Information Exchange with Competitors: What are the Rules of Engagement?

The EU’s highest court has issued a pivotal ruling clarifying the circumstances where the mere exchange of information between competitors can violate EU competition law, even without evidence of actual harm to competition. The judgment underscores the critical need for companies to carefully evaluate any information-sharing practices, as certain exchanges could be inherently anti-competitive. Our Competition, Antitrust & Foreign Investment teams explore the implications for banks and lenders and the types of information exchanges that are likely permissible.

The Court of Justice of the European Union (CJEU) has ruled[1] that a standalone exchange of confidential and strategic information may infringe EU competition law without any need to assess the possible effects on competition. The judgment highlights the importance of adopting a holistic approach to assessing whether an information exchange is capable of restricting competition and identifies certain types of information that are, or may be, safe for competitors to share.

Background

The Portuguese Competition Authority in 2019 imposed on 14 banks, including the 6 largest in Portugal, a fine totalling €225 million for participating in an exchange of information over a period of more than 10 years. The exchange of information was ‘standalone’ because it was not linked to any agreement to restrict competition.

The banks brought an action to challenge the decision of the Portuguese Competition Authority before the Portuguese Competition Court. The court referred to the CJEU the question of whether, and under what circumstances, an exchange of information can be a restriction of competition by object, i.e. deemed by its nature to be harmful to competition without any need to assess the effects.

What information was exchanged?

Two kinds of information concerning the home loans, consumer credit and corporate lending markets were exchanged amongst the banks on a monthly basis:

1. Current and future ‘commercial conditions’, namely, charts of credit spreads. The information also related to future changes to risk variables applied to spreads according to the risk profile of customers, and
2. Production volumes, i.e. individualised figures showing the amount of loans granted in the preceding month, broken down into detailed sub-categories.

Information sharing must be assessed in the round

The CJEU confirmed that an exchange of information may be regarded, by its very nature, harmful to competition if it is both confidential and strategic.

The CJEU found that, given the level of completeness and organisation of the information, it was not publicly available, or it was difficult to obtain or to organise. The court clarified the concept of ‘strategic information’. The court described it as information that may reveal, once combined with other information already known to the participants in an information exchange, the strategy which some of those participants intend to implement.

The information regarding credit spreads related to future changes to those spreads and to the risk variables applying to those spreads. Therefore, the CJEU found that the exchange of this information must be regarded as a restriction of competition, without any need to consider whether it had any actual effects on competition.

The CJEU acknowledged that the information relating to production volumes, considered in isolation, was not strategic because it related to the past and, as such, did not reveal future intentions. However, the CJEU said it was necessary to consider the possibility of cross-referencing the different categories of information exchanged. The information on production volumes was combined with information that the court considered as clearly strategic. As a result, the CJEU considered it possible that the information could have allowed the banks to infer their competitors’ future intentions or led the banks to follow the same course of conduct on the market.

This aspect of the judgment highlights the need to assess the information holistically, having regard to other information shared or already known. This then allows a determination to be made as to whether the information is confidential and strategic or not.

Permissible information exchange

It is widely recognised that information sharing between competitors can also have positive effects on competition and benefit consumers. For example, certain exchanges can create efficiencies and save costs. Additionally, shared knowledge about best practices can drive innovation and improve quality.

Consistent with this, the judgment highlights that certain types of information sharing between competitors may be permissible. In particular, the CJEU confirms that information exchanged in the following ways will generally not infringe the EU competition laws:

• Legal obligation to exchange information: an exchange of information made mandatory by national legislation cannot infringe the competition laws. This, however, is provided that the information exchanged is not capable of having any effect beyond that caused by complying with the legislation. The information exchanged must not go beyond that which is necessary to comply with the legislation.

• Information-sharing not revealing future intentions: in the absence of particular circumstances, the sharing of backward-looking information alone is not likely to infringe the competition laws. This is on the basis that the information does not allow inferences to be drawn about future intentions.

• Aggregated information: the exchange of aggregated information which does not identify the position of an individual business is generally non-problematic. However, competitors should be wary not to breakdown or disaggregate this information in a manner which identifies any market participant.

• Pro-competitive benchmarking: benchmarking or the exchange of information concerning the best management or production methods that generate efficiencies for consumers may be allowed between competitors. However, this does not apply to situations where confidential information relating to future intentions is shared.

• Information publicly available at the time of exchange: competitors may exchange information that is already in the public domain. However, competitors should not share public information in a manner which is more complete or systematically organised than equivalent data available in the public domain. Further, even information that is shared shortly before it is made public may still amount to ‘confidential’ information.

Comment

Banks, financial institutions and alternative lenders should exercise caution when sharing any confidential information with competitors. The assessment of whether information sharing may be harmful to competition is highly contextual and fact-specific. Therefore, we strongly encourage relevant organisations to engage with their competition law advisors before they share or receive information of this nature.

For advice on these and other competition law questions, please get in touch with a member of our Competition, Antitrust & Foreign Investment team for more information.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Case C‑298/22 – Banco BPN v BIC Português and Others.