The Department of Justice has in recent years shown an increased interest in the prosecution of information exchanges among competitors. In harmony with the Department’s focus on algorithmic collusion, the DOJ’s renewed efforts to combat cartel behavior accomplished through competitors’ information-sharing and facilitated by third-party intermediaries represents a new front in antitrust agencies’ efforts to expand the antitrust toolbox. Companies participating in information exchanges should examine their compliance efforts, while upstream buyers and sellers of industries with information exchanges should take note.
Information exchanges can run afoul of the antitrust laws when they facilitate price fixing or other oligopolistic behavior or effects, including reduced output and limited innovation. If competitors can obtain key information about each other’s businesses, the formation of a coordinated group of competitors becomes far easier, whether that coordination is formal, through agreements to fix price or not compete, or takes a more informal expression, where competitors follow each other’s movements in the marketplace, stay out of each other’s way, and thus earn supra-competitive profits by limiting or avoiding competition. In industries and markets where conditions are ripe (for example, in concentrated industries with excess capacity), information exchanges can pose a greater risk to competition and consumers, and where competitors are sharing a greater level of detailed information, harm to competition is more likely.
The DOJ has responded to this trend by suing, along with several state Attorneys’ General, Agri Stats, a subscription-based agriculture reporting and consulting firm. United States v. Agri Stats, Inc., No. 23-cv 3009 (D. Minn.). In Agri Stats, the Antitrust Division takes on the information exchange itself, that is the facilitator, rather than the market participant. The DOJ’s case recently survived a motion to dismiss, meaning Agri Stats’s conduct will likely be fully examined and could influence other cases of industry exchanges. Agri Stats first gained notoriety from its appearance in several private antitrust class actions challenging meat processor cartels in the chicken, pork, and turkey supply chains, including as a defendant.
In Agri Stats, the Justice Department has accused the defendant of operating an anticompetitive information exchange among meat processors, enabling processors to reduce output and increase prices based on competitively sensitive information exchanged through Agri Stat’s reporting and consulting services. Agri Stats provides detailed and contemporaneous reporting to its subscribers, which are limited to competitors in U.S. processing industries. Agri Stats’s reporting describes for each of its subscribers (on a “loosely anonymized” basis) in-depth information regarding subscribers’ costs, production, sales, and profitability. Agri Stat’s reporting, according to the suit, allows processors to increase profitability, not through competition on price and for market share, but by watching and anticipating each other’s commercial decisions and, importantly, limiting production and increasing prices.
The DOJ’s suit asserts that Agri Stats has reached agreements with each of its subscribers and that the subscribers have agreed with each other as well, to exchange competitively sensitive information through Agri Stats’s services. According to the operative complaint, each of Agri Stats’s subscribers knew, when signing up with Agri Stats, that its competitors were also using Agri Stats—meaning those competitors would also be sharing intimate details of their business—and thus each subscriber knew that by agreeing with Agri Stats, it was effectively agreeing to share information with its competitors.
In May of this year, the court in Agri Stats denied the defendant’s motion to transfer or dismiss the action, allowing the case to proceed to discovery. Agri Stats, 2024 WL 2728450 (D. Minn. May 28, 2024). Agri Stat’s motion did not attack the United States’ theory of harm or conspiracy allegations, and thus the court’s decision does not address those aspects of the DOJ’s case and likewise provides little insight as to how the court might resolve those merits issues. However, the decision means the plaintiffs will spend the next year or so examining mounds of evidence relating to how Agri Stat’s reporting may have affected competition in the meat processing industry in the United States.
The Agri Stats case is not the only example of the DOJ’s approach to information exchanges. In February 2023, the Department announced withdrawal of three policy statements for the health care industry that previously had established “safety zones” for competitors’ exchange of information through third parties. In announcing the change, the DOJ specifically noted its increased focus on exchanges, both in the health care industry and in the broader economy. The DOJ has also reached settlements with a data consulting firm and poultry processors to resolve claims that processors were relying on data surveys to suppress prices paid to poultry growers, their suppliers.
The DOJ’s focus on information exchanges represents an analog to its focus on algorithmic collusion and price fixing. Both enforcement policies focus on the use of third-party “data intermediaries”—that is, non-participants in the market that collect information from rivals that can be used, including through enhanced data analytic tools and AI, by rivals to limit competition. Both policies recognize that the wide availability of software tools and the increasing use of machine learning can provide new channels for anticompetitive behavior and pose new challenges to competition enforcement.
Companies should take note. Whether information exchanges are used by a company or its competitors or in adjacent markets, this increased focus on collusion through “data intermediaries” raises new threats and opportunities that should be addressed with knowledgeable antitrust counsel.
