Websites such as www.cancerpage.com offer cancer patients sophisticated medical
ID: 437708 • Letter: W
Question
Websites such as www.cancerpage.com offer cancer patients sophisticated medical data and advice in exchange for personal information that is then sold to advertisers and business partners and used by the websites to create products to sell back to patients. Some argue that cancer patients visiting these sites are willingly exchanging their personal information for the sites' medical information. Others contend that this kind of exchange is unethical. Please respond to the following:Explain the ethical aspects of selling personal information to third parties for purposes of creating products to sell back to the patients.
Explanation / Answer
The obtaining and utilization of competitive intelligence is becoming increasingly important in the life insurance industry. The movement toward the integration of financial services is enhancing the demand for up-to-date, accurate information. The advent of electronic communication, i.e., facsimile, e-mail, and the Internet, has changed the way business is done. Because business can be completed more rapidly (even instantaneously), the demand for competitive intelligence is even greater than ever before. The purpose of this paper is to outline some of the legal and ethical issues that confront the life insurance industry in the process of obtaining competitive intelligence. What is "competitive intelligence"? One definition would be any information that would help an insurer (or the seller of insurance) compete in the marketplace. Such information could include prices, sales practices, methods of delivery, costs of production, methods of product development, methods of compensation, utilization of information technology and other research capabilities, strategic plans, marketing plans and methods, as well as other information. The legal and ethical issues resulting from the obtaining of competitive intelligence can be roughly divided into two areas. First, there are the problems that arise with the obtaining of competitive intelligence by competitors acting cooperatively. These can be characterized as antitrust or unfair competition issues. Second, there are the issues that arise when an insurer, or its agent, obtains information from public sources or from third parties. These issues include privacy, confidentiality, trade secrets, and both civil and criminal breaches of state and federal law. We will first address the issues that arise in the context of the cooperative obtaining of information. Next we will turn to those issues that might arise by obtaining information in the public domain or from third parties. Finally, we will conclude by proposing a method whereby competitive intelligence gatherers can seek to avoid breaching either legal or ethical constraints. OBTAINING INFORMATION COOPERATIVELY (ANTITRUST) Much useful competitive intelligence can be gathered through the cooperative activity of competitors. However, the exchange of information that may have an effect upon competition in the marketplace must be approached with great caution because it might be perceived as evidence of an agreement or conspiracy in the restraint of trade. In general, any conspiracy or collective activity which has the purpose or effect of fixing, stabilizing or tampering with prices is illegal under Section 1 of the Sherman Act on a per se basis, i.e., the court does not need to examine the effect on prices, the ability of the defendants to control prices, or other related considerations. However, in cases involving the exchange of cost and price information among competitors in trade associations, the Supreme Court has generally taken a rule of reason approach. The general principles involved in this kind of analysis were established by the cases of American Column Co. v. United States, 257 U.S. 377 (1921), and Maple Flooring Mfrs. Ass’n v. United States, 268 U.S. 563 (1925). In American Column, the exchange of cost and price information by trade association members was held to violate the antitrust laws. The Supreme Court was able to infer from the detailed nature of the information provided, the means whereby the information was acquired, and the use to which the information was put (the projection of future prices) that an agreement to raise prices existed. American Column was subsequently distinguished by the Maple Flooring case. In Maple Flooring, the Supreme Court held that there was no evidence of an agreement to raise prices or any evidence of an increase in prices as a result of the exchange of information. The Maple Flooring Manufacturers’ Association circulated to its members the price components of hard wood flooring; however, the parties to the individual transactions were not identified, the information reflected exclusively past transactions, and the information was available to consumers as well as members of the association. Even though the exchange of information by the association resulted in a stabilization of trade practices and price, the Supreme Court held that those restraints were not "unreasonable" and only became so in a competitive market situation when "improper use is made of that information through any concerted action which operates to restrain the freedom of action of those who buy and sell". In United States v. Container Corp., 393 U.S. 333 (1969), the Supreme Court