Fully Integrated Joint Ventures

• Pages: 55-78

CHAPTER V

FULLY INTEGRATED JOINT VENTURES

Section 1 of the Sherman Act reaches contracts, combinations, or

conspiracies that unreasonably restrain trade.1 By definition, section 1

applies only when independent actors take some action together. Thus, if

the alleged restraint is deemed to be the conduct of a single entity for

antitrust purposes, it cannot be scrutinized under section 1 of the

Sherman Act although it may be evaluated under section 2.

Whether or not a joint venture or competitor collaboration is deemed

a single entity depends on the degree of economic integration of the

venture’s business activities. At one end of the spectrum is full and

lasting integration, in which a combination is complete and enduring

such that the entity’s actions must be viewed as unilateral and cannot,

without more, give rise to section 1 liability.2 At the other end of the

spectrum are entities that have not integrated their economic activities in

any way; clearly agreements among them can give rise to liability under

section 1. In the middle are many joint ventures and partial

combinations, which, because they are only partially integrated, may be

deemed, under certain circumstances, to be conspiracies among their

creators. If a joint venture is viewed as a tool or instrumentality of its

1. See, e.g., Arizona v. Maricopa Cnty Med. Soc’y, 457 U.S. 332, 342-43

(1982) (“Section 1 of the Sherman Act of 1890 literally prohibits every

agreement ‘in restraint of trade.’ In United States v. Joint Traffic Ass’n,

171 U.S. 505 (1898), we recognized that Congress could not have

intended a literal interpretation of the word ‘every’; since Standard Oil

Co. of New Jersey v. United States, 221 U.S. 1 (1911), we have analyzed

most restraints under the so-called ‘rule of reason.’ As its name suggests,

the rule of reason requires the factfinder to decide whether under all the

circumstances of the case the restrictive practice imposes an unreasonable

restraint on competition.”).

2. However, if such ventures by their terms extend for a significant amount

of time, they would be subject to review based on the same analysis

applied to mergers. See U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N,

Antitrust Guidelines for Collaboration Among Competitors § 1.3 (2000),

reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,161,

available at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf

(hereinafter Competitor Collaboration Guidelines).

Joint Ventures

56

creators, then the venture or its creators may be liable under section 1 for

an act of the venture that restrains competition.

The test for whether a joint venture should be treated as a single

entity for antitrust purposes originated in the case of Copperweld Corp.

v. Independence Tube Corp.,3 which addressed parent/subsidiary

relations rather than joint ventures, finding that parent companies could

not conspire with their wholly owned subsidiaries in violation of section

1 because they are not separate economic entities. More recently, the

Supreme Court’s 2010 decision in American Needle, Inc. v. National

Football League,4 a case concerning the intellectual property rights of the

National Football League (NFL), clarified the standard for evaluating the

applicability of section 1 to joint ventures when the venture arguably acts

as a single entity. Under American Needle, “the relevant inquiry . . . is

whether there is a ‘contract, combination . . . or conspiracy’ amongst

‘separate economic actors pursuing separate economic interests’ such

that the agreement ‘deprives the marketplace of independent centers of

decisionmaking’ and therefore of ‘diversity of entrepreneurial

interests.’”5 The Court found that the joint venture, consisting of an

unincorporated association of NFL teams, did not “possess either the

unitary decisionmaking quality or the single aggregation of economic

power characteristic of independent action.”6 Rather, “each was a

substantial, independently owned, independently managed business,

whose ‘general corporate actions are guided or determined’ by ‘separate

corporate consciousnesses,’ and whose ‘objectives are’ not ‘common’

and therefore could be subject to violations of section 1.”7

A. Historical Treatment: The Copperweld Single-Entity Doctrine

1. Copperweld v. Independence Tube

In Copperweld, the Supreme Court reversed the Seventh Circuit’s

holding that a corporation and its wholly owned subsidiary had conspired

to violate section 1.8 The Court reasoned that section 1 does not reach

3. 467 U.S. 752 (1984).

4. 560 U.S. 183 (2010).

5. Id. at 184 (quoting Fraser v. Major League Soccer, L.L.C., 284 F.3d 47,

57 (1st Cir. 2002)).

6. Id.

7. Id. (citing Copperweld, 467 U.S. 752, 771).

8. 467 U.S. at 758-59, 768 (re-examining intra-enterprise conspiracy

doctrine for wholly owned subsidiary and reversing Seventh Circuit