All Things FinReg


As highlighted previously, three federal banking agencies (the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency) recently issued proposed risk management guidance regarding third-party relationships (Proposed Guidance). Among other things, the Proposed Guidance specifies that banking organizations should adopt third-party risk management processes that are commensurate with the identified level of risk and complexity from the third-party relationships, and with the organizational structure of each banking organization.

Of note from a competition law perspective, the Proposed Guidance highlights that banking organizations may collaborate with other banking organizations for some purposes when they use the same third party, which can have the procompetitive benefits of improving risk management and lowering costs among such banking organizations. See Proposed Guidance at 14. The Proposed Guidance contemplates that collaborations among banking organizations may include coordinated due diligence, contract negotiation, and performing ongoing monitoring of third parties. See id. The Proposed Guidance also explains that a banking organization may use the services of industry utilities or consortia—and potentially consult with other banking organizations—in joint efforts for performing due diligence to meet established third-party assessment criteria. See id. at 25.

The Proposed Guidance cautions, however, that any collaborative activities must still comply with antitrust laws. The reader is referred generally to the FTC’s and DOJ’s joint guidance, Antitrust Guidelines for Collaborations Among Competitors (April 2000) (Competitor Collaboration Guidelines). Unfortunately, that general reference (without more) may leave many banking organizations wondering whether and to what extent shared risk initiatives are permissible under US antitrust laws.

Antitrust issues are often complex and require fact-specific analyses. Thus, the advice of qualified antitrust counsel is always advisable when contemplating any collaboration among competitors. With that said, as a general matter, competitor collaborations that do not involve an agreement among competitors to fix prices, boycott competitors, divide markets, allocate customers, or some other manifestly anticompetitive conduct are typically not condemned as per se unlawful under US antitrust law. Rather, as explained in the US Supreme Court’s recent decision in NCAA v. Alston, most restraints are subject to the rule of reason, which is a fact-specific assessment of market power and market structure aimed at assessing the challenged restraint’s actual effect on competition, in particular a restraint’s capacity to reduce output and increase price in a relevant market. See 141 S. Ct. 2141, 2155 (2021).

The scrutiny that courts apply to restraints varies. At one end of the spectrum, some restraints may be so obviously incapable of harming competition—such as a joint venture between market participants with a de minimis combined market share—that they require little scrutiny. Other agreements may require more scrutiny. As a general matter, competitor collaborations can be procompetitive and acceptable under the antitrust laws where collaboration combines complementary assets or promotes efficiency. As explained in the FTC’s and DOJ’s Competitor Collaboration Guidelines, consumers often benefit from collaborations that enable participants to offer goods or services that are cheaper, more valuable to consumers, and brought to market faster, or where the collaborations make better use of existing assets or provide incentives to make output-enhancing investments that would not occur absent the collaboration. The potential efficiencies from competitor collaborations may be achieved through a variety of ways. See Competitor Collaboration Guidelines at 5-6. In all competitor collaborations, however, it remains incumbent to ensure that the procompetitive benefits and efficiency gains outweigh any potential anticompetitive harms and to consult with qualified antitrust counsel.