Joint Ventures And Partnership As Coopetition

• Published date: 21 January 2021
• Subject Matter: nti-trust/Competition Law, Antitrust, EU Competition
• Law Firm: Acuity Law
• Author: Mr Henry Clarke

In the recent article "The strategic utility of joint ventures and partnerships in difficult and uncertain times", I advocated the merits of joint ventures and partnerships as relatively resource-light means to achieve growth and retain market share. This article considers the assessment of such opportunities with competitors in "co-opetition" or "coopetition".

Coopetition saves costs and removes the duplication of effort. It shares risk. It pools skills for mutual benefit. Coopetition is worth considering and the competition law impact can be assessed for the viability of coopetition (if the parties have such market share significance as to make competition law a worry). Coopetition opportunities missed may be business growth and profit foregone. Your alternative options may be poorer ones. Your counterparty may still find a competitor for coopetition.

Considering all the options for you and the options you think that your competitor has is important in deciding if you enter a coopetition project. Coopetition opportunities should involve your senior managers in thorough discussion. Is there inequality of bargaining power between the parties to make the opportunity a non-starter? Despite the inequality of bargaining power, can you shape the project in a way to ensure a win-win for you and the counterparty?

There may be many dimensions to relations between parties in coopetition. A manufacturer might consider supplying component parts to a competitor, but it may also consider the impact of this on the sales of its final product range. The buyer of parts may also consider the impact of its reliance on a competitor for parts. If the parts provider has a really good component and the product assembler has a strong brand with loyal customers, this combination may work.

It may be that together the parties can create a new product. Alternatively, and more commonly, competitors cooperate to define standards and interoperability. This expands the product market for each manufacturer if its gadgets are compatible with other gadgets within an operating system.
Each party may have valuable proprietary technology to preserve. On other occasions the combined effect of each parties' proprietary technology or skills may be market changing. The latter situation enables the parties to refine the market and leap ahead of the competition.

Coopetition may work where there is inequality of bargaining power. For the larger party it builds reliance of the smaller party on it...