[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