Talk to, listen in on, and watch your competitors?

April 23, 2014

A recent article in Entrepreneur[1] suggested that business owners “fraternize” with their competition. One of the key suggestions was “[w]hen speaking about your business with a competitor, [you] should give up 2% more information than you are naturally inclined to give up.” What?

Elicitation of competitors is a valid, even powerful, research tool in competitive intelligence. However, such work should be done very carefully and completely honestly.

First, realize that no one is that interested in what you are doing – unless it is to their benefit to collect your data. Never play games. For example, never use a contact with a competitor as an occasion to engage in disinformation. If you engage in disinformation, it is unethical, possibly illegal, and, in addition, it can mess up your own communications with your personnel, your customers and others.

Second, it is illegal and unethical to seek to appropriate trade secrets. No exceptions here.

Third, if you are dealing with competitors that are publicly traded, there is another obligation you have to respect: certain kinds of “commercial secrets” are protected under the concepts of “insider trading” under the federal securities laws. The scope of this obligation is well beyond a single blog; but as an outsider, you have a duty not to misappropriate such protected information. However, the boundaries of your obligations are not nearly as clear as one would like[2].

Two insider trading examples noted in a recent article in The Economist[3] illustrate how this concept may impact competitive intelligence:

“[One] jury determined that there was nothing wrong with using [such] valuable information overheard when a friend was speaking on the telephone…. [Another] jury found for workers at an Illinois railyard who had bought shares in their company after seeing unfamiliar people in suits looking around. They concluded that a takeover was imminent.”

In other words, if you can develop competitively important data legally and ethically, feel free to and use it. However, do not try to engage in elicitation without proper training and without a clear understanding of the legal and ethical limits.


[1] Ross McCammon, “Behind frenemy lines”, Entrepreneur, May 2014, 28-29.

[2] For more on this, see the interesting article, Stephen J. Crimmins, “Insider trading: where is the line?”, Columbia Business Law Review, vol. 23:2, 330 – 68. For example, he notes that “[i]t has long been recognized that no duty [to avoid trading a stock] arises when material nonpublic information is simply overheard, in an elevator, a taxi, or elsewhere. But…the SEC has charged [in some complaints] that a duty may arise where the insider (who inadvertently discusses confidential information) and the listener happen to be friends.”” P. 338-39.

[3] “Knowing too much”, The Economist, April 12, 2014, p.71-72.

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