Antitrust Compliance Manual

Transcription

1 Antitrust Compliance Manual January The Williams Companies, Inc. All rights reserved. 0110/01423 AntiTrust Policy_cover_ indd 1 1/5/10 2:44:40 PM

2 Introduction To all Williams employees: Antitrust laws, which have existed within the United States for well over one hundred years and today are also in place in most foreign countries, are broadly designed to protect and promote free and fair competition. As such, they affect almost every aspect of the way we do business. While compliance with some types of specialized laws and regulations is really only a concern for the employees in those particular areas, antitrust laws are different. Because they affect so much of what we do, it is important for virtually every employee to have a basic understanding of what the antitrust laws require and prohibit. This manual is not designed to turn anyone into an antitrust expert; however, it should provide you with sufficient information to spot potential antitrust issues early, which is critically important. If and when you do encounter an antitrust issue, or even think there may be an issue, contact the Legal Department immediately for guidance. Williams employees are expected to be familiar with this manual and to comply with the policies outlined in the document. To assist in this regard, the Legal Department and our Business Ethics Resource Center will continue, as in the past, to provide periodic training sessions and other training resources, such as our various online compliance training modules. Nonetheless, as Williams Antitrust Policy states, the responsibility for compliance ultimately falls to each individual employee. Employees who fail to comply with the antitrust laws or with the Company s antitrust compliance policy will be subject to disciplinary action, including (in appropriate cases) dismissal. Like any good company, Williams prides itself on being a skilled and effective competitor. Yet there is no commercial objective that is more important than obeying the law. Thank you in advance for your efforts to ensure that Williams continues to maintain a solid record of antitrust compliance. Steven J. Malcolm Chairman, President and Chief Executive Officer CONFIDENTIAL i For Williams Internal Use Only

3 Contents Introduction i Contents ii Williams Antitrust Policy...1 Dos and Don ts Scope of the Antitrust Laws and Their Applicability to Williams Business...3 Antitrust Statutes Antitrust Penalties...5 Criminal Sanctions...5 Civil Damages and Penalties Dealings with Competitors Anticompetitive Agreements...7 Conduct That Is Virtually Always Unlawful...8 Price-Fixing Agreements...8 Price Signaling Market Division and Customer Allocation Bid Rigging (and Joint Bidding)...11 Mail and Wire Fraud Additional Conduct That Can Be Unlawful Group Boycotts and Collective Refusals to Deal Joint Purchasing Arrangements Joint Research and Standard Setting Trade Association Activities and Lobbying...12 Benchmarking Surveys and Industry Groups...13 Joint Ventures...14 CONFIDENTIAL ii For Williams Internal Use Only

4 Contents Dealings with Customers, Suppliers, Traders, Jobbers, Dealers, and Distributors Resale Price Maintenance Customer, Territorial, and Other Non-Pricing Restrictions on Resellers...15 Tying and Bundling Arrangements Exclusive Dealing and Requirements/Output Contracts Price Discrimination and Discrimination in Promotional Allowances and Services Monopolization and Attempted Monopolization Monopoly Power Exclusionary Conduct Unfair Methods of Competition and Deceptive Practices Mergers and Acquisitions...21 Other Conduct That Raises Legal Questions Interference with Other Business Relationships Gathering Competitive Information...22 Advertising and Marketing Writing Smart CONFIDENTIAL iii For Williams Internal Use Only

5 Williams Antitrust Policy It is the policy of Williams that the Company, its subsidiaries, affiliates, and employees will observe and comply with all federal, state, and international antitrust laws. No officer, employee, or agent of Williams has any authority to engage in, or to direct another to engage in, conduct that violates these laws. Compliance with the antitrust laws is a serious matter. Failure to comply with the law could lead to significant adverse consequences for both Williams and responsible employees. As an employee, officer, or agent of Williams, it is your personal responsibility to at all times comply with the antitrust laws and with Williams antitrust policy. Responsible individuals that fail to comply with the law could be subject to criminal prosecution, imprisonment, personal fines, and other personal liabilities, as well as appropriate disciplinary action, which could include dismissal. Claims of ignorance, over-zealousness, or good intent are no excuse and will not justify any failure to comply with the antitrust laws or with the Company s policy. Any employee, officer, or agent of Williams with information concerning actual or potential violations of the antitrust laws or this policy must promptly disclose that information to Williams. Such information may be reported to counsel in the Williams Legal Department or anonymously through the Williams Ethics and Compliance Action Line, (800) , which is available 24 hours a day, 7 days a week. Employees that fulfill their responsibility to report actual or potential antitrust violations need not fear they will suffer retribution because of such disclosures. However, employees that knowingly fail to report such information may be subject to disciplinary action. CONFIDENTIAL 1 For Williams Internal Use Only

