[Federal Register Volume 62, Number 81 (Monday, April 28, 1997)]
[Notices]
[Pages 22945-22948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10853]
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FEDERAL TRADE COMMISSION
Comment and Hearings on Joint Venture Project
AGENCY: Federal Trade Commission.
ACTION: Notice of opportunity for comment and public hearing.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is
requesting public comment about issues to be addressed in the Joint
Venture Project that the Commission has authorized. The Project is
being
[[Page 22946]]
undertaken by the Commission in collaboration with the Department of
Justice. Comments may be provided to the Commission in writing as
specified below. In addition, the Commission will hold public hearings
concerning these issues beginning June 2, 1997. The Commission is
likely to provide another opportunity for public comment in the fall of
1997 on additional issues to be addressed in connection with the Joint
Venture Project.
The Joint Venture Project grows out of public hearings held by the
FTC in the fall of 1995, at which businesses reported that global and
innovation-based competition is driving firms toward ever more complex
collaborative agreements that sometimes raise new competition issues.
Some commenters at those hearings also requested clarification and
updating of current antitrust policy toward business collaborations
among competitors.
The Joint Venture Project will address whether antitrust guidance
to the business community can be improved through clarifying and
updating antitrust policies regarding joint ventures and other forms of
competitor collaborations. As has been generally noted, businesses may
find it desirable to collaborate with rivals in order to achieve a
large variety of goals: Attain economies of scale; increase capacity
and market access; minimize risk; avoid duplication; transfer,
commercialize, or distribute technology efficiently; combine
complementary or co-specialized capabilities; or better appropriate the
returns of innovation. Some competitor collaborations, however, raise
antitrust concerns about the degree to which competition among rivals
has been curtailed. In such cases, antitrust enforcers must assess
whether and to what extent competition is harmed.
Issues relevant to why and how competitors wish to collaborate with
their rivals, and the impact those arrangements have on competition,
are of interest to the Commission in connection with the Joint Venture
Project. Specifically, the FTC is seeking comment at this time on the
following issues:
Factual Questions Relating to Recent Trends in Collaborations Among
Competitors
The Commission is interested in better understanding the current
use of competitor collaborations \1\--including new types of competitor
collaborations, their business purposes, and any business reasons why
they may have become more frequent. As an aid to understanding, the
Commission has included the following questions as examples of the
kinds of factual information in which the Commission is interested.
Those who respond should neither feel constrained by those questions
nor compelled to answer each one, however. The most informative
responses will aid the Commission in better understanding new types of,
and possibly more frequent, competitor collaborations.
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\1\ For purposes of this notice, ``competitor collaborations''
should be understood as including all collaborations, short of a
merger, between or among entities that would have been actual or
likely potential competitors in a relevant market absent that
collaboration.
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Because real-world examples are usually the most informative, the
Commission would prefer descriptions of competitor collaborations that
actually have been undertaken. However, recognizing that businesses may
wish to protect confidential information about some collaborations, the
Commission also encourages the use of hypothetical fact patterns to
describe the types of business situations that are prompting new types
of and more frequent collaborations among competitors.
Questions
During the past few years, in what types of collaborations with
competitors have businesses engaged and what have been the business
purposes of those collaborations?
What types of legal arrangements have been used (e.g., traditional
forms of joint ventures, strategic alliances, contractual arrangements,
etc.) and why? In what ways, if any, did those legal arrangements
differ from traditional forms of joint ventures?
To what extent have competitor collaborations involved an
integration of operations or facilities as opposed to other types of
contractual arrangements?
What types of business activities have been most often involved in
recent competitor collaborations--e.g., production, information-
sharing, marketing, selling, buying, etc.? Why were collaborations with
competitors, rather than single-firm activity, preferred as the means
used to accomplish them? What were the perceived advantages and
possible disadvantages of competitor collaborations as opposed to
independent activity or merger? To what extent, if any, have the
business activities covered by recent competitor collaborations
differed from business activities covered by earlier competitor
collaborations?
Under what circumstances have competitor collaborations involved
more than one type of business activity--e.g., joint product
development plus joint production plus joint marketing? What are the
business reasons that have prompted such collaborations? Would the
collaborations still have taken place in the absence of one or more of
the business activities--e.g., if joint selling was not achievable? If
not, why not? For collaborations that included joint marketing, why was
it necessary to use joint, rather than independent, marketing (e.g.,
advertising, distribution, sales, etc.)?
Under what circumstances have competitor collaborations involved
more than two firms? What are the business reasons that have prompted
such collaborations?
