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The Cooperative Joint Venture: The Rehabilitation of a Neglected Child

Published online by Cambridge University Press:  21 July 2009

Ernst W.J. Ferdinandusse
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Extract

On December 23, 1993 the European Commission adopted the final version of its Explanatory Notice concerning the assessment of cooperative joint ventures under Article 85 of the EC Treaty. This Notice is part of a general readjustment of the Commission's competition policy with regard to cooperative joint ventures. On that same date, the Commission took a further step in this respect by adopting Regulation 151/93/EEC, which widens the scope of four of the Commission's block exemption Regulations. This article gives an explanation of the four block exemption Regulations prior to and after their amendment by Regulation 151/93/EEC, and their importance in relation to stimulating the creation of cooperative joint ventures in the European Union. As a result of the introduction of Regulation 151/93/EEC, industry will be relieved in a number of cases from the administrative burden of having to notify joint venture agreements to the Commission in order to obtain an individual exemption from the prohibition contained in Article 85(1) of the EC Treaty.

Type
Current Legal Developments
Information
Leiden Journal of International Law , Volume 7 , Issue 1 , Spring 1994 , pp. 103 - 113
Copyright
Copyright © Foundation of the Leiden Journal of International Law 1994

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References

1. O.J. 1993, C 43/2.

2. O.J. 1993, L 21/8.

3. EC Press Release, IP/92/1111, of Dec. 23, 1992.

4. See supra note 1, para. 10. Cooperative joint ventures are joint ventures which either have been created for only a limited period of time or perform only some functions of an autonomous economic entity. Joint ventures which perform all the functions of an autonomous economic entity may also be regarded as cooperative, if they give rise to coordination of competitive behaviour of the parents in relation to each other or the joint venture.

5. Supra note 3.

6. See Art. 3(2) of Regulation 4064/89/EEC, O.J. 1989, L 395/1. This Article provides that the creation of a joint venture will be regarded as a concentration if the joint venture performs on a lasting basis all the functions of an autonomous economic entity and does not give rise to coordination of the competitive behaviour of the parties amongst themselves or between them and the joint venture.

7. See Art. 1 of Regulation 4064/89/EEC. This Article provides that concentrations with a “Community dimension” have to be notified to the Commission. A concentration has a Community dimension if the aggregate worldwide turnover of all the undertakings concerned is more than 5,000 million ECU and the aggregate Community-wide turnover of at least two of the undertakings concerned is more than 250 million ECU and each of the undertakings concerned does not achieve more than two-thirds of its aggregate Community-wide turnover within one Member State.

8. Depending on the nature of the case, the Regulation imposes a time limit on the Commission from 1 to 5 months within which it must raise its objections against the concentration. See Art. 10 of Regulation 4064/89/EEC.

9. Supra note 1.

10. See supra note 3. Such information is particularly important in cases where a joint venture does not fall within the scope of a block exemption Regulation and therefore has to be notified to the Commission in order to obtain an individual exemption.

11. See speech by Sir Leon Brittan to CEPSon “The future of EC Competition Policy”, IP/92/1009 of Dec. 8, 1992. According to the former EC Commissioner for DG IV, the Commission's decisions and procedures can either assist or hamper European industry in its attempts to compete in ever-widening markets. The Commission must therefore provide for quick decision-making and legal certainty, while toughening up its action against cartels, abusive monopolies and curbs on parallel trade.

12. See supra note 3. Within two months from the date of the complete notification, the Commission will inform the parties in writing whether or not the agreement concerned gives rise to serious doubts as to its compatibility with the EC competition rules. Where compatibility of the notified agreement with the competition rules is doubtful, the parties will receive a warning letter which informs them of the Commission's intention to launch an in-depth inquiry with a view to adopt an exemption or prohibition decision.

13. Generally, the Commission is of the opinion that cooperative joint ventures infringe Art. 85(I). In order to prevent nullity or fines, parties to a joint venture either have to draft their agreement in conformity with one of the block exemption Regulations or have to apply for an individual exemption. For a critical analysis of the Commission's policy with regard to joint ventures, see Barry Hawk, United States Common Market and International Antitrust: A Comparative Guide 308 (1990).

14. See, Council Regulation 19/65/EEC.O.J. 1965, L533/65.ThisRegulationempowerstheCommission to adopt block exemption Regulations on patent licensing and know-how licensing agreements. Further see. Council Regulation 2821III /EEC, O.J. 1971, L 285/46, which empowers the Commission to adopt block exemption Regulations on specialisation and research and development agreements.

15. See, V. Korah, EEC Competition Law and Practice, 116(1990). Koran characterises completion of the official A/B notification form as burdensome. Annexes to this form have to be prepared analysing the market and stating why the agreement does not infringe Art. 85( 1) or why it merits exemption. Preparation of these documents usually means collaboration between a manager of the company and specialised lawyers. It is difficult, costly (attorney's fees) and time-consuming work. Further, in the past one could wait several months before the Commission would seriously start analysing the notification.