6 The following are some key points to keep in mind as you conduct business: DO compete vigorously and ethically. DO deal honestly, directly, and fairly with all customers, competitors, and suppliers. DO avoid meeting or communicating with a competitor unless it can clearly be demonstrated that the meeting or communication serves a lawful purpose. DON T agree with a competitor on prices, sales territories, customers, distribution practices, exchanges of cost or other competitively sensitive information, or any other matter inconsistent with independent decision-making and vigorous competition. DON T even discuss competitively sensitive information with competitors, absent a legitimate purpose, such as a joint venture or other legitimate business transaction (and narrowly confine all discussions to the subject matter of the transaction). DON T attend meetings with competitors where prices or any of the other forbidden subjects are discussed; and DON T stay at a meeting where these subjects are raised leave quickly and make your departure visible to those who remain. DO contact the Legal Department if you have any questions, if you encounter any situations that might lead to trouble, or if something just doesn t feel right. DON T attempt to injure a competitor by making false statements about its products or using unfair or deceptive tactics. DO contact the Legal Department before proposing or proceeding with any joint venture, acquisition, exclusive contract, or other agreement that could raise antitrust issues. DON T attempt to obtain proprietary or confidential information directly from a competitor, and DON T use any improper means in gathering competitive information. DON T engage in exclusionary practices designed to impair a competitor s ability to compete. DO compete aggressively on the merits. Dos and Don ts DON T make oral or written statements using careless words or exaggerations; DO at all times express yourself carefully, professionally, and clearly in business communications, including . DO contact the Legal Department if you have any questions or doubts about the legality of any competitive practice or proposed course of action. These and other important points and issues are discussed in this Compliance Manual. You should read and have a good understanding of this entire Compliance Manual. If you have any questions, address them to the Williams Legal Department. CONFIDENTIAL 2 For Williams Internal Use Only

7 Scope of the Antitrust Laws and Their Applicability to Williams Business The antitrust laws are designed to promote competition. Generally speaking, the law seeks to achieve this goal by eliminating and discouraging anticompetitive practices, and thereby ensuring that all firms are given the opportunity to do business in an open competitive environment. Antitrust law is fundamentally premised upon the idea that, where free and open competition exists, markets will function efficiently, and consumers will benefit from better quality products and services, as well as lower prices. While the antitrust laws are broadly applicable across all industries and economic sectors, courts traditionally have refrained from enforcing the antitrust laws in heavily regulated industries, where competition has been displaced by complex regulatory schemes monitored and overseen by government agencies. Certain segments of the energy industry historically were good examples of this, but more recently that has begun to change. Deregulation in the energy industry at both the federal and state levels has led to substantially more competition, and with it substantially greater exposure to antitrust laws. Today, energy companies like Williams are fully subject to the antitrust laws in most of the markets in which they operate. For Williams, exposure to antitrust statutes presents both benefits and risks. Like any firm, we benefit from the environment of fair and open competition that antitrust laws promote and encourage. As explained below, however, antitrust laws can create substantial legal risks for any company that is alleged to have violated the law, and for any responsible individuals: Some antitrust violations are prosecuted criminally and violators, in addition to being fined, are routinely sentenced to time in federal prison. Companies found to have violated the antitrust laws can be subjected to millions, or even hundreds of millions, of dollars in governmentimposed fines and private damage awards. CONFIDENTIAL 3 For Williams Internal Use Only

8 Antitrust Statutes There are four principal federal antitrust statutes: The Sherman Act prohibits agreements or understandings between two or more persons or companies to restrain trade in any product or service. The Sherman Act also prohibits any firm, acting alone or with another, from illegally monopolizing, or attempting to gain a monopoly, over a particular product or service. The Clayton Act, among other things, prohibits stock or asset acquisitions that may substantially lessen competition in any relevant market. Certain sections of the Clayton Act are sometimes referred to separately as the Hart-Scott-Rodino Act. The Robinson-Patman Act prohibits a seller, under certain circumstances, from discriminating in the price of a product between two competing customers or favoring one competing customer over another in the granting of promotional services, facilities, or allowances. The Robinson-Patman Act also prohibits payment of brokerage fees or commissions to a buyer or buyer s agent, and may apply to buyers who knowingly benefit from unlawful discriminatory prices. The Federal Trade Commission Act ( FTC Act ) prohibits unfair methods of competition and unfair or deceptive acts or practices. The FTC Act also allows the Federal Trade Commission to enjoin potentially anticompetitive conduct before it can ripen into a violation of other antitrust laws. These are the principal laws addressed by this Manual. However, Williams is also subject to antitrust and competition laws at the state level, as well as to certain international antitrust laws. These state and international antitrust laws typically parallel United States federal law to a large degree, although there are some differences. In addition, the Federal Energy Regulatory Commission ( FERC ) and the Commodity Futures Trading Commission ( CFTC ) among other agencies have jurisdiction to investigate and address issues of anticompetitive conduct and market power. For purposes of this Manual, the details as to which law prevents which conduct are not important. If you have a question relating to the scope or application of any given antitrust statute, however, you should always feel free to contact the Legal Department for more detailed guidance. CONFIDENTIAL 4 For Williams Internal Use Only

