Distribution, Competition, and Antitrust / IP Law

What You Need to Know About the Four Basic Types of Pricing Claims (Part 4)

In the last post, we saw that price information exchanges that do not impact pricing are not unlawful. However, we also saw that such exchanges can facilitate collusion and can provide plaintiffs with evidence supporting a price fixing charge.

A comment to the last post asked about how to structure information exchanges to avoid these potential problems.

In their antitrust healthcare guidelines, DOJ and FTC have provided guidance on this issue. Although the guidance comes in the context of the healthcare industry, there is little or no reason to suspect that the guidance would vary according to industry. Note, however, that DOJ/FTC guidelines are not binding on the courts, which may or may not accept them.

With those caveats out of the way, what do DOJ and FTC say about competitors’ collection or provision of price information? According to DOJ and FTC,

“Participation by competing providers in surveys of prices for health care services, or surveys of salaries, wages or benefits of personnel, does not necessarily raise antitrust concerns. In fact, such surveys can have significant benefits for health care consumers. Providers can use information derived from price and compensation surveys to price their services more competitively and to offer compensation that attracts highly qualified personnel. Purchasers can use price survey information to make more informed decisions when buying health care services.”

DOJ and FTC go on to note that without appropriate safeguards, however, information exchanges among competing providers may facilitate collusion or otherwise reduce competition on prices or compensation, resulting in increased prices, or reduced quality and availability of health care services. “A collusive restriction on the compensation paid to health care employees, for example, could adversely affect the availability of health care personnel.”

DOJ and FTC then articulate a “safety zone” for exchanges of price and cost information among providers that they will not challenge, absent extraordinary circumstances. The safety zone applies to a written survey where:

  1. the survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
  2. the information provided by survey participants is based on data more than 3 months old; and
  3. there are at least five providers reporting data upon which each disseminated statistic is based, no individual provider’s data represents more than 25% on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider.

These conditions are designed to prevent the sort of facilitation of collusion discussed in the last post.

Note that a price information exchange that does not meet these criteria is not automatically unlawful; it just does not enjoy the DOJ/FTC safety zone. But there is little reason to design a program that does not meet the safety zone criteria from the outset.

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About Howard Ullman

Antitrust, competition, and IP law enthusiast.

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