Sending the Wrong Message? Antitrust Liability for Signaling

F A L L 2 0 1 6 · 8 3 lude or just public statements that do not seek explicit assent. While the FTC has for at least 30 years taken the position that signaling is unlawful, the agencies recently have stepped up enforcement efforts. Antitrust enforcement actions targeted at signaling conduct historically were limited to “invitations to collude,” whereby one firm solicits a horizontal competitor to enter into anticompetitive coordination. Recent investigations and enforcement efforts have not been so limited and have targeted unilateral disclosures of competitive information that could not be characterized as the solicitation of an agreement. We consider both forms of conduct to be signaling for the purpose of this article. Signaling is not defined in the antitrust statutes or, given the limited case law, by the courts. However, one might get a consensus among antitrust advisors that a signal is defined as: (1) a unilateral statement, (2) likely to be heard by a competitor, (3) that communicates intended or proposed pricing, output, customer terms, or other dimensions of competition. Each of these elements is important to distinguish signaling from other types of conduct within the antitrust mainstream. First, a signal is unilateral. Bilateral “signals” between firms can be analyzed as a potential Section 1 agreement. Second, a signal must be heard by a competitor for there to be any potential competitive harm, whether communicated privately (e.g., by telephone or email) or publicly (e.g., investor presentations). Third, a signal must contain some information that, when received by a competitor, potentially could lessen competition between the firms. This definition of signaling captures all types of unilateral statements that have been challenged by the antitrust agencies and private plaintiffs. For example, a signal can include: A private invitation to collude by one competitor to another via telephone call.1 A public invitation to coordinate on an earnings call.2 A complaint about prices to a competitor/distributor.3 Letters to trade publications regarding future pricing.4 Antitrust enforcers today might challenge any of these types of signaling conduct, even if unreciprocated. All raise the same risk that the signal will lead to coordination or will otherwise facilitate a Section 1 “agreement.” But even among invitations to collude—seemingly the category of signaling conduct most likely to give rise to anticompetitive harm— such communications can also involve legitimate business communications to customers or investors, even if they might also be suspected signals to competitors. Therefore, the entire range of signaling conduct can be analyzed together, even though there may be qualitative differences between a bare invitation to raise prices and an analyst discussion on forward-looking production plans.