9 Antitrust violations can lead to severe legal consequences, both for the companies that are found to have violated the law and any individuals held responsible for engaging in unlawful conduct. Due to recent federal legislation, those antitrust offenses that are prosecuted criminally (e.g., price fixing, market divisions, and bid rigging) now carry even harsher penalties than in the past. In addition, the risks of civil penalties and large damage awards have never been greater. Criminal Sanctions Some antitrust violations are crimes and can lead to felony prosecution, large corporate and individual fines, and prison time for responsible individuals. If convicted of a criminal antitrust offense, a corporation may now be fined up to $100 million per violation. Alternatively, courts may impose fines equal to twice the monetary gain or twice the loss resulting from the offense, which can lead to fines well in excess of $100 million. Individuals convicted of antitrust crimes may now be subjected to personal fines up to $1 million per violation. In addition, individuals convicted of antitrust crimes may now be sentenced to as many as ten years in federal prison. Do not be mistaken the threat of imprisonment is real. Many years ago, individuals found guilty of criminal antitrust offenses would often be sentenced only to community service or probation. Yet today, virtually every individual convicted of an antitrust crime in the United States is sentenced to prison time. In addition, the United States Department of Justice ( DOJ ) has become increasingly aggressive about prosecuting antitrust crimes. Working with the Federal Bureau of Investigation and other law enforcement agencies, the DOJ today uses wiretaps, hidden cameras and recorders, confidential informants, and undercover agents to detect antitrust crimes and to develop evidence to present in court. The Department also seeks to detect violations by granting leniency to companies that monitor their compliance with the antitrust laws, and that self-report violations to the Department. Contact the Legal Department immediately if you have any questions or concerns regarding potential criminal conduct. Civil Damages and Penalties Antitrust Penalties For those antitrust violations that are not criminal, the consequences can still be severe. Federal and state antitrust officials often bring civil antitrust suits seeking civil penalties and disgorgement of ill-gotten gains. Individuals and businesses harmed by an antitrust violation may also sue, and prevailing plaintiffs may recover three times their actual damages, plus their attorneys fees. In addition, courts frequently allow antitrust suits to proceed as class actions, in which the claims of thousands or even tens of thousands of individual plaintiffs are consolidated into one suit. CONFIDENTIAL 5 For Williams Internal Use Only

10 Antitrust Penalties Private antitrust damage awards can easily reach into the hundreds of millions of dollars. The threat of such monstrous damage verdicts causes many antitrust defendants even those convinced of their innocence to enter into voluntary settlements. Although settling an antitrust case may allow a company to avoid the potential of truly catastrophic damages, antitrust settlements themselves sometimes range into the hundreds of millions of dollars. As serious as the threat of damages can be, the threat of an injunction can be an even greater concern in some cases. Antitrust injunctions can extend well beyond prohibiting the conduct that was held to be illegal. In certain circumstances, courts have authority to enjoin business activities that are normally lawful, but that could lead to unlawful behavior in the future. Companies that are subjected to such broad injunctions may therefore become handicapped in competing with other firms. Given the expense and disruption of antitrust litigation, even parties that win suffer substantial costs. Even companies that prevail in defending antitrust charges usually pay a high price. Defending a large antitrust case can costs tens of millions of dollars in a single year, and antitrust cases are known to drag on for many years. In addition, businesses mired in antitrust litigation often suffer greatly from the diversion of company resources, and the time and attention of key executives, to the defense of a legal action and away from core business concerns. Finally, the mere accusation of antitrust violations can adversely affect a company s reputation and standing within the business community, and individuals charged with antitrust violations may also suffer harm to their professional reputations. CONFIDENTIAL 6 For Williams Internal Use Only

