October 19, 2023
W. Todd Miller, Lucy Clippinger, Erin Glavich
The Department of Justice (DOJ) has issued a shot across the bow for competitor information exchanges. At the end of September 2023, the DOJ filed a conspiracy complaint against a data exchange for allegedly engineering and facilitating a conspiracy to raise prices by providing the platform through which participants across several industries exchanged information. This complaint comes several years after the DOJ initiated, and lost or abandoned, criminal conspiracy charges against several executives of the industry participants.
While this case does not represent a shift in substantive antitrust law, it is another indication that the DOJ and the Federal Trade Commission (FTC) are attempting to rethink and invigorate antitrust enforcement. Here, the agencies are taking a harder look at what information is shared and how that information can be used with today’s more advanced data analytics. There are no longer any “safe harbors,” and companies should carefully examine information sharing practices and ensure compliance with antitrust laws. This is particularly the case in industries where there are only a few major players or at industry supply chokepoints (eg, meatpacking, healthcare and technology).
Agri Stats complaint
On 28 September 2023, the DOJ filed a civil complaint against Agri Stats, Inc, a subscription data analytics and consulting service, for its role in facilitating illegal information sharing between meat processors in the broiler chicken, turkey, and pork industries.
Agri Stats is the sole defendant; DOJ did not name as parties any of the alleged co-conspirator processors from any of the affected industries. The DOJ seeks a permanent injunction against Agri Stats.
The thrust of the case is that Agri Stats enticed and enforced an information sharing scheme between meat processors, sharing competitively sensitive information that allowed individual producers to raise prices higher than they would absent the alleged sharing. Agri Stats also offered consulting services utilising competitively sensitive information to advise processors on how to raise prices and increase profitability.
Information sharing among competitors is not per se illegal under US antitrust laws. It has however long been viewed as a “plus factor” that permits an inference of a per se illegal conspiracy and may be deemed illegal under a more comprehensive market analysis where the sharing of information is likely to result in increased prices and there is no countervailing legitimate business purpose. Importantly, the antitrust analysis of information sharing is not limited to pricing to customers. These same principles apply to the sharing of cost information among entities that compete for those supply inputs (eg, labor and materials).
In February 2023, the DOJ withdrew three healthcare related policy statements which included prior guidance on information sharing between healthcare industry participants. The guidelines included “safety zones” describing conduct that the agencies would generally not challenge as anticompetitive. The safety zones were always subject to the specific facts of the conduct. While these guidelines were aimed at healthcare, many other industries used them as helpful guidance on the appropriate analysis of information sharing and the creation of benchmarking projects. The FTC also withdrew the guidelines in July 2023.
The withdrawal of the healthcare guidelines did not represent a shift in substantive antitrust law. As the DOJ explained at the time of the withdrawal, the evolution of the economy and in particular data analytics has changed the competitive value of information. The assumptions that the guidelines and safety zones were based on were outdated. The withdrawal removed reliance on safety zones and gave the agencies more flexibility in their enforcement.
While the information sharing alleged in the Agri Stats complaint would not have been within the safety zone included in those guidelines, the withdrawal is notable as it signaled that the agencies would be looking more critically at information sharing among competitors. The Agri Stats complaint simply reinforces the agencies’ concern with the modern use of data analytics, artificial intelligence and similar advances in the analysis and use of information.
Those who track the Biden administration’s statements around competition and private litigation against meatpackers may wonder why the suit was filed now. Class actions challenging meatpackers’ conduct under the antitrust laws, including their use of Agri Stats, have been litigated since 2016. In the realm of executive action, President Biden signed his Executive Order on Promoting Competition in the American Economy, which discussed meatpackers in particular, in the summer of 2021. The administration announced an Action Plan related to competition in the meat and poultry sector in early 2022, lamenting concentration in the beef, poultry and pork processing markets and identifying steps the administration intended to take to increase competition, fairness and transparency.
In the meantime, the DOJ pursued (but did not prevail in) criminal antitrust actions against broiler chicken executives, alleging that they rigged bids and fixed prices (for more information, see “Department of Justice set back by acquittals in labour antitrust cases“). Discovery in these matters, as well as the ongoing private antitrust class actions, may have provided the DOJ with additional information to form the basis for its complaint against Agri Stats. It was also reported in 2020 that the DOJ issued subpoenas to major beef processors as part of an antitrust probe, which is another potential source of evidence underlying the allegations.
However, one development that occurred between the Biden administration’s announcement of its focus on meatpacker competition and the current suit may be unhelpful to the government’s case. In the private broiler chicken antitrust litigation, the judge issued a decision in July 2023 that there was not sufficient evidence from which a reasonable jury could conclude that Agri Stats participated in the alleged conspiracy and granted Agri Stats summary judgment. The judge observed that the absence of evidence was telling because unlike the broiler chicken processors, Agri Stats did not market broiler chickens and would not have benefited from increasing their price, making it less likely Agri Stats would have joined the conspiracy. It remains to be seen whether the DOJ has uncovered additional evidence from which a jury could find an anticompetitive agreement between Agri Stats and others.
The takeaway from this latest case is that the “old way” of advising clients on information sharing and benchmarking is fraught with risk. The agencies have moved away from “safety zones” to broad policies, such as is seen in the draft merger guidelines, that presume anticompetitive effects subject to rebuttal. While the old safety zones for aggregated data provide helpful themes when considering practices for sharing aggregated data, compliance with those guidelines will not insulate companies from agency scrutiny.
Companies and trade associations that aggregate competitors’ data, and companies participating in that data sharing, should perform a careful review of their practices to ensure that the information shared does not permit competitors to use the information to coordinate pricing, costs, or other competitive terms. While all companies should take these precautions, those operating in industries in which the Biden administration has signaled a particular focus due to concerns about industry concentration should take special care to review their policies and procedures around data sharing and aggregation.
This content was originally published on October 19, 2023, via the International Law Office (ILO) newsletter. It can be found here: DOJ’s Agri Stats case demonstrates increased concern with information sharing among competitors in data analytics era
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