federal trade commission office of international affairs the anticompetitive aspects of information...
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FEDERAL TRADE COMMISSIONFEDERAL TRADE COMMISSIONOffice of International AffairsOffice of International Affairs
The Anticompetitive Aspects of Information Exchange Agreements –
A U.S. Perspective
The Anticompetitive Aspects of Information Exchange Agreements –
A U.S. PerspectiveKrisztián Katona, Counsel for International Antitrust*
•The views are my own and do not necessarily reflect those of the Commission or any of its Commissioners.
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.
FEDERAL TRADE COMMISSIONFEDERAL TRADE COMMISSIONOffice of International AffairsOffice of International Affairs
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)
FEDERAL TRADE COMMISSIONFEDERAL TRADE COMMISSIONOffice of International AffairsOffice of International Affairs
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
FEDERAL TRADE COMMISSIONFEDERAL TRADE COMMISSIONOffice of International AffairsOffice of International Affairs
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”
FEDERAL TRADE COMMISSIONFEDERAL TRADE COMMISSIONOffice of International AffairsOffice of International Affairs
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
FEDERAL TRADE COMMISSIONFEDERAL TRADE COMMISSIONOffice of International AffairsOffice of International Affairs
Conclusion
• U.S. law on information exchanges: procompetitive benefits – anticompetitive risks• Extensive guidance form government
policy statements and recent enforcement actions
Thank you!