertising and solicitation by its approximately 600 members, thereby harming consumers of arbitration services. The restraints were incorporated in NAA's Code of Professional Responsibility for Arbitrators of Labor-Management Disputes and its Formal Advisory Opinions.

The previous version of NAA's Code prohibited virtually all advertising and solicitation by its members. The current version continues to prohibit solicitation, while nominally permitting advertising that is not false or misleading. But the NAA's Formal Advisory Opinions often do not draw a distinction between advertising and solicitation, and consequently continue to restrict members from distributing truthful information. The result, according to the FTC's complaint, is that consumers of arbitration services are deprived of the benefit of truthful information and of free and open competition among arbitrators.

The proposed consent order will prohibit NAA from maintaining or enforcing any policy, ethics rule, interpretation, or guideline that impedes or restricts arbitrators from advertising truthful information about their services, including the prices, terms, and conditions for the sale of their services. It also will prohibit NAA from maintaining or enforcing any policy, ethics rule, interpretation, or guideline prohibiting its members from soliciting arbitration work. NAA would, however, be permitted to adopt and implement reasonable guidelines governing the conduct of its members with respect to representations it believes would be false or deceptive or governing conduct that would compromise, or appear to compromise, the impartiality of its member arbitrators.

To ensure NAA's compliance with the proposed order, a time frame has been established for the Association to remove all provisions that are inconsistent with its terms from the Code, its Formal Advisory Opinions, any NAA policy statement or guideline, and the NAA Web site. Additionally, the proposed order requires NAA to publish a copy of the order and complaint in its newsletter, as well as on its Web site, with a link placed in a prominent position on the site's home page.

The Commission voted 5-0 to approve the consent agreement and place it on the public record. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The proposed order will be subject to public comment for 30 days, until January 2, 2003, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.