What have been the primary business goals of such arrangements--
e.g., entering into new markets, sharing costs, sharing and managing
the risk associated with large capital investments and uncertain future
earnings streams, etc.? Why were competitor collaborations rather than
independent activity or merger preferred as the means to achieve those
goals? To what extent, if any, did the business goals of recent
competitor collaborations differ from business goals on which earlier
competitor collaborations were based? To what extent, if any, did the
goals of the members of the competitor collaborations differ from each
other?
In what ways (if any) do competitor collaborations typically vary
by type of industry? In what ways (if any) do competitor collaborations
typically vary when their primary customer is a government agency?
What are the business issues relevant to determining with which
firm or firms to collaborate? Once a collaboration is formed, what are
the business issues relevant to determining whether to admit additional
members or to confer partial access to non-member competitors? What
mechanisms are used in making such decisions? What are the terms on
which access is granted, and how are they determined?
What are the mechanisms for determining price and output levels?
Are these determinations made independently by individual members or
jointly? Through what mechanism is joint control exercised? What
business factors govern these choices?
What mechanisms are used for allocating costs and sharing profits
among the participants in a competitor collaboration? How are internal
transfer prices set?
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What factors affect the incentive or the ability of a participant
to invest significant assets and efforts in a competitor collaboration?
What types of arrangements are necessary to prevent opportunistic
conduct by participants?
In general, competitor collaborations may be ``exclusive'' (that
is, members of the collaboration are not permitted to compete against
it independently) or ``non-exclusive'' (that is, members of the
collaboration are permitted to compete against it independently). Have
recent competitor collaborations most often been ``exclusive'' or
``non-exclusive''? What were the business reasons for choosing between
exclusivity or non-exclusivity? What factors affect the incentive or
the ability of a member to compete with the collaboration?
For competitor collaborations involving the possibility of
investment and expansion by the venture, what mechanisms are used to
make such decisions? By whom are such decisions made? Can such
decisions be made unilaterally by individual members?
What has been the typical duration of competitor collaborations?
Why have they been of such duration? When no limit is placed on
duration, what mechanisms govern termination? Is there any difference
between the typical duration of recent competitor collaborations as
opposed to earlier competitor collaborations? If so, why?
What limitations are placed on competition from former members
after withdrawal from or termination of competitor collaborations?
Have competitor collaborations typically involved business
activities in countries other than the U.S. or in other countries and
the U.S.; if so, why was a competitor collaboration used for such
international activity? In what ways (if any) do competitor
collaborations typically vary when they involve conduct in foreign
countries?
In general, have competitor collaborations worked well to achieve
their business purposes? Why or why not?
Policy and Legal Questions Relating to Competitor Collaborations
The Commission also is interested in better understanding the
extent to which antitrust law and the antitrust agencies' current
policy guidelines and advice mechanisms are useful to businesses, and
how the usefulness of antitrust guidance might be improved. The
following questions are suggestive of issues that would be of interest
in responses, but, again, the questions are not intended to constrain
or to require responses.
Questions
The State of Antitrust Law
What aspects of antitrust law regarding joint ventures or other
collaborations among competitors require clarification?
For the following competitive issues, in what circumstances are
competitor collaborations more or less likely to cause competitive
harm? What are the factors critical to an accurate assessment of
whether competitor collaborations will likely harm competition in those
circumstances? Are there any of the following issues on which the
agencies should not focus in analyzing the permissibility of competitor
collaborations under antitrust law? Which are why?
--Whether the price- or output-related decisions of competitor
collaborations may harm competition
--Whether restrictions on competition between or among the members of a
competitor collaboration, or between the collaboration and another
entity, may harm competition
--Whether the competitor collaboration increases the likelihood of
collusion outside the joint venture as a result of sharing
confidential, competitively sensitive information or other mechanisms
--Whether the competitor collaboration may raise rivals' cost
--Whether a denial of membership in or access to a competitor
collaboration may harm competition
--Whether a competitor collaboration that lacks market power in any
relevant market may still harm competition in a relevant market
How can a collaboration among rivals be structured and implemented
to reduce the likelihood of anticompetitive harm from any of the above-
listed competitive issues? For example, what mechanisms should be
included in joint venture agreements to prevent the inappropriate
sharing of competitive, confidential information among venture
participants? What types of procedural or structural mechanisms can a
competitor collaboration use to lessen the likelihood of
anticompetitive harm from any of the above-listed competitive issues?
Which of those mechanisms, if any, may be undesirable from a business
perspective? Why and in what ways?
What are the benefits and harms of treating certain types of
conduct as per se unlawful? How might current articulations of the
dividing lines between per se and rule of reason analysis, or between
quick-look or full-blown rule of reason analysis, be clarified? Are
there new articulations of those dividing lines that are worth
consideration by the antitrust agencies and the courts?