11 There is no activity that raises greater antitrust risks to the Company, or to individual employees, than communications and dealings with competitors. In this area, there is a genuine threat of criminal prosecution. Where two or more competitors coordinate with each other in ways that limit competition, the individual participants could be prosecuted and sent to jail. Given the potential legal risks, it is best to avoid communications with competitors if at all possible. On the other hand, there are some aspects of our business that require us to interact with personnel from competing companies. Whenever that is the case, caution is key. Even in casual conversations with friends or acquaintances who happen to work for competing firms, you must always be guarded in discussing the Company s operations. When it comes to dealings with competitors, drawing distinctions between lawful and unlawful conduct often requires careful legal analysis. Contact the Legal Department if you have even the slightest question about the legality of a given course of action. As explained below, however, there are some activities that are almost always unlawful. Anticompetitive Agreements Dealings with Competitors Section 1 of the Sherman Act the principal antitrust provision that governs dealings between competitors only applies in instances in which two or more firms have agreed, or conspired, to coordinate their actions in a way that unreasonably limits competition. An illegal agreement need not be in writing. Nor does there need to be any direct evidence, or admission, that any actual agreement existed. Courts often infer the existence of anticompetitive agreements merely from circumstances that tend to suggest a likelihood of coordination between the actions of two competing firms. Hence, the mere appearance of collusion between two competing firms can be enough to create serious legal risk. The slightest indication that two firms may have secretly coordinated their actions can turn an otherwise common marketplace occurrence such as parallel pricing into a high-risk legal issue. For example, suppose a company were to announce a significant rate increase and one of its competitors, very soon thereafter, followed suit. In highly competitive markets, this type of parallel pricing is extremely common and certainly not, in and of itself, unlawful. But suppose that executives or high-level employees of the two companies happened to speak by phone, or happened to attend the same trade association meetings, or were otherwise in communication in the days leading up to the parallel pricing action. If there were evidence of such opportunities to conspire, this could lead to inferences of unlawful coordination, which could be difficult to disprove. Even assuming the companies did not secretly coordinate their actions, there is no guarantee that they will prevail in litigation, particularly when there are unexplained or suspicious circumstances. At a minimum, such circumstances could prolong the cost and disruption of a lawsuit by making it more difficult to achieve a dismissal. CONFIDENTIAL 7 For Williams Internal Use Only

12 Therefore, we must always be careful not to engage in conduct or make statements that could lend even an appearance of validity to a potential accusation of anticompetitive coordination. Conduct That Is Virtually Always Unlawful It is a central tenet of the antitrust laws that competitors may not agree between or among themselves to limit competition with one another. Agreements not to compete can take many different forms, including agreements to fix prices, rig bids, divide markets, allocate customers, or limit output. These types of agreements between competitors are virtually always unlawful. In fact, courts often condemn agreements of this sort as per se unlawful without even considering whether they have resulted in any actual harm to competition or consumers. When rival firms agree between themselves to limit competition, there is often no defense to liability such agreements are usually automatically (or per se ) unlawful. Price-Fixing Agreements Dealings with Competitors Competitors may not agree with one another on the prices they will charge for products or services they sell in competition with one another. This sounds like a simple rule, and in many ways it is. But it is important to understand that courts define price fixing quite broadly. For a price-fixing violation to arise, it is not necessary for two competitors to agree on the exact prices they will charge, or even a range of prices. It is enough if the agreement directly or indirectly influences the price of the products or services the businesses sell in competition with one another. Thus, agreements between competitors to do any of the following would likely be deemed to be per se unlawful price fixing: agreements to charge the same prices, tariffs, or rates (the most direct form of price fixing); agreements to follow the same or similar methodologies in setting prices or rates; agreements to limit production; and agreements to forego or delay plans to introduce new capacity into the market. CONFIDENTIAL 8 For Williams Internal Use Only

13 In addition, agreements to exchange non-public pricing information, or other competitively sensitive information that could facilitate pricing coordination, might also be deemed equivalent to price fixing and thus condemned as unlawful. Williams prices must be determined independently, based on our own analysis of costs and prevailing market conditions. However, while it is important to avoid even the appearance of engaging in unlawful price fixing, do not confuse price fixing with lawful forms of competition. In setting its own prices, it is absolutely legal for Williams to consider information relating to competitor pricing. It is also perfectly legal, and often quite important, for Williams to decide independently to match the prices charged by a competitor. On the other hand, we must be careful to ensure that we obtain competitive pricing information only from appropriate sources, which may include customers, newspapers, industry reports, and other public sources. Moreover, when we come into possession of such information through a customer or some other legitimate source, we should always be careful to document how the information was obtained (to the extent it is not self-evident). In some businesses (such as energy marketing and trading), companies we deal with as customers or suppliers may also be competitors. Complex business relationships of this nature can raise particularly high antitrust risks. While there is nothing improper, per se, about doing business with a competitor, in such situations it is critical that all communications with the competitor be strictly limited to only the legitimate business transaction at hand (such as buying or selling an energy commodity). No other matters relating to competition between the two companies, or the markets in which they compete, should be discussed. Never obtain competitive price information (or other sensitive competitive information) directly from a competitor, or even discuss such subjects with a competitor, absent a lawful purpose, such as a legitimate business transaction, that requires exchanges of such information. Limit any communication to what is necessary for the business at hand. Price Signaling Dealings with Competitors It is not uncommon for companies to make public statements relating to prices. Executives, for instance, are sometimes called upon to discuss pricing in public investor conferences. In some industries, including the natural gas pipeline business, it is also common, and even required, to publish prices or rate schedules. These actions, in and of themselves, are perfectly lawful. Nonetheless, public pricing announcements could, in theory, serve as a vehicle for facilitating industry price coordination, and a number of antitrust cases have been brought based on such allegations. For instance, in the early 1990s the United States Department of Justice brought an antitrust lawsuit alleging that the major domestic airlines were using computerized fare postings to signal their future pricing plans and thereby coordinate fare increases. CONFIDENTIAL 9 For Williams Internal Use Only

