Blockchain consortium participants should be wary of antitrust risk, Verizon lawyer says
7 March 2018. By Joshua Sisco.
Companies participating in blockchain consortia should carefully weigh antitrust risk when interacting with their competitors, an in-house lawyer for Verizon Communications said.
Essentially a decentralized database equally controlled by all participants, blockchain can be used to eliminate the middleman for a host of functions, from clearing securities trades to supply chain management. Much of the collaboration is done through a consortium, which consists of companies, trade associations and other interested parties.
Participating in these groups can be immensely beneficial. But given the nascent stages of the technology, companies should approach it with skepticism and have a plan for explaining their involvement to enforcers, Gabrielle Kohlmeier, in-house antitrust counsel at Verizon, said Wednesday during an American Bar Association webinar*.
Kohlmeier used supply chain management as an example. Blockchain has the potential to dramatically simplify logistical operations in a variety of industries, but that could include competitors having access to sensitive information such as prices, costs, contract terms and customer names.
That in turn can raise concerns with antitrust authorities, which have already become sensitive to new methods of collusion, including the use of encrypted communications and algorithmic pricing. “Enforcers definitely have this on their radar,” Kohlmeir said.
Blockchain consortia can also be used to facilitate the development of technology standards, with the financial services industry especially forging ahead on this for regulatory reporting and transaction processing, among other functions. R3 is a company running a blockchain consortium of more than 100 financial institutions, regulators and trade groups.
Given recent comments by senior antitrust division officials from the Department of Justice about added scrutiny of the standard setting process, companies should be especially careful, Kohlmeier said.
David Kully, a former antitrust prosecutor with the Department of Justice, agreed that companies should be extra cautious in the early days of the technology. But he said the efficiencies are so great, it is unlikely that there will be major antitrust concerns.
*American Bar Association, Blockchain: What It Is and Its Implications for Antitrust Compliance, March 7, 2018.