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Anti-trust Laws Affect Compensation Survey Design and Use
7/10/2002
by John E. Williams, CCP, SPHR
former Director, Compensation Services
The
Management Association of Illinois
COMPENSATION SURVEYS
OVER
the past hundred years have seen many changes but not
with their basic design or purpose.
Most changes deal with the expanding focus and variety of market segments for
which surveys are available and the various elements of compensation for which
data is collected.
But determining what others pay for things, whether it be for labor or goods,
is a basic element of capitalism and the economics of supply and demand. As
such, it is also covered by legislation that controls free markets.
The use of surveys is an effective method for determining market position and
maintaining effective compensation programs. But as simple as that may sound,
there are important differences in quality of surveys that go beyond the number
of benchmark positions included or the number of participating firms.
Survey design itself, including statistics and display of data, need to
facilitate both ease of use and legal compliance. The selection of surveys for
use can have an impact on your compensation program, but also on whether your
organization's practices comply with anti-trust legislation.
Although Microsoft and the Department of Justice have been making headlines
recently because of alleged violations of anti-trust legislation, HR
professionals need to understand how anti-trust laws can also affect common
practices in the use and participation in compensation surveys.
The following points can be drawn from a review of antitrust legislation and
survey processes:
- Any information exchange program, no matter how informal, including
telephone discussions of compensation data, is a survey and may involve
potential antitrust problems.
- All data collected should be of past activities. Prospective data
collection is suspect unless it is based on global salary information such as
budget and pay structure movement
- Published data may be exchanged for prospective activities. Published data
is information made available to the public — for example, labor contracts,
pension activities reported under ERISA, etc.
- The display format and method of aggregation of survey data may eliminate
some potential problems.
- The use of third parties to conduct surveys can eliminate some potential
problems.
- Each firm and association can potentially be held individually and liable
for civil damage and criminal sanctions.
How to spot "dangerous" practices:
- Industry specific surveys conducted by industry members where members
jointly discuss the survey, analyze data or set rates.
- Surveys on prospective pay data of jobs.
- Surveys where individual company data are identified (even in coded
format).
How to identify "safe" surveys:
- Surveys of historical data in an aggregated format conducted by a third
party in which individual company data cannot be identified
- Surveys with retrospective information
The Sherman Anti-Trust Act
The Sherman Anti-Trust Act is the basic federal antitrust statute. It
prohibits businesses in interstate commerce from contracting, combining, or
conspiring to restrain trade, or attempting to monopolize the market in a
particular area of business.
Violations of this Act include making contracts that unreasonably restrain
trade, price fixing, group boycotts, allocating markets and attempting to form
and maintain a monopoly in an industry to injure competition.
Persons found in violation of certain aspects of the Sherman Anti-trust Act
may be fined or jailed. However, in practice, these violations generally are
handled by civil, rather than criminal, lawsuits. The Anti-trust Division of the
Department of Justice enforces the Sherman Act.
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