Unpacking Antitrust: What Is A Joint Venture?

• Published date: 08 June 2023
• Subject Matter: ntitrust/Competition Law, Antitrust, EU Competition
• Law Firm: Bona Law PC
• Author: Mr Aaron Gott and Molly Donovan

The Short Answer: Two or more businesses that work together to produce something. Antitrust Law: An Analysis of Antitrust Principles and Their Application (Areeda and Hovenkamp) ("A joint venture is a form of organization in which two or more firms agree to cooperate in producing some input that they would otherwise have produced individually, acquired on the market, or perhaps would have done without.").

Why Does It Matter? Absent a valid joint venture, it is per se unlawful for two competitors to work together to price a product. Per se means that the conduct is unlawful with no opportunity to present a defense that it was actually a good thing.

"The pricing decisions of a legitimate joint venture," however, escape the per se rule. Freeman v. San Diego Ass'n of Realtors, 322 F.3d 1133, 1144 (9th Cir. 2003).

The decisions of a joint venture may still be subject to antitrust scrutiny, but the scrutiny is relaxed (under the rule of reason).

So, I've Decided to Form a Joint Venture. What Do I Need to Know?

In forming the joint venture, sometimes officers and employees start out discussing a potentially procompetitive joint venture but end up crossing the line'instead discussing subjects relating to current, horizontal competition. Exchanges of competitively sensitive information, for example, should be structured to mitigate concerns of improper horizontal collusion.

Sometimes no-poach and non-solicitation agreements are reached by the officers and employees who are discussing the joint venture's formation. Those agreements should be narrowly tailored to meet their procompetitive justifications.

The formation of the joint venture itself can be challenged as an antitrust violation. Typically, this occurs where the combination eliminates or endangers price competition.

How Do I Form A Legitimate Joint Venture?

Legitimate joint ventures are "integrations of economic activity," Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224 (D.C. Cir. 1986), wherein "multiple sources of economic power cooperat[e] to produce a product," Am. Needle, 560 U.S. at 199, 203 (2010).

More simply: there is a single firm that competes with other sellers in the market. Arizona, 457 U.S. at 356-57.

Courts are skeptical of claimed "joint ventures" that lack "economic integration" or do not provide "a new and unique product." In re Sulfuric Acid Antitrust Litig., 743 F. Supp. 2d 827, 873 (N.D. Ill. 2010).

Here are some questions to ask yourself:

• Was the joint venture...