Background Report on the FTC Investigation of ATA

To:       ATA Board of Directors
From:   Ted R. Wozniak, Treasurer
Date:    October 6, 2016

Introduction:  The Federal Trade Commission (FTC) investigation1 of ATA regarding antitrust violations took place more than 25 years ago. As the individuals involved in the investigation and ATA at the time have aged or left the Association, much of the current discussion of the issue is peppered with remembrances or third-hand information.

The purpose of this report is to provide background information on the actual events and findings based on documentary evidence. The documents used were those provided by the FTC under a Freedom of Information Act (FOIA) request in June 2016, consisting of 185 scanned pages of typewritten documents. Many of the documents provided are not pertinent to this report as they concerned other organizations or procedural documents (letters to or from attorneys, FTC investigators, or individuals requesting information or scheduling meetings), and were ignored for this report. Two documents contained in the FOIA file contain most of the information included in this report, the FTC “order” containing the actions that ATA was to be ordered by the FTC to take or refrain from in the future, and the FTC “final report” from the investigators requesting that the investigation be closed.

Note: Instances of bolding in the body text of this document are intended to emphasize those actions or statements that the FTC investigators appeared to find problematic and that would likely have been used as evidence of violations of antitrust provisions.

The FTC Investigation: From 1987 through 1990, ATA published rate guidelines that were recommended for use by its members. At some point in 1990, the FTC was “contacted by a member of an ATA chapter who wanted to know whether publication of a price schedule was legal.” The FTC opened the initial phase investigation and received documents from ATA and the Northern California and Washington, DC chapters. (NOTE: ATA decided to cease rate guideline activities in March 1990, several months before the investigation was launched. ATA had also adopted a statement regarding compliance with antitrust laws. Although the questionable activities had been discontinued, the FTC still launched the investigation.)

In August 1991, the Commission authorized the use of compulsory process. During the course of the subsequent investigation, the FTC received additional documents from ATA chapters and select individuals, interviewed buyers of translation services, and took sworn testimony from five ATA officials, including the then-president and the three members of the Rate Guidelines Committee (“RGC”), which conducted the survey, and prepared the rate guidelines.

In February 1992, the FTC offered ATA the opportunity to enter into consent negotiations. ATA’s counsel responded that they considered the matter to be moot and there was no need for an order. In May 1992, ATA was asked for additional documentation relevant to ATA’s counsel’s claims that the matter was moot. The FTC was provided additional materials throughout the fall. In November 1992, the ATA president issued a strong statement published in The ATA Chronicle reminding ATA members of the (new) ATA policy on antitrust compliance. At some point in 1993 the investigation was closed.

Questionable Activities of Concern to the FTC

The FTC investigation was triggered, not by a “complaint,” but by a mere question by a member of an ATA chapter if the publication of rate guidelines by ATA was compliant with antitrust regulation. During the course of its investigation, the FTC investigators focused on a number of activities at ATA and/or its chapters and affiliates that apparently lent credence to a potential charge of anti-competitive behavior. A review of these “questionable” activities would therefore appear to be beneficial for understanding ATA’s antitrust compliance policy and how it should be implemented in specific instances.

Creation, Approval, and Publication of the ATA Rate Guidelines

In October 1986, ATA formed a Rate Guidelines Committee consisting of three Board members, two of them freelance translators and one an owner of a “medium-sized bureau.” The RGC conducted a survey in November 1986 asking each of the (then five) ATA chapters “…to ask five members their highest and lowest rates charged per thousand words for the typical translation job.” In two cases, two of the RGC members contacted friends and acquaintances to obtain the data on behalf of their respective chapters. After each chapter had submitted their responses, the RGC calculated the mean of the reported highs and lows, $107 and $52 per 1,000 words, and then selected the midpoint between those two figures ($80) and called that the “average charge.”

The RGC made its first report to the Board in February 1987. In its report, the RGC stated “the publication of rate guidelines would serve both as a point of reference and as a means of establishing a consensus among ATA members on a rate of return, below which no one purporting to be a professional translator should be willing to work” (emphasis added). The report further stated that the guidelines “… may help prevent undercharging. Some translators charge rates that they know to be significantly below what others charge to ensure that they get the work…(T)his practice, sometimes known as “undercutting,” is unscrupulous and is not in the interest of the majority of ATA members.” According to testimony by one of the RGC members, the RGC also hoped that rate guidelines would drive less talented, “low-cost” translators from the market.

The RGC submitted a second report to the ATA Board in June 1987, reiterating its conclusion that $80 per 1,000 words was the “average” rate for “typical” translations into English. By coincidence, the rate published by the U.S. Department of State for independent contractors for translations of “technical” material was also $80. The RGC therefore recommended that ATA adopt the State Department schedule as rate guidelines. The Board of Directors discussed the report at its June 1987 meeting and again at its meeting in October 1987, at which the Board adopted the rate guidelines. These guidelines were published in the November 1987 issue of The ATA Chronicle under the title “ATA Guidelines for Translation Rates and Quantification” and stated that they be taken into consideration when determining amounts to charge clients. The FTC investigators state in the report that “(t)he ‘take into consideration’ language in the guidelines was chosen to [not only] suggest that translators charge clients the guideline rates, but to cover up ATA’s purpose from law enforcement authorities.”