14 Dealings with Competitors Likewise, companies in a number of different industries have been accused of soliciting and maintaining price-fixing agreements through public statements and press releases. While there are perfectly legitimate reasons to communicate publicly about pricing, the following guidelines should be followed in order to avoid the potential for antitrust claims relating to public price announcements: all public communications (regardless of subject) must be consistent with the limitations and requirements of the Company s Policy on Public Relations and Disclosure of Information; only personnel whose official work responsibilities entail making public communications about pricing are permitted to do so; absent authorization from the Legal Department, no executive or employee should ever make public statements about the Company s future pricing plans or intentions; and no one should ever make public statements about pricing for the principal purpose of influencing the pricing behavior of competitors. Market Division and Customer Allocation Agreements or understandings between competitors to allocate customers or potential customers, or to divide or allocate markets or territories, are also per se unlawful and very often will be prosecuted criminally. Such agreements may take a variety of forms, including: agreements whereby one firm commits not to do business with particular customers or classes of customers in exchange for some reciprocal commitment from a competing firm; agreements whereby one firm commits not to do business in, or not to expand into, a given market or territory in exchange for some reciprocal limitation on competition by another firm; and agreements whereby one competitor commits not to manufacture or sell a given product in exchange for another competitor s commitment not to produce or sell a different product. Again, particular care must be taken in transactions in which Williams is a supplier to, or a customer of, a competitor. In such a relationship, it could be unlawful to enter into agreements that restrict either party s freedom to do business with particular customers or within particular markets. Likewise, as with pricing information, all Williams employees should be careful to avoid communicating with competitors relating to the customers or markets we serve or plan to serve in the future. CONFIDENTIAL 10 For Williams Internal Use Only

15 Bid Rigging (and Joint Bidding) Bid rigging occurs when competitors agree to rotate jobs among potential bidders, to submit complementary bids (in other words, to make a bid knowing it is unacceptable, so that the other bidder will be awarded the contract), to submit bids with agreed upon pricing, or otherwise to create sham competition in bidding. Bid rigging is per se unlawful and can result in criminal prosecutions. When Williams responds to requests for proposals ( RFPs ) or engages in other bidding practices, it should do so independently, without coordinating or communicating with other actual or potential bidders. Submitting joint bids together with other companies, on the other hand, may be perfectly lawful. Nonetheless, all joint bidding activities must be cleared in advance with the Legal Department. Mail and Wire Fraud Dealings with Competitors As discussed above, Section 1 of the Sherman Act applies only in instances in which two or more firms have reached some form of anticompetitive agreement (e.g., an agreement to fix prices, divide markets, or rig bids). Even if two firms merely discuss the possibility of such an agreement, however, this can also violate the law. Specifically, if competitors communicate via telephone or mail (including or instant messaging) with an intent to enter into an unlawful agreement, this may violate federal criminal statutes prohibiting mail fraud and wire fraud. Persons convicted of such violations may be imprisoned for up to 20 years and fined up to $250,000 per violation. Corporate fines are even greater. Additional Conduct That Can Be Unlawful As discussed above, certain types of agreements between competitors are virtually always unlawful under the antitrust laws, but other types of agreements may or may not be unlawful, depending upon the circumstances. Group Boycotts and Collective Refusals to Deal Generally speaking, companies may choose on their own to do business, or not do business, with whomever they wish. However, in some circumstances it can be illegal for two or more companies jointly to refuse to do business with, or boycott, a competitor, customer, or supplier. This is especially true where the companies participating in any such group boycott are direct competitors. Examples of collective refusals to deal that would likely be held unlawful include: agreements by manufacturers not to sell to price-cutting distributors; and agreements between competitors not to sell to a customer unless the customer discontinues buying from other competitors. CONFIDENTIAL 11 For Williams Internal Use Only

