Blockchain and Antitrust
Emerging antitrust issues
18 July 2019
Blockchain is the technology that underpins digital currencies but it has a range of other uses and also raises a number of antitrust issues, including price fixing and anti-competitive behaviour.
As the sharing of information by competitors can raise antitrust concerns depending on the nature of the information shared, participants in a blockchain consortium need to regulate the sharing of information. Participants in a consortium need to review what information is available to competitors through a shared ledger and avoid sharing information that could facilitate price-fixing. Price-fixing is illegal per se under the US antitrust laws and is prohibited in most other jurisdictions. Price fixing may be prosecuted criminally in some jurisdictions, including the US. While price-fixing is illegal, distributing pricing information is not a per se violation of antitrust law of the US antitrust laws; although it may be a violation of other antitrust laws, including those of the EU. That said, in most jurisdictions, antitrust regulators will evaluate both the nature of information shared and the structure of the industry’s market to determine whether competition has been harmed. For instance, historic information regarding pricing is far less likely to be problematic than data on future or current prices.
Antitrust issues can also arise when competitors collaborate on setting standards in an industry. Adopting common standards in an industry often has pro-competitive benefits, including improving efficiencies, and creating common standards is important in the development and implementation of blockchain technology. Although antitrust issues sometimes arise when competitors collaborate on setting those standards, a single company can also abuse the standard setting process. For example, if a company owns intellectual property rights to technology that is incorporated into a standard adopted by other participants and that company then demands exorbitant royalties or licensing terms from other participants that need access to the technology.
Other restrictions on competition
Commentators have raised the possibility that blockchain technology itself could aid collusion. The nature of the technology and the information made available during transactions might more easily enable collusion by providing another way for competitors to communicate information. Additionally, one concern with the use of private ledgers is what happens when competitors are excluded from certain consortiums. Under US law, courts have prohibited some joint ventures that unreasonably exclude competitors from competing in the market. Due to the commercial benefits that blockchain consortiums may offer and the likelihood that companies excluded from such consortiums might object, companies should be prepared to justify membership restrictions. Consortiums should consider limiting such restrictions to only what is necessary for efficient collaboration.
What should businesses do?
There is great potential in blockchain technology for many industries, but participants need to consider potential antitrust risks when collaborating. Some of the key issues for companies arise in the context of sharing information and setting standards for new technology. Companies of all sizes, even startups, need to evaluate their policies to minimise antitrust risk when participating in a blockchain consortium.
Clifford Chance's Abigail Cessna contributed to this article.