February 17, 2013
Surveys can be a great way to collect member information and are commonly used by trade and professional associations. Indeed, one of the most important functions that an association can perform for members is the collection and dissemination of information, which may include statistical information, industry trends, production levels and industry laws and regulations.
Surveys and information exchanges can have many legitimate and pro-competitive effects – for example, facilitating research initiatives and benchmarking exercises, increasing market transparency and customer knowledge, promoting improved products and services and supporting lobbying and advocacy efforts.
Associations may also, however, from time-to-time want to collect and distribute information about members’ business practices or competitors’ activities. This may include information about product or service pricing, markets (or customers and suppliers) or new and contentious business models that may be perceived as a risk or threat to the association, the industry or both.
Information relating to these areas is often referred to as “competitively sensitive information”, which can include information relating to current or future pricing, market shares, costs, customers, markets, market shares or current or future marketing or business plans.
In this regard, surveys and information exchanges can also constitute one of the most significant risks for trade associations and their members.
While the mere exchange of competitively sensitive information is not a competition law offence in Canada (though may in some cases raise concerns under other sections of the Competition Act), there are generally two potential issues with surveys or information exchanges involving competitively sensitive information where appropriate precautions/procedures have not been adopted.
First, the survey or exchange could lead to an agreement that contravenes the Competition Act (e.g., an agreement between competing members to fix-prices, divide/allocate markets or restrict/limit output). Second, a mere exchange of competitively sensitive information could be used by the Competition Bureau, a court or a private plaintiff to infer the existence of an agreement that violates the Act.
In addition to the fact that evidence of improper information exchanges has been used by the Bureau and Canadian courts for over a century to prove illegal agreements between competing members of associations, associations have also been the subject of heightened competition enforcement in Canada over the past few years. The Interim Commissioner of Competition has also recently highlighted inappropriate information exchanges through associations as a concern saying:
“… we are concerned with conduct that reduces incentives to compete vigorously. Information sharing agreements are an example of this. Competitively sensitive information exchanged among competitors who can have serious negative effects on competition, especially if they are in highly concentrated markets with relatively homogenous product offerings.”
As such, when association business turns to surveys, information exchanges or “benchmarking” that may raise competition issues or involve the exchange of the types of information above, the competition law radar of association leadership should go up. A few important initial questions to ask include:
1. Is this a conversation the association should be having and the type of information the association can or should be gathering?
2. What is the purpose of the survey or information exchange? For example, is there a legitimate pro-competitive purpose – e.g., an effort to improve products, increase efficiencies, collect information to allow association members to compete more effectively, etc.?
3. If there are legitimate objectives for a survey or information gathering exercise, are there practical steps that can be taken to reduce potential competition law risk?
Generally speaking, some of the key factors to consider when assessing the potential risk of an association survey or information exchange exercise involving competitively sensitive information include: the type of information (competitively sensitive, such as pricing information?); currency of information (historic or current?); frequency of the exchange (frequent or periodic?); level of detail and aggregation (have adequate precautions been taken to adequately aggregate the data?); whether the information will remain private (or be made available to the public); and whether a third party is used.
Some best practices for association leadership to consider for surveys and information gathering exercises that may include competitively sensitive information include:
1. Information should be based on historical data (with no indication, for example, of future pricing, production or marketing intentions).
2. It is prudent to use an independent third party or survey firm to collect, analyze and disseminate information.
3. Raw data/information should be provided one-way (i.e., inbound) to a third party, which should be distributed in a generalized and aggregated nature (e.g., non-company specific). While association personnel can conduct surveys, where competitively sensitive information is involved there can be more risk where competing members are involved than where an independent third party is used.
4. Participation by members should be voluntary (i.e., members should not be coerced into participating in surveys or information gathering exercises).
5. Information that is made publicly available is less likely to raise concerns, although making information public is not necessarily determinative.
6. It is generally prudent to ensure that the number of participants is not so small so that, even if aggregated, it is impossible or unlikely that results will be anonymous – e.g., a very small number of respondents, small number of respondents relating to particular question, market or product, etc.
7. It is a good practice to internally document the pro-competitive purpose(s) of a survey or information exchange. These may include, for example, improving the quality of association services to members, a benchmarking project to help members more effectively compete / innovate / become more efficient, etc. Practical steps in this regard may include briefly describing the pro-competitive purposes in member communications and reflecting those purposes in internal memoranda, minutes, notes, etc.
8. Information should be circulated without any requirement or recommendation for future conduct for members – for example, not require or suggest that members adhere to particular pricing, distribute products in a particular market, limit/restrict production or recommendations as to whether or not to deal with specific customers, suppliers or competitors.
In sum, surveys are and are likely to remain a key tool for associations to engage with members for a variety of legitimate purposes.
Having said that, where a survey, information exchange or benchmarking exercise involves competitively sensitive topics and information, it is a good practice for association leadership to ask a few key questions at the outset, assess the potential risk and adopt some commonsense safeguards to avoid competition law risk. Such steps will both, in most cases, allow an association to keep doing its job while reducing the likelihood that the Competition Bureau will come knocking.