In a highly competitive marketplace, access to price intelligence is an increasingly vital asset for retailers and manufacturers of all kinds of consumer goods and services. Many price intelligence tools allow companies to react and change prices within seconds. Some even allow computer algorithms to decide when to automatically adjust prices.
Ordinarily, price intelligence fosters competition and benefits consumers. It allows retailers to monitor competitors’ pricing strategies and amend their own through applying big data’s analytical framework. But even when price intelligence results in pro-competitive benefits like lower prices, if a company gains access to price intelligence by sharing pricing information with competitors, it may raise antitrust concerns with the government.
Should the government find your information sharing practices anticompetitive, your company stands to potentially lose millions of dollars, among other penalties. You can manage antitrust risk by learning about, and applying, the government’s data exchange standards to keep your company free of unintentional antitrust violations.
Price intelligence: Toeing the line between procompetitive and problematic
The government recognizes that information sharing is sometimes necessary to achieve procompetitive benefits and economic efficiencies. Indeed, most price intelligence-driven pricing decisions are procompetitive, as they end up lowering the price a consumer pays.
Antitrust concerns can still crop up, however, when competitors share with one another the underlying data that supports pricing decisions. The Federal Trade Commission (FTC) has explained that certain data exchanges or statistical reports from individual competitors can raise antitrust concerns. This is especially true if that data reduces uncertainty about a rival’s product offerings, prices or strategic plans.1
For example, the FTC recently settled allegations that two surgical hair transplantation companies violated the FTC act by exchanging non-public information about future product offerings, surgical hair transplantation price floors and discounts, plans for expansion and contraction, and business operations and performance.2 Notably, one of the companies did not see these communications as problematic, but viewed them as “business as usual” and indicated it had similar information exchanges with other rivals.3
Companies must therefore realize that sharing competitively sensitive information can subject them to antitrust liability, particularly if it results in an agreement to fix prices or limit output.4 Not all information exchanges are unlawful, however, and the government has indicated liability will not attach to legitimate information sharing, such as sharing technical cyber threat information.5 As remarked in a recent blogpost on the FTC website, the level of antitrust concern raised by an information exchange depends mainly on the type of information shared.6
The “safety zone” guidelines to protect against antitrust violations
To assist companies in determining whether information exchanges with rivals are lawful, the Department of Justice (DOJ) and FTC have issued guidelines for competitor collaboration. These guidelines appear in the publication, “Statements of Antitrust Enforcement Policy in Health Care” (Statements).
While developed for health care providers, Statements broadly applies to other industries as well, including the food and beverage industry. Through understanding these guidelines, you can learn how to share company data without running afoul of antitrust laws.
Statements sets out the following elements to help competitors remain in the “safety zone” when exchanging pricing or other data:
- Third parties (such as trade associations) manage the data collection
- The shared data is over three months old
- The exchange involves at least five members, where no individual member accounts for more than 25% of a weighted basis of a reported statistic
- The aggregator must compile the data in a way so as to make it impossible to identify a particular member’s data7
Generally the FTC or DOJ will not challenge as anticompetitive any data exchanges that operate within these guidelines. Where a data exchange falls outside the safety zone, these agencies will perform an individualized review. This will typically involve an evaluation of whether the exchange’s likely anticompetitive effects outweigh any procompetitive justification.
Additional guidance for your pricing data sharing practices
If your business is unsure whether a proposed data exchange falls within the safety zone, you can seek additional guidance from the government. To do this, you can request either an expedited business review through the DOJ8 or an advisory opinion through the FTC.9 The agency in charge of the review will make its best effort to send a response within 90 days. This will advise you as to the agency’s current enforcement intentions with respect to the conduct at issue. You can visit the DOJ or the FTC’s websites for more information about these processes.10
The sharing of pricing data offers great benefits while also raising serious antitrust concerns. On the benefits side, companies can channel the ever-growing supply of transactional and behavioral data to predict consumer behavior and outcomes. This can help companies optimize their marketing, pricing, and competitive positioning.
When that pricing intelligence stems from competitor-provided data, businesses must ensure that such shared data does not violate antitrust regulations. By remaining in the safety zone, and seeking additional guidance when necessary, companies can minimize their antitrust risk.
Liz Friedman and Steve Safranski are antitrust attorneys at Robins, Kaplan, Miller & Ciresi L.L.P.
1 Federal Trade Commission, Information exchange: be reasonable, http://www.ftc.gov/news-events/blogs/competition-matters/2014/12/information-exchange-be-reasonable.
2 Case Summary, In the Matter of Bosley, Inc., Aderans America Holdings, Inc., and Aderans Co., Ltd., File No. 121-0184, http://www.ftc.gov/enforcement/cases-proceedings/1210184/bosley-inc-aderans-america-holdings-inc-aderans-co-ltd.
3 Complaint at ¶ 16, In the Matter of Bosley, Inc., Aderans America Holdings, Inc., and Aderans Co., Ltd., File No. 121-0184 (May 30, 2013).
4 Federal Trade Commission, Information exchange: be reasonable, http://www.ftc.gov/news-events/blogs/competition-matters/2014/12/information-exchange-be-reasonable.
5 Department of Justice and Federal Trade Commission: Antitrust Policy Statement on Sharing of Cybersecurity Information (April 10, 2014), http://www.ftc.gov/public-statements/2014/04/department-justice-federal-trade-commission-antitrust-policy-statement
6 Federal Trade Commission, Information exchange: be reasonable, http://www.ftc.gov/news-events/blogs/competition-matters/2014/12/information-exchange-be-reasonable.
7 Department of Justice & Federal Trade Commission, Statements of Antitrust Enforcement Policy in Health Care at 63 (Aug. 1996), http://www.justice.gov/atr/public/guidelines/0000.htm.
8 58 Fed. Reg. 6132 (1993).
9 C.F.R. §§ 1.1-1.4 (1993).
10 For the Department of Justice: http://www.justice.gov/atr/public/busreview/201659a.htm and http://www.justice.gov/atr/public/busreview/201659c.htm. For the Federal Trade Commission: http://www.ftc.gov/tips-advice/competition-guidance/competition-advisory-opinions.
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