In March 1988 the RGC presented another report to the ATA Board. Following extensive discussion and several amendments offered by Board members, the Board approved the RGC’s specific recommendations to increase rates over the previous guidelines. The Board minutes state, “The guidelines are aimed at those who don’t know what the market will bear, and those who deliberately undercut.”

The revised guidelines were published in the May 1988 issue of The ATA Chronicle, stating the recommended rates were for translations into English from major Western European languages such as French, German, and Spanish for direct clients. This time, the guidelines also included recommendations for quantification methods, stating that additional charges “are justified and may be levied for the following special services.” Among others, surcharges were recommended for rush jobs, source material that is difficult to read, special photocopying, etc. A survey conducted in 1987 during the RGC’s work on quantification to which 6% of the ATA membership responded showed that a majority of respondents felt that “discounts should not be applied, even for items such as repetitions, leisurely deadlines, and large volume of work.” The published guidelines made no mention of discounts. The guidelines published in May 1988 were accompanied by an article from the RGC that stated, inter alia, that translators may submit low bids for a translation out of ignorance of going rates or in an attempt to ensure obtaining the project, but that low bids were a “disservice to [the translator] and their colleagues” and that translators should tell low-paying clients to take their business elsewhere because “… we do want the public to consider us as professionals.”

At the 29th ATA Annual Conference in Seattle on October 12-16, 1988, attended by approximately 600 people, the RGC hosted a session on the rate guidelines that attracted about 80 attendees. A list of proposals from attendees’ suggestions was later prepared by the RGC, which included, among others, that ATA should look into rates charged by bureaus, and whether ATA should deny membership to translation bureaus that fail to pay a minimally acceptable rate. In subsequent discussions, members of the RGC discussed whether agencies paying low rates should be prohibited from advertising in ATA publications or attending ATA conferences. These suggestions were apparently supported by the members of the RGC, however, the RGC was disbanded before any action on the suggestions was taken.

The next recommendation by the RGC was discussed at the Board meeting in March 1989. These guidelines included “exotic” languages for the first time, the rates for which were calculated by adding one third to the rates recommended for Western European languages. During the meeting, in response to concerns that new translators may be prevented from entering the market by the rate guidelines, the RGC responded that quality translators must be assured a decent living, and that “if we hope to push rates upward, it is better to err on the high side.”

The 1989 guidelines recommended a 15% increase over the previous year to reflect changes in the cost of living, the expense of “buying word processing equipment,” and according to testimony, “…based on higher rates received abroad, the incomes of other professionals, and the desire to achieve an income commensurate with a high level of education of most translators.” These rate guidelines were approved by the Board and published in the April 1989 issue of The ATA Chronicle.

When working on the 1990 rate guidelines, in addition to attempting to outpace inflation by increasing the 1989 rates by 9% for an assumed 5% inflation rate, the RGC discussed adding rates for translators working through agencies (commonly called “bureaus” at the time). The chairman of the RGC stated, “at this point I am leaning toward being in favor of setting guidelines that express the percentage a bureau should take from a contractor… I would guessthat 35% would be fair for extensive revision, and then a sliding scale down to 20% if there is no revision at all.”

In a memo dated June 6, 1989 to the other members of the RGC, a member expressed concern that the level of rates in the U.S. was too low, that one of the objectives of the RGC should be to create conditions for rates to rise, that they should not simply describe what rates are but that the RGC should attempt to increase rates up to a fair return by going for “quantum leaps, to reach a level that will provide a ‘living wage,” and then after obtaining that goal, to settle for more moderate increases to keep pace with inflation and other factors.

In a subsequent memo dated August 9, 1989, the RGC chairman proposed an increase of slightly more than 9%. He later testified that one of the reasons he sought a 9% increase was “to enhance the professional status of translators.” In a response to this memo from another RGC member dated August 10, 1989, in which he agreed with the 9% increase, this RGC member also stated, “… It is in our best interest to keep pushing the rates upwards until we reach at least the levels prevailing in Europe and Japan.”

The RGC proposed its new rates to the ATA Board in a memo in September 1989 and reported on the methodology used to calculate those rates. At the Board meeting in October 1989 there was some discussion about the validity of those rates as they were not based on a survey. The recommended rate guidelines for 1990 were approved by the Board by a vote of eight for, zero against, with two abstentions.

At a session hosted by the RGC at the 30th ATA Annual Conference in October 1989, the RGC chair stated to the attendees. “Now we know that the rates are too low. Thanks to your input and thanks to the deluge of mail that I received, we will be increasing the rates [over] 1989, I would say substantially more than the inflation rate…”

The 1990 rate guidelines were published in the January 1990 issue of The ATA Chronicle, even though there was still some concern by some members of the RGC and Board members that the guidelines were no longer based on surveys.

