Treatment to Joint Ventures Under The European Commission On Merger Regulations.

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"To evaluate in an individual case whether the formation of a joint venture in the production field restricts potential competition, the commission may use a checklist of questions with respect to each of the parties..."1 A joint venture could be used to describe practically any commercial agreement concerning two or more firms. In other words, this is the coming together of two or more undertakings (parents) in order to achieve a goal by integrating part of their operations and putting it under joint control. Joint ventures cover wide commercial activities, ranging from full-merger like activities, to activities limited to some functions which include research and development (R &D), production and distribution and so on.2

Co-operation between undertakings which are on the same level in the market may not always necessarily be anti-competitive. Co-operation between such firms may, in some circumstances facilitate economies of scale and even encourage new products to be brought into the market.

Competition authorities such as the commission, usually encourage such co-operations however, keep a watchful eye against concerted practices which are not in line with the market. Examples of such agreements or Joint ventures encouraged by the commission include where two or more parties put their resources together in order to develop a project. This may only be limited in time to the development period, with usually no co-operation between the parties beyond the project. In addition, two parties can also come together to develop a project and decide together how collectively, they will embark on it. Another example is when parties combine part of their resources in a particular field, thus initiating a new jointly-owned corporate channel, with its own administration and resources, that is, finance, staff, and so on, to enable it manage its activities on a long-lasting basis.

In the case of Hitachi/Necdram/Jv3, this form of activities was found since after a joint venture was established, the commission found that after two years, the joint venture established an independent channel and had exclusive use of its own brand.

Having discussed the definition of a joint venture and the basics of what a joint venture entails, this essay will focus on how the commission treats joint ventures under the European Commission on Merger Regulations and Article 81 of the treaty expanding on how a joint venture is found based on commission requirements.

Since May 2004, major changes have been made in the application of Article 81 of the treaty and the Merger Regulation, in relation to joint ventures4, hence, these new applications would be focused on in this essay to see the commissions attitude towards joint ventures.

Treatment to Joint Ventures Under The European Commission On Merger Regulations.

A joint venture would usually be assessed under the merger regulations if it amounts to a concentration and if it has community dimension, that is where the relevant turnover thresholds are exceeded.

Concentration.

Under article 3(1)(b) of the merger regulations, "a concentration emerges when there is a change of control on a lasting basis which results from the merger of two or more previously independent undertakings, or where there are more people controlling at least one undertaking. Also, when one or more undertaking acquires direct or indirect control of the whole or part of other undertakings".5 In order for a joint venture to be eligible as a concentration under article 3(1)(b)of the merger regulation, there must be an acquisition of joint control by two or more independent undertakings, the joint venture must 'on a lasting basis perform all the functions of an autonomous economic entity, in other words, it must be a full function joint venture' as stipulated in article 3(4) of the European commission merger regulation6 and the joint venture must have community dimension. All the requirements for the existence of a joint venture under the Merger regulation would be explained separately below.

Acquisition of Joint Control.

There are various principles for determining joint control set out in the commissions notice on the concept of concentration7, however, only one of these principles would be assessed in this discussion.

The commissions notice on the concept of concentration expands upon the definition of concentration to state that "Joint control exists when two or more undertakings have the possibility of exercising decisive influence over the joint venture".8 Decisive influence means the power to block actions which establish tactical business-related behaviours of an undertaking. The critical characteristic of a joint control is the possibility of a deadlock arising from the power of the parent companies to reach strategic decisions, which require them to arrive at an understanding in determining the commercial policy of the joint venture. Under article 3(3) of the merger regulation, control is constituted by rights or any means, having regard of fact or law involved, confer the possibility of exercising decisive influence on the undertakings concerned. A recent case where the merger regulation applied the acquisition of joint control under the merger regulation is Hutchinson/Rcpm/Ect9. However, if only one parent can effectively take all the decisions by itself without the interference of any of the other parents, then it does not constitute joint control under the merger regulation.
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Examples of Joint Control Under the Merger Regulation.

When two or more participants with equal voting rights come together in a joint venture, they are said to have equal voting rights. To have equal rights, the consent of both parties is necessary before any decisions can be made. Parents are also said to have joint control when they enjoy equal shareholdings, in other words, equal rights in shareholding dealings. In the case of Alba/Beko/Grundig10 ,all the decisions had to be made by majority voting pursuant to the shareholders agreement of the joint ventures' partners. In this case, ...

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