Trade Association Basics: Simple tips for reducing antitrust risk in an information exchange
Information exchanges are a critical aspect of many trade associations’ value proposition. Information exchanges can provide significant benefits to association members by giving them insight into a particular market so that they can compete more effectively, and positioning the association to represent members before lawmakers and regulatory authorities. Exchanges also can provide substantial benefits to the public by establishing standards that promote safety or enable components from different manufacturers to operate together. And if administered correctly, exchanges can be procompetitive (or at least competitively neutral) and perfectly legal.
But improperly administered information exchanges can have seriously anticompetitive effects. For instance, an exchange or survey that includes current prices or data that identifies individual competitors can encourage more uniform prices than otherwise would exist in a competitive market. In this way, information exchanges can facilitate one of the most objectionable forms of antitrust violations – price fixing – even when done with good intentions.
So how can trade associations and their members minimize the risk of running afoul of the antitrust laws when exchanging information? The key is to avoid exchanging information from which individual market participant’s future pricing and/or output decisions can be gleaned, because that information is most susceptible to misuse and facilitating collusion or tactic agreements among competitors. To this end, associations should follow five simple – yet important – safeguards:
- Before the exchange occurs, document an identifiable and legitimate purpose for it.
- Involve at least five market participants, where no individual participant accounts for more than 25 percent of the particular market.
- Limit the exchange to historical information that is at least three-months old, and strictly avoid the exchange of current or future information.
- Engage a third party, such as an industry consultant, accounting firm, or even the association itself, to collect and aggregate information.
- Disseminate information only in aggregated form, and strictly prohibit individual responses from being shared with association members or other market participants.
But that’s not all! Particularly savvy or cautious associations can take additional steps to further reduce the risk and scrutiny of their information exchanges. These steps include:
- Destroying individual responses after aggregation.
- Engaging counsel to review the information request in advance.
- Having counsel review any draft report of aggregated data before dissemination.
- Prohibiting discussion of survey results among members without prior approval of counsel.
Of course, every situation is different, and adhering to these best practices does not necessarily mean that a particular information exchange is lawful, just as failing to adhere to them does not necessarily mean that an exchange is unlawful. However, as a general rule, the more of these safeguards that are satisfied, the less likely it is that a given exchange will be challenged.If you are a trade association or a trade association member and have antitrust questions or concerns, don’t hesitate to contact the attorney listed below.