Joint Ventures and Licensing Agreements
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CHAPTER V
JOINT VENTURES AND LICENSING
AGREEMENTS
The term “joint venture” does not have a single, well-defined meaning
under the antitrust laws. “In its broadest sense, the term embraces any
collaborative activity, short of a full merger, by which separate firms pool
resources to produce or sell a common product or service, to obtain needed
inputs, or to pursue some other common objective.”1 A joint venture has
thus been defined as “a collaboration among competitors designed to
achieve a specific business objective through some integration of
resources or risk, short of a complete merger.”2 The federal antitrust
agencies refer to joint ventures among actual or potential competitors as
“competitor collaborations.”3 This chapter pr ovides an over view of the
different types of joint ventures and the case law and government
guidelines applicable to analyzing joint ventures.
A. Joint Venture Analysis
Joint ventures have become quite common in the pharmaceutical
industry. In recent years, for example, joint ventures have been created to
expand the availability of products internationally (Merck & Co. and
Supera Farma Laboratories S.A.) and to take advantage of economies of
scale by combining consumer healthcare businesses (Novartis and
1. 1 ABA SECTION OF ANTITRUS T LAW, ANTITRUST LAW DEVELOPMENTS
453 (8th ed. 2017) [hereinafter ALD EIGHTH].
2. Thomas A. Piraino, Jr., A Proposed Antitrust Approach to Collaborations
Among Competitors, 86 IOWA L. REV. 1137, 1171 (2001) (citing ABA
SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS 372 (3d
ed. 1992)); see also ABA SECTION OF ANTITRU ST LAW, JOINT VENTURES:
ANTITRUST ANALYSIS OF COLLABORATIONS AMO NG COMPETITORS 6 n.6
(2d ed. 2014) [hereinafter JOINT VENTURES] (collecting cases that define
“joint ventures”).
3. See, e.g., U.S. DEP’T OF JUSTICE & FED. TRAD E COMM’N, ANTITRUST
GUIDELINES FOR COLLABOR ATIONS AMONG COMPETITORS (2000)
[hereinafter COMPETITOR COLLABORATIONS GUIDE LINES], available at
http://www.ftc.gov/os/2000/04/ftcdojguidelines.pd f.
232 Pharmaceutical Industry Antitrust Handbook
GlaxoSmithKline).4 In each instance, the strengths of the two companies
complemented each other in an important enough way that combining
certain resources made sense. By using a joint venture, rather than a
merger, each company was able to remain independent and continue to
focus its efforts in areas other than those specifically covered by the joint
venture.
When two or more companies form a joint venture, they must define
the scope of their collaboration as well as the structural and operational
limitations that will protect the member firms while ensuring efficient
output. “Operational issues turn on the nature and scope of collective
action by a venture’s members. Structural issues turn on the identity of
those members and the rules, if any, governing changes in membership.”5
Absent such limitations, risks of free-riding, dissension, or outright
misappropriation—always present to some degree in a joint venture—may
assume unworkable proportions. Even with such restrictions, joint
ventures are prone to failure.6
Both the free interchange of information in the joint venture and the
restrictions placed upon it can give rise to antitrust concerns . Joint ventures
may be subject to regulatory review7 and to challenges from disadvantaged
customers or suppliers, competitors and excluded participants, the
government, and even the joint venture partners themselves. In analyzing
a prospective or existing joint venture, the individual agreements that
constitute the joint venture must be evaluated separately and the venture
must be evaluated as a whole.8
4. See, e.g., Press Release, Merck & Co., Merck Establishes Joint Venture to
Commercialize Innovative Pharmaceutical Products and Branded Generics
in Brazil (Feb. 15, 2012), available at http://www.merck.com/
licensing/our-partnership/S upera-Farma -Licenses-partnership.html;
Media Release, Novartis, Novartis Announces Portfolio Transformation
(Apr. 22, 2014), available at http://www.novartis.com/newsroom/media-
releases/en/2014/1778515.shtml.
5. Howard H. Chang, David S. Evans & Richard Schmalansee, Some
Economic Principles for Guiding Antitrust Policy Toward Joint Ventures,
1998 COLUM. BUS. L. REV. 223, 227 (1998).
6. See Piraino, supra note 2, at 1172 (“[A]pproximately sixty p ercent of joint
ventures ultimately fail .”).
7. See generally 15 U.S.C. § 18a; see also Hart-Scott-Rodino Antitrust
Improvements Act of 1976, Pub. L. No. 94-435, 90 Stat. 1383 (1976)
(codified in multiple sections of 15 U.S.C.).
collaboration and an individual restraint within the co llaboration are
Joint Ventures and Licensing Agreements 233
1. Types of Joint Ventures
There are six pri mary types of j oint ventures: production; p urchasing;
fully-integrated; research and development; marketing and distribution;
and network.9
Production joint ventures involve agreements between parties to
produce jointly a product to be sold to others or used by the participants.
In the jointly issued Competitor Collaborations Guidelines, the U.S.
Department of Justice (DOJ) and the Federal Trade Commission (FTC)
specifically recognize that such agreements are often procompetitive, as
participants may combine complementary technologies, know-how, or
other assets to enable the collaborati on to produce a good more efficiently
by, for example, achieving economies of scale or to produce a good that
neither participant could produce alone.10 On the other hand, joint
production ventures also may involve agreements on output, price, quality,
service, or other competitively significant variables that may create or
enhance market power and limit the participants’ ability or incentive to
compete independently.11
Courts typically analyze joint production ventures under the rule of
reason.12 The National Cooperative Research Act of 1984 was amended
in 1993 to include production joint ventures and retitled the National
Cooperative Research and Production Act (NCRPA), which provides that
a venture will “be judged on the basis of its reasonableness, taking into
account all relevant factors affecting competition.”13
Purchasing joint ventures, or buying collaborations, including
business-to-business agreements, allow buyers to identify and access
subject to review); COMPETITOR COLLABORATIONS GUIDELINES, supra
note 3, § 2.3.
9. See JOINT VENTURES, supra note 2, at 7-17. The Competitor
Collaborations Guidelines discuss four of these: production collaborations,
buying collaborations, research and development collaborations, and
marketing collaborations. See COMPETITOR COLLABORATIONS
GUIDELINES, su pra note 3, § 3.31(a).
10. COMPETITOR COLLABORATIONS GUIDELINES, supra note 3, § 3.31(a).
11. Id.; see also Proposed Final Judgment, United States v. ConAgra Foods,
79 Fed. Reg. 30,881, 30,882 (D.D.C. May 29, 2014) (requiring joint
venture intended to combine production facilities to divest four production
facilities because joint venture would control large share of capacity in the
markets as defined by the DOJ).
12. See, e.g., Texaco v. Dagher, 547 U.S. 1, 6-7 (2006); United States v. Alcan
13. 15 U.S.C. § 4302.
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