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University of Cincinnati Law Review

Abstract

An agreement to exchange competitive sensitive information among rivalrous competitors usually results from an intent to inhibit or restrict the discretion of those firms to engage in competition. Basic economic logic about competition leads to that conclusion. Hence, such an exchange is in itself a naked agreement in restraint of trade without legal justification. Currently, case law requires a more convoluted and irrelevant inquiry into market definition and market power before a court can condemn such agreements. This is the result of ambiguous Supreme Court decisions as well as the recognition that in a few instances there are plausible arguments that such information exchanges do not restrain the participants’ competitive freedom. Also, most of these cases have arisen as private damage actions so the necessary proof of a harmful effect has been confused with the questions of the legality of the exchange itself. This Article examines this history, the functional characterization of such agreements, their economic-competitive logic as well as the lackluster efforts of the Federal Trade Commission (“FTC”) and the Antitrust Division of the Justice Department to provide guidance in contrast to the efforts of the European Union (“EU”).

The thesis of this Article is that agreements among rivals to exchange confidential, competitively sensitive information are very likely to be restraints on competition, and so are essentially naked restraints. Such agreements should be presumed to be illegal regardless of market power analysis unless the parties can prove that their agreement would not restrain their competitive freedom. The resulting framework for analysis of such cases focuses on the function of the exchange and provides a more relevant and coherent way to evaluate these cases. This framework also provides an alternative way to condemn tacit collusion that such exchanges make possible.

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