Loose Lips: The Danger Of Sharing Competitive Information With Competitors

Keywords: competition, antitrust, FTC, Federal Trade Commission,

Increasing prices can be stressful for manufacturers as they consider such questions as: What is the proper price point? How will customers react? What will the competition do? In addition to these issues, manufacturers considering a price increase should also be concerned with antitrust best practices.

There are many well-recognized business reasons to raise prices: increased demand, rising costs, or finding it profitable to follow the price increase of a larger competitor. However, regardless of the intentions, improper communications, suspicious meetings, or the mere presence of executives at trade association meetings around the time of a price increase can give rise to antitrust scrutiny.1

As the US Federal Trade Commission's recent consent judgments with AmeriGas and Blue Rhino make clear, communications with competitors at or near the time of a price increase are fraught with danger, especially when competitively sensitive information is exchanged. In order to avoid potential antitrust pitfalls, companies considering price increases should avoid communications with competitors and adhere to antitrust compliance procedures, like carefully documenting meetings, having corporate counsel present at any trade association or other meeting with competitors, and not announcing price increases further in advance of the effective date than necessary.

The Applicable Law

Mere "evidence of social contacts and telephone calls among [competitors is] not sufficient to exclude the possibility that the [competitors] acted independently."2 "The decision by a group of industry players to have a meeting or to talk at a dinner or cocktail reception does not constitute a conspiracy."3 After all, "[c]ompany personnel do not often operate in a vacuum or 'plastic bubble'; they sometimes engage in the longstanding tradition of social discourse."4 For this reason courts have rejected as "pure conjecture" the assumption "that the contemporaneous presence of [corporate] officers at a trade association meeting permits an inference of conspiracy."5

With that said, communications with competitors around the time of a price increase may raise the specter of price-fixing in certain situations if proper compliance measures are not observed. For instance, some courts have found nearly contemporaneous trade association meetings and price increases to be suggestive of a conspiracy. In In re Titanium Dioxide Antitrust Litigation,6 a district court denied motions for summary judgment where class plaintiffs tendered evidence showing that manufacturers of titanium dioxide kicked off a series of lock-step price increases shortly after attending meetings...