July 17, 2013
Readers of my blog will know that I do a lot of work with trade and professional associations. In this regard, a topic that perennially arises (and which I continually find interesting) relates to “information exchanges” that occur at and through associations.
On this theme, a Case Summary issued earlier today by the German antitrust authority (the Bundeskartellamt) caught my eye relating to enforcement proceedings against drugstore product manufacturers for problematic exchanges of competitively sensitive information through an industry association.
In this case (see: Fine proceedings against manufacturers of drugstore products), the German authority commenced proceedings against manufacturers of drugstore products based on their participation in allegedly anti-competitive information exchanges and imposed fines of about € 63 million against 15 companies. A fine was also imposed on an industry association and its personnel for assisting the companies in information exchanges over an approximately two-year period.
According to the German authority, members of a “body care, cleaning agents and detergents” working group regularly exchanged competitively sensitive information (including planned price increases, customer and contract information, non-public sales data and cost data), which gave member firms “a knowledge edge and helped them to minimize uncertainty about market developments”. The German authority also took the position that the information exchanged by the working group members allowed the companies to adjust their own price or negotiation strategies with retailers and improved bargaining positions with customers.
While a German case, it raises issues that consistently arise for Canadian associations and, if not managed in a commonsense manner, can lead to significant competition law risk for associations, their personnel and members.
Though Canada does not make mere information exchanges between competitors an offence, the orthodox advice typically given to associations is that the exchange of un-aggregated competitively sensitive information without safeguards taken can lead to two issues – first, that the exchange may result in an agreement that violates the Competition Act; or second, that an exchange will more easily allow the Competition Bureau, a court or private plaintiff to infer the existence of an agreement that violates the Act (e.g., a price-fixing or other cartel agreement).
Some of the categories of information that can particularly raise competition issues include information relating to prices, markets and output (e.g., prices, discounts, geographic markets, customers or product lines, production/output, as well as marketing, business or other plans that may dampen competition or rivalry). While there are a great many legitimate categories of information that associations and their members can be involved in – ranging from education, lobbying, general industry trends, non-discriminatory standards, ethics, etc. – prices, markets and output can, and historically often have, raised serious competition law concerns.
Also, since amendments made to the Canadian Competition Act in 2010, the Bureau may commence civil proceedings to prohibit agreements between competitors that substantially prevent or lessen competition (which may include information exchange agreements, though it remains to be seen whether and how frequently the Bureau will bring any such challenge).
Based on the potential risks of discussions or other exchanges of competitively sensitive information between competitors through trade or other associations, it makes sense for associations to take commonsense steps to minimize risk.
These can include ensuring that there are basic conduct of meeting guidelines for key association meetings (e.g., board, task force or other meetings), guidelines for online or Internet chat rooms or member discussion forums (e.g., LinkedIn groups, etc.) and ensuring that precautions are taken for surveys or other association-related or sponsored information gathering exercises that may touch on prices, markets, output or member business strategies/approaches.
The German case is also a bit of a reminder that simply because collective activities have mutual business benefits to members or that activities are labeled as “task force” or “working group” efforts will not necessarily insulate the activities from competition law risk if the likely effects are to raise price, divide markets, reduce or limit output or otherwise dampen rivalry between members.
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