Joint Ventures and Other Competitor Collaborations

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CHAPTER XVI

JOINT VENTURES AND OTHER COMPETITOR

COLLABORATIONS

A. Antitrust Compliance and Collaborations with Competitors

Joint ventures ( JVs), for the purpose of antitrust analysis, occur when

independent economic actors integrate some aspect of their formation or

operation, but otherwise retain their identity as independent economic

actors. When the parties to the integration are competitors, the resulting

venture is termed a competitor collaboration.

Joint ventures and competitor collaborations require special attention

as a matter of antitrust compliance. First, as a structural matter, all parties

must individually ensure compliance with the antitrust laws. When a

company enters into a relationship with its competitors, the number of

entities that must comply with antitrust laws increases, as does the

potential for mistakes or wrongdoing. Second, and separate from the fact

that the collaborative relationship places competitors in closer proximity

to each other, the formation of the JV itself may raise antitrust concerns.

The potential risks from these arrangements are familiar: civil or

criminal prosecution under Sections 1 and 2 of the Sherman Act,

especially if the arrangement is tantamount to a hard core cartel; treble

damages for those injured by the collaboration or JV; investigation under

Section 5 of the Federal Trade Commission Act for unfair methods of

competition; or a requirement to divest or unwind the arrangement under

Section 7 of the Clayton Act.

At the same time, the antitrust laws recognize that joint ventures and

competitor collaborations may also offer procompetitive rewards. Fans

who gather together with their friends to watch NFL football are

entertained by the activities of a joint venture.1 The recorded music

playing at the sports pub where they gather is heard pursuant to an

agreement reached among competing songwriters and music publishers

to offer a blanket license.2 And when those friends settle their bar tab

1. See American Needle, Inc. v. National Football League, 560 U.S. 183

(2010).

2. See Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc., 441 U.S.

1 (1979).

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using Visa or MasterCard, they are taking advantage of the collaboration

among financial institutions that supports the functioning of these credit

cards.3 The Federal Trade Commission (FTC) and U.S. Department of

Justice Antitrust Division (DOJ) (collectively, the Agencies) have issued

joint guidanc e addressing man y of the issues raised in these

circumstances.4

B. Identification of Joint Ventures and Competitor Collaborations

Among the challenges in advising on joint ventures and competitor

collaborations is that these terms refer to a broad, and often overlapping,

category of arrangements that result in some degree of integration among

entities, typically falling short of wholesale integration or permanent

linkage. Overall, these arrangements can take many forms and can raise a

variety of antitrust concerns. While some are memorialized via formal

agreements, or even through notification to the antitrust agencies, not all

collaborations or joint ventures are so formalized. Some may result in the

formation of a new legal entity, while others may not. Regardless of the

name applied or the degree of formality, it is best that the company’s

antitrust counsel scrutinize the arrangement for antitrust risks, before

government attorneys or opposing counsel begin raising questions.

The FTC and DOJ describe competitor collaborations as agreements

other than merger agreements, between or among competitors, to engage

in joint economic activity. In the broadest sense, any collaborative

activity that is not a full merger and that pools separat e firms’ resources

in order to produce or sell a product or service or to achieve a common

objective is a joint venture. Pooling is important: sharing risks and losses

is indicative of a joint venture but the parties to the collaboration are

3. See SCFC I LC v. Visa U.S.A., Inc., 36 F.3d 958, 963 (10th Cir. 1994);

Paycom Billing Servs. v. MasterCard Int’l, 467 F.3d 283 (2d Cir. 2006).

4. U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, ANTITRUST GUIDELINES

FOR COLLABORATIONS AMONG COMPETITORS (April 2000) [hereinafter

COLLABORATION GUIDELINES], available at https://www.ftc.gov/

sites/default/files/documents/public_events/joint-ve nture-hearings-

antitrust-guidelines-collaboration-among-competitors/ ftcdojguidelines-

2.pdf. The DOJ and FTC have also released guidelines on horizontal

mergers in 1992 and 2010, guidelines for the licensing of intellectual

property in 1995 and 2017, and statements of antitrust enforcement policy

in health care in 1996 and 2011, which also provide guidance on the

antitrust analysis o f joint ventures in certain circumstances.