Department of Justice Signals Increased Scrutiny for Information Sharing

Introduction

The U.S. Department of Justice (DOJ) sent a strong message recently about information exchanges. In a “Statement of Interest”¹ filed on October 1, 2024, the DOJ stated that "standalone information sharing … can undermine the competitive process; increase coordination among rivals; and cause an asymmetry of power in the market" and, therefore, can constitute a violation of the antitrust laws.² Thus, according to the DOJ, information exchanges may, themselves, constitute an antitrust violation in certain circumstances.

Though the DOJ has recently filed a series of statements supporting cases against pricing recommendation tools allegedly fueled with non-public information,³ this is the first move that appears to target mere analog, aggregated information sharing without an allegation of a commonly determined price. While the DOJ has not announced a shift in law, this appears to confirm the DOJ’s shift in enforcement priorities to detect and prosecute conduct involving exchanges of competitive information.

As described below, companies should take care to analyze their practices, policies, and training to evaluate antitrust risk related to the exchange of competitively sensitive information (including, but not limited to, information related to pricing, costs, capacity, and labor) and benchmarking exercises. This includes the use of third-party vendors or software, particularly those using algorithmic metrics to facilitate information exchange.

Background

In the United States, the exchange of competitively sensitive information between competitors can give rise to an antitrust violation.⁴ Not all information exchange, however, is an antitrust violation; courts and enforcers alike have recognized that exchanges may, in some circumstances, be procompetitive. Thus, enforcers historically had promulgated certain policy statements to guide companies and individuals as to when an information exchange was unlikely to be an antitrust violation. Those policy statements were:

(1) DOJ and FTC Antitrust Enforcement Policy Statements in the Health Care Area (September 15, 1993);
(2) Statements of Antitrust Enforcement Policy in Health Care (August 1, 1996); and
(3) Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (October 20, 2011).

Although originally aimed at the healthcare industry, enforcers and courts alike quickly applied the guidance to information exchange more broadly, across multiple industries.

Importantly, these three policy statements created presumptive safe harbors for the exchange of pricing and cost-related information, as the enforcers noted a policy not to challenge the exchanges "absent extraordinary circumstances."⁵ For instance, these policy statements typically granted companies some comfort when participating in industry surveys, so long as the surveys 1) were managed by third parties; 2) included aggregated, historical information; and 3) included a sufficient number of sources such that the data was anonymized.

Such was the status quo until the DOJ withdrew its support for all three policies in February 2023.⁶ The DOJ described the statements as "overly permissive on certain subjects, such as information sharing, and no longer serv[ing] their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today's environment."⁷ At that time, the DOJ did not indicate whether and, if so, when, it would provide additional guidance on its views on information sharing.

The DOJ Files a Statement of Interest

On October 1, 2024, the DOJ filed a Statement of Interest in In re Pork Antitrust Litigation, pending in the District of Minnesota. The case involves allegations of a per se illegal conspiracy to restrict supply and stabilize prices based on competing pork producers sharing information with Agri Stats, and includes a claim for violation of Section 1 of the Sherman Act for conspiracy to exchange competitive information.⁸ Recognizing that "[m]odern advances have also enabled information sharing to take a more dangerous form than in the past, as greater amounts of information are exchanged more quickly, more frequently, and with increasing granularity[,]"⁹ the DOJ sought to provide clarity on the "correct application" of Section 1 of the Sherman Act, as it relates to the pork plaintiffs' information sharing claim.

The DOJ's Statement of Interest provides insight into the DOJ's view on the two questions asked in a Section 1 claim involving information sharing: 1) whether there was “concerted action,” and 2) whether the action was an “unreasonable restraint” of competition.¹⁰

Concerted Action

A claim under Section 1 requires a "contract, combination, or conspiracy"¹¹—that is, a form of concerted action. In the DOJ's view, the exchange of competitively sensitive information between or among competitors can constitute “concerted action” in at least two ways. First, the reciprocal exchange of information can, itself, constitute the concerted action.¹² Stated differently, "free-standing information exchange among competitors is … itself concerted action … ."¹³ Second, information exchange could support an inference that a price-fixing or output-restriction agreement exists and, therefore, could be relied upon as evidence of a conspiracy to fix prices or restrict output.¹⁴ In such a circumstance, the price-fixing or output-restriction agreement is the concerted action.

