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FTC Challenges Competitors’ Exchange of Sensitive Business Information

A mere discussion about pricing with a competitor may violate the Federal Trade Commission Act’s prohibition against “unfair methods of competition,” even if the exchange does not result in price fixing or cause any actual harm to competitor. (Federal Trade Commission v. Bosley, No. 121-0184). The Commission has authority to issue a complaint when it has reason to believe the Act has been or is being violated.


FTC Challenges Competitors’ Exchange of Sensitive Business Information

A mere discussion about pricing with a competitor may violate the Federal Trade Commission Act’s prohibition against “unfair methods of competition,” even if the exchange does not result in price fixing or cause any actual harm to competitor. (Federal Trade Commission v. Bosley, No. 121-0184). The Commission has authority to issue a complaint when it has reason to believe the Act has been or is being violated.

In this case the FTC charged Bosley – the nation’s largest manager of hair restoration procedures – with an illegal exchange of competitively sensitive, nonpublic information about its business practices directly with a competitor, Hair Club, Inc. The exchanges over a four year period were reciprocal and included product price floors and discounts, future product offerings, plans for business expansion/contraction and current business operational performance. These exchanges occurred directly between the CEOs of the two rival firms. Bosley also allegedly shared such information with other unnamed competitors.

The FTC identified three plausible risks to competition associated with sharing this kind of information:

Without admitting liability, Bosley agreed to an FTC consent order that (1) required the company to cease all direct or indirect exchanges of “sensitive information” with any competitor or soliciting sensitive information from a competitor; (2) mandated the company to maintain a formal antitrust compliance program for 20 years; and (3) provided the FTC with access to its U.S. facilities, records and employees with five days’ notice. The order defined “sensitive information” to include nonpublic information relating to pricing, costs, revenues, profits, margins, output, business plans, marketing, advertising, promotion or research and development. The order contains a number of permitted exchanges, including ordinary and customary communications with vendors and independent contractors, and ordinary participation in trade associations.

While the exchange of such information is certainly not advisable, the FTC did not allege that Bosley engaged in an open invitation to collude and fix prices similar to earlier cases. This indicates that the FTC will expand and use its enforcement authority to halt information sharing between competitors despite the lack of harm to competition or an unequivocal invitation to collude.

 


Keeley, Kuenn & Reid, a Chicago based law firm with government relations affiliates in Washington, D.C., is engaged in the practice of business law, commercial litigation, employment law, taxation, antitrust, product liability, estate planning and legislative matters. Through its affiliates, the firm also meets its clients' needs in protecting intellectual property rights and international commercial law matters.

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