Bitcoin tech may be the future, but it raises serious antitrust questions
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Blockchain has gone mainstream. Currently best known as the technology behind bitcoin, other potential uses of blockchain, or distributed ledger technology, are regularly receiving mass media attention.

Distributed ledger technology has been described recently in the Wall Street Journal as a potential secure and efficient solution to maintaining electronic medical records; by the New York Times as an efficient way to track food supply and address contamination issues; and by Forbes as a means of permitting consumers to trace and have trust in the materials used in the clothing they wear.  

Tracking the integrity and provenance of other products, such as diamondspharmaceuticals, or seafood, is an application of blockchain that is widely anticipated.


Widespread use of blockchain technology in the truly transformative ways that some believe are possible might remain years away — it took decades for the internet to reach its potential, after all — but many are investing time and money today to implement the technology in narrow test cases to establish its promise and lay the groundwork for its expanded use in the future.


As some proceed with exuberance down the road to blockchain implementation, others advocate for a degree of caution. Reports of hacks of some bitcoin exchanges have raised questions about the security of distributed ledgers and whether we are ready to replace trusted intermediaries with blockchain-driven “smart contracts.” Regulatory requirements applicable to the financial services industry might delay blockchain implementation by banks.

Another potential issue that has received less attention is whether the shared use of a distributed ledger by competitors might present risks under the antitrust laws.  This possibility issue deserves greater consideration because several anticipated blockchain use cases would entail the collaboration of competitors.

As a recent article in the Harvard Business Review explains, unlocking the value of many blockchain applications will require the participation of multiple users.  Distributed ledgers might promise the elimination of bills of lading and other paperwork as products work their way through a supply chain, but only if companies at each stage in the shipping process have adopted a common platform.  

Security concerns are also likely to diminish as participation increases, as the ledger will be replicated across a greater number of databases, further incentivizing firms to work together on blockchain projects.

The report of a recent survey of 3,000 C-Suite executives conducted by IBM’s Institute for Business Value highlighted respondents' thought process that successful blockchain implementation will require collaboration among competitors through industry consortia and that, “Something more than chance encounters with competitors will be required to advance blockchains across industries.”

Although the antitrust laws generally welcome collaborations among competitors that, like many anticipated blockchain applications, allow participants to achieve together outcomes they would be unlikely to achieve independently — or to achieve them more efficiently — companies that join blockchain consortia should remain mindful of areas of potential antitrust concern.

For instance, although certain information sharing is regarded by the antitrust laws to be competitively benign, the exchange of current or future prices or other competitively sensitive information can facilitate price fixing, which is among the most serious of antitrust offenses and can be prosecuted as a crime. 

Participants in blockchain consortia should think in advance about what information they might be asked to exchange with competitors through the shared ledger and whether that information exchange helps the consortia achieve legitimate benefits of the collaboration. If not, members of a consortium needlessly sharing sensitive information might find themselves receiving unwanted attention of antitrust enforcers.

Companies that collaborate with competitors through blockchain consortia should also carefully consider whether any rules adopted by the consortia limit competition among participants or with other organizations. A requirement that firms commit exclusively to a single consortium and agree not to participate in others, might present antitrust concerns if not reasonably necessary to allow the consortium to achieve its objectives. 

Particularly efficient permissioned blockchains that attempt to exclude certain competitors from accessing the distributed ledger should also be prepared to explain why they need restrictive membership policies. Efficient collaborations among competitors, like many blockchain consortia promise to be, can often justify restrictions on members’ activities if the rules help the joint undertaking operate more efficiently. 

But not all restrictions satisfy that condition, and companies should ensure in advance that a proposed blockchain consortium can articulate sound reasons for any rules it imposes.

Antitrust considerations need not materially impede companies from capturing the many benefits that blockchain technology promises to provide. But because antitrust violations can create criminal exposure in the worst of cases and, even in the best of cases, costly government investigations and damages liability, companies should not plunge forward with blockchain consortia without considering potential antitrust risks. 

David Kully is an antitrust partner at the Washington, D.C., office of Holland & Knight LLP. Joe Dewey is a partner in Holland & Knight’s Miami office, representing a diverse portfolio of clients in the banking and finance, real estate, technology and gaming industries. Dewey is also an accomplished coder and one of the legal industry’s leading experts on blockchain technology.

The views expressed by contributors are their own and not the views of The Hill.