In the realm of fierce competition and mutual striving, I have witnessed the propensity among growth-oriented corporations to exchange vital information with their rivals. As a managing partner of Montague Law with over a dozen years of experience guiding high-growth companies, I, John Montague, aim to shed light on the potentially treacherous waters of this exchange.
Indeed, collaborations such as research and development agreements, joint commercialization agreements, or joint bidding arrangements often necessitate some form of information exchange. Competition laws, in their wisdom, acknowledge the potential advantages of such exchanges. But proceed with caution, dear reader. Violations of these competition laws can unleash a tempest of negative consequences, including substantial fines, reputational mauling, possible private damages actions, and criminal sanctions.
When information sharing reduces the element of strategic uncertainty, thus enabling competitors to predict and modify their behavior, we encounter the edge of a precipice. For instance, discussing future prices could set a dangerous precedent that reeks of price-fixing – a strictly outlawed form of cartel under competition law. The scent of danger becomes all the more potent when non-public, strategic commercial information such as current or future pricing, changes in production volumes, or product launches is being aired.
The art of determining what can and cannot be legally exchanged can be likened to deciphering an encrypted code. Therefore, I present to you a set of guiding principles and practical examples for your consideration.
The mode of information exchange – be it private, public or via a third party – is immaterial. No written or explicit agreement is necessary to make the exchange sensitive. A single encounter or dialogue can cross the line of competition law. Bilateral exchanges are not a requirement; even one-way communication can land you in hot water. Merely being present when a competitor reveals future pricing can breach competition law, even without any explicit agreement between the attendees. There exists a presumption of market impact. Receiving unsolicited, sensitive information from a competitor implies an acceptance and subsequent breach of competition law, barring a clear rejection of said information. The plea of ignorance or herd behavior holds no ground in the court of competition law. The principle of proportionality prevails. Information exchange for procompetitive reasons may not cause a stir, provided the volume and nature of the information aligns with the procompetitive objective.
As we delve into the specifics, it is essential to understand that there’s no exhaustive or definitive list of permissible or prohibited information types. However, a general rule of thumb is that sharing details about current and future business endeavors poses a higher risk compared to disseminating historical information. Let the nuance of competition law guide your steps as you navigate the complex and often turbulent business landscape. Please see the table below for a visual representation.