Unreasonable Restraint

A claim under Section 1 also requires that the concerted action "unreasonably restrains trade."¹⁵ In the DOJ's view, the method by which a court should analyze whether the information sharing unreasonably restrains competition depends on which of the above two “concerted actions” form the basis of the claim.

If the alleged concerted action is a price-fixing or output-restriction agreement (which would support criminal liability)—and information exchange is offered as support for the existence of such agreement—then courts should apply the per se standard.¹⁶ Under the per se standard, certain types of concerted action (e.g., price-fixing) are "deemed unlawful without elaborate inquiry into competitive effects."¹⁷ The anti-competitive effect to the competitive process is presumed; the plaintiff, therefore, need not offer "proof of power, intent, or impact."¹⁸

If the information exchange itself, however, is the alleged concerted action, then courts should apply the rule of reason standard.¹⁹ Under the rule of reason, courts apply a burden-shifting framework. The plaintiff must show that the challenged conduct has an anticompetitive effect, at which point the burden then shifts to the defendant to prove a procompetitive justification for the conduct. If the defendant does so, then the burden shifts back to the plaintiff to demonstrate that the procompetitive efficiencies offered by the defendant could be reasonably achieved through less anticompetitive means.²⁰

When determining whether the information exchange alleged has an anticompetitive effect, the DOJ urges courts to consider factors such as the sensitivity of the information exchanged, the granularity of the information exchanged, the public availability of the information exchanged, and the contemporariness of the information exchanged.²¹ Notably, the DOJ considers all of these factors together to assess whether the information exchange “undermines the competitive process.”

The DOJ concluded by urging the court in this private case to apply the rule of reason framework to the pork plaintiffs' standalone information sharing claim.²² The DOJ urged the court to not adopt the defendants’ argument that because the information was “aggregated” that it categorically should not support a claim. The DOJ again urged the court to consider a variety of factors to assess whether the conduct undermined the competitive processes.

While the Statement provides a clearer picture of the DOJ’s view of the law, it still leaves many questions to be answered, particularly about when and how information exchange by itself constitutes concerted action. For example, the guidance does not specify whether, for there to be a violation of Section 1, the plaintiff needs to offer proof of a mutual agreement to exchange information or whether the individuals involved in the exchange must possess pricing authority. Nor does the Statement offer any insight into examples of procompetitive justifications that, under the rule of reason, could defeat this type of Section 1 claim. As the DOJ continues to pursue investigations and litigation related to standalone information exchange, courts will be afforded an opportunity to add some much-needed clarity for practitioners and companies alike.

The DOJ's Other Recent Efforts Related to Information Exchange

The DOJ’s Statement of Interest is yet another indication that the DOJ is expanding its enforcement efforts related to information exchanges. It has recently filed two civil actions in this space, including United States v. Agri Stats, Inc.,²³ also pending in the District of Minnesota, and United States v. RealPage, Inc.,²⁴ pending in the Middle District of North Carolina.

United States v. Agri Stats, Inc.

In September 2023, the DOJ filed suit against Agri Stats,²⁵ alleging that Agri Stats violated Section 1 of the Sherman Act by facilitating anticompetitive information exchanges in the broiler chicken, pork, and turkey markets.²⁶ In the DOJ's view, Agri Stats's distribution of competitively sensitive information related to prices, costs, and output among competing processors suppressed competition, increased prices, and limited supply.²⁷ The court denied Agri Stats's motion to dismiss²⁸ and the matter is currently proceeding through discovery.

United States v. RealPage, Inc.