16 Agreements of this type are not rendered lawful simply because there may be a sound business reason for refusing to deal with the third party. For example, the fact that a given customer is a known credit risk might give each supplier, acting independently, a legitimate basis for refusing to do business with that customer. Nevertheless, it could be illegal for a group of competitors to agree collectively to boycott that customer. Each company must decide on its own with whom it will deal, and it would be unwise even to communicate with a competitor about such issues. Joint Purchasing Arrangements Dealings with Competitors Joint purchasing arrangements may be permitted under certain circumstances; however, where the participants in a joint purchasing group collectively represent a sizable portion of the relevant market (e.g., 30 percent or more), the antitrust laws do apply stricter scrutiny, and there is a risk the activity could be held unlawful. To avoid potential legal risks, you should contact the Legal Department before agreeing that Williams will participate in any joint purchasing activity. Joint Research and Standard Setting Given the substantial costs of research and development, and the benefits of pooled resources, it is not uncommon for multiple firms to collaborate on major research projects and the development of common industry standards. Such activities can be of great benefit both to industry participants and to their customers. But, as is true in virtually any context in which competitors work together, participation in such activities does create some antitrust-related risks. For instance, there is a risk that joint research and development activities could be characterized as agreements to limit research expenditures, thereby retarding rather than promoting innovation. Likewise, standard-setting activities, if they are not conducted in an open and objective manner, could be attacked on the grounds that they unfairly exclude particular firms or technologies. Despite such risks, participation in joint research and standard setting projects may be worthwhile. However, all such activities should be cleared in advance by the Legal Department. Trade Association Activities and Lobbying Participation in trade associations and industry conferences can be important in the energy industry, as in any industry. Nonetheless, because such events result in competitors assembling together, every employee participating in such activities must exercise caution. No person participating in trade association activities should discuss Williams prices, costs, competitive strategies, or other competitively sensitive topics without clearing the discussion, in advance, with the Legal Department. If someone from a competing company raises such topics, stop the conversation immediately, saying that Williams policies prohibit you from discussing such subjects without Legal Department clearance. If the conversation continues or you continue to feel uncomfortable, CONFIDENTIAL 12 For Williams Internal Use Only

17 Dealings with Competitors leave the room, making your departure visible to those who remain. In all such instances, no matter how serious, make certain that you promptly report the episode to the Legal Department. If a competitor attempts to engage you in a discussion about prices or other sensitive competitive topics, halt the conversation immediately and promptly report the incident to the Legal Department. Trade associations commonly engage in lobbying and other efforts to influence an agency or branch of government at the federal, state, or local level. For example, pipeline operators may work together to advocate for new legislation or revisions to regulations that affect their operations. The First Amendment to the United States Constitution generally protects efforts to persuade the government to take a proposed action, even if those efforts are pursued jointly by competitors, and even if the government responds by limiting competition in some way. This protection is not unlimited, however. Therefore, you should consult with the Legal Department before taking part in any joint lobbying activities with other companies. Benchmarking Surveys and Industry Groups Williams obviously has a strong interest in controlling and managing its costs, including the amount it spends on such items as insurance and employee compensation. At the same time, like all companies, Williams has an interest in attracting and retaining the best, most talented employees it can. The Company thus desires to ensure the compensation terms available to its employees are competitive with those offered by other businesses, both within and outside the energy industry. One way for companies to gain a better understanding of current market trends as relates to costs (including employee compensation) is to participate in surveys and industry groups addressing such costs. Participating in groups that collect and exchange cost-related information is not uncommon, and typically such activities are conducted in a careful and professional manner by experienced consultants. There is reason to be concerned, however, about the potential legal risks associated with such activities, the principal legal risk being the threat of antitrust suits. In order to avoid and minimize such risks, the Legal Department should be consulted before any Williams employee agrees to participate in activities of this type. Likewise, in the event you are contacted directly by another company, or a consultant working on behalf of another company, with questions about Williams costs, including salary or other compensation-related information, you should politely decline to provide such information. Any such contacts should also promptly be reported to the Legal Department. CONFIDENTIAL 13 For Williams Internal Use Only

