The aproach to joint ventures under EC competition law after the reform package from 2004

Abstract: A joint venture is a business cooperation between undertakings embodied in a seperate legal body with elements more or less resulting in a structural change on the markets involved. It may serve many purposes, such as cost savings, entry into a new geographic market or the carry out of joint research. For the purpose of EC competition law, there are three categories of joint ventures: Full-function joint ventures Where the cooperation is embodied in a separate legal entity, financially independent from its parents who confer all their activities in the market upon the JV, without the result of a potential coordination of competitive behaviour between the parents. Full-function joint ventures with cooperative elements As above, with the additional feature that the JV has the object or effect (whether wholly or partially) of co-ordinating the competitive behaviour of the parties who have established the joint venture, because two or more of the parents retain significant activities either in the same market as the joint venture, or in upstream, downstream or neighbouring markets. Non full-function joint ventures Where the cooperation between the parents are not embodied in a separate legal entity amounting to the Commission's definition of an autonomous economic entity. These joint ventures are assessed outside the merger regulation, under Articles 81 or under the competition rules of the Member States. The full-function character depends on three principal criteria: 1) that at least two of the parents have a decisive influence over the business decisions related to the JV, such that a deadlock situation over strategy decisions may occur&semic 2) that the joint venture has sufficient staff, financial and material resources which enables it to is able to carry out the normal activities of other undertakings on the market without dependence on its parents&semic and 3) that the joint venture is intended to operate on a lasting basis. A full-function joint venture of community dimension will be subject to the SIEC-test in Article 2(3) in the merger regulation. Potential spill-over effects of cooperative nature between the parents will be assessed in accordance with Article 81(1). The SIEC-test in the merger regulation is new. It does no longer require the Commission to prove evidence of a dominant position after the operation has been executed. Basically, the new feature is that the Commission will be more concerned with the dynamics of economical reasoning, and may now base its conclusion on an assessment of the overall impact on the markets concerned, such that it would lead to a significant impediment of competition in a substantial part of the common market. Mainly this will be the case in highly concentrated markets with a risk for establishment of oligopolies. If the concentration will not distort competition itself, the Commission will assess whether there are any cooperative restraints attached to the joint venture which are not regarded as necessary for the concentration. If so, the Commission will seek to establish whether there is any block exemption under which the cooperation will fall. Ultimately, the Commission has the ability to balance the potential beneficial and negative aspects of the agreement within the frame of an individual exemption under Article 81(3). A novelty in Regulation 1/2003 is that non-full-function joint ventures will now have to assess for themselves whether their agreement is anticompetitive or not. The possibility of recieving a clearance from the Commission has been abolished. This makes the assessment harder for the parties and increases its costs for legal advice.