held that an exchange of pricing information which had resulted in stable prices was unlawful. The Court noted that the corrugated container industry is dominated by relatively few sellers, the product is fungible, the demand is inelastic, and, therefore, the exchange of price information tends to establish price uniformity and thereby have an anticompetitive effect. The holdings of the above cases, and others interpreting them, is that an arrangement to exchange price information is per se illegal if there is evidence of an agreement to fix or stabilize prices. Absent such an illegal conspiracy or purpose, the exchange of information will be held to be an unreasonable restraint of trade if the activity has "an anticompetitive effect in the industry chilling the vigor of price competition". An antitrust conspiracy can be established by a court on the basis of inference from the nature of the activity undertaken by competitors even if that activity itself does not establish an agreement or conspiracy. Accordingly, the danger exists that even though the information may be produced for a legitimate purpose, its use may appear to facilitate collusion. A conclusion which can be drawn from American Column, Maple Flooring and Container (and the cases construing them) is that information which permissibly may be exchanged must be historical (i.e., related to prior transactions). There is wide agreement on this issue among authorities. The information exchanged should also be in a composite format so that individual company data is not revealed. The insurance industry is subject to one of the several exemptions from the federal antitrust laws embodied in the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq. However, the McCarran exemption is quite narrow. It exempts conduct that constitutes "the business of insurance" but only to the extent that such conduct is "regulated by State law" and only so long as that conduct does not constitute an "agreement to boycott, coerce, or intimidate". Obtaining competitively sensitive information, such as rate related information through a state regulated rating bureau, would fall within the McCarran exemption. However, to the extent that sensitive information is obtained outside the protection of a rating organization, the McCarran exemption would not apply. In other words, obtaining information from a rate filing or other public documents would not pose antitrust risk. Obtaining such information from an individual carrier could pose antitrust risk, particularly if such an exchange of information could lead to the inference that prices were being set as a result of collusive activity among competitors. A further concern would be that the exchange of price information could result in collective action by insurers to engage in a "boycott" of non-cooperating insurers. A boycott or other action to enforce price collusion would fall outside the protection of the McCarran Act under the "boycott, coercion, or intimidation" exception. A violation of the Sherman Antitrust Act can be a very serious matter. A violation is a felony which can be punished by up to three years in prison and a $350,000 fine for individuals and a $10 million fine for corporations. While the exchange of sensitive information among competitors may not necessarily produce a restraint on trade, it may produce the appearance of such a restraint and, therefore, is dangerous to the participants. While not directly applicable, the Department of Justice and the Federal Trade Commission have cooperated in the development of standards embodied in the Statements of Antitrust Enforcement Policy in Health Care. The Guidelines acknowledge that surveys of competitive information can have benefits for consumers, but must be performed with appropriate safeguards. Statement 6 of the Guidelines references the following safeguards: (1) a survey must be managed by a third party, e.g., counsel, consultant, trade association, etc.; (2) the information must be at least three months old; (3) there are at least five entities (in this case, hospitals) providing information, and (4) the information is aggregated so it does not allow the recipients to identify the specific participant in the survey providing the sensitive information. In sum, while some competitively sensitive information may be collected cooperatively, current information or information affecting the future, e.g., marketing plans, pricing, etc. presents a grave antitrust risk and should be avoided. To the extent that it is decided to collect such information, third party non-competitors, e.g., consultants, or counsel, should be utilized. Of course, the nature of the information to be collected is significant. Price information or marketing strategies are highly sensitive because their exchange could lead to the inference that prices are being fixed or markets are being allocated. Other factors include the number of participants involved in the data sharing (the greater the number of participants, the less likely it is that a conspiracy can exist), the concentration of the market (a conspiracy is easier in a concentrated market), and the frequency of the information exchanges (a frequent exchange of information can lead to the inference that information is being exchanged in response to market conditions for the purpose of affecting market conditions).
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.