16 September 2010

Art and cultural assets law: competitors sharing information about undesirable buyers and sellers

Kenneth Mullen
Partner | UK

Art market professionals may find it useful to discuss clients, in the context of a meeting of their trade association or otherwise. They may want to compare notes on clients' ability to pay or their payment record, problems they have encountered with individual collectors, consignors of stolen property, etc.

The starting point is that a cloud of suspicion hangs over competitors who discuss amongst themselves business information not in the public domain.

A key concern is that the sharing of information may distort competition. The law in the England prohibits behaviour by competitors, which has the effect of preventing, restricting or distorting competition. There are also provisions in English law designed to prevent undertakings in a dominant position from abusing that dominant position.

There are obvious no-go areas, such as discussions over pricing and market share. The question is whether competitors would infringe competition rules, or expose themselves to other risks, if they shared amongst themselves information on undesirable clients, for example bad payers and consignors of forged or stolen property.

The level of risk will depend, in part, upon the type of information being shared and how it is shared. Generally speaking, the more specific the information, the greater the risk. In other words, sharing information of a generic or purely historical nature may not give rise to a concern. If, however, competitors share current information on specific clients, they run a serious risk of crossing the line beyond which they will be engaging in illegal information sharing.

If they do not discuss specific clients, but simply discuss situations in generic terms, for example that several attempts have been made recently to consign fake sculptures by Dali from the Manchester region, the risks are less severe.

If competitors share information within a trade association, for example the trade association facilitates the sharing of information or members share information during meetings of the trade association, one concern is that not all members of the trade association in the UK may be members of the trade association. If members of the trade association share sensitive information and benefit as a result, this arguably distorts competition in that UK market because members of the trade who are not members of the association will not have access to that information.

Another concern is that by sharing the information, competitors may distort competition within the trade association. This is because members provide information to each other that they would not otherwise have, thereby potentially reducing or removing uncertainties inherent in the process of competition.

The Office of Fair Trading, the English institution in charge of policing competition law, advises that the fact that this information could have been obtained from other sources (credit reference agencies) is not necessarily relevant.

The next question is, what would members of the trade association do once they knew, for example, that a particular individual is a bad payer? If all members of the association stopped doing business with him, this will create an appearance of collusion. The other issue is boycott: this would be a serious problem if the trade association were deemed a dominant player in the UK auction market.

An accusation of anti-competitive behaviour is not the only risk to which competitors expose themselves if they discuss client information. The other risks are violating clients' confidentiality, defamation and breach of data protection laws.

In summary, caution should be exercised by members of the trade if they engage in information sharing beyond generic market information or information of a purely historical nature. If competitors decide to discuss non-public information amongst themselves, they would be well advised to do so in the presence of a lawyer whose role will be to ensure that the conversation does not stray into anti-competitive territory.

Category: Article