DOJ Signals More Aggressive Enforcement Against Information Sharing Among Competitors

Authors: Bernard (Barry) A. Nigro Jr., Richard A. Powers, Nathaniel L. Asker, Harrisson Kummer, and special thanks to Lydia Saltzbart, Litigation Law Clerk, for her valuable assistance in the research and drafting of this client alert.

On February 2, 2023, Principal Deputy Assistant Attorney General Doha Mekki announced that the Department of Justice (“DOJ”) would be increasing its focus on the exchange of competitively sensitive information, including by scrutinizing mergers involving companies with a history of anticompetitive information exchange.[1] Mekki, said that, as part of this initiative, the DOJ is withdrawing three “outdated” policy statements that provide guidelines for permissible information sharing in the healthcare industry. The policy statements, issued between 1993 and 2011, include safe harbor provisions that have been relied on by companies in the healthcare and other sectors.

I.      The “Outdated” Policies and Safe Harbor Provisions

The previous set of policies[2] outlined “safety zones,” within which information exchanges were considered “very unlikely to raise competitive concerns.”[3] In general, information sharing fell into a safety zone if: “(1) the exchange [was] managed by a third-party, like a trade association; (2) the information provided by participants [was] more than three months old; and (3) at least five participants provide[d] the data underlying each statistic shared, no single provider’s data contribute[d] more than 25% of the “weight” of any statistic shared, and the shared statistics [were] sufficiently aggregated that no participant [could] discern the data of any other participant.”[4] Previously, even exchanges of information outside the safety zones could be lawful, if the exchange promoted competition—determined by balancing the potential anticompetitive harms against procompetitive justifications.[5]

Last week, Mekki made clear that DOJ would “revisit” enforcement policies and guidance that have not kept up with changing “market realities.”[6] According to Mekki, healthcare firms’ “greater use of algorithms, the speed of data and the ability of firms to de-anonymize sensitive information” undermine the old policies and require greater scrutiny.[7] Further, she stated that the rise of technologies like pricing algorithms, for instance, may undermine previous assumptions that three-month-old data is unlikely to be competitively valuable.[8] These comments reflect the DOJ’s heightened skepticism of information exchanges that previously did not raise concerns under the generally understood safe harbor framework. Given this change, companies should review their current practices and consult with counsel when considering sharing any competitively sensitive information, not just pricing information.

II.    Looking Ahead

The DOJ emphasized that by withdrawing the policy statements, it hopes to promote greater transparency around its view of anticompetitive conduct and corresponding enforcement priorities.[9] In place of these statements, the DOJ recommended that the public look to “[r]ecent enforcement actions and competition advocacy” for guidance.[10] For example, the DOJ recently obtained settlements from poultry producers for exchanging wage and employee benefit information—finding that the use of a third-party consultant did not insulate the companies from liability.[11] DOJ also cited several other enforcement actions going back a number of years, including a criminal prosecution related to the use of algorithmic pricing tools.[12]

Notably, Mekki foreshadowed a crackdown on allegedly anticompetitive information sharing in merger review, linking it to coordinated effects theories under the current merger guidelines.[13] She explained that going forward, mergers between companies with “a prior history” of “anticompetitive information exchanges” will face heightened review and may face an “uphill battle” getting deals approved.[14]

Conclusion

This policy change highlights DOJ’s heightened focus on information sharing and that the generally understood safe harbor provisions can no longer be relied upon. Instead, the DOJ will look at “the structure of the industry involved and the nature of the information exchanged” in the context of current, specific market dynamics, which will not be limited to just highly concentrated industries.[15]

This announcement reiterates the need to have an appropriately tailored compliance program that, among other things, ensures that sharing any competitively sensitive information, including information shared in merger diligence, complies with procedures and is handled appropriately. Companies should no longer treat compliance with the safety zones as sufficient to ensure that the conduct is immune from prosecution or that a merger will go through review with ease.