(English) Exchange of information, benchmarking and competition

[:en]Because of entrepreneurial dynamism, companies frequently seek to improve their management tools in order to improve their performance and reduce their costs. Therefore, market agents make use of several methodologies, business practices and tools in order to achieve the maximization of their business activity.

Thus, one of the business practices that, by itself, is little debated in the competition field, stands out. It is the exchange of information between competitors, which, at least with regards to its essence, can be beneficial and make the market more transparent.

The importance of transparency of the market is such that the theoretical model of perfect competition considers, among other aspects, the existence of a market with several buyers and several sellers, homogeneous products and where there is transparency and symmetry of information to all market agents.

Furthermore, it is possible to understand that sharing information improves business practice, allocates goods efficiently, reduces costs and helps with market competitiveness.

One of the forms of information exchange used by the agents is benchmarking. In general, benchmarking is the comparison of methods from other companies, in order to identify the best practices of an organization with similar organizations, pointing some possible improvements in the activity of the agents and/or reduce its costs.

As anticipated, at first, it is a pro-competitive practice, since its primary objective is to increase companies’ efficiency. However, part of the benchmarking scope generates concerns with regards to competition. This is because the practice of benchmarking can affect the competition between competitors and allow a coordination of strategy in a particular market or restrict competition. Well! This is information exchange between competitors.

There remains no doubt left as to the concern of the global antitrust authorities with regards to the exchange of information between competitors – commonly associated with the practice of cartels – in view of its potential to also generate negative effects on the market. The practice of benchmarking is just one example of the occurrence of exchange of information, while other exchanges, through meetings between competitors organized by associations or even through symposiums and events held for this purpose, are also a concern with regards to competition.  The mere association or meeting to exchange information does not immediately result in an anticompetitive behavior, and it is even a practice guaranteed by the Brazilian Constitution.

However, companies, associations and their members, in these situations, must be cautious not to incur illicit practices. Although the intention of the exchange of information is legitimate and aims the improvement of the business activity, the conduct may result in granting information considered sensitive.

For example, sensitive information such as providing data to competitors regarding the current or future pricing policy, cost structure, profit margin, market shares, production levels, idle capacity, customers, among others, may, eventually, result in the creation of agreements and informal understandings harmful to competition.

In this context, the exchange of information can lead to collusive behavior among market agents, facilitating a common understanding on future strategies, besides a coordination of conducts between the companies.

It is important to note one thing. When competitors adopt the same trade policy but there is a rational economic justification for it, for example conditioning agents to the same set of economic facts, there is just a simple parallelism of behaviors. In this case, the mere parallelism, without any prior agreement, is not punishable by the antitrust legislation.

However, although there is a simple parallelism, the exchange of information between competitors may allow collusions liable to investigation and punition, because it is a practice that has the potential to cause negative effects when limiting, falsifying or injuring free competition. Under these conditions, a possible parallelism would no longer originate from economically explainable factors, but from a practice of exchanging illicit information.

Moreover, even if some classical scholars defend the need for direct evidence, such as documents, in order to prove collusions, another part of the doctrine argues that for some anticompetitive behaviors of hard evidence (for example cartels), evidences of certain circumstances, in other words indirect proof, may support a conviction for anticompetitive behavior.

It is the doctrine plus factor, in which the exchange of information between competitors is seen as one of the factors that, in addition to parallelism and to the lack of economically reasonable justifications, serves as indirect evidence for proving anticompetitive behaviors, such as a cartel.

International experiences have already considered the exchange of information between competitors as a behavior which has the potential to limit competition, even without the presence of a cartel. In addition to it, certain decisions of the Cade (the Brazilian board of antitrust), as in “Steel Cartel”, sentenced in 1999, demonstrate the possibility of accepting an illicit action from indirect evidence.

Using this acceptance of indirect evidence in order to prove anticompetitive behaviors, particularly in cartels, it is for companies and associations to adopt extreme caution when there is exchange of information, through benchmarking or other means. It is important to note that the practice itself is not prohibited, but requires attention, especially with regards to defining what information to share and in what situation.

Felipe Ribeiro Duarte: Member of the Commission for Competition and Economic Regulation of the Minas Gerais Bar Association and lawyer at the law firm Chenut Oliveira Santiago.

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