TRUST, Antitrust, and Can You Trust a Competitor?

Last week, one of my “May Trust be With You!” keynote was preceded by a 10-minute antitrust presentation and guidance from the association’s legal counsel. I have to admit that after delivering trust-related keynotes hundreds of times, this was the first time I had to follow an antitrust warning…

While making a light-spirited comment about that, it also made me think. First, antitrust is a serious thing. When competitors get together, there are certain practices that they should avoid, as those might hurt fair competition and the consumers. Second, I wondered whether competitors ever need to trust each other.

So, in this article, I will address that question and more.

Antitrust is not against trust

I should start by saying that the term antitrust is not against trust in general or people trusting each other. The term dates back to the first “trust of companies,” a legal entity created in 1882 by John D. Rockefeller under the name The Standard Oil Trust. Companies met together and created a monopoly, set prices, and generally hurt the public so they could increase their profitability. It didn’t take long before the government realized that this practice should be avoided, and created several laws (the 1890 Sherman Act, the 1914 Federal Trade Commission Act, and the Clayton Act) to prevent such “trusts” of companies. Hence the term antitrust.

But not all meetings of competitors should be discouraged. There are a lot of benefits to those meetings. Competitors can share ideas and best practices and pool resources to create awareness and launch marketing activities they couldn’t do independently. As long as they don’t hurt the public or fair competition.

This brings me to the bigger question: why do I need to trust my competitor?

When should you trust a competitor?

The level of trust in a competitor depends on the market's growth potential. When the market matures and has no growth potential, my competitor must lose business for me to win business. It’s a zero-sum game, and trust among competitors is very low under these conditions. However, when the market has significant growth potential, pooling resources to “grow the pie” leads to a win-win outcome. Such were the early days of the Wi-Fi Alliance (I served on the board of that association). There was a huge potential for growth as the technology adoption was very low. There was a need to assure the interoperability of products made by different manufacturers, and the competitors who participated in the alliance trusted each other enough to develop such an interoperability mechanism and jointly promote the technology to customers who didn’t yet see the potential. It was a win-win for everyone, competitors and customers alike.

Can you trust your competitor?

How do you decide whether you can trust a competitor? Do that using the same six components of the relative trustworthiness model. Generally, you will consider their competence jointly with how much you respect them professionally. You look at their personality compatibility with you as a person and not necessarily as a competitor. The symmetry component is problematic for competitors because you are obviously on opposite sides of the figurative wall. This is also where the distinction between a market with significant growth potential and a mature market comes to play. If the market has significant growth potential, certain activities (such as pooling marketing resources and sharing best practices) could put the competitors on the same side of a market issue. But if the market is mature, competitors have no such bonding effect. Even when the market has growth potential, the symmetry component would require the competitors to contribute to the joint effort equally, or at least fairly, so they could trust each other.

How much should you trust a competitor?

Trust is contextual (Trust Law #2), and therefore you may be able to trust your competitor more in certain things (recommend a restaurant in town) and less in others (best practices). You have to remember that trust is required to compensate for risk. In the competitive landscape, the risk is for you to fail in the market and not generate the financial returns you expected. There is probably no level of trust in a competitor that would help you overcome that risk, and it shouldn’t. You should always feel in danger when in the room with a competitor. But some level of trust can help, especially when pooling resources could help both of you grow the pie you compete over. As long as you don’t violate antitrust laws.

Note: this article is not intended to provide legal advice. Seek professional legal advice from your legal counsel.?