The Exchange of Information: Per Se or Rule of Reason?

Recently, I attended the ABA Antitrust Section’s Spring Meeting in Washington. One of the hot topics of discussion was the exchange of information. Earlier this year the DOJ’s Antitrust Division withdrew its healthcare guidelines which contained safe harbors for information exchanges. There was speculation that the DOJ might pursue a criminal case for information exchange.

The Supreme Court has held that an exchange of price or other information can be pro-competitive. It described the exchange of price information among competitors as illustrative of behavior proscribed by the Sherman Act that is often difficult to distinguish from the “gray zone of socially acceptable and economically justifiable business conduct.”

There are three basic ways to treat the information exchange as a violation of the antitrust laws. First, the exchange of price information among competitors could be a facilitating mechanism of a naked agreement to fix prices, reduce output, or allocate markets. Second, the exchange of price and other information could be circumstantial evidence of an agreement to fix prices, limit output, or allocate markets. Third, the agreement to exchange price and other information is the agreement itself in restraint of trade that has an overall anti-competitive effect.

The first approach should be considered under a per se analysis, particularly if the price information exchange is part of a naked restraint to fix prices and there are no plausible pro-competitive justifications. The second and third approaches should apply the Rule of Reason, especially if there are arguably plausible pro-competitive justifications.

Because exchange of price information among competitors could be pro-competitive, to pursue a criminal violation of Section 1 of the Sherman Act under Supreme Court precedent, the government would have to prove two types of intent. The first is an intent to enter into the agreement. This requirement is standard conspiracy law. One cannot enter into a conspiracy by mistake, happenstance, or ignorance. The second type of intent is the intent to achieve an anti-competitive effect.

I was a member of the drafting committee that prepared the ABA Antitrust Section’s Sample Jury Instructions in Criminal Antitrust Cases that was published in 1984. The committee prepared a sample jury instruction that followed the Supreme Court precedent described above. The instruction charged the jury that the government must prove beyond a reasonable doubt each of the following elements: First, that there was an agreement to exchange price information; second, that the exchange of information about prices had the anti-competitive effect of artificially fixing or stabilizing prices; and third, either that it was the conscious purpose of the defendants to produce such an anti-competitive effect, or that the defendants knew that such an anti-competitive effect was likely to result from the exchange of price information.

The DOJ Antitrust Division, however, opposed requiring that it prove the second and third elements. It argued successfully to a number of appellate courts that an attempt to enter into a conspiracy to fix prices subsumed any attempt to have an anti-competitive effect. In other words, by intending to fix prices, a conspirator also necessarily intended that such conduct would have an anti-competitive effect.

The ABA Antitrust Section published Model Criminal Antitrust Jury Instructions in 2009. I also was on the drafting committee for this publication. The representative of the Antitrust Division on the drafting committee, however, was adamant that the drafting committee drop the instruction that reflected the two types of intent for a per se criminal information exchange case. I discussed this issue directly with the then Deputy Assistant Attorney General for the Antitrust Division for Criminal Enforcement. He justified dropping the jury instruction for the information exchange with the two types of intent on the ground that the Antitrust Division would never bring a criminal case involving an information exchange.

However, we have a different administration than we had in 2009 and different leadership in the Antitrust Division. It remains to be seen whether it does pursue a criminal information exchange case, and if so whether it embraces the 1984 Sample Jury Instruction reflecting the Supreme Court’s two types of intent in such cases.