DOJ continues to warn companies sharing information outside of their organizations, including through third-party reporting services or pricing software, that such exchanges will be closely scrutinized and may be prosecuted as stand-alone violations of the US antitrust laws if they tend to harm competition.
DOJ has filed a statement of interest in a case where it said:
Information sharing alone can violate antitrust law], even without proof of an agreement to fix prices and
Information exchanges that report only aggregated data can violate the antitrust laws, even where the information is not linked to specific competitors.
The Statement offers insight into how the DOJ views and analyzes information exchanges. It also reminds us that information exchanges pose a greater risk than ever and warrant close review.
DOJ has taken an increasingly aggressive approach toward information exchanges over the past few years. In early 2023, DOJ withdrew from an almost 30-year-old position that had formed what the business and legal community relied on as the rules for information sharing. In withdrawing from the prior policy, DOJ declined to replace it with an updated policy. It said it would analyze information exchanges individually and advised companies and lawyers to turn to DOJ speeches, enforcement proceedings, and amicus briefs for guidance.
Since its withdrawal, DOJ has continued to signal it is closely scrutinizing exchanges of competitively sensitive information between entities, notably competitors, and companies' use of pricing algorithms and other AI technology that assists companies in predicting competitors' strategies and decision-making, particularly when they rely on data collected from competitors.
DOJ is litigating two civil cases challenging information sharing agreements: (1) where DOJ accuses a company of violating antitrust law by helping meat processors exchange competitively sensitive information about production levels, costs, and pricing; and (2) a pricing-algorithm case where DOJ accuses a software provider of violating antitrust law by facilitating an agreement among competing landlords to share competitively sensitive information through joint use of its revenue management software.
DOJ's Statement highlights key points that businesses and counsel advising them should note when assessing the antitrust risks posed by an information exchange.
DOJ takes the position that information exchange among competitors may not only support an inference that a price-fixing or output-restriction agreement exists but is also a form of concerted action that can violate antitrust laws. According to DOJ, this includes any information-sharing arrangements run by a third-party reporting service in which participants agree to share their information with the third party. Courts regularly allow plaintiffs to rely on information exchange as evidence to suggest the existence of an agreement to fix prices or reduce output. The position that sharing competitively sensitive information alone is enough to violate antitrust law is an expansion of the types of conduct that could run afoul of the antitrust laws.
DOJ takes the position that whereas price-fixing agreements are automatically condemned as a violation of antitrust law, stand-alone information-sharing claims are subject to a flexible rule-of-reason analysis, which requires an inquiry in each case that considers all of the facts and circumstances to determine whether the restraint tends to harm competition.
While DOJ acknowledged that the rule-of-reason framework considers procompetitive justifications for an exchange and weighs them against the exchange's anticompetitive effects, DOJ did not give examples of procompetitive justifications that might outweigh potential anticompetitive harm. DOJ focused on the broad and subjective harm to competition, saying competitors' information sharing can undermine the competitive process, increase coordination among rivals, and cause an asymmetry of power in the market.
DOJ highlighted some factors to consider when assessing whether an information exchange among competitors harms competition. It argues that no factor is dispositive and clarifies there are no safe harbors or bright-line rules in terms of the exchange's structure, nature, and manner.
The more sensitive the information, the more it can be used to restrain competition. Price, output, cost information, and information that reflects recent, current, or future price or output are among the most competitively sensitive and carry the highest risk. However, not every case requires a direct exchange of price or cost, and other types of information can still raise concerns.
When information is detailed or nonaggregated, the exchange is more likely to harm competition. There is no definite rule, and courts do not require detailed or nonaggregate information if other circumstances indicate a tendency for anticompetitive harm. DOJ pointed to examples of aggregated data exchanges, which allowed firms to glean information about the competitors' budget plans and to coordinate their salaries in response and polls reporting back the mean, median, and mode minimum rates that physicians would accept from payors, which helped encourage members on the low end to raise their minimum rates.
When competitors agree to exchange competitively sensitive information only among each other, it suggests that the information sharing will benefit only the competitors at the expense of consumers, workers, or other market participants.
Exchanges of recent or future information carry far greater potential for anticompetitive effects than historical data.
Information exchanges in highly concentrated markets may increase the risk of anticompetitive effects, but not every case must involve only a handful of competitors.
Companies should expect DOJ to continue to closely scrutinize exchanges of competitively sensitive information between separate entities and companies' use of pricing algorithms and AI technology that assists companies in predicting competitors' strategies and decision-making, particularly when they rely on data and information collected from competitors. Companies should:
Review all information exchanges to determine whether it (1) is reasonably necessary to achieve a legitimate business purpose, (2) has any actual or potential anticompetitive effects, and (3) is structured in a way to reduce antitrust risk.
Companies should be cautious when developing or using algorithms that rely on competitors' nonpublic data to determine prices, production levels, and output or employee compensation.
Implement internal compliance procedures to ensure information exchanges are flagged and reviewed before they occur and are subject to periodic review to confirm accuracy and adherence to any recommended safeguards.
Review and update antitrust compliance policies and training so employees across all departments know how exchanging information outside the company can create antitrust risks.
Comments