Monday, May 19, 2003

Antitrust News: Restraining Technology

The Justice Department's Antitrust Division isn't opposed to technology, so long as it doesn't help producers exchange price information:

The Department of Justice today said that it cleared a proposal by Texas-based BroChem Marketing Inc. (BroChem) to establish a computer database aimed at giving chemical distributors efficient access to the information they need when marketing chemicals sold to them by chemical producers. The Department approved the proposal after BroChem agreed to make substantial modifications to address the Department's competitive concerns.

"The database could produce procompetitive efficiencies by making it easier for chemical distributors to access information and eliminating a large percentage of time-consuming, costly telephonic communications between chemical producers and distributors," said R. Hewitt Pate, Acting Assistant Attorney General for the Antitrust Division.

The Department's position was stated in a business review letter from Pate to counsel for BroChem.

According to the Department's business review letter, BroChem modified its original proposal by agreeing to establish computer safeguards to ensure that price-sensitive information is not accessible to competitors or others who should not have access to it. In addition, BroChem modified its proposal to ensure that the database will not include information added by BroChem that could facilitate price coordination.

In other words, it's okay to have a database so customers can access price information, so long as producers can't learn the prices their competitors are charging. Now in the real world, exchanging information is not a crime. But in the world of antitrust, anything that could be used as a "restraint of trade" is presumed illegal.

Here's another way to look at it: If I download information off the Internet on how to build a bomb, that's legal so long as I don't act upon that information and actually build a bomb. But if I'm a chemical manufacturer, I'm banned from even asking my competitor what he charges for his product, even if I never act upon that information. In the DOJ's mind, there's no divorcing thought from action, and mere acts of speech are considered overt acts for purposes of labelling behavior legal or illegal.

The other interesting thing about this story is that the DOJ actually reviews business practices in advance. According to the DOJ: "Under the Department's business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement as to whether the Division would challenge the action under the antitrust laws." Well isn't that a wonderful policy? Again, in the real world, prior restraints of this kind are frowned upon, if not outright forbidden. But in the antitrust world, businessmen may act only by government permission.

Incidentally, "Acting" Assistant Attorney General Pate has been nominated to take over the Antitrust Division permanently. The Senate Judiciary Committee is holding a prefunctory confirmation hearing this Wednesday morning. at 10 a.m. I plan on attending, so if you're in the neighborhood of the Dirksen Senate Office Building, stop by and say hello.

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