Policy statement

ICC recommendations to the International Competition Policy Advisory Committee (ICPAC) on exchange of confidential information between competition authorities in the merger context
Commission on Law and Practices relating to Competition, 21 May 1999

French version

The increasingly international nature of business transactions has resulted in a growing number of mergers and cooperation projects falling within the jurisdiction of more than one competition authority. In response to this, competition authorities are examining means of cooperation to facilitate and coordinate their respective review, investigative and decision-making processes.

While recognizing the potential benefits of such cooperation, the business community has also been greatly concerned by one of its main elements: the exchange of confidential corporate information between competition authorities. Confidential information supplied by companies to competition authorities in the context of merger reviews or anti-trust investigations often includes extremely sensitive information relating to the strategy of the company, its investment plans and its marketing goals and methods. If such information falls into the hands of competitors of the company involved, or into the public domain, this could have serious adverse consequences on the competitive position of the company, or its share value. This risk is not theoretical, especially when information is sent to countries where the company providing the information faces strong competition, especially from state-owned companies, or in the context of mergers, when share prices are particularly volatile.

ICC therefore applauds the initiative of the International Competition Policy Advisory Committee (ICPAC - established by the US Department of Justice), in addressing this issue and in inviting the international business community, through ICC, to contribute to its work in this area.

ICC has been working for several years on issues arising out of the increasing cooperation between antitrust authorities which have an impact on businesses. It issued a paper in 1996(1) (the "ICC 1996 statement") which set out business concerns relating to the exchange of confidential information between antitrust authorities and suggested safeguards to reduce the risks of prejudice to the companies concerned. ICC has now been asked by ICPAC to submit views on its core concerns arising from the exchange of confidential information, and recommendations to address these concerns.

I. Scope of paper

In its proposal to ICPAC, ICC will focus on information exchange in the merger review context. Cooperation between authorities in the merger area is increasing substantially as multi-jurisdictional merger transactions become more c ommon. To ensure transparency and predictability for both companies and authorities involved in multi-jurisdictional merger notifications, ICC feels that it is essential to have internationally agreed standards - accepted by authorities as well as companies - which would be integrated into multilateral as well as bilateral agreements.

With respect to other areas, reference is made to the ICC 1996 statement which is attached. This paper pointed out that, although certain overarching competition law principles are generally accepted in major trading countries, considerable differences between national antitrust laws do exist. ICC members in Europe felt that with the current low level of convergence, cooperation between antitrust authorities should not include the exchange of confidential information. Other members, especially in North America, did not feel that further convergence need be a precondition for information exchange.

ICC members were, however, unanimous in their concern that any confidential corporate information exchanged should be properly protected. The paper stressed that companies should be given prior notification before any proposed information exchange, and recommended several other safeguards. The ICC 1996 statement also pointed out that alternative forms of cooperation to information sharing agreements, such as ad hoc cooperation with the companies' consent, could help avoid some of the problems discussed.

II. Exchange of information in the merger context

Companies have an interest in reducing the administrative burden, costs and delays resulting from multi-jurisdictional merger reviews. They also have an interest in ensuring that the decisions given by different competition authorities are consistent.

To the extent that the exchange of certain information could help ease the problems associated with multi-jurisdictional merger review, companies are often prepared to consent to the competent authorities exchanging their confidential information and accept the risks associated with this, in the hope of a speedier, more consistent and less costly and burdensome merger review process. To foster this mutually beneficial cooperation between companies and competition authorities, however, it is essential that a high degree of trust in the will and ability of competition authorities to ensure the protection of such information is established.

Information exchange is only one, albeit an important, element in a broader framework, and other approaches to ease problems arising from multi-jurisdictional merger review must also be pursued. These include reduction of the information required to the essential minimum, harmonization and transparency of substantive and procedural requirements to the extent possible, clear time frames, raising notification thresholds and more use of comity to avoid the need for review of foreign mergers that are unlikely to have significant effects on the local market (which may require changes to national legislation).(2) Ad hoc agreements between the interested companies and competent authorities in specific cases to harmonize the timing, procedure and information required could also help facilitate multi-jurisdictional merger reviews. Another approach to be considered would be for a company to supply a requesting authority directly with the information requested, rather than for this information to be exchanged between authorities.

II I. Principles for the exchange of confidential information in multi-jurisdictional merger cases

ICC recommends that the following set of principles should be applied when confidential information exchange is contemplated in multi-jurisdictional merger cases, as well as integrated into multilateral and bilateral agreements:

Preconditions for exchange

• Confidential information should only be exchanged with the consent of the party (or parties) from whom the information was obtained. Where such information is the property of a third party, authorization should also be obtained from that party. The terms and conditions under which the company consents to the exchange should be set out and agreed by the company and the competition authority supplying the information.
  
  
• Information exchange procedures should be fair and transparent and carried out in consultation with the companies owning the information e.g. companies must be given the opportunity to explain any information transmitted which could be misinterpreted.

The competition authority requesting the information should have exhausted its own administrative possibilities for obtaining the information independently before making the request.

• Any exchange of information should speed up the investigative process, rather than lead to extra delays.
  