Problems with the Guidelines

The initial guidelines were based on a “survey” of ATA chapter members that was nonrandom and statistically invalid. Subsequent guidelines were not based on subsequent surveys, but rather were manual adjustments to the rates published in the first guidelines. These adjustments were made to overcompensate for inflation and to increase the rates to rates that, in the RGC’s opinion, better reflected desired rates, or perceived rates overseas.

In addition to their statistical invalidity, the guidelines were never meant to be a survey of historical rates, which is allowed under antitrust law, but were instead intended to increase market prices. Statements such as those highlighted above regarding the purpose of the guidelines or desired goals for prices, including statements equating rates with professionalism, all received special attention by the FTC investigators.

Demise of the RGC and Rate Guidelines

On December 30, 1989, an agency owner “faxed a letter to the editor of The ATA Chronicle questioning whether the rate guidelines constituted illegal price fixing.” Two other agency owners joined in an “exchange of angry letters.” As a result, at the request of the ATA President, ATA’s legal counsel consulted an antitrust attorney and subsequently reported to the Board that ATA had violated “just about every antitrust law on the books” and included statements about ATA not recommending rates or encouraging members to adopt particular rates. It also included recommendations on how to conduct rate surveys in compliance with antitrust law. This report was apparently not well received by some current and former Board members, who strongly opposed the recommendations and statements made by ATA’s counsel. Nevertheless, at its meeting on March 25, 1990, the Board adopted a policy statement that effectively forbade the rate setting procedures previously used by the RGC and requiring objective data gathering and actions that did not encourage rate setting. The Board also adopted procedures for gathering and publishing rates. The policy was published in the May 1990 issue of The ATA Chronicle, but the procedures were only made available on request.

At the same meeting, however, the Board created a Statistical Information Committee (SIC) consisting of all former members of the RGC. The SIC collected and published rates paid by the U.S. Department of State, the World Bank, and other public entities. The SIC was disbanded at the July 27, 1991 Board meeting due to the FTC investigation. The editor of The ATA Chronicle was placed in charge of gathering and publishing rates paid by public entities. Such rates were published at least as late as the November/December 1992 issue of The ATA Chronicle.

Public Dispute/Disagreement with the New Antitrust Policy

The FTC report contains several pages outlining the acrimonious dispute among members and ATA chapters following the report by counsel and the subsequent antitrust policy adopted by the Board in 1990. The statements quoted in the FTC report against the policy are generally that the policy violates free speech, that ATA and chapter members have a right to freely discuss and publish information, that responding to a request by a fellow translator asking how much they should charge does not constitute price fixing, that another legal opinion should be obtained, that the new policy was an attempt at “union busting,” etc.

Consequences of the Policy on ATA Governance

The FTC report states that the new ATA policy was “a major issue” in the October 1990 elections. Two “freelancer faction” candidates were elected to the Board in a write-in campaign. Subsequently, the ATA Bylaws were amended to eliminate mail-in ballots and the electoral code was amended to prohibit the use of private funds and non-ATA channels for campaigning. The intent was allegedly to prevent the election of “insurgents” to the Board.

The Bylaws were also subsequently amended such that ATA chapters and divisions are required to promote and support ATA policies or else face dissolution. (Several chapters had actively campaigned against the new policy in communications with their members, and one chapter reportedly funded the telephone and mail campaign of one of the “insurgents” mentioned above.)

Dispute and Discussion Continues through 1991 and 1992

The FTC report notes that there was no explanation of or presentation on the new antitrust policy at either the 1991 or 1992 ATA Annual Conferences. But the discussion of the rates guidelines and dispute on the policy continued in meetings at the conferences. The FTC investigators made much of the fact that after publishing the new policy, ATA did little, or nothing to explain it to its members or reinforce adherence to the new policy.

Takeaways

The FTC investigators report shows that they found more than just the publication of a rate schedule to be problematic with respect to antitrust compliance. Statements made by members of ATA leadership, articles (and even letters to the editor) published in The ATA Chronicle, presentations given at the Annual Conference, newsletters, and communication from ATA chapters were scrutinized during the investigation. It is therefore apparent that extreme caution must be exercised whenever prices, rates, competition, or market access are discussed in any ATA-related forum or channel.

Respectfully submitted,

Ted R. Wozniak
Treasurer
October 6, 2016

Notes

  1. The American Society of Interpreters (ASI, apparently now defunct), The American Association of Language Specialists (TAALS), and the International Association of Conference Interpreters (AIIC) were also investigated in conjunction with the investigation of ATA. Unlike ATA, AIIC was actually charged with price fixing. In January 1994, ASI and TAALS agreed to consent orders from the FTC regarding “conspiracies of their members to restrain price and other forms of competition.”

 

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