DOJ Statement of Interest States Information Sharing Among Competitors Warrants Closer Scrutiny

The US Department of Justice Antitrust Division (DOJ) recently filed a Statement of Interest (Statement) to highlight its view that (1) information sharing alone, without any agreement to fix prices, can violate US antitrust law and (2) information exchanges that simply report aggregated data can still violate the law—even where the information is not competitor-specific. The Statement clarifies DOJ’s current positions following its withdrawal of three enforcement policy statements that previously created a safe harbor for the sharing of information that was historical, anonymous, and administered through a third party.

The Statement[1] in In re Pork Antitrust Litigation[2] comes more than a year after the DOJ withdrew the agency’s information sharing safe harbor provisions. It demonstrates the DOJ’s evolving perspective on information exchanges and that the DOJ intends to prioritize heightened scrutiny for all such exchanges.

KEY TAKEAWAYS

At its core, the Statement emphasizes three key principles: (1) the antitrust laws prohibit information sharing whenever the exchange tends to harm competition, (2) information sharing constitutes “concerted action” and it alone can violate Section 1 of the Sherman Act, and (3) the exchange of aggregated data does not provide a safe harbor from antitrust scrutiny.

The Statement suggests that courts should evaluate whether information exchanges tend to harm competition by looking at various factors, including, for example, the structure of the industry, the nature of the information exchanged, and the manner of the exchange. It states that none of these factors is alone dispositive, and courts should instead evaluate all the factors and then determine whether the “principal tendency” of the restraint is to harm competition. To that end, DOJ identifies four characteristics of the exchanged data to consider in evaluating the lawfulness of an exchange: (1) competitive sensitivity, (2) granularity, (3) availability, and (4) timeliness.

Competitive Sensitivity

According to DOJ, the more competitively sensitive the information exchanged is, the more likely it is that the exchange restrains competition. The DOJ identified recent, current, or future price and output as being sensitive categories that are more likely to restrain competition because they can help facilitate anticompetitive conduct among competitors (e.g., price stabilization).

Granularity

Information sharing of detailed or non-aggregated data is also more likely to harm competition by exposing the intimate competitive details of a business to its rivals, according to DOJ. Nevertheless, the Statement highlights court cases that found that even the exchange of aggregated and anonymized data, under certain circumstances, could enable anticompetitive conduct and would thus be subject to scrutiny and challenge.

Availability

The exchange of data that is otherwise publicly available is less problematic than the exchange of information that is only available to the actors participating in the exchange, according to the Statement. DOJ argues that the exchange of non-public information suggests that the information exchange will only benefit the competitors at the expense of others, including consumers, workers, or other market participants.

Timeliness

Finally, DOJ emphasizes that the exchange of recent or future data is more likely to produce anticompetitive effects compared to the exchange of historical data. Moreover, DOJ asserts that having access to recent or current data can help competitors converge (e.g., stabilize or match prices)—rather than pursue their individualized economic interests. Unlike the prior information sharing safe harbors, DOJ provides no bright-line rules for market participants to consider in evaluating the timeliness of the data.

DOJ cautions that these factors are not exhaustive; they should only be treated as instructive of the types of factors the agency considers. In other words, there are no categorical rules for information sharing. In light of this inherent uncertainty, market participants should evaluate with antitrust counsel whether, and to what extent, it is advisable to share information among competitors (which, broadly defined, can include competitors for labor in addition to products and services).

LITIGATION DEVELOPMENTS

In the Statement, the DOJ notes that in addition to its pending case against Agri Stats Inc. involving what it classifies as a more classic information exchange, it is also actively litigating another action—US v. RealPage Inc.[3]—in which it alleges that competing landlords entered into an agreement with RealPage Inc. to share competitively sensitive information through the joint use of RealPage’s rental pricing software.[4] This demonstrates that the DOJ is not only interested in traditional information exchanges, but it is also examining the use of algorithmic pricing software and artificial intelligence (AI) technology to facilitate the exchange of information.

Multiple private civil antitrust complaints have also been filed in federal court alleging that other providers of algorithmic pricing software and their users have violated the Sherman Antitrust Act by, for example, engaging in improper information exchange practices. The DOJ also filed statements of interest in a number of those cases, including in Cornish-Adebiyi v. Caesar’s Entertainment Inc.[5] (Caesar’s),[6] which was recently dismissed at the pleading stage.

In Caesar’s, plaintiffs representing a purported class of consumers that stayed at the Defendant Hotels[7] alleged that the Defendant Hotels violated Section 1 of the Sherman Act by engaging in an unlawful conspiracy to fix prices for their hotel rooms. Specifically, plaintiffs alleged that the Defendant Hotels agreed to collectively use pricing algorithms provided by Defendant Cendyn’s revenue management products, which they alleged resulted in inflated prices for hotel rooms.

In granting the Defendant Hotels’ motion to dismiss,[8] the court had to determine whether the common use of the same pricing software plausibly suggested that an agreement among competitors existed in violation of the Sherman Act. The court found that no such agreement existed, holding that:

• While the plaintiffs alleged that the Defendant Hotels knowingly provided Cendyn with non-public pricing and room occupancy data (i.e., they used the software), they did not allege that that data was then, for example, comingled such that the software’s pricing recommendations would reflect confidential competitor data. Thus, they never plausibly alleged that there was an improper exchange of information.
• Plaintiffs failed to establish the rim in their alleged hub-and-spoke conspiracy. In other words, plaintiffs failed to plausibly allege that the competing Defendant Hotels (i.e., the spokes) that all allegedly shared non-public information with Cendyn (i.e., the hub) in order to use Cendyn’s revenue management service, actually (directly or indirectly) exchanged information among themselves (i.e., the rim).
• The Defendant Hotels did not engage in parallel conduct because they each subscribed to Cendyn’s software at different times over a 14-year period, which did not raise the suggestion of a preceding agreement.

In sum, Caesar’s highlights that the mere use of the same software—even if it requires sharing non-public pricing data with the software provider, for example—is not on its own sufficient to establish a Sherman Act violation.  

LOOKING FORWARD

Litigation continues to explode in this area, and the DOJ’s position is in a state of evolution, so it is imperative that in-house counsel and antitrust practitioners alike continue to monitor these developments.

Companies engaging in any form of information exchange—whether directly, through a third-party intermediary, or through software—should consult antitrust counsel to mitigate potential antitrust risk. That guidance adheres even where the information exchanges are of a nature that has been long-standing and regarded as acceptable under prior prevailing safe harbor provisions and related government guidance.