Exchange of Information between competitors

What?

Very often, competing companies find themselves in the same business or industry associations. These take care of legitimate industry concerns such as professional and further training, joint advertising, lobbying in politics, etc. If the cooperation and contact between them is good, it is tempting to take anti-competitive measures together. Such measures are often seemingly harmless and do not even take the form of explicit (let alone written) resolutions. Here it is important to pay attention!

For example, I was asked by a trade association that includes all (!) importers and manufacturers of certain equipment to deliver an opinion on whether the following practice were compatible with Swiss competition law: The trade association compiles monthly “market statistics” in such a way that all association members reported their sales of equipment (divided into different product categories) to the association on a monthly basis, which then compiled detailed statistics and made them available to the members. In this way, all members of the association knew, on the basis of current data, how they themselves stood in terms of sales figures and market shares in comparison to the industry as a whole and in comparison to the individual competitors. For the members, these statistics had the advantage that they could quickly see how their own sales campaigns affected the figures and how the sales campaigns of the competitors affected them. For the members of the association, these statistics are very valuable market intelligence.

The antitrust authorities (worldwide) however view an exchange of information among competitors critically. For just as detailed information on the success of competitors can spur a producer to try harder and offer better conditions to customers (namely if he sees that he is losing ground in the market as a whole or to certain competitors), he can also put the brakes on competition and refrain from action (namely if he sees that he is not losing any share in the market).

Both the EU Competition Commission and the Swiss Competition Commission CoCo have become increasingly critical of the exchange of information between competitors in recent years. In the ASCOPA case – concerning the exchange of information in the cosmetics industry association, CoCo clarified that the mere exchange of information in itself, i.e. without any further agreements between the competitors, can be a violation of antitrust law. The EU Commission has laid down its practice in the “Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements” (2011/C 11/01).

With both competition authorities it is now clear that the exchange of information between competitors for the purpose of creating a market information system MIS is only permissible under very restrictive conditions.

As a guideline, the CoCo has stated the following necessary conditions for a permissible exchange of information:

• The data of individual participants must be effectively anonymized – no participant may be able to elicit the data of individual other participants. Conclusions about individual business transactions must be excluded.
• Or: Refrain from exchanging very current data and refrain from exchanging future-related information (i.e. budgets, sales forecasts).
• Or: refrain from sharing trade secrets or important elements of business strategy, including in particular customer data (such as their sales, revenue shares and terms).
• And: the collected data must be provided to any market participant or potential market participant (if necessary, charging for it).

Based on these rules, I have recommended that the association

a) members should no longer be disclosed the quantities mentioned by individual importers / producers, but only the figures of the total market

b) or only “sufficiently historical” individual data should be disclosed. Individual data – if this were desired – would be allowed to be made accessible after the expiry of one year, as they would then only be of “historical” significance.

So What?

It is moot to state that CoCo has become much more aggressive in enforcing the competition law rules. Harsh penalties can be handed out. For the management involved, experience shows that such penalties (for which they can be made liable personally) lead to a massive loss in reputation, even stigmatization, that can effectively kill careers.

Not only the “usual suspects”, i.e. the “big” players are subject to closer scrutiny , but also small and medium enterprises. Swiss SME are specially prone to the pitfalls of anti-competitive behaviour as the traditional system of trade associations can lead to “too close cooperation of competitors”.

Do What?

Lessons to be learned: The exchange of information between competitors must not be the basis or the occasion for (tacit) anticompetitive behaviour by competitors. Often – especially in SME – it is not well appreciated how low the threshold of anti-competitive “behaviour” is – it does not need a formal contract signed and sealed between the competitors. An agreement is also in breach of antitrust law (and thus punishable) if it was neither explicitly nor in writing nor even bindingly concluded. It is sufficient that the competitors behave in a concerted manner.

To prevent such suspicion from arising against you in the first place, when meeting with competitors (especially not in the context of association meetings) you should never

• disclose your sensitive business information (sales figures, turnover, profits, capacities)
• participate in meetings that involve such information about your competitors
• discuss strategies, customers, marketing efforts, etc.
• discuss anything that might be in the nature of price fixing, territorial agreements, quantity agreements.
• if you are a member of an association, make sure that this association has its own compliance policy and adheres to it.