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X is a public authority that provides funding, based on

calls for proposals, to selected...
X is a public authority that provides funding, based on calls for proposals, to selected company-formed consortiums that are competing. Y is a non-profit organization, that is setting the profession’s trends and vision, members of which are said companies. Y aims to remain independent from X, both financially and professionally. What are the legal, or other arguments against Y joining such consortiums, considering; a) Y may very likely end up in a consortium that is competing against its own members, who are entering another consortium for the same call for proposals; b) Y could form a consortium with its own members and be accused of unfair competition; c) Y could end up promoting one consortium, and X’s interests and views to market, instead of its own; d) this may be counter to non-profit policy since the only income should be membership fees.
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Answered in 4 hours by:
1/17/2018
Law Educator, Esq.
Category: Business Law
Satisfied Customers: 126,922
Experience: All corporate law, including non-profits and charitable fraternal organizations.
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Non-profit professional organizations frequently join groups to help broad the abilities of their members. So as their members are joining multiple groups or consortiums the non-profit can belong to multiple consortiums as well. It is not unlawful to even have the non-profit support one consortium over another as Y is not making profit off of doing so, they are supporting these consortiums based on the trend in the industry as to which one is best for the member organizations at the time.

Non-profits can have income other than membership fees. It is just that any income has to go to the non-profit's purpose.

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Customer reply replied 7 months ago
Thank you. This is one interpretation. Now I would also like arguments against Y joining such consortiums, elaborating on possible conflict of interests and unfair competition. For example, Y’s members A and B joining consortium C1 would not like that Y joins competing consortium C2, using the membership fees to write a proposal and boosting the C2. Indeed, Y aims to help broad the abilities of their members. But if Y was to join such consortiums would be to get funding (money) from X. Y will then need to promote the interests of X and that particular consortium, while making a profit. So it should be other ways for Y to support its members than by competing them

Thank you for your reply.

Here is the issue. Y as a non-profit has a right to pursue their stated non-profit purpose. So it is not unfair competition because they are NOT competing with anyone, they are joining multiple consortiums to promote their non-profit purpose.

As long as Y is not setting and controlling prices in the industry in each consortium, which would be a Sherman Anti-Trust violation, what you describe is something that happens frequently where they they belong.

If Y is not taking business from its members in C 1 by joining C 2, there is no conflict of interest. Y can promote multiple consortiums at one time if they choose to do so. As long as the non-profit has no contract with its members not to do so. If the non-profit has bylaws or contracts with the members that prohibits this conduct, that is the only way to stop them from joining multiple consortiums.

Law Educator, Esq.
Category: Business Law
Satisfied Customers: 126,922
Experience: All corporate law, including non-profits and charitable fraternal organizations.
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