Joint ventures can have many different objectives, and have different implications for competition.
Joint ventures with the purpose of fixing prices, restricting output, or allocating markets between firms reduce competition, and generally should not be permitted.
Joint ventures may generate efficiency gains and cost savings. In this case, regulators or competition authorities should consider whether the joint venture will increase market power sufficiently to cause a substantial lessening of competition. Will the joint venture lead to an increase in prices or a reduction in output? If the potential gains from the joint venture outweigh any competitive damage, then the joint venture should be allowed to proceed.
In some cases joint ventures include an agreement for the parties to acquire assets or voting rights in their respective firms. This type of arrangement is more durable than a conventional joint venture, and so requires additional scrutiny. The investigation should consider factors such as:
- The level of competition in the relevant market,
- The number and power of competitors in the relevant market,
- The market power of the parties in the joint venture,
- The background of, and the relationship among, the parties in the joint venture,
- The setting in which the joint venture was created,
- The relationship between the lines of commerce of the joint venture and of the individual parties in the joint venture.
Telecommunications Joint Ventures
Telecommunications joint ventures come in many forms. They may have one or more of the following objectives:
- Integration of operations at one or more stages of the production process,
- Pooling of diverse resources and talents in order to conduct research and development, or
- Building efficient marketing and sales channels.
Telecommunications joint ventures raise three broad types of competition concern:
- The potential for collusion among the parties in the joint venture,
- A loss of potential competition, and
- The potential for market exclusion and access discrimination.
Ultimately, regardless of the benefits they produce for the collaborating parties, joint ventures must deliver consumer benefits and limited (in both duration and scope) integration in order to enhance the public interest.