18 Dealings with Competitors Joint Ventures Although the antitrust laws treat certain agreements between competitors as criminal (for example, price fixing and market division), they also recognize that many collaborations between competitors can improve, rather than harm, competition. These sorts of arrangements, generally known as joint ventures, are not uncommon in the energy business. For instance, two competing firms might form a joint venture to develop energy reserves or to construct a new pipeline. Consult the Legal Department before proceeding with any joint venture with another company. While joint ventures in the energy business are common and typically lawful, they must be carefully structured in order to avoid legal issues. Moreover, before they may commence operations, proposed joint ventures sometimes must obtain regulatory approvals from the Department of Justice, the FERC, and other government agencies. Thus, no executive, manager, or employee should discuss entering into any form of alliance or venture with another business without the active and early participation of the Legal Department to ensure that the joint venture is properly structured and that all necessary approvals are obtained. Even after a legitimate joint venture has been established, there are continuing antitrust risks that must be carefully monitored. The fact that two competing firms enter into a legitimate joint venture focusing on a given business enterprise does not mean that those same firms may coordinate with each other concerning separate matters outside the scope of the joint venture s operations. For instance, while it might be lawful for the participants in a joint venture to agree they will not independently compete with the joint venture, it would likely be unlawful for the same two companies to agree not to compete against each other in other areas of their business not directly related to the joint venture. Competitors that participate as partners in a joint venture must continue to compete vigorously in all areas falling outside the scope of the joint venture agreement. CONFIDENTIAL 14 For Williams Internal Use Only

19 Dealings with Customers, Suppliers, Traders, Jobbers, Dealers, and Distributors While the greatest antitrust risks arise in connection with dealings with competitors, antitrust issues can also arise when dealing with customers, suppliers, traders, jobbers, dealers, and distributors that is, all firms with which we have a vertical relationship. It is particularly important to remember that all of our thirdparty business partners, be they customers, suppliers, traders, or others, are entitled to make their own independent business decisions. Any attempt to deprive such companies of their freedom to determine what products they will purchase or sell, what prices they will pay or charge, what territories they will compete in, or what companies they will do business with, could result in an antitrust violation. Thus, it is important to seek advice from the Legal Department before imposing any such restrictions. Contact the Legal Department before imposing any form of competitive restriction on resellers, customers, suppliers, or other companies with which we have a vertical business relationship. Remember, some vertical relationships may be with entities that are also horizontal competitors, in which case antitrust risks and limitations are heightened (see the discussion above on Dealings with Competitors). Resale Price Maintenance An agreement between the Company and traders, jobbers, distributors, or other resellers setting specific or minimum resale prices is known as resale price maintenance. Until recently, such agreements were per se unlawful under federal and state antitrust law. Courts and antitrust enforcers now take a more flexible approach and, as a result, resale price maintenance may be lawful in many cases. However, the law in this area continues to be in a state of flux. Accordingly, the determination of whether any particular resale price maintenance program is permissible should be made on a case-by-case basis. For this reason, if any questions arise concerning resale pricing, or the extent to which the Company may even seek to influence resale pricing, it is important that you contact the Legal Department for guidance. Customer, Territorial, and Other Non-Pricing Restrictions on Resellers The law governing non-pricing-related restrictions on resellers (such as limits on reseller or distributor service territories and customers) is complex. Company personnel should not include any such limitations on resale in agreements without first seeking guidance from the Legal Department. Seek legal guidance before pursuing any customer, territorial or other business restrictions on resellers. CONFIDENTIAL 15 For Williams Internal Use Only

20 Dealings with Customers, Suppliers, Traders, Jobbers, Dealers, and Distributors Tying and Bundling Arrangements A tie-in occurs when a seller offers a product or service (the tying product) only on the condition that the buyer also agree to purchase a different product or service (the tied product) it may not want. Such tie-ins are illegal in certain circumstances, provided that the seller has a strong market position (or market power ) in the tying market, which can occur if the product is patented or if there are only a few firms that dominate the market for the tying product. However, no tie-in will be found unless there are in reality two (or more) separate products and customers have in some way been forced, or coerced, into buying the separate products or services together. Do not force customers to buy separate products or services together. It is also possible for tying-related issues to arise where products, although available to be purchased separately, are priced in such a way as to induce customers to purchase such products in packages or bundles. Where a seller offers such a substantial package discount that purchasing the individual components of the package separately, or from different vendors, is not a viable option, this practice could lead to antitrust complaints by competing vendors. As discussed below, the antitrust risks associated with package discounts are particularly significant when the seller has substantial economic power in the market for one or more of the products in the package. Because the law governing application of antitrust tying principles to multi-product packages is currently in a state of flux, you should contact the Legal Department if you have any questions regarding when and under what circumstances package discounts could create risks of antitrust liability. Exclusive Dealing and Requirements/Output Contracts Contracts that prohibit a purchaser from buying or dealing in the goods or services of a competitor may be unlawful depending upon their effect upon competition. Contracts that commit a customer to purchase all, or substantially all, of its requirements for a particular product from one seller or commit the seller to sell all, or substantially all, of its production of a particular product to one customer also may be unlawful. The pivotal question in determining the legality of such contracts is whether they foreclose a substantial portion of the relevant market to competition. The analysis of such questions can be very complex. Therefore, you should consult the Legal Department before proposing or entering into any exclusive dealing arrangements. Seek legal guidance before entering into exclusive contracts. CONFIDENTIAL 16 For Williams Internal Use Only

