PPPC AntiTrust Guidelines_ 2006

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P ULP AND P APER P RODUCTS C OUNCIL

ANTITRUST COMPLIANCE GUIDELINES

Introduction

The economic systems of the United States of America, Canada, the European Unionand other nations are based on the operation of free markets in which rival businessescompete vigorously to provide the best products and services at the lowest prices.

Central to the operation of free markets is the absence of restraints on competition amongcompeting firms. While antitrust enforcement authorities have acknowledged the valuablecontribution of trade associations to the well being of the industries they serve and theeconomy generally, the collaboration of competitors in any endeavour is perceived asproviding opportunities for illegal activity. The Pulp and Paper Products Council (PPPC)recognizes the fundamental importance of complying with competition laws and hasalways taken most seriously its commitment to uphold them. In furtherance of this,PPPC, regularly reviews and updates its competition law (antitrust) compliance policy.

The complexity of antitrust and competition law makes it impractical in this very brief

outline to include all the principles in those laws. For these reasons, these Guidelines areintended only to alert PPPC members and staff to those types of association activitieswhich are most likely to present antitrust law compliance concerns.

Overview of antitrust laws

Antitrust and competition laws (together antitrust laws) prohibit most business behaviourthat unreasonably restrains competition. The centerpiece of these laws, and the onemost applicable in the context of trade association compliance, is the prohibition, as a

general rule, of any practice or agreement that tends to limit competition by, e.g., fixingprices, curtailing production, allocating markets, to name a few. An impugned agreementneed not be, and in practice seldom is, explicit. The courts have been astute at findingagreements based on very subtle, often circumstantial evidence. Moreover, and this ismost important to keep in mind in the case of trade association activities, the illegalagreement or arrangement seldom arises from a single incident. The typical antitrustconspiracy case covers a multiplicity of documents, events and conversations, oftenspanning a period of many years. It is the accumulation and interaction of these various

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elements that constitute the prosecutions or the plaintiffs case. Participants at a meetingsometimes ask if a particular subject may be raised. It is possible that a one-timemention of a subject that borders on the sensitive area could not alone form the basis ofliability, but it could add to an accumulation of circumstances which, together, at somepoint in the continuum, would be sufficient to tip the balance and invite an investigation orcomplaint resulting in liability.

Antitrust laws also prohibit anti-competitive practices amongst buyers, such asagreements to pay not more than a certain price for a product that is an input to theirbusiness or not to do business with a supplier or customer.

Liability can result in the imposition of very large fines, imprisonment and prohibitionorders or any combination of the foregoing in the United States and Canada.Proceedings can be directed at companies and their directors, officers and employees.Trade associations are often involved at the investigation stage and may be implicated,

but less often, at the prosecution stage. Private lawsuits may also be undertaken by aninjured party. These are particularly prevalent in the U.S. where the courts areempowered to award treble damages. In Europe, the sanction is an administrative fine,often in a substantial amount.

There are far reaching agreements for cooperation among enforcement authorities innumerous countries, and foreign entities are in many situations subject to local laws in thecountries in which they do business. The U.S. and the EU both apply their antitrust lawsextra-territorially so as to reach illegal activity that may have taken place entirely off shorebut with effect on commerce within their territories.

Purpose

The purpose of an antitrust compliance plan in most manufacturing or service providingfirms is to protect the firm itself, by setting down a behavioral code to be followed by itsdirectors, officers and employees, from the various types of antitrust liability, includingliability that results from illegal agreements or arrangements with competitor firms.

While trade associations cannot be unconcerned with antitrust compliance of this kind(they do in some instances have competitors in the form of rival associations andconsultants who provide similar services), the potential for liability, in their case, issomewhat different for a number of reasons. For trade associations, therefore, theemphasis in antitrust compliance (and in the present Guidelines) is more on avoidingconduct and activities that could be construed as engaging the liability of its members,who are competitors of each other. In this sense, the compliance plan of an associationcomplements a members own compliance plan, which, in any event, will likely offer someguidance on participation by employees in trade association activities.

