Regulations Affecting Purchasing

The old expression “there oughta be a law” captures the idea that for every wrong, there must be a remedy, and that remedy might well be a statute. The granddaddy of the laws for procurement are the antitrust laws. The laws were created in response to the great monopolies of the early industrial revolution. This was done to establish the principles of free and fair competition. The antitrust laws (The Sherman Act, the Clayton Act and the Federal Trade Commission Act) prohibit agreements that create unreasonable restraints of trade.

The Institute for Supply Management’s seminar The Legal Aspects of Supply Management: The Basics You Need to Succeed addresses these laws and their impact on procurement well. Why do supply management professionals need to know about the law? Understanding the law will enable you to avoid misunderstandings and maintain productive relationships. This seminar helps you know your rights, responsibilities and obligations so you can protect yourself and your organization.

The Supply Management Handbook points out that since all contracts restrain trade to some degree, the question before the court in most antitrust litigation is whether a contract does so unreasonably. Some rules we all know and should follow:

Agreements on pricing are illegal. Supply professions should not agree with fellow purchasers (whether or not competitors) on any aspect of pricing.

Do not agree to buy any products on the basis of a reciprocal agreement on the part of the supplier to buy the purchasing firm’s products.

Exclusive dealing arrangements may also be anti-competitive.

The Robinson-Patman Act prohibits an organization from charging different prices for the same product to two different buyers if that difference would have an adverse effect on competition and is not justifiable.

Supply management activity involves many areas of law. When in question, seek legal help. It is wiser to investigate upfront rather than to justify your actions at the end. If you have a doubt, that is a good reason to check a situation out.