21 Dealings with Customers, Suppliers, Traders, Jobbers, Dealers, and Distributors Price Discrimination and Discrimination in Promotional Allowances and Services The Robinson-Patman Act makes it unlawful in certain circumstances for a seller to discriminate in price between different buyers of commodities of like grade and quality. The Act applies only to sales of tangible goods and generally does not apply to services. The Robinson-Patman Act also requires that promotional allowances or services (such as advertising materials) furnished to distributors in connection with the resale of a product must be made available to competing customers on proportionally equal terms. A price difference alone will not violate the Act, but an unjustified difference in the price of a good that causes injury to competition can be unlawful. Robinson-Patman Act violations most often occur in two situations: first, when a seller charges different prices for the same product to buyers that compete in the resale of the product (e.g., competing branded and independent gas stations) or in the sale of a product that incorporates the original product, and, second, when a seller sells below cost to some customers but not others or reduces prices in a specific geographic area while maintaining higher prices elsewhere. There are several defenses and conditions to liability under the Robinson-Patman Act. As an initial matter, two sales need to be reasonably contemporaneous in order to be comparable for purposes of the Robinson-Patman Act. Thus, a purchaser (e.g., of natural gas) who paid a market price when the market was high would not have a Robinson-Patman claim just because other purchasers bought (at a different time) when the market was low. Further, cost differences may justify price differences where a lower price charged to a given customer is due to a lower cost of manufacture, sale, or delivery to that customer; note, however, the cost justification defense requires that the facts supporting the price differential be developed prior to making the sale. Finally, there is a meeting competition defense, which requires the seller to conduct a good-faith investigation to verify that the customer has been quoted a lower price by a competitor. It is important to remember that you should not contact a competitor to verify the competitor s lower-price offer; you should only contact customers to obtain this information. Anyone with questions concerning how to comply with the Robinson-Patman Act should contact Williams Legal Department. CONFIDENTIAL 17 For Williams Internal Use Only

22 Monopolization and Attempted Monopolization Section 2 of the Sherman Act forbids the monopolization or attempted monopolization of any market for products or services. Section 2 differs from Section 1 in that, among other things, it can be violated by a single company, acting alone (i.e., there is no requirement of any anticompetitive agreement), provided that the company so dominates a market that it may be said to possess monopoly power or a dangerous probability of achieving such power. Monopoly Power Monopoly power is generally defined as the ability of a single company, on its own, to raise prices above competitive levels or to exclude competitors. Even in businesses with substantial competition, a firm with a large market share (e.g., 65 percent or greater), might be at risk of being found to possess monopoly power or a dangerous probability of achieving such power, depending upon the overall competitive conditions in the marketplace. Also, such determinations are made by reference to a relevant market defined according to certain legal and economic tests. Relevant markets for antitrust purposes are often more narrowly defined than the markets that business people define. Hence, it is possible for a company that thinks of itself as competing within a much larger market to be found to possess monopoly power in what businesspeople may think of as a market segment or submarket. Firms that possess monopoly power or something close to it must be more cautious about the legal risks associated with competitive practices. If a company does possess monopoly power or something close to it in a given market or market segment, this may elevate the legal risks of certain competitive practices. If you have any questions or concerns about the extent to which Williams might be deemed to possess monopoly power in a given market, you should contact the Legal Department for guidance. Exclusionary Conduct Section 2 does not condemn the mere possession of a monopoly achieved as a result of superior products, innovation, or business acumen. Likewise, even monopolists are permitted to compete vigorously on the merits. It is unlawful, however, to obtain or maintain monopoly power through exclusionary or predatory conduct. It is also unlawful to attempt to acquire a monopoly through such conduct, where the firm engaging in the conduct has a dangerous probability of becoming a monopolist. Precisely what may be deemed to constitute exclusionary or predatory conduct for Section 2 purposes is not always entirely clear. Courts tend to analyze this issue on a case-by-case basis. Generally speaking, however, exclusionary conduct is conduct that lacks a legitimate business justification and threatens to destroy or eliminate competition. The following are examples of types of conduct that have been attacked as being exclusionary: CONFIDENTIAL 18 For Williams Internal Use Only