[staunch]

He's just stating a fact. It is considered a no-no by most people.

The most common problems happen when privileged information is exchanged between the competitors.

An example: Company A discovers a killer marketing technique that gives them a big advantage but they keep their success quiet. Then the shared VC tells Company B about it. Company A loses their competitive advantage (driving up their costs, etc).

That's one of a myriad of scenarios where information exchange can be unethical and highly damaging. The hard part is that even if your VC is 100% ethical they can easily make mistakes that cause problems.