In February 2023, Doha Mekki, the Principal Deputy AAG for Antitrust announced the withdrawal of the FTC-DOJ guidelines on information exchange. It had become painfully apparent that oligopolists had found exchanges of confidential business information to be an effective means of restraining competition without entering into overt conspiracies. In December of that year, we published our article, Pooling and Exchanging Competitively Sensitive Information Among Rivals: Absolutely Illegal Not Just Unreasonable, 92 U. Cin. L. Rev. 334 (2023), on the exchange of such information. We argued that most such exchanges are naked restraints of trade. Because there are a few plausible explanations for limited kinds of exchanges that are unlikely to result in restraint on competition, we recommended that a “quick look” approach would be the appropriate standard. Moreover, we stressed that the focus of such an assessment should be on the merits of any purported justification rather than market shares or other indicia of market power.
Late in 2023, the DOJ sued Agri Stats for its program of collecting, analyzing and sharing confidential business information for pork packers and poultry and turkey integrators. Then in 2024, it sued RealPage for its information collection, processing, and rent recommendations to landlords. Both complaints were unclear as to the exact standard that the government was claiming applied to such information exchanges. What is clear is that the government is contending that the agreements to share such competitively sensitive information are in themselves unlawful restraints of trade regardless of whether there is a further agreement to fix prices or control output. This is an important step in the process of reclaiming a critical analysis of such agreements.
Most recently the DOJ submitted a Statement of Interest in the Pork Antitrust case where it more clearly invited the court to focus on the justification for the exchange and the market context in which it occurred rather than measuring market shares or other inferences of market power. Moreover, the Statement initially pointed out that the Supreme Court has held that agreements to exchanges competitively sensitive information can in themselves violate the antitrust law.
Leading decisions such as Todd v. Exxon have referred to the “rule of reason” as the standard and seemed to embrace a requirement of finding market power as a predicate to condemning such an exchange. The Statement is at pains (unnecessarily in my view) to advance a broad definition of the rule of reason as a flexible inquiry into the merits of the conduct at issue. Quoting from the Gypsum decision, however, the Statement stressed that the focus should be on how the exchange affects competition among the participants and in the market. Implicit in this approach is a rejection of the standard rule of reason model in which restraints are presumed lawful unless there is substantial market power.
Indeed, why would rivals, even if they did not dominate the market, exchange competitively sensitive information? Such an exchange would be likely to and is almost certainly intended to stabilize and restrain the competition between those rivals for customers in common. The primary function of any such exchange among rivals, however inclusive, is to provide a common understanding of the market to reduce or eliminate the incentives to compete.
The Statement of Interest in the pork case moves the government closer to recognizing that the appropriate standard is one that both presumes illegality and requires a legitimate explanation. Explicitly, it first emphasizes that exchanges of information inherently involve an agreement or understanding which satisfies that element of a section 1 case. Second, pointing to a long history of antitrust decisions, such exchanges can be in themselves illegal. They need not only serve as facilitating devices for express collusion on price, output, or customer allocation. This is a very important point to emphasize in relation to such agreements and is the basis on which the government has sued both Agri Stats and RealPage.
Third the Statement emphasizes that even if information is aggregated, it can still serve an anticompetitive function. Implicit, in this point is the proposition that the focus of analysis should be on why this information is being exchanged, which includes a variety of extrinsic factors. This leads to a section that identifies four factors that a court should consider. They are 1) the nature (“sensitivity”) of the information exchanged, 2) its granularity (how detailed is the information and how easily can a participant determine what its rivals are doing), 3) the public availability of the information, and 4) its contemporariness. Missing from this list is any recognition that legitimate bench marking projects might require exchanges of information that satisfy most of these criteria, but if this is a legitimate benchmarking project, there are ways to limit the granularity and contemporaneousness of the data.
The Statement regrettably failed to take a sufficiently strong and clear position that once the plaintiff established that an agreement to exchange confidential business information exists, that should create a rebuttable presumption that it constitutes a restraint of trade. Only if the defendant(s) can offer and provide proof of a plausible explanation for the exchange that does not involve a restraint should there be any need for a more nuanced investigation of the merits of the conduct. At that point, the four factors that the government identified are indeed relevant as is a direct rebuttal of the asserted justification for the exchange.
The legal doctrine governing information exchange continues to wrestle with two decisions from 1925 involving the maple flooring and cement industries that upheld anticompetitive information exchanges. Those case came during a time of “open competition” advocated by Herbert Hoover, then the Secretary of Commerce, and others to limit competition among business though use of information exchange and trade associations. Justice Stone, the author of both these opinions, was a friend of Hoover’s and apparently supported this kind of restraint on competition. A decade later, the Court essentially rejected these decisions. Justice Stone chose not to participate in that decision rather than dissent.
Nonetheless, the legacy of this early 20th century childlike faith in the potential that such exchanges might serve some public interest has continued to dog the development of a coherent doctrine. Deference to the dead-hand of the past leaves open too many paths for defendants and courts to justify or excuse harmful information sharing. The best hope is that the judge in either the Agri Stats or RealPage case (or better both) focus the decision on a presumption of illegality and require the defendants to bear the burden of persuasion that the presumption is inapplicable to the specific case. The Statement of Interest in the pork case does move the analysis a little closer to the appropriate standard.