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Britain: New Limits on Exchanging Price Information Data

Steven Levitsky, David Turetsky, Dewey & LeBoeuf Antitrust News in Five Minutes, February 15, 2011.
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Britain’s Office of Fair Trading (the UK consumer and competition authority) has negotiated an agreement that would limit the exchange of pricing data among car insurers. This proceeding is especially significant because it targeted an information exchange carried out through third-party software that was developed for brokers who run online consumer shopping sites. The software allowed insurers to see each others’ confidential pricing information without any direct communications. The OFT settlement agreement will almost certainly be a blueprint for future enforcement action against pricing exchanges in any industry. This action brings UK and US treatment of price exchanges closer. Companies in both countries should consider whether they are involved in pricing exchanges, and, if so, consider whether those exchanges meet prudent standards.

The OFT Insurance Industry Investigation

In June 2009, the OFT heard that “a large number of insurance companies” might be operating “illegal information exchanges.” The exchanges were carried out through computer programs and databases designed to allow online brokers to offer competitive bids for insurance products. Insurers supplied detailed pricing information to the software companies to include in the pricing program. Brokers used the program to let customers comparison shop for car insurance. But the programs also allowed each participating insurer to see other companies’ sensitive pricing information including future price changes even before they became effective.

According to the OFT, the overall arrangement had the following characteristics:

■ The program let insurers see “individualised and highly disaggregated pricing data for vast numbers of permutations of customer risks across most competing private motor insurers that sold through brokers.”

■ Insurers provided not just prices but also “underwriting rules and rating models,” that were incorporated into the insurance quote engines for use by brokers.

■ The data was specific enough for one insurer to discover in its competitor data “all the possible combinations of risks that each insurer would quote for.”

■ Insurers could get information beyond what was available to the public.

■ The software database was kept current and updated at least monthly.

■ The insurers could get information about competitors’ future pricing intentions because the software was updated before the new pricing plans were actually put into effect.

Enforcement Strategy

In an attempt to win a quick and inexpensive victory, the OFT strategically targeted the largest insurance market (car insurance), the largest online brokerage software (Experian’s “WhatIf Private Motor”), and the largest insurers by revenue (seven of them).

The OFT concluded that access to the pricing exchanges “raised the competition concern that the ability of the insurer parties to reach a coordinated outcome on the pricing of private motor insurance could be significantly enhanced.”

The OFT considered and rejected the argument that the software database merely centralized the type of information that competitors themselves could legitimately assemble from public sources. The OFT release said:

While it would, in theory, be possible to replicate the information by obtaining individual quotes from insurers, this would be almost impossible in practice as it would require obtaining hundreds of thousands of individual quotes.

The OFT concluded that the program in this form created an increased risk of price coordination among motor insurers.


In exchange for quick agreement to its terms, the OFT agreed to stop its proceedings and not decide whether this practice had actually violated competition law. The proposed settlement (now out for public comment) will impose the following requirements on information available to competitors through the pricing program:

■ All pricing information must be anonymous.

■ It should be averaged across at least five insurers.

■ It should be restricted to current pricing and not include any projected future pricing.

The OFT concluded that these conditions would “remove[e] the ability of the insurer parties to reach a coordinated outcome on the pricing of private motor insurance. For instance, a product complying with the commitment principles will not enable insurers to reach a common understanding on the terms of coordination or to monitor and target entry.”

The OFT settlement will obviously not affect the pricing information provided to the brokers themselves. The onlinebroker program was affirmatively pro-competitive. The only problem was that the program also allowed the information to be shared among competitiors, and it is that component that is now stopped. The OFT also noted another pro-competitive potential in that the exchange of the aggregated pricing information might allow new competitors to enter the car insurance market by giving risk analysis tools to companies that have little or no experience in that market. In other words, the aggregated data might serve as risk pooling data that could guide them in setting adequate premiums.

Ruling Would Be the Standard for All Information Exchanges

The OFT’s action specifically targeted the car insurance market but covered practices that were reportedly widespread through the entire insurance market. The OFT pointedly observed that its enforcement action should “give a clear indication to insurers outside of the scope of the investigation on the level of information that it is acceptable to exchange.” It added that, “where these lessons are not heeded, further enforcement action may be necessary.”

The underlying principle of competitive harm through information exchanges could obviously apply to exchanges in any industry, not just insurance. You can see the OFT official release at

US Price Exchange Standards

The OFT settlement brings UK and US law closer on the significance of current pricing exchanges.

In general, in the US, any systematic exchange by competitors of current pricing data would be highly suspect and could result in an antitrust agency’s inference of price fixing.