  
• Information exchanged should be subject to conditions of confidentiality, in the receiving jurisdiction, at least as stringent as those of the jurisdiction supplying the information. Legal safeguards in the receiving jurisdiction should ensure that information exchanged will not be disclosed to third parties.
  
  
• The principle of reciprocity should be respected i.e. the competition authorities supplying and receiving the information should both agree to abide by the same rules regarding the exchange of information.

Scope and duration of information exchange

• Information should be considered to be confidential when 1) the owner/provider company itself designates the information as being confidential; or 2) the information is considered to be confidential or subject to legal professional privilege by domestic legislation of the supplying or the receiving authority (provided of course that it is not publicly available) .
  
  
• The information for which consent is required for exchange should be precisely identified, and consent must be sought for any modifications to the scope of the information exchanged. ICC believes that the identification of confidential information for exchange should be done on a case-by-case basis, and suggests that it would be difficult to identify categories of confidential documents that agencies could share under a waiver, as suggested in the ICPAC staff draft protocol on international agency cooperation.(3)
  
  
• Information exchanged should be limited to the necessary minimum.
  
  
• The period during which the information is available to the receiving authority must be limited and the information must be returned to the owner/provider company after the agreed time period elapses. All notes and copies of the information must be destroyed to prevent institutional knowledge.(4)
  

Circumstances of disclosure
The company should be informed of:

• the identity of the authorit(y)(ies) to whom the information would be sent;
  
  
• the terms and conditions under which the supplying authority was providing information to the other authority;
  
  
• the national rules governing use of the confidential information which would bind the receiving authority; and
  
  
• the date of proposed disclosure.
  

Conditions of use by receiving authority of information exchanged

• Use of information by the receiving authority should be limited to the purpose, and to proceedings, for which the company providing the information agreed to its transfer.
  
  
• Information exchanged should not be disclosed to any parties outside the receiving authority, in particular third party plaintiffs, other agencies or governments. Legal safeguards should be put into place to ensure that such information will not be disclosed to third parties.
  
  
• Authorities in the receiving jurisdiction must commit, to the extent possible, to resisting attempts by third parties to obtain information from them (see also section IV).
  
  
• Information exchanged should be subject to legal professional privilege when it would be considered as being so under the rules of either the supplying or receiving jurisdiction.

Non-respect of agreed terms of exchange

• If the terms and conditions under which the company agreed to information exchange are not respected, it should have the right to obtain the immediate return of the information from the receiving authority, and not be obliged to provide further information. ICC also feels that it would be desirable for the company to have the possibility of seeking judicial relief, including orders for the return of all or part of documents or information provided, and constraining the use by the foreign authority of all or part of the documents or information. However, it is aware that mechanisms to make this possible in an international context are still not in place.

IV. Confidentiality waiver/agreement between company and competition authority

ICC suggests that the following elements should be included in any agreement in which a company party to a merger consents to a competition authority providing its confidential information to another competition authority:

• The identit y of the authorit(y)(ies) to whom the information will be sent.
  
  
• The date of proposed disclosure.
  
  
• The date on which the information will be returned, together with an undertaking that all notes and copies of the information with the receiving authority will be destroyed.
  
  
• The purpose for which the information is being exchanged.
  
  
• Precise identification of the information to be exchanged, together with an undertaking that further consent will be sought if the scope of the information to be exchanged is modified.
  
  
• A description of the national rules governing use of the confidential information by the receiving authority. In jurisdictions, such as the US, where domestic legislation may permit disclosure of confidential information relevant to administrative or judicial proceedings, this risk should be specifically drawn to the attention of companies entering into a waiver agreement.
  
  
• The terms and conditions under which the supplying authority is providing information to the receiving authority, which should include undertakings by the receiving authority that

  a) its use of the information will be limited to the purpose, and to proceedings, for which the company providing the information agreed to its transfer;
  

  b) the information exchanged will not be disclosed to any parties outside the receiving authority, in particular third party plaintiffs, other agencies or governments; and
  

  c) it will resist attempts by third parties to obtain information from it, including by invoking all available privileges and exercising any prerogatives under freedom of information legislation.

• A provision that, in the event that the terms and conditions under which a company agreed to information exchange are not respected,
  
  a) the company should have the right to obtain the immediate return of the information from the receiving authority,
  
  b) the company should not be obliged to provide further information, and
  
  c) the authority should make no further use of the information in question.

It would also be desirable for the company to be assured of the possibility of obtaining judicial relief, as discussed above, but ICC is aware that the required mechanisms are still not in place.

Document 225/525
21 May 1999

 

FOOTNOTES

(1)) ICC Statement on International Cooperation between Antitrust Authorities (28 March 1996 Doc. 225/450 Rev.3)
(2) See discussion in the ICPAC staff working draft proposals for Multi-Jurisdictional Merger Review Best Practices (25 March 1999)
(3) ICPAC staff working draft protocol for International Agency Cooperation in Mulit-jurisdictional Merger Review (17 March 1999)
(4) ICPAC staff working draft protocol for International Agency Cooperation in Mulit-jurisdictional Merger Review (17 March 1999)