Dealing with Customers and Suppliers

• Pages: 119-134

119

CHAPTER V

DEALING WITH CUSTOMERS AND SUPPLIERS

A. Our Customer Offered to Give Us a Competitor’s Price

Quote. Is It Okay for Us to Accept It? Can We Use It in

Reviewing Our Pricing Generally?

Courts have recognized that it is “common sense to obtain as much

information as possible [about] the pricing policies and marketing

strategies of one’s competitors.”1The gathering of information,

including price information, about one’s competitors can promote

interbrand competition.2Simply obtaining information about a

competitor’s prices would not necessarily amount to a violation of any

antitrust laws. Whether or not the receipt of such information might

result in the violation of the antitrust laws depends in large part on the

source of the competitor’s price information and any actions taken in

response to the information. The risk of an antitrust violation is much

higher when competitors directly share information on current or future

prices because such an exchange may be seen as facilitating (or even

evidencing) a price-fixing agreement in violation of Section 1 of the

Sherman Act. When that information comes from a customer, or publicly

available sources, a seller’s antitrust risk is significantly lower because

such information sharing is more likely to be used for procompetitive

purposes.3In other words, a customer is unlikely to share another

supplier’s prices with a particular supplier, unless the customer believes

this would be in their own interest.

1. In re Baby Food Antitrust Litig., 166 F.3d112, 126 (3d Cir. 1999).

2. United States v. U.S. Gypsum Co., 438U.S. 422, 441 n.16 (1978)

(recognizing that information exchanged between competitors may have

procompetitive effects).

3. See U.S. Dep’t of Justice Business Review Letter (BRL) 97-1,

DataCheck, Inc. (Jan. 6, 1997) (explaining that any threat of harm to

competition is “attenuated . . . where the prices at issue already are

publicly available”).

120 Frequently Asked Antitrust Questions

Because the antitrust risk varies with the source of the competitively

sensitive information, it is usually wise to document how the information

was obtained—and in particular that it came from legitimate and lawful

sources, such as a customer.

That said, even the sharing of information directly among

competitors can be accomplished consistently with the antitrust laws

under certain circumstances. The Supreme Court has held that

competitors do not violate Section 1 of the Sherman Act if they merely

“openly and fairly gather and disseminate information” as to their costs,

production volumes, actual prices in previous transactions, and

inventory, so long as they do not reach or attempt to reach any agreement

in restraint of competition with respect to such prices or other

commercial terms.4Such legitimate benchmarking activities may

include, for example, the open exchange of statistical information about

past prices that do not identify particular customers.5As a general

matter, it is advisable when entering into such an exchange with

competitors, to properly document the procompetitive nature of the

exchange and the specific source of information, to avoid any suggestion

later that the exchange was used to facilitate an illegal agreement. It is

also advisable to have legal counsel closely involved and monitoring the

data that is exchanged. For more detail on the risks of benchmarking,

please see Chapter 1.

B. Can a Supplier Offer to Give a Buyer Money to Be Used in

the Buyer’s Promotions of the Supplier’s Products, in

Exchange for Signing an Agreement Not to Sell the Products

Distributed by the Supplier’s Competitors?

Exclusive dealing arrangements, like the arrangement in this

hypothetical, are generally considered as potentially beneficial to

competition and thus do not necessarily amount to a violation of Section

1 of the Sherman Act or any other antitrust laws.6Such arrangements are

4. Maple Flooring Mfrs.’ Ass’n v. United States, 268 U.S. 563, 586 (1925).

5. Id. at 567.

6. SEE FED.TRADE COMM’N,ANFTC GUIDE TO THE ANTITRUST LAWS,

Dealings in the Supply Chain: Exclusive Dealing or Requirements

Contracts 1 (2008), available at

http://www.ftc.gov/bc/antitrust/factsheets/ antitrustlawsguide.pdf (“Most

exclusive dealing contracts are beneficial because they encourage

marketing support for the manufacturer’s brand.”).