What factors should be used to determine whether price or non-price
restrictions are related to the procompetitive purpose of a competitor
collaboration? What factors should be used to determine whether price
or non-price restrictions are reasonably necessary for achieving the
procompetitive purpose of a competitor collaboration?
What are the factors that should be included in a rule of reason
analysis of a competitor collaboration? Are there particular factors
whose early examination could simplify rule of reason analysis? If so,
what are they, and why and how could they simplify the analysis? In
what ways could reliance on such factors reduce the ability of
antitrust enforcers to discern anticompetitive effects?
Are there any circumstances in which forms of competitor
collaboration that could have enhanced competition have been deterred
due to uncertainty about antitrust rules or possible costs of antitrust
investigation or litigation? What were the circumstances, and what was
the uncertainty?
Are there any circumstances in which parties have failed to
challenge arguably anticompetitive competitor collaborations due to
uncertainty about antitrust rules or possible costs of antitrust
investigation or litigation? What were the circumstances, and what was
the uncertainty?
How has the National Cooperative Research and Production Act of
1993 (``NCRPA'') \2\ affected competitor collaboration? In what
circumstances has the Act's notification procedure been used? Are there
any factors that prevent this procedure from achieving its full
potential benefits?
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\2\ The NCRPA, Pub. L. 103-42, 107 Stat. 117 (1993) (current
version at 15 U.S.C.A. 4301-4306), provides for rule-of-reason
treatment and limitation of damages for certain research and
development and production joint ventures for which notification is
filed with the Department of Justice and the Federal Trade
Commission.
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FTC/DOJ Guidelines
Which set of agency guidelines--e.g., Statements of Antitrust
Enforcement Policy in Health Care, Antitrust Guidelines for the
Licensing of Intellectual Property, Horizontal Merger Guidelines issued
by the U.S. Department of Justice and the Federal Trade Commission--is
used most frequently in providing guidance regarding permissible
competitor collaborations and collateral agreements? Why?
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To what extent, if any, do any of the current agency guidelines
constrain competitor collaborations so as to prevent firms from
adopting new ways to compete more effectively? How? To what extent, if
any, do agency guidelines affect the strategic decisions of companies?
How?
In what areas, if any, is agency guidance through guidelines
inadequate for the current needs of business? What are those areas, and
what are the perceived inadequacies? To what extent could such
inadequacies be remedied through changes in or additions to the current
guidelines, and to what extent would effective remedies require more
targeted fact-specific advice in the form of advisory opinions?
FTC Advisory Opinions
How often do you ask for Commission or staff advisory opinions
regarding new types of competitor collaborations? In what types of
circumstance do you use those procedures? Are these circumstance in
which you do not use them? Why?
What are the advantages and disadvantages, from a business
viewpoint, of obtaining a Commission or staff advisory opinion about
the antitrust legality of a proposed or current collaboration among
competitors?
DATES: Any interested person may submit written comments by August 1,
1997. Request to participate in public hearings should be submitted by
May 16, 1997, or earlier if at all possible. Such request should
identify the requesting party and briefly state the matter that the
party wishes to address at the hearings. Public hearing will be held
beginning June 2, 1997, at the Federal Trade Commission, Room 332,
Sixth Street and Pennsylvania Avenue, NW., Washington, DC 20580.
ADDRESSES: To facilitate efficient review of public comments, all
comments should be submitted in written and electronic form. Electronic
submissions may be made in one of two ways. They may be filed on either
a 5\1/4\ or 3\1/2\ inch computer disk, with a label on the disk stating
the name of the commenter and the name and version of the work
processing program used to create the document. (Programs based on DOS
or Windows 3.1 are acceptable. Files from other operating systems
should be submitted in ASCII text format.) Alternatively, electronic
submission may be sent by electronic mail to [email protected].
Submission should be captioned ``Comment on Issues relating to Joint
Venture Project'' and addressed to Donald S. Clark, Office of the
Secretary, Federal Trade Commission, Sixth Street and Pennsylvania
Avenue, NW., Washington, DC 20580.
Notice of interest in participating in the hearings also should be
addressed in writing to the Office of the Secretary at the above
address.
FOR FURTHER INFORMATION CONTACT: Policy Planning staff at (202) 326-
3712.
SUPPLEMENTARY INFORMATION: The Commission is examining its role in
enforcing antitrust laws in light of the above issues. Public comments
and hearings are expected to provide information relevant to
determining what, if any, actions may be desirable. The Commission has
general authority under the FTC Act to interpret its substantive laws
through guidelines, advisory opinions, and policy statements.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 97-10853 Filed 4-25-97; 8:45 am]
BILLING CODE 6750-01-M