Joint Venture Regulation under European Competition Laws: An Update

• Date: 01 May 2007
• Published date: 01 May 2007
• Author: Nicole Tyson
• DOI: http://doi.org/10.1111/j.1468-0386.2007.00356.x

Joint Venture Regulation under European

Competition Laws: An Update

Nicole Tyson*

Abstract: This article examines the European approach to joint venture regulation. It

updates previous analysis by examining the impact of modernisation reforms on joint ven-

ture regulation in Europe. It is argued that although the changes on the whole are

conducive to joint venture activity, problematic aspects of regulation were either unad-

dressed, or could be provoked by, the reform. In particular, the substantive and procedural

divide in legal treatment of ‘concentrative’ and ‘cooperative’ joint venture arrangements

continues to engender some difficulty.

I Introduction

Horizontal joint ventures are unique economic phenomena that challenge competition

law paradigms. A ‘joint venture’ for the purposes of this article is an arrangement

formed to pursue a particular endeavour, between two or more otherwise separate and

competing (or potentially competing) entities at the same level in the production chain.

It is more comprehensive than a contractual arrangement, yet falls short of the full

union resulting from a merger.1It may involve, for instance, firms sharing operation

of a manufacturing plant,2undertaking a joint R&D project,3or operating a sports

league.4

Horizontal joint ventures do not sit comfortably within traditional frameworks for

analysis and regulation of anticompetitive conduct. They often involve not only

collaboration between competitors, but also complex and simultaneous combinations

of concentrative and cooperative interactions. Collaboration between actual or poten-

tial competitors is instinctively antithetical to the broad goal of regulating markets to

preserve an economic landscape of independent, competing firms. It also renders

cumbersome the application of orthodox competition law analysis which assumes a

distinction between behavioural and structural aspects of commercial conduct. Yet the

fact that horizontal joint ventures are often regarded as pro-competitive from an

* BA/LLB (First Class Hons), MST (Oxon). Senior Associate, Minter Ellison Lawyers, Melbourne

(nicole.tyson@minterellison.com). This article is a heavily abbreviated version of the author’s Masters

thesis.

1J. Brodley ‘Joint ventures and antitrust policy’, (1982) 95 Harvard Law Review 1521, 1527–9.

2E.g. Boral Resources Pty Ltd & FRH Group Pty Ltd joint venture clearance ACCC PR 19 September

2003, available at <http://www.accc.gov.au/content/index.phtml/itemId/470142>(accessed 30 March

2005).

3E.g. Case IV/33.814 Ford v Volkswagen OJ L20/14 1993.

4E.g. News Ltd v ARL [1996] 139 ALR 193.

European Law Journal, Vol. 13, No. 3, May 2007, pp. 408–423.

© 2007 The Author

Journal compilation © 2007 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK

and 350 Main Street, Malden, MA 02148, USA

economic perspective5grounds the working assumption of this article that competition

laws nevertheless should—subject to appropriate modification where economic

analysis shows that anticompetitive detriment is a genuine risk—adopt a permissive

approach towards joint ventures.

This article briefly overviews how European competition laws apply to joint ven-

tures. Significant recent reforms make this a timely comparative enquiry. European

competition laws and procedures underwent change as part of a broader ‘modernisa-

tion’ programme, generally effective from 1 May 2004, which redesigned certain insti-

tutional functions and decentralised aspects of enforcement. Understood in the context

of past experience, reform will, on the whole, impact positively on joint venture regu-

lation. A degree of articulated permissiveness towards competitor collaboration is

evident in the context of more-established analytical frameworks for determining com-

petitive impact. The regulatory approach is at least rhetorically grounded in economic

analysis, attaching importance to efficiencies and seeking to facilitate joint-venture

arrangements through publication of specific and detailed instruments of guidance.

However, problems are identified that either remain unaddressed, or might be pro-

voked, by reform. There remain problems given the differences regarding the extent of

the division of substantive and procedural treatment according to joint venture type

and at least some confusion regarding the factors considered relevant in determining

joint venture legality.

II Overview of Joint Venture Regulation in Europe

Two principal competition laws currently regulate joint ventures in Europe: Article 81

of the EC Treaty and the European Community Merger Regulation (ECMR).6

Whereas Article 81 EC regulates behavioural relationships between entities, the ECMR

is primarily concerned with structural aspects of conduct. Procedural and substantive

differences between assessment under the ECMR and Article 81 EC render characteri-

sation of arrangements as ‘concentrative’ or ‘cooperative’ a crucial, defining and some-

what problematic feature of European joint venture regulation.

Early permissiveness towards joint ventures7found expression in mandated Com-

munity support of R&D cooperation8and endorsement of collaborations conducive to

market integration.9But the initial regulatory response to joint venture activity was

generally prohibitive. Early enforcement priorities included taking action with ‘special

vigour’ against restrictions on competition seen as jeopardising Common Market

unity.10 The regulator, the European Commission, tended to assume competitor

5P. Roth (ed.) Bellamy and Child European Community Law of Competition (5th edn Sweet & Maxwell,

2001) p. 287; S. Martin ‘Private and social incentives to form R&D joint ventures’, (1994) 9 Review of

Industrial Organisation 157.

6Detailed analysis of these laws can be sourced elsewhere: e.g. D. Goyder, EC Competition Law (4th edn,

Oxford University Press, 2003) chs 6–8, 17, 18; R. Whish Competition Law (5th edn, Lexis Nexis, 2003)

chs 3, 4, 20, 21; Roth, op. cit. note 5 supra, chs 2, 3, 5, 6. It is beyond the scope of this article to consider

joint venture regulation under Article 82 of the EC Treaty, which prohibits abuse of a dominant market

position—a provision potentially applicable only in more limited circumstances and subject to imminent

but as yet unpublished, change in interpretation.

7E.g. ACEC (Belgium)/Berliet (France) OJ L201/7 1968; Jaz/Peter OJ L195/5 1969.

8EC Treaty Art 163(2); generally Arts 163–173.

9Commission First Annual Competition Report (Brussels, 1972) 14.

10 Ibid. 15.

May 2007 Joint Venture Regulation under European Competition Laws

© 2007 The Author 409

Journal compilation © 2007 Blackwell Publishing Ltd.