The reason that exchange of information can be detrimental for competition is pretty obvious. By disclosing sensitive competitive information to competing companies the strategic uncertainty in the market is reduced. The company that receives information about the competitor’s future market behaviour can relax, sleep well at night and will not have to compete as hard as if uncertainty about the rival’s next move still had ruled. The exchange of strategic information consequently reduces the incentives to compete.
This is why the competition authorities generally consider exchange of information about future prices and volumes in the same way as cartels. The exchange of other information, e.g. customer lists, costs, production methods, etc. may also be illegal. Companies that share strategic internal affairs with their competitors therefore run a significant risk.
Even more surprising for many it seems, is that if only one company provides strategic information to its competitors that is sufficient to be considered as a violation of regulations. Mutual exchange of information is therefore not a condition. The recipients are, according to recent practice, considered to have accepted the information from a competitor if they do not expressly declare that they do not wish to receive the information. If, for example, a party in a meeting receives information about a competitor’s future prices, and does not expressly protest, the party would be in a precarious situation if another meeting participant speaks out to the competition authorities.
Companies thus run a risk just by meeting or communicating with competitors. It is therefore prudent to first assess the need for such communication. Why should you meet at all? What is the agenda? Who will attend? In some cases, reflections on these questions are sufficient for the meeting or the communication to be cancelled. In other cases the company has a genuine need or it is inevitable to meet or communicate with the competitor, for example, in trade organisations or other types of cooperation.
If a meeting or communication with competitors is necessary, the company should always ensure that employees who participate in such meetings or communications have good knowledge of what they legally can tell the competitors. Employees should also be trained so that they know when and how they should react if they receive strategic information from competing businesses.
The article was published in the Norwegian newspaper Finansavisen 22 January 2014.