About a year later, in August 2024, the DOJ filed suit against RealPage,²⁹ alleging that RealPage coordinated rental prices in the real estate market by collecting nonpublic competitively sensitive pricing and other data from owners, using that data to determine a recommended market price through various algorithms, and then sending that recommended price to the owners that subscribed to certain RealPage software.³⁰ RealPage has filed a motion to transfer the case to the Middle District of Tennessee, where an earlier-filed, private litigation related to similar legal claims and factual allegations, is pending.³¹ The government's response is due October 17, 2024.

Both Agri Stats and RealPage differ from the DOJ's Statement of Interest in the pork litigation in at least two key ways.

First, in both litigations, the entities alleged to have violated the law were third-party platform facilitators used by industry competitors (meat processors in Agri Stats and landlords in RealPage). In the Statement of Interest, however, the DOJ focuses its view on the competitors themselves (i.e., the entities alleged to have exchanged the information).

And second, in both litigations, the defendant entities were alleged to use algorithmic pricing software to facilitate information exchange. The Statement of Interest, on the other hand, notes that modern advances (presumably, algorithms) are enabling information sharing to take a different form than in the past but does not limit its views to algorithmic exchanges. To the contrary, the DOJ's views in the Statement are articulated as to all forms of information exchange.

Standalone Information Sharing in the European Union (EU)

The DOJ’s position largely aligns with the law in the EU, where standalone information sharing has traditionally been considered a concerted practice that violates EU antitrust laws if it restricts, eliminates, or distorts competition. Whether that is the case depends on the type of information shared and the nature of the exchange.

The sharing of future-looking information related to prices (or any element of price), output, or competitive strategies between or among competitors is considered the most problematic and is typically treated as a restriction "by object" without the need to prove any anticompetitive effects. It can take place with competitors exchanging information directly or through an independent third party. In the latter case, the sharing company’s liability is predicated on its knowledge (actual or constructive) about the information being shared, through the third party, with competitors. Information sharing that restricts competition "by object" is usually viewed as a form of cartel conduct by competition agencies in the EU, which can result in significant penalties.

The sharing of other types of information, such as current or past prices or orders, costs, sources of inputs, etc., is considered an illegal concerted practice only if it leads to anticompetitive effects. This will depend on the type of the information shared, nature of the exchange (private or public), and the relevant market characteristics.

Competition authorities in the EU are focusing on information sharing and the role of third parties, such as consultancies or trade associations, in potentially facilitating it. Notably, conduct involving alleged price signaling, whereby competitors engage in the sharing of information via public announcements in the media or earnings calls has also come under scrutiny in the past few years. The European Commission (EC) has recently launched an investigation into the conduct of major suppliers of replacement tires, which allegedly involves coordination via public announcements.³² Also, the EC is known to be using a data scraping tool that collects media and other public announcements to detect potentially problematic conduct.

Key Takeaways and Implications

1. Information Sharing Practices and Compliance Training. Clients are advised to carefully review existing practices, protocols, and training to provide employees with clear guidance on information sharing.
2. Exercise Caution When Utilizing Third-Party Platforms for Data Collection, Data Sharing, or Benchmarking. Clients should review any third-party platforms used for data collection or sharing for antitrust risk. Clients should evaluate the pro-competitive bases for using these platforms or for any other information sharing practices.
3. For the EU: Clients are advised to carefully consider the potential risks of sharing information with their competitors or using information supplied via third-party platforms. Given the EC’s focus on public announcements, clients are also advised to carefully vet their public statements to minimize the risks of anticompetitive signaling allegations in the EU.

^[1] See Statement of Interest of the United States, In re Pork Antitrust Litigation, No. 0:18-cv-01776-JRT-JFD (D. Minn. Oct. 1, 2024) (hereinafter "statement").

^[2] Id. at 12 (relying on the 1923 Supreme Court decision in United States v. Am Linseed Oil Co., 262 U.S. 371, 390 (1923)).

^[3] See Statement of Interest of the United States, Cornish-Adebiyi v. Caesars Entertainment, Inc., No. 1:23-cv-02536-KMW-EAP (D.N.J. Mar. 28, 2024); Statement of Interest of the United States of America, Duffy v. Yardi Systems, Inc., No. 2:23-cv-01391-RSL (W.D. Wash. Mar. 1, 2024); Mem. of Law in Support of the Statement of Interest of the United States, In re RealPage, Rental Software Antitrust Litig., No. 3:23-MD-3071 (M.D. Tenn. Nov. 15, 2023).

