The Antitrust Attorney Blog
Authors: Steve Cernak & Molly Donovan
There is no guaranteed safety zone for exchanging competitively sensitive information amongst competitors. Practices once deemed relatively safe—like subscribing to a third-party data services provider to manage the exchange—now carry increased risks. This is mostly because machine learning and AI have made it possible to predict a specific competitor’s future strategies even if a third party has aggregated and anonymized the underlying data and even if the underlying data is old.
While antitrust compliance is best assessed on a case-by-case basis, there are general guideposts that third parties and their subscribers should understand before gathering, providing, and/or exchanging price, production, procurement, employment or other competitively sensitive data that competitors would not (or should not) share directly with each other.
Antitrust concerns are at their peak if the exchanged information allows competitors to increase price or restrict output in explicit or even tacit collusion with each other in a joint effort to raise profits industry wide. To steer clear of even the appearance of such conduct, these pointers matter:
- Avoid exchanging data that is comprehensive, detailed and current. Any one of these is a concern, but the combination is very concerning.
Comprehensive means the information covers every aspect of business planning and strategy: how to procure, how to price, how to set production levels, and how to compensate workers and executives. Have you been asked to provide entire internal business plans? That should raise flags.
Detailed means the data reveals information broken down by specific production facilities or specific products, as examples. The higher level, the better. More detailed, lower-level information entails more risk.
Current means the information exposes what your business is doing in real time. The government once said that data should be at least 3 months old before it is exchanged, but machine learning and complex algorithms have since increased the value of historical data—making it possible that subscribers might be able to use even months-old data to discern future-facing strategies.
- Don’t fill in the donut hole. Even when the information exchanged is not comprehensive, make sure that it is not the missing piece that, when combined with information that “everyone knows,” allows subscribers to act collusively. Even after the information exchange, those subscribers should still not be certain about how their competitors will act and react.
- Asymmetry can be a bad fact. Suspicions are raised if the third-party reports are available only to companies who compete at the same level of the supply chain—and not to their suppliers, employees, and/or customers. The “give to get” idea (i.e., you must be able to provide the relevant data to receive the relevant data) can appear collusive.
- The antitrust risks from all exchanges are not equal. Exchanging price, production, and cost information is risky. Exchanging tips on organization of a parts warehouse is less risky (though not riskless). Your antitrust reaction should be calibrated to the different levels of risk.
- Voluntary surveys and periodic polling are preferred over direct downloads of internal ledgers and reports. You obviously would not share the latter directly with a competitor, so you should exercise equal caution before sharing it with a third party.
- Don’t couple sensitivity with deanonymization. Flags should go up if subscribers are able to deanonymize sensitive information, i.e., identify which competitor supplied what information.
- Even aggregated data poses risks. Ask whether subscribers can use algorithms or other methods to disaggregate data to predict competitors’ pricing or output strategies.
- Complete or near-complete industry participation could appear collusive. If the data being shared represents all or most of the relevant industry, talk to counsel about risk mitigation. The risks increase if the third party discloses the identities of the participants (or they are otherwise known, obvious or can be inferred) and/or the industry is concentrated.
- Third-party consultants should not advise subscribers how to use the information to raise total industry profits. Nor should consultants in their reports to subscribers identify opportunities to raise prices or restrict output or tell one subscriber how other subscribers are using the information.
- Exercise caution when converting data to common metrics for apples-to-apples comparisons.
- Don’t advertise the third-party reports as “verified” or more trustworthy than information you’d receive directly from a competitor.
- Have an antitrust compliance program. This goes for third parties and their subscribers – and subscribers should make sure the third parties they hire have a good one. Your antitrust compliance program should keep pace with the technology being used to analyze competitive intelligence. What was deemed compliant a year or two ago, may need a fresh look.
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