Information Exchanges: Understanding and Mitigating Antitrust Risks

By Kathy Osborn and Anna Konradi Behrmann

Good antitrust compliance practices are essential for participants in any industry, but that has never been as true for firms in the healthcare sector as it is today. Recent trends toward cost saving and integrated care models often involve rivals working together to gain cost efficiencies and share limited resources and sensitive information.

At the same time, the Federal Trade Commission (FTC), the regulatory body typically responsible for enforcing federal antitrust laws, has made it clear that not only will it make anticompetitive practices in the healthcare industry a focus for the agency, but also that it will closely scrutinize information exchanges between competitors, even if those exchanges fall short of full-fledged anticompetitive agreements.

Like other antitrust violations, unlawful information exchanges carry the risk of severe penalties, including treble damages, joint and several liability, and attorneys’ fees, in addition to the high costs of defending civil lawsuits and responding to government investigations.

Information Exchanges

Federal and state antitrust laws prohibit competitors from forming agreements “in restraint of trade.” But under certain circumstances, competitors can violate the antitrust laws merely by exchanging competitively sensitive information because such exchanges, even by themselves, can facilitate agreements — whether implicit or explicit — that can harm competition.

For example, competitors that receive one another’s competitively sensitive information about pricing, costs, business strategy, or other sensitive topics could use that information to align their respective business practices and stifle competition in the marketplace. Note that in 2013, the FTC charged two companies engaged in surgical hair transplantation with violating the antitrust laws after they spent years exchanging company-specific information about future product offerings, price floors, discounting practices, expansion plans, operations, and performance in anticipation of a potential acquisition.

Agreements between competitors relating to these kinds of competitively sensitive topics typically are judged as “per se” unlawful, meaning there are no legal excuses or defenses once an agreement is established. Information exchanges by themselves, however, are scrutinized under the comparatively relaxed “rule of reason,” meaning courts and antitrust authorities weigh whether the information exchange by itself has more potential for anticompetitive effects or procompetitive benefits. That said, information exchange allegations often are brought parallel to allegations that the parties used such exchanges to fix prices, rig bids, allocate markets, or engage in other kinds of per se unlawful conduct.

Of course, today’s business realities often require healthcare competitors to work collaboratively in a wide number of areas. Where appropriate precautions are taken, parties can minimize the antitrust risks associated with exchanging competitively sensitive information. Such precautions typically involve a real-time assessment of what procompetitive goals underlie the proposed information exchange, and purposeful tailoring of the exchange to ensure appropriate firewalls are in place to prevent the inclusion of unnecessary competitively sensitive information. See the FTC and Department of Justice (DOJ)’s joint Statements of Antitrust Enforcement Policy in Health Care (the Statements), which provide guidance on myriad health care-related antitrust issues, including information exchanges.[1]

Trade Association Best Practices

Trade associations do a great deal of good for industries and consumers. For example, they often help to establish health and safety standards that protect the public and establish production standards that enable different manufacturers’ products to operate together. Many trade associations represent their members in the political arena and provide important industry-level information to inform governmental decision-making.  Despite all these valuable benefits, trade associations do provide many opportunities for meetings between competitors and, as a result, opportunities for potential collusion if participants are not properly trained on antitrust compliance best practices.

In their Statements, the antitrust agencies describe how parties to a trade association can avoid antitrust scrutiny when exchanging information. The agencies’ guidance provides that exchanges involving competitively sensitive information are very unlikely to be challenged when (1) the data is gathered and managed by a third party (e.g., a trade association), (2) the data involved is more than three months old, and (3) the exchange involves at least five participants, none of whose data accounts for more than 25% on a weighted basis of the statistic reported, and the data is aggregated such that it is not possible to identify the data of a particular participant. While not a requirement, it often is a good fact when trade associations publish their survey results to nonmembers.  

Compliance with these “safety zone” requirements is not mandatory for compliant information exchanges. Courts and agencies would still conduct a rule of reason analysis on benchmarking or information exchanges to weigh the benefits against the potential harms. But information exchanges that fall outside of the safety zones are more likely to catch the attention of antitrust authorities and potential plaintiffs, particularly where competitor behavior already appears similar and there’s a case to be made that such exchanges facilitated explicit or implicit competitor agreements regarding competitively sensitive topics.