16. See Art. 5 of Regulation 151/93/EEC.

17. See Ritter, Rawlinson and Braun, EEC Competition Law, A Practioner's Guide 127, 133 (1991).

18. See Art. 1 of Regulation 417/85/EEC, O.J. 1985.L53/1.

19. However, the scope of Regulation 417/85 is considerably wider than that of its predecessors, the first of which was introduced by the Commission in 1972. See Barry E. Hawk, supra note 13, at 260.

20. See, Art. 3(1)c of Regulation 417/85/EEC.

21. Supra note 16.

22. See Art. 2(1)c of Regulation 417/85/EEC.

23. See Art. 3(1)b of Regulation 417/85/EEC.

24. See Art. 4 of Regulation 417/85/EEC. Under the opposition procedure, undertakings whose aggregate turnover exceed 500 million ECU may still benefit from Regulation 417/85/EEC provided that the respective agreement is notified to the Commission and that the Commission does not oppose an exemption within a 6 month period. In practice, this procedure is seldomly applied. In 1990 the Commission received two notifications requesting appl ication for the opposition procedure. See The 29th (Commission) Report on Competition Policy 45 (1991).

25. For example see VFA/Sauer, The 15th (Commission) Report on Competition 78 (1986). See also the Commission Decision in ENI Montedison, O.J. 1987, L 3/13. In this Decision the Commission exempted a series of agreements involving a reciprocal transfer of certain lines of business in the petro-chemical industry. These agreements included, inter alia, reciprocal supply provisions, and were de facto treated by the Commission as specialisation agreements.

26. See Art. 1(3) of Regulation 151/93/EEC.

27. Supra note 3.

28. See Art. 1(5) of Regulation 151/93/EEC.

29. Id.

30. See the view expressed by the Commission in recital 4 of Regulation 418/85/EEC, O.J. 1985, L 53/5.

31. See Art. 1 of Regulation 418/85/EEC, OJ 1985 L 53/5.

32. See Art. 2(e) and 2(f) of Regulation 418/85/EEC.

33. See Art. 3(2) of Regulation 418/85/EEC.

34. See Art. 3(1) of Regulation 418/85/EEC.

35. See Art. 3(3) of Regulation 418/85/EEC.

36. See Art. 2(1) and 2(2) of Regulation 151/93/EEC.

37. Supra note 21.

38. See the view expressed by the Commission in recital 12 of Regulation 2349/84/EEC, O.J. 1985, L 280/32.

39. See Art. 1(1) of Regulation 2349/84/EEC.

40. See recital 7 of Regulation 2349/84/EEC.

41. See Article 5(1)2 of Regulation 2349/84/EEC.

42. See, inter alia, V. Korah, R & D and the EEC Competition Rules Regulation 418/85/EEC 15 (1986). Koran argues that a joint venture may have legal personality, but will probably not be controlled by a single undertaking. If control is what matters a joint venture will not be regarded as a single undertaking since it will be able to operate only with the consent of two or more undertakings.

43. See Art. 3(1) of Regulation 151/93/EEC.

44. Supra note 27.

45. Id.

46. Id.

47. See recital 1 of Regulation 556/89/EEC, O.J. 1989.L 61/1.

48. See Art. 1(1) of Regulation 556789/EEC.

49. See Art. 5(1)2 of Regulation 556/89/EEC.

50. See Art. 4 of Regulation 151/93/EEC.

51. Supra note 33.

52. See Arts. 1,2, 3 and 4 of Regulation 151/93/EEC.

53. Supra note 35.

54. Nevertheless, if the aggregate turnover of the parties to a specialisation agreement were to exceed 1100 million ECU, they could still apply for the opposition procedure, See Art. I of Regulation 151/93/ EEC.

55. Supra note 35.

56. See Ritter, Rawlinson and Brown, supra note 17, at 136, who explain the large number of specialisation agreements that have been cleared by individual exemptions or comfort letter by the fact that specialisation agreements which include distribution by a joint venture do not fall within the scope of the block exemption Regulation.

57. See V. Korah, supra note 15, at 232. Korah criticises the Commission's method of drafting narrow group exemption Regulations. In her view it is often virtually impossible to bring an agreement within their scope. In particular, she doubts whether in practice any R /85/EEC.

58. A first indication hereof is provided by the Commission's Notice in the BP Chemicals/Enichem Case, O.J. 1993, C 272/7. BP Chemicals and Enichem had notified a joint research and development agreement in the field of polyethylene to the Commission. The Commission explicitly argued that the notified agreement could not benefit from the amended Regulation 418/85/EEC since the combined market share of Enichem and BPChemicals in the field of certian chemicals exceeded the thresholds of the Regulation. The agreement therefore needed an individual exemption.