October 30, 2014
I was pleased to have been a speaker at the Canadian Society of Association Executives’ (CSAE) Annual Conference in Niagara. I spoke, with Mark Katz of Davies Ward Phillips & Vineberg LLP, on information exchanges and surveys, codes of ethics and recent competition law developments for associations. The following is the first of three posts with our conference materials – an overview of competition law and surveys, recent Competition Bureau statements on information exchanges and some best practices.
Over the next several days I will also post some of our materials on competition law and codes of ethics and our PowerPoint on recent competition law developments for associations.
OVERVIEW OF COMPETITION LAW
AND SURVEYS
Surveys are one of the most important functions an association can perform for members. Surveys can be used to facilitate research initiatives and benchmarking exercises, increase market transparency and customer knowledge, promote improved products and services, and support industry lobbying and advocacy efforts.
Competition issues can arise, however, when associations collect information about members’ business practices and activities, such as revenues, costs, margins, market shares, customers, marketing or business plans, and so on.
While the collection and sharing of this type of competitively-sensitive information is not in and of itself an offence in Canada, information exchanges may be regarded by Canada’s Competition Bureau as a “red flag” evidencing illegal cartel conduct (such as price-fixing or market allocation). Indeed, evidence of information exchanges between members has often figured prominently in cases where trade associations have been convicted for involvement in criminal anti-competitive behavior.
In addition, since 2010, the Competition Bureau is now authorized to bring civil proceedings to prohibit agreements between competitors that substantially prevent or lessen competition. In its Competitor Collaboration Guidelines, the Bureau specifically points to “information sharing” agreements as the type of arrangement that could invite enforcement action. According to the Bureau, it may seek to prohibit an “information sharing” exercise where the exchange of information creates transparency between competitors and diminishes or even eliminates their incentive to compete vigorously.
Canada’s Commissioner of Competition has reiterated the potential concerns inherent in trade association-sponsored information surveys:
“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 can have serious negative effects on competition, especially if they are in highly concentrated markets with relatively homogenous product offerings.”
None of this means that associations should immediately scrap their information gathering exercises. However, associations must approach these activities with caution, and should take into account a few important factors before proceeding.
The first question that always must be asked is: what is the purpose of the survey or information exchange? It is critical that the association be able to identify and support a legitimate pro-competitive purpose for the exercise – e.g., an effort to improve products, increase efficiencies, promote the industry, etc. If a legitimate reason cannot be articulated, the survey should not proceed. Moreover, it is equally important that all documents and other communications relating to the planned survey (including emails) reflect the legitimate reasons for collecting and disseminating the information so as not to undercut the association’s position if challenged at a later stage.
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.
RECENT COMPETITION BUREAU STATEMENTS ON
INFORMATION EXCHANGES
Over the past few years, the Competition Bureau has taken a renewed interest in trade and professional associations.
This has included: a number of detailed association-related discussions by the Commissioner of Competition in speeches; several association related enforcement matters involving the Toronto Real Estate Board and Canadian Wireless Telecommunications Association; and a recently issued pamphlet on association compliance with the Competition Act (Trade Associations and the Competition Act – included in these materials).
The following are several recent Competition Bureau statements on information exchanges involving associations:
“Do exercise care when collecting and sharing competitively sensitive information within the association. Use a third party to collect the information and have it disseminated in aggregated form so that it cannot be attributed to any competitor” (Associations Pamphlet).
“Don’t engage in communications at association meetings or social events about competitively sensitive information. Private meetings between competitors under the pretext of association meetings should be discouraged” (Associations Pamphlet).
“Don’t use unreasonable disciplinary measures to coerce members to provide information or data for information sharing purposes” (Associations Pamphlet).
“Avoid improper communications with competitors on prices, output, markets and customers, as well as on bids” (Commissioner of Competition speech, November, 2013).
“Exchanging competitively sensitive information can raise significant legal issues, regardless of whether it takes place around a boardroom table or at a cocktail reception – so, exercise caution at industry networking events” (Commissioner of Competition speech, October, 2013).
BEST PRACTICES:
SURVEYS AND INFORMATION EXCHANGES
Some general best practices for association conducted surveys and information exchanges:
1. Information collected should be based on historical data (i.e., no indication of future competitive plans, such as pricing, production, marketing plans, markets or customers).
2. Depending on the complexity or competitive sensitivity of the project, it may be prudent to use an independent third party to collect, analyze and disseminate information to members.
3. If a third party is not used, associations should ensure that the processes they use to compile and communicate information are sufficiently robust to ensure that the anonymity of individual members’ data is preserved.
4. It is prudent to ensure that the number of participants is not so small as to make it unlikely or impossible to ensure that results will be anonymous.
5. Associations should not coerce members to participate in surveys or information exchanges (or punish or discipline members that choose not to participate).
6. Information distributed should be of a generalized and aggregated nature (i.e., not company or individual specific).
7. Member-specific raw competitive data/information (e.g., pricing, markets, output, costs, customers, marketing, etc.) must be kept confidential and not be distributed.
8. Any competitively sensitive information collected should be retained only for as long as necessary to complete a particular legitimate objective (e.g., track general trends).
9. Information that is made publicly available is less likely to raise concerns although making information public is not necessarily determinative.
10. It is prudent to document the pro-competitive purpose(s) of a survey or information exchange and keep the exercise focused on that objective.
11. Information should be circulated without any requirement or recommendation for future competitive conduct by members (e.g., pricing, markets, marketing, output, customers, etc.).
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