Information exchange is extremely topical. It can be both pro- and anticompetitive, depending on the circumstances. On the one hand, the exchange of information can be considered a requisite element for the creation of a market; whereas, conversely, it would be extremely anti-competitive where the exchange is ancillary to an anti-competitive agreement. It is therefore surprising that the Commission has not addressed it in any great detail from a competition standpoint.
Definitive direction on the extent to which information exchange is sanctioned under Article 81 EC Treaty would be welcomed. Many companies which are looking to exchange information under agreements, joint ventures or even on an industry-wide basis, are concerned by the extent of the EU Commission’s powers to penalize anti-competitive behaviour and are desperately seeking guidance.1 The European Commission’s Horizontal Guidelines2 are currently in the renewal process. As part of the consultation process, the Commission has been asked to consider information exchange specifically, as previously they have not given the necessary guidance.
Information exchange is at the heart of Article 81 EC Treaty; as it states that together with agreements between undertakings and decisions by associations of undertakings, concerted practices preventing, restricting, or distorting competition are prohibited. It is established that where there is communication or cooperation between parties, through direct or indirect contact, which has as its object or effect an influence over how the parties conduct themselves in the relevant market, then the elements for establishing a concerted practice exist. Information exchange is a key element of these activities and further, it should be noted, can be anti-competitive as a stand-alone infringement when it gives rise to collusive practices.
On a related topic, signalling in the market has also been considered an anticompetitive practice. Where a company announces publicly via the press, or perhaps its own website, its future strategy with regard to pricing or proposed capacity changes, this could be regarded as a form of information exchange, as competitors could use the information to match that signalled. The Commission may well find that the infringement is more or less severe, depending on the relative strength of the company within the market affected and the status of the person within the company who signals the strategies to the market.
Further aspects affecting the potential finding of anti-competitive behaviour in signalling have been brought to our attention by our U.S. colleagues. An argument that companies have the right to free speech could be quite justly made, together with the fact that legitimate business motives lay behind the announcement. The issue that the authorities therefore need to consider carefully is whether there are other factors that could prove a “conscious commitment to a common anti-competitive scheme.”
Where uncertainty has historically entered the frame, is in the distinction between when information exchange will unlawfully restrict competition and when the exchange of information could provide a transparency to the market which actually benefits the consumer and therefore proves to be pro-competitive. On the one hand, transparency could support collusion and coordination. Knowledge of pricing, capacity and a competitor’s strategy removes the uncertainty which underpins a competitive market. Tacit collusion, it is argued, is as damaging to competition as coordination agreements and both may be ancillary to anticompetitive arrangements, such as monitoring compliance with a cartel.
Conversely, transparency could be said to be a positive feature of a market. Where supply and demand are in equilibrium based on an informed position on both sides, from a competition point of view this should lead to efficiencies in supply leading to lower costs—to be passed on to the consumer—and an understanding of the products on the market for consumers to be able to make sophisticated choices. New entrants to the market would also be in a position to challenge incumbents more effectively.
Uncertainty also exists as a result of the fact that a number of economic factors are recognized by the Commission as relevant to the assessment of where information exchange systems fit between these two poles. Consequently, the approach to assessment is on a case-by-case basis with no hard-and-fast rules; only policies interpreted from case law and the limited amount of EU guidance is available.
What has been made clear is that there is certain information, in particular pricing, costs and volume information, which is considered by competition authorities to be far more sensitive in anti-competitive terms, than, for example, information related to training, technical or safety issues. Instances where a contrary position has been taken, such as where benchmarked cost information has been stated to be potentially pro-competitive, complicates the matter.
A further interesting, and potentially confusing, factor to consider is the different approaches taken by the U.S. antitrust authorities as compared to the European Commission. From a general perspective, it seems that the United States in particular is more aware that information production and transparency in a market can have pro-competitive effects. For example, Piers and other data collecting agencies publish data on a daily basis. In contrast, under the EU’s Maritime Guidelines, a period of one year was recognized as the acceptable backstop for what could be considered historical individual data for information exchange purposes. However, information this old is of no value in many sectors. Unfortunately, the maritime guidelines are being cited in other industry contexts in the EU.
In the United States, the DOJ and FTC have provided guidance and established a “safe harbor” guiding competitors in how lawfully to share information.3 In addition, the Antitrust Division of the DOJ has provided business review letters in response to requests for statements of enforcement intentions. These letters are an extremely useful source of information and provide a basis for companies to assess whether their proposed exchange structure would be acceptable. For example, in relation to a towing and barge services information exchange system, with the proposed purposes of reducing costs and improving efficiencies by establishing benchmarks on certain costs and best practices, the Department of Justice set out conditions which, if followed, would mean that the Department would not challenge the system (although it reserved its position with regard to future challenges if the structure turned out to be anti-competitive). In addition to stating that the information exchange would not include any information on pricing, or on new or redeployment of equipment, some of the main conditions imposed by the Department of Justice were:
- That an independent entity should manage the data
- The data should be more than three months old at the time of dissemination
- At least five companies’ data should be aggregated on any point
- No individual company’s data should represent more than 25 percent or more on a weighted basis of the statistical point
This advice follows the guidelines the DOJ and FTC established in the health care industry. In a number of its business review letters, the Antitrust Division states that the proposed information sharing would have pro-competitive effects, with the costs saved by companies leading to lower prices and increased output to the benefit of consumers.
European case law on the subject is fairly extensive, however in most cases the findings are very much based on the individual facts and it is therefore difficult to draw broad principles from these beyond the very basic. Further, in the majority of instances, the information exchange is ancillary to other anti-competitive behaviour, in particular cartel activity.
Another method of assessing the topic could be to examine certain examples of information exchange systems which have not been queried by the European competition authorities. However, when a year’s time lag is seen as the safe harbour in the maritime sector, and at the same time financial markets data is being provided on a minute-by-minute basis by news services such as Reuters or Bloomberg, it may be understandable that companies with the legitimate objective of reducing costs via an information exchange system are uncertain as to the potential lawful scope of the exchange in the EU and what circumstances will attract the Commission’s attention.
Accordingly, in the renewal of the Horizontal Guidelines, it is hoped that the EU will go beyond their present position—where the Maritime Guidelines are increasingly being referred to for general guidance as to where and how information exchange may be permissible—and draft definitive guidelines on information exchange to clear up what is currently a grey area in EU law