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The purpose of these Guidelines is to ensure that:

1. The antitrust laws are observed, not only to the letter, but also in a manner that willnot present the appearance of possible illegality. In the light of the extremelycostly consequences of violation of antitrust laws, a conservative approach to

compliance is adopted.2. Staff is informed in antitrust matters generally and, in collaboration with antitrust

counsel, involved in effective monitoring of PPPCs activities.

3. PPPCs activities are limited to those which will not expose members to antitrustliability and that those activities are conducted accordingly.

4. Activities sponsored by PPPC are not used as an opportunity for the conduct ofillegal activities by members outside of PPPCs approved activities.

5. Members and their representatives participating in PPPCs activities are reminded

regularly of its antitrust compliance policy and the requirement that it be strictlyobserved.

The current compliance Guidelines have been developed on the basis of the presentactivities of PPPC. Should other activities be considered at some future time, antitrustimplications will be assessed carefully at that time.

Activities

PPPC, through its various product groups (associations), carries on the following activities:1. The collection of data from members and other sources and the development and

dissemination of statistical reports and information based thereon.

2. Organizing periodic meetings and conferences to present these reports and hearguest speakers on topics relevant to the industry.

3. On some occasions, in association with a meeting or conference, the organizationof a social event, usually a dinner or luncheon.

4. Upon request, consulting with individual members on specific projects.

Antitrust compliance principles

The following subjects are excluded from all PPPC activities:

1. Members or non-members current or future prices. Past prices may be alluded toin certain contexts approved by counsel.


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2. All matters that affect price, such as discounts and credit terms. These subjects,and any others that affect price or agreements on the terms and conditions of sale,such as warranty or delivery provisions, must be subject to competitive forces asmuch as price.

3. Agreements with regard to changes in capacity or production levels.

4. Allocation, division or rationalization of markets or customers. These practicesare similar in effect to price fixing and are treated accordingly in the law.

5. Costs. However, there are exceptions which are discussed below.

6. Product quality. However, there are exceptions, particularly in the context ofestablishing standards needed for interoperability and other legitimate purposes.

7. Boycotts or agreements not to deal with competitors, customers or suppliers .

Meeting procedures

1. Discussion of excluded subjects is not tolerated and, if it occurs, will be stoppedimmediately by counsel or staff present. If it does not stop, all members shouldleave immediately.

2. There should be a written agenda, prepared in advance, for all meetings, includingcommittees and subcommittees. Agendas should be followed.

3. Minutes should be prepared which accurately reflect the matters discussed and

action taken.

4. Counsel should examine agendas prior to meetings and should review all minutesin draft form.

5. No informal or secret meetings should be held.

6. Counsel and PPPC staff should be present at all meetings of members or groupsof members and the board of directors.

7. Presentations, which are reviewed in advance, by guest speakers and panelistsmust conform to these Guidelines.

Procedure at conferences

Procedure at conferences organized by PPPC is similar to that at meetings with thepossible exception of minutes.


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Statistical reports

Antitrust laws generally permit the exchange of statistics provided the exchange does notresult in an anti-competitive effect. Data on current or future pricing plans, for example,should never be exchanged or published.

Statistics reflecting past costs paid by members, but not revealing individual membersresponses, may be collected and distributed to participants with the guidance of counsel.

Statistical reports issued by PPPC have been carefully designed in collaboration withantitrust counsel and are believed to be in conformity with the various principles in thatregard which have been laid down in the case law and guidelines issued by antitrustauthorities. The matter is kept constantly under review by PPPC staff and counsel.

Social events

Members representatives should avoid discussion of business matters outside formalmeetings, including social events. PPPC may organize a social event on occasion. Insuch cases, the following guidelines and procedures will apply:

1. Social gatherings organized by PPPC are limited to luncheons, dinners orreceptions taking place immediately before or after a regular meeting orconference. Their purpose is purely social and not to discuss industry matters.

2. At the end of a meeting or conference, prior to gathering for lunch, counsel presentat the meeting again reminds those present that the same precautionary rulesapply during lunch as at the meeting itself. At a dinner gathering prior to a meetingor conference, the reminder will be given at the commencement of the dinner.

3. Counsel and staff members will be present at social events and, as in the case ofregular meetings, will intervene immediately should conversation border oninappropriate subjects.


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Documents

PPPC AntiTrust Guidelines_ 2006