Parties looking to share information in a trade association setting should take heed of the trade association’s policies and procedures surrounding information exchanges.  Unless you trust that the trade association will treat the competitively sensitive information it receives in compliance with the agencies’ Statements, entities should be circumspect about sharing information through an intermediary that they could not share directly with competitors.

Competitor Collaborations and Joint Ventures

There may be instances where otherwise-competitors combine for a limited purpose – for instance, to make group purchases, to combine their respective resources to design and manufacture a new product that would not otherwise be available in the marketplace, or to provide a wider provider or service network to patients. Such collaborations and joint ventures typically are considered procompetitive because they offer something to consumers (e.g., better downstream pricing or HMOs for managed care) that would not otherwise be available.

That said, parties to a procompetitive collaboration must be careful not to use the collaboration as a vehicle to exchange competitively sensitive information about their respective businesses that is outside the scope of their collaboration. This likely involves crafting the scope of any necessary information exchanges to include only information critical to the collaboration and setting up electronic and other physical firewalls to prevent individuals who are not designated by their respective companies to participate in the collaboration from viewing their competitor’s information. 

Company representatives who have day-to-day decision making authority over competitively sensitive topics such as pricing, costs, and product development should not have access to their competitor’s information, including that of a joint venture in which the company participates but also with which it competes. The latter is often surprising to joint venture participants such as those involved in HMOs and PHOs, but to the extent the collaboration creates a new product or service that competes with its member companies’ products or services, the collaboration must not “conspire” with its participating members regarding the prices or terms on which the collaboration product or service is offered to the marketplace.

In the context of a healthcare collaboration, this often plays out when providers and hospitals come together to jointly offer services to patients. Such collaborations typically are viewed as procompetitive by the antitrust enforcement agencies, particularly where the network takes steps toward clinical integration (i.e., coordination of patient care across conditions, providers, setting, and time to facilitate efficient and equitable care) and financial risk-sharing, and where the network members rely on a third party to ensure that competitively sensitive information shared within the collaboration is not available on a disaggregated basis.[2] To the extent that a collaboration’s board of directors includes participating doctors or hospitals, it also is important that board members be firewalled if they have decision-making authority over competitively sensitive topics within their own respective organizations.

Due Diligence Considerations

These same principles also apply to due diligence in the context of a potential merger, acquisition, or similar transaction. Particularly where the entities are competitors, they must be cautious about exchanging competitively sensitive information that is not necessary to the proposed transaction. Moreover, they must take precautions to ensure that any competitively sensitive information that is exchanged is appropriately firewalled and only viewable by the other company’s clean team.

In addition to concerns relating to information exchanges during due diligence, entities to a proposed transaction must continue competing until the proposed transaction is consummated and avoid allowing their decision makers to make formal plans regarding the combined entity’s future pricing, costs, business strategies, and other sensitive business topics, because doing so may constitute unlawful “gun-jumping.” That said, members of the clean team may, where necessary, discuss competitively sensitive issues for the merged entity so long as current decision makers for the respective parties are not involved in those discussions, and as long as the parties don’t take steps to functionally merge in advance of formal consummation of the transaction.

The antitrust laws are nuanced and complex, and their application to particular circumstances depends on the unique facts at play. Companies and individuals who have questions or concerns about information exchanges with competitors should consult with legal counsel.

For more information, please contact Kathy Osborn or Anna Konradi Behrmann.


[1] Notably, under the Trump administration, the DOJ Antitrust Division has announced that it has withdrawn several of its guidance documents. While we have not seen anything indicating that the DOJ would not continue to rely on the Statements of Antitrust Enforcement Policy in Health Care, it is important to be aware that, under the right circumstances, the DOJ might not constrain itself to the four corners of its guidance documents. Moreover, courts have adopted much of the same thinking around information exchanges as is reflected in the Statements.

[2] See. e.g., Norman PHO Advisory Opinion, available at https://www.ftc.gov/sites/default/files/documents/advisory-opinions/norman-physician-hospital-organization/130213normanphoadvltr_0.pdf (Feb. 13, 2013); TriState Health Partners Inc. Advisory Opinion, available at https://www.ftc.gov/sites/default/files/documents/advisory-opinions/tristate-health-partners-inc./090413tristateaoletter.pdf (April 13, 2009); MedSouth Inc. Staff Advisory Opinion, available at https://www.ftc.gov/sites/default/files/documents/advisory-opinions/medsouth-inc./070618medsouth.pdf (June 18, 2007).

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