Chapter V. Joint Ventures and Joint Action by Competitors
| Pages | 105-126 |
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CHAPTER V
JOINT VENTURES AND JOINT ACTION BY
COMPETITORS
A. Joint Ventures
The antitrust laws do not define the term joint venture. Accordingly,
there is no well understood definition of what constitutes a joint venture.
In general, the term joint venture refers to some measure of collaboration
among and between independent firms that falls short of a full merger
through which firms contribute their resources to a common economic
entity to produce and market a common product or service, increase
inputs, meet demand, or achieve common business objectives. The
common economic entity is typically created and owned by the joint
venture participants. When such joint activities occur among
competitors, they are generally referred to as “competitor collaborations”
for purposes of the antitrust laws.
As with any coordination between independent firms, joint ventures
are subject to scrutiny under Sections 1 and 2 of the Sherman Act
1
and
Section 5 of the Federal Trade Commission Act (FTC Act).
2
Moreover,
1. 15 U.S.C. §§ 1-2. Section 2 of the S herman Act may apply if formation
or operation of the joint venture is alleged to represent an unlawful
monopolization of or an atte mpt to monopolize any part of trade or
commerce. See United Sta tes v. Pan Am. World Airways, 193 F. Supp.
parent of growth of 50%-owned subsidiary into fields occupied by such
parent held violative of Section 2).
2. 15 U.S.C. § 45. Based on the 2009 jurisdictional thresholds, joint
ventures formed as limited liabilit y companies, partnerships, or other
forms of unincorporated entities are subject to Hart-Scott-Rodino Act
pre-formation notification a nd review if ( 1) the creation of the venture
results in one person obtaining a controlling interest in the venture—i.e.,
having the right to 50% or more of the venture’s profits or assets upon
dissolution; (2) the value of that interest is more than $65.2 million; and
(3) the size-of-the-parties test, if applicable, is satisfied. 15 U.S.C. § 18a;
Revised Jurisdictional Thresholds for Section 7A of the Clayton Act, 74
Fed. Reg. 1687 (Jan. 13, 2009). T he size-of-the-parties te st is satisfied if
(1) the acquiring person has annual net sales or total assets o f $130.3
million or more and the newly formed entity has total assets of $13.0
106 Energy Antitrust Handbook
joint ventures may be subject to review under Section 7 of the Clayton
Act when a new entity is created and the parties acquire voting securities
in the newly formed entity.
3
Joint ventures also may be subject to the
reporting requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
4
Because joint ventures provide unique opportunities for risk
diversification and cost sharing, t hey have become increasingly popular
in the energy industry. At a minimum, the procompetitive, efficiency-
enhancing potential of the arrangements makes them very attractive to
energy companies. To capitalize on the benefits from collaborations
with others in the energy markets, many companies have utilized joint
ventures to serve myriad business ends. For instance, in electricity
markets, electric utilities have used joint ventures to share the risks of
generation and transmission, offer new services, and enlarge their
geographic footprint to service broader markets. Similarly, in oil and
natural gas markets, collaboration via the joint venture mechanism has
allowed oil and natural gas companies to share and diversify upstream
and downstream risks and minimize costs associated with exploring,
developing, and selling energy products.
The forms of joint ventures vary depending on the level of desired
integration or collaboration objectives of the joint venture participants.
However, for antitrust purposes, the principle attributes of joint ventures
are the enhanced efficiencies made possible through the integration of
economic activity. Energy companies tend to favor joint ventures
because of the synergies and cost-saving benefits made possible through
the collaboration, but the arrangements can have a range of competitive
effects, and as such, joint ventures are subject to antitrust scrutiny. To
the extent joint ventures lack meaningful integration and are viewed as a
sham to facilitate collusive conduct among competitors to fix prices,
allocate markets, or engage in other anticompetitive behavior, the joint
venture label will do little to protect the joint venture participants from
liability under the antitrust laws.
million or more, or (2) the acquiring person has annual net sales or total
assets of $1 3.0 million or more and the newly formed e ntity has total
assets of $130.3 million or more. Id. Special rules apply to determine the
total val ue of assets of the newly formed entity. See ABA SECTION OF
ANTITRUST LAW, THE MERGER REVIEW PROCESS 67-72 (3d ed. 2006).
3. United States v. Penn-Olin Chem. Co., 378 U.S. 158 (1964).
4. 15 U.S.C. §18a; 16 C.F.R. §801.40.
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