This blog was co-written by Josh Da Costa, Candidate Attorney
How much is too much? How long is a piece of string? How much information can I share with my competitors, and in how much detail? What do the Competition Authorities have to say on the matter in South Africa? The 2022 Guidelines provide some clarity.
The Competition Act regulates agreements and understandings between competitors which contravene particular provisions of the Act. The Competition Authorities regard the mere exchange of information between, and the sharing of information among, competitors as potentially problematic because it can be used to facilitate, monitor or encourage collusive agreements and behaviour between and among competitors in contravention of the Act.
The Competition Authorities are taking an increasingly conservative approach to information exchanges between competitors, and the sharing of information among competitors for instance as members of an industry association. To assist firms in understanding their stance, the Competition Commission has published updated draft Guidelines on the Exchange of Competitively Sensitive Information between Competitors, 2022 (available here).
Despite previous indications from industry stakeholders that the Original 2017 Draft Guidelines were overly-broad, the Commission has largely retained its broad approach, covering all markets; and has suggested, in its explanatory note, that it will determine market-specific safe harbours on ad hoc basis. The Commission has also elected not to provide guidance on certain complex topics (such as price signalling, joint ventures, cross-directorship and shareholding, requests for quotations, market studies and benchmarking), and has stated, in its explanatory note, that it will deal with these issues on a case-by-case basis.
Overall, the 2022 Draft Guidelines seek to provide more clarity on the type of information exchanges that are likely to fall foul of the Act, as well as provide more detailed guidance for industry associations and government policymakers or regulatory bodies. The Commission notes that most industry associations are not truly independent of their members and, therefore, the collection and collation of disaggregated competitively sensitive information from members, before distribution to other members, is problematic. The Commission strongly advises that industry associations should appoint independent parties to collect and collate information.
The general factors that will be taken into account in evaluating whether the exchange or sharing of competitively sensitive information is anti-competitive are the market characteristics, the availability of the information exchanged, the indispensability of the information given the purpose of the exchange, and whether the information is historical or relates to current or future activities.
Some fundamental requirements proposed by the 2022 Draft Guidelines are:
- The purpose or object of the information exchange must be clearly identified (and stated in the case of industry associations);
- All information shared among competitors must be limited to what is relevant and necessary to achieve the lawful object or purpose for which the information is being collected;
- It is strongly advised that industry associations appoint independent parties to collect and collate information;
- All competitively sensitive information shared among competitors must be aggregated at least nationally, must be historical and it should not be possible for competitors to identify firm specific information;
- Firms must not share and discuss individualised competitively sensitive information with competitors;
- Competitors may not discuss individualised information on capacity, production volumes and sales figures. However, competitors can discuss aggregated total annual national capacity, production volumes and sales figures which are historical and that are prepared by an independent third party; and
- Information relating to customers, marketing strategies, budgets, as well as business and investment plans, cannot be shared or discussed by competitors either in an individualised or aggregated form.
Importantly, ‘Commercially Sensitive Information’ has been replaced with ‘Competitively Sensitive Information’ in the new Draft Guidelines. Traditionally, competitively sensitive information has been understood to include information which is non-public, non-generalised or aggregated, and of a current, recent (less than one year) or predicted nature in relation to: prices and pricing policies (including rebates and discounts); margin and cost data; the identity of customers and product destinations; product volumes and usage; current and future business and/or marketing strategies; product development plans; investment proposals; any aspect of competition between the parties; and competition more generally in any market in which the parties operate.
The new Draft Guidelines now define competitively sensitive information as information that is important to rivalry between competing firms and likely to have an appreciable impact on one or more of the parameters of competition (for example price, output, product quality, product variety or innovation). Competitively sensitive information could include prices, customer lists, production costs, quantities, turnovers, sales, capacities, qualities, marketing plans, risks, investments, technologies, research and development programmes and their results.
Typically, the following kinds of information may be considered to be neutral, depending on the frequency with which such information is exchanged: the structure of the market and the types of products or services already provided by competitors; confidential and necessary exchanges of information with non-competitors; process-type information; information that is in the public domain; historic information that is no longer competitively sensitive; and aggregated data.
It is therefore important to identify potentially problematic information exchanges between and among competitors and within industries and industry associations so that measures can be put in place to minimise risk, because contraventions of this kind can carry penalties of up to 10% (25% for repeat offenders) of a firm’s total annual turnover in South Africa.
If you would like to know what measures you can put in place to avoid this kind of contravention, please speak to Marianne Wagener.