Researching Europe - An economic competition law analysis of research and development joint ventures within the European Union

Abstract: Research and development is a crucial part of any functioning economy, not the least within the European Union as one of the leading markets in the world today. In addition to providing the market with new products, R&&semicD also introduces better ways of production thereby creating new markets. However, R&&semicD is often a costly and advanced process demanding huge economic and intellectual resources, which are crucial for economic development. Furthermore, one actor might lack intellectual capital or property rights needed for a new development. One solution to these problems might be to spread the economic risks and use the combined know-how of several parties in a joint venture. R&&semicD is a way for companies to find new markets and/or gain new market shares from their competitors. However, companies can also use R&&semicD in different ways to cut out competitors from their relevant product markets and thereby establish themselves as market leaders, which in itself may damage market competition and hinder further product developments. There is therefore a potential conflict of interests. Within the European Union, several objectives have been the guiding light in order to define the competition policy. Maximizing consumer welfare and achieving optimal allocation of resources are examples of economic objectives. A further objective has been to protect consumers and smaller firms from large economic entities. Third but not least, within the legacy of the coal and steel union, is the objective of creating a single European market, thus bonding the Union members economically in order to prevent future armed conflicts. The objective of this thesis aims to research the EC competition rules and regulations regarding research and development joint ventures within the European Union in comparison with economic theorems regarding competition. Furthermore it will examine the transparency within the reasoning made by the Commission as well as in the judgements of the European Court of Justice and the Court of First Instance to clarify these decisions and rulings from an economic perspective. Due to the wide scope of the term joint venture, I have for the sake of this thesis chosen to restrict the term to the situation where two or more companies choose to jointly form a third party within the European Union for research and development purposes. The turn towards a more effect driven approach provides the flexibility necessary to evolve within the modern economy, albeit do put a higher demand of the economic analysis on undertakings embarking on a R&&semicD joint venture. The general provisions for cases regarding competition are Article 81 (1) and (3) ECT. However, the broad range of joint ventures has called for more specialized provisions that are more suited to deal with the different forms of joint undertakings. In addition, the importance of R&&semicD for the economic development of the Common market has allowed for a block exemption regarding these matters through Regulation 2659/2000. Although the general rule is to asses the R&&semicD joint undertaking under the block exemption regulation, one should not rule out the use of either the MR or Article 81 ECT. Thus, if the R&&semicD joint venture does not fall under the exemption rules of Regulation 2659/2000 then Article 81 (1) is the applicable provision, and exemption can be granted through Article 81 (3). However, if the R&&semicD joint venture could be considered full function and a concentration of community dimension, the MR would be the applicable provision. In contrast to the previous normative legislation, the legal evolution of the provisions and case law regarding R&&semicD joint ventures has been towards an effect driven estimate of the undertaking regardless of how it arose, rather than prohibiting certain forms of competition infringing behaviour.