The Anticompetitive Aspects of
Information Exchange Agreements –
A U.S. Perspective
Krisztián Katona, Counsel for International Antitrust*
•The views are my own and do not necessarily reflect those of the Commission or
any of its Commissioners.
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Overview
• US antitrust framework for information
exchanges
– Section 1 Sherman Act
– Section 5 FTC Act
• Supreme Court case law
• FTC and DOJ guidelines
• Recent enforcement actions (National
Association of Music Merchants case)
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Legal Framework – Section 1
• Section 1 Sherman Act
– Elements to a Section 1 violation:
•
•
•
•
Agreement
Between entities
Unreasonable restraint on competition
Affecting interstate commerce
• Per se – rule of reason
• Information exchanges – rule of reason
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Legal Framework – Section 5
• Section 5 FTC Act prohibits “unfair
methods of competition”
• May reach conduct that doesn’t rise to a
Section 1 violation (e.g., invitation to
collude – see Valassis case)
• National Association of Music Merchants,
Inc.
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Supreme Court Jurisprudence
• American Column and Lumber Co. v.
United States, 257 U.S. 377 394-95 (1921)
– “Open Competition Plan” is facilitating practice
• United States v. American Linseed Oil Co.,
262 U.S. 371 (1923)
– Purpose of exchange is to affect prices
• Maple Flooring Mfrs. Ass’n v. United
States, 268 U.S. 563 (1925)
– No purpose to fix prices or restrain trade
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Supreme Court Jurisprudence (cont’d)
• United States v. Container Corporation of
America, 393 U.S. 333 (1969)
– Shift from purpose to the likely effect on prices
• United States v. Citizens & S. Nat’l Bank,
422 U.S. 86, 113 (1975)
– “[t]he dissemination of price information is not
itself a per se violation of the Sherman Act”
• Catalano, Inc. v. Target Sales, 446 U.S.
643, 647 (1980)
– “advanced price announcements are legal”
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Appellate Courts’ Decisions
• In re Petroleum Products Antitrust Litigation,
906 F.2d 432 (9th Cir 1990)
– Form of exchange is not determinative of its
legality
• United States v. Airline Tariff Publ’g Co., 836
F. Supp. 9, 12 (D.D.C. 1993)
– Signaling future price intentions condemned
• Todd v. Exxon Corp., 275 F.3d 191 (2d Cir.
2001)
– Confidential exchange to set employees’ salaries
“troubling” and “problematic”
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FTC/DOJ Health Care Statements (1996)
• Guidelines for dissemination of price and
cost data among health care providers
• Antitrust safety zone:
• Third party collects and manages the information
• The data provided is more than 3 months old
• Specific information cannot be matched with
competitors
• Outside the safety zone – rule of reason
• Principles apply to other industries
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FTC/DOJ Collaboration Guidelines (2000)
• FTC/DOJ Antitrust Guidelines for
Collaboration among Competitors
• The Guidelines recognize the exchanges’
procompetitive benefits
• Three main points:
• Type of information shared (price, output, costs are
more likely to raise concerns)
• Recency of sharing; past-present-future information
• Individual company data – aggregated data
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Advisory Opinions and Business Letters
• FTC’s advisory opinions
– E.g., clinical integration programs
(GRIPA (2007) and TriState (2009) cases)
• DOJ’s business review letters
– E.g., Fair Factories Clearinghouse (2006)
Safeguards:
• Voluntary participation
• Aggregated information
• Antitrust policy statement
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Procedures and Safeguards
• Market data is gathered and maintained on a
confidential basis by a neutral third-party.
• Voluntary participation, with results reasonably
accessible to all competitors.
• Data limited to historic market information – no
data gathering related to future prices or other
competitive issues.
• Indices and reports are designed to aggregate and
report data in a way that precludes price
calculations.
• Reports not including recommendations or
encouraging actions by competitors or others.
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Recent U.S. Information Exchange Cases
• National Association of Realtors (NAR) case
– DOJ suit (Sept. 2005) against NAR to require the
continued operation of an information exchange
program (Multiple Listing Service – MLS)
– NAR’s virtual office website policy “. . . [s]uppresses
technological innovation, discourages competition on
price and quality, and raises barriers to entry”
– Consent decree (May 2008) requires NAR to rescind
this policy and treat Internet-based brokers the same as
brokers on the MLS
– In sum: the Agencies recognize the procompetitive
benefits and will do more than permit programs, i.e.
affirmatively require their continued operation
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National Association of Music Merchants
• FTC complaint and consent order in National
Association of Music Merchants (NAMM) (April
2009)
• Complaint: NAMM violated Section 5 FTC Act
by enabling and encouraging the exchange of
competitively sensitive information about pricing
policy and strategy among its members
• At NAMM meetings competitors discussed
minimum advertised pricing (MAP) strategies,
margins, profits, restricting retail price
competition, and securing higher retail prices
• NAMM: setting agenda and steering discussions
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National Association of Music Merchants (cont’d)
• FTC complaint
– Conduct constitutes unfair method of competition
(“principal tendency or likely effect of harming
competition and consumers”)
– No legitimate business purpose and efficiency
– Conduct can facilitate collusion
• Consent order
– Bars NAMM to exchange price information
– Prohibits NAMM from aiding merchants to form
anticompetitive agreements
– Requires extensive antitrust compliance program
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Valassis
• Invitation to collude case
• Issue: free-standing inserts
Valassis v. News America
• Valassis CEO’s communication during stock
analyst conference call
– Compare with United States v. American Airlines,
Inc. 743 F.2d 1114 (5th Cir. 1984)
• FTC consent order (March 2006):
public statement was invitation to collude
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Conclusion
• U.S. law on information exchanges:
procompetitive benefits – anticompetitive risks
• Extensive guidance form government policy
statements and recent enforcement actions
Thank you!
kkatona@ftc.gov
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