Other Types of Competitor Collaborations

• Pages: 165-187

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CHAPTER IX

OTHER TYPES OF COMPETITOR

COLLABORATIONS

This chapter addresses several additional types of competitor

collaborations that may occur in the trade association context: joint

purchasing; joint marketing; and joint research and development.

A.Joint Purchasing

Some trade associations offer group purchasing programs to their

members and other industry participants. In some joint buying programs

the association acts as a purchasing agent, while in others the association

has a more limited role and may simply sponsor the program. Group

purchasing is not limited to product inputs but also may involve services;

for example, trade associations sometimes act as joint purchasing agents

for health care services or insurance.

1

The potential procompetitive

benefits of joint buying are apparent: “[p]urchasing collaborations, for

example, may enable participants to centralize ordering, to combine

warehousing or distribution functions more efficiently, or to achieve

other efficiencies.”

2

Nevertheless, joint purchasing may under certain

1. U.S. DEP’T OF JUSTICE &FED.TRADE COMM’N,STATEMENTS OF

ANTITRUST ENFORCEMENT POLICY IN HEALTH CARE,Stmt. 7 (1 996)

[hereinafter HEALTH CARE STATEMENTS], ava ilable at http://www.usdoj.

gov/atr/public/guidelines/1791.pdf; DOJ B usiness Review Letter to

Houston Healthcare Coalition, 1994 DOJBRL LEXIS 4, at *5 (March 23,

1994) (no intention to c hallenge formation of group purchasing

association to procure health care services for its members).

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

FOR COLLABORATIONS AMONG COMPETITORS§ 3.31(a) (20 00)

[hereinafter COMPETITOR COLLABORATIONS GUIDELINES], available at

http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf; see also Northwest

Wholesale Stationers v. Pac. Stationery & Printing Co., 472 U.S. 284 , 295

(1985) (“The [joint buying] arrangement permits the participating retailers

to achieve economies of scale in both the purchase and warehousing of

wholesale supplies, and also ensures ready access to a sto ck of goods that

might otherwise be unavailable on short notice.”).

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Antitrust and Associations Handbook

circumstances raise risks under Section 1 of the Sherman Act or the

Robinson-Patman Act.

3

The Antitrust Division of the U.S. Department of Justice (DOJ or the

Division) and the Federal Trade Commission (FTC or the Commission)

have pointed out that “[a]n agreement . . . that simply fixes the price that

each purchaser will pay or offer to pay for a product or service is not a

legitimate joint purchasing arrangement and is a per se antitrust

violation.”

4

The rule of per se illegality is reserved for agreements that

do not involve a potentially efficiency-enhancing integration of

economic activity and have no purpose other than to restrict

competition.

5

Most joint purchasing arrangements involve plausible

efficiencies and accordingly are analyzed under the rule of reason.

6

Joint purchasing may have anticompetitive effects if the purchasing

group forces vendors to reduce prices and depress output below what

would likely prevail in the absence of the buyers’ agreement, by

exercising monopsony power.

7

According to the Horizontal Merger

Guidelines, “[t]he exercise of market power by buyers (‘monopsony

power’) has adverse effects comparable to those associated with the

exercise of market power by sellers.”

8

Some commentators have argued,

3. Seegenerally Kathryn M. Fenton, Antitrust Counseling on Group Buying

Issues, 12 ANTITRUST 23 (Spring 1998).

4. HEALTH CARE STATEMENTS, supranote 1, Stmt. 7, n.17; see also

Mandeville Island Farms v. Am. Crystal Sugar Co., 334 U.S. 219, 236

(1948) (applying per se rule to conspir acy among sugar r efiners to

purchase sugar beets at agreed-upon prices); Nat’l Macaroni Mfrs. Ass’n

v. FTC, 345 F.2d 421, 427 (7th Cir. 1965) (holding unlawful per se an

agreement among macaroni manufacturers limiting the amount of durum

wheat purchased).

5. COMPETITOR COLLABORATIONS GUIDELINES, supra note 2, § 3.2

6. See ABA SECTION OF ANTITRUST LAW,ANTITRUST LAW DEVELOPMENTS

455 (6th ed. 2007) [hereinafter ANTITRUST LAW DEVELOPMENTS]

(collecting cases).

7. COMPETITOR COLLABORATIONS GUIDELINES, supra note 2, § 3.31(a)

(Buying collaborations “can create or increase market power . . . or

facilitate its exer cise by increasing the ability or incentive to drive the

price of the purchased product, and thereby depress output, below what

likely would prevail in the absence of the relevant agreement.”).

8. U.S. DEP’T OF JUSTICE &FED.TRADE COMM’N,HORIZONTAL MERGER

GUIDELINES § 0.1 (1992 & 1997 Rev.) [hereinafter 1992 MERGER

GUIDELINES], available at http://www.usdoj.gov/atr/public. The FTC has

stated that “[a] buyer has monopsony power—or a gro up of buyers has