The only general exception would be where regulatory schemes authorize or require pricing exchanges. For example, the exchange of risk-pooling data and of some rates by members of the insurance industry is protected under the McCarranFerguson Act and other antitrust immunities. (The exchange of aggregated risk-pooling data would almost certainly be protected as legitimate joint-venture activity even if the McCarran-Ferguson Act were repealed).

But aside from these distinct exceptions, US antitrust law generally condemns exchanges of current pricing among competitors. In United States v. United States Gypsum Co., 438 U.S. 422, 441 (1978), the U.S. Supreme Court warned that “exchanges of current price information . . . have the greatest potential for generating anticompetitive effects and although not per se unlawful have consistently been held to violate the Sherman Act.” The exchanges of current pricing information among competitors could support an inference of a price-fixing conspiracy. In this regard, US antitrust law condemns not only direct conspiracies but also “hub-spoke-and-rim” conspiracies carried out through a broker. Since it is the pricing communication itself that creates the antitrust risk, the systematic sharing of current pricing through a common database could produce the same inference of illegality as in the OFT proceeding. You should consult antitrust counsel in these sensitive areas. (NOTE: A “systematic” exchange means the methodical and general circulation of current pricing information among competitors. This is not meant to cover a situation where a broker reveals one competitor’s price to another competitor in order to solicit a lower bid.)

What is permitted under US law are aggregated industry pricing surveys. But those surveys differ fundamentally from a systematic exchange of current and detailed pricing data, either directly or through some intermediary like a broker or an online pricing program. The 1996 DOJ/FTC Health Care Guidelines are the general model used to judge pricing exchanges. Those guidelines acknowledge that “the exchange of price data and other information among competitors does not invariably have anticompetitive effects; indeed such practices can in certain circumstances increase economic efficiency and render markets more, rather than less, competitive.” But the Guidelines also prescribe the conditions for an “antitrust safe zone” in cost and pricing information exchanges, and the agencies have generally applied those conditions to other cases outside the health-care industry. The three conditions imposed are:

■ Cost or pricing surveys must be managed by a third-party and not be exchanged directly among competitors.

■ The information provided by survey participants must be more than 3 months old.

■ There must be at least five reporting companies for each reported statistic, no reporting company can represent more than 25 percent of that statistic, and any information must be aggregated so that the recipients could not match the prices with the reporting company.

These guidelines obviously would not protect a systematic exchange of current prices carried out through online databases or through a broker.

We are not aware of any US enforcement actions involving online bidding systems. But there are no special principles that would apply different standards to Internet pricing exchanges as opposed to any traditional price exchange scheme. US antitrust enforcers generally view the exchange of sensititve competitive information, including costs and prices, as highly suspect and without redeeming qualities. Exchanges of this information could arguably support an inference of price fixing.

The legitimate need for price comparisons does not excuse a systematic exchange. Obviously, pro-competitive price competition benefits consumers and price competition clearly could not work if companies did not know what their competitors were charging. Most companies carry out price checks. Some might logically argue, as the defendants in the OFT proceeding apparently did, that price exchanges are a more efficient form of unilateral price checks. The exact line between legality and illegality may not be crystal clear. What is clear, however, is that when unilateral procompetitive pricing checks morph into orchestrated, systematic, and industry-wide current price exchange schemes, those coordinated actions are more likely to be characterized as an antitrust violation.

What kind of Price Information does your company have access to?

Relevant questions about price exchanges include:

■ Are there any formal or informal exchanges pricing prices between anyone at your companies and your competitors?

■ What kind of databases does your company have access to? Have these been given an “antitrust all clear”?

■ Are there any discussions about pricing?

■ If there are price exchanges, how extensive are they?

■ Is the information historical, or current and/or future?

■ Is the information aggregated and unlinked to any actual company, or does it identify a specific competitor’s prices by name?

■ What proportion of the industry is involved in the information exchange?

■ Why is your company collecting this information?

■ How does the exchange help your company (as opposed to the industry)?

■ Is the exchange based on mutual agreements or understandings?

■ Most companies engage in unilateral industry price checks. If yours does, what are your internal guidelines for these checks; what monitoring procedures do you have to make sure they are being carried out; and how do you segregate this data after your company receives it?


The OFT action brings the UK enforcement position closer to the US model. Given the very significant penalties for antitrust violations, this OFT action should serve as a timely reminder to companies in both countries to conduct an audit of actual competition practices that are going on within their organizations. Antitrust audits should be conducted on a regular schedule anyway.

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