^[4] See United States v. Container Corp. of Am., 393 U.S. 333 (1969) (reversing an order granting dismissal in a price information exchange case and finding that the exchange of pricing information violated the Sherman Act).

^[5] Statement of Antitrust Enforcement Policy in Health Care (August 1, 1996).

^[6] See Press Release, Justice Department Withdraws Outdated Enforcement Statements (Feb. 3, 2023), available at https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements. This withdrawal also left unclear the state of other guidance that relied on the (now withdrawn) policies, including the Department of Justice and Federal Trade Commission joint Antitrust Guidance for Human Resources Professionals, promulgated in 2016. In that guidance, the enforcers noted that the exchange of competitively sensitive employment information was similar to the exchange of pricing information and that companies could mitigate their risk of an antitrust violation by ensuring that any exchange was limited to historical, aggregated data with safeguards to ensure the information would not be used to limit competition. See Antitrust Guidance for Human Resources Professionals (Oct. 2016), available at https://www.justice.gov/atr/file/903511/dl.

^[7] See Press Release, Dep't of Justice, Justice Department Withdraws Outdated Enforcement Statements (Feb. 3, 2023), available at https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements.

^[8] CIPPs' Fourth Am. Consolidated Class Action Compl., In re Pork Antitrust Litigation, No. 0:18-cv-01776-JRT-JFD (D. Minn. Jan. 12, 2022).

^[9] Statement at 2.

^[10] The DOJ explicitly does not offer an opinion on Section 1's requirement that the alleged restraint substantially affected, or occurred in the flow of, interstate or foreign commerce, nor does the DOJ offer a view on the private-suit requirement that plaintiffs establish antitrust standing and injury. Id. at 4, fn. 4.

^[11] 15 U.S.C. § 1.

^[12] Statement at 5.

^[13] Id. at 1.

^[14] Id. at 5.

^[15] 15 U.S.C. § 1.

^[16] Statement at 7.

^[17] Id.

^[18] Stop & Shop Supermarket Co. v. Blue Cross & Blue Shield, 373 F.3d 57, 61 (1st Cir. 2004).

^[19] Statement at 7-10.

^[20] See Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 885-86 (2007).

^[21] Statement at 13-18.

^[22] Id. at 18.

^[23] No. 0:23-cv-3009-JRT-JFD (D. Minn. filed Sept. 28, 2023).

^[24] No. 1:24-cv-00710 (M.D.N.C. filed Aug. 23, 2024).

^[25] Agri Stats is an analytics company that compiles, aggregates, and disseminates data among competing meat processors. See Complaint, United States v. Agri Stats, Inc., No. 0:23-cv-03009-JRT-JFD (D. Minn. Sept. 28, 2023), at ❡❡ 2-3.

^[26] Id.

^[27] Id. at ❡❡ 161-66.

^[28] See Mem. Op. & Order Denying Def.'s Mot. to Transfer & Mot. to Dismiss, United States v. Agri Stats, Inc., No. 0:23-cv-03009-JRT-JFD (D. Minn. May 28, 2024).

^[29] RealPage is a developer, marketer, and seller of commercial revenue management software for rentals. See Complaint, United States v. RealPage, Inc., No. 1:24-cv-00710-LCB-JLW (M.D.N.C. Aug. 23, 2024), at ❡ 5.

^[30] See generally id.

^[31] See Def. RealPage, Inc.'s Mot. to Transfer Under 28 U.S.C. 1404(a), United States v. RealPage, Inc., No. 1:24-cv-00710-LCB-JLW (M.D.N.C. Sept. 26, 2024).

^[32]See Press Release, European Commission, Commission carries out unannounced antitrust inspections in the tyres sector (Jan. 29, 2024), available at https://ec.europa.eu/commission/presscorner/detail/en/ip_24_561.