[Federal Register Volume 62, Number 179 (Tuesday, September 16, 1997)]
[Notices]
[Pages 48660-48662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24515]
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FEDERAL TRADE COMMISSION
Comment and Hearings on Joint Venture Project
AGENCY: Federal Trade Commission.
ACTION: Notice of second opportunity for comment and public hearing on
Joint Venture Project.
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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 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 hearing
concerning these issues in November, 1997.
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 distrubte 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. In order to better inform itself as to these issues, the
Commission engaged in a first round of public comment and hearings
regarding issues identified in a notice published on April 28, 1997, at
62 FR 22945. Now the Commission is seeking comment and testimony
regarding additional issues, including some issues that the first round
of comments and testimony have indicated warrant follow-up attention.
The Commission's April 28 notice sought information relating to
many of the issues associated with the potential anticompetitive
effects of competitor collaborations. Consequently, the factual
questions in this notice deal primarily with possible efficiencies.
Specifically, the FTC is seeking comment at this time on the following
issues:
Factual Questions Relating to Competitor Collaborations
The Commission is interested in better understanding the
efficiencies that may be generated by competitor collaborations.\1\ 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.
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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 information concerning 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 and discuss the efficiencies that may result
from collaborations among competitors.
Questions
What kinds of efficiency benefits are most frequently attributed to
competitor collaborations, e.g., economies of scale, risk reduction, or
learning advantages?
To what extent are differences in assets or technology among
prospective participants important to the possible efficiency benefits
from a competitor collaboration?
What contractual problems do prospective competitor collaboration
participants encounter in designing an arrangement to achieve
efficiency gains, and how have those problems been solved? What types
of agreements or mechanisms are most frequently or most successfully
used to align incentives? to safeguard the value of assets or efforts
that individual participants might contribute to the collaboration? to
deal with possible disputes among the participants? Are particular
contractual problems more pressing in certain kinds of ventures, or in
certain industries, than in others?
How and under what circumstances do variations in a competitor
collaboration's governance structure--such as variations in individual
participants' abilities to affect the collaboration's level of output
or to control portions of its productive capacity--affect the
collaboration's ability to achieve efficiencies?
Under what circumstances might restrictions on the ability of
participants to compete promote legitimate efficiency goals?
Specifically, when and how can restrictions on price, quality,
advertising, geographic scope, or other dimensions of competition
contribute to legitimate efficiency ends? Are some restrictions more
closely related to the formation of a competitor collaboration, while
others are needed to help the collaboration run smoothly after it is
formed?
Under what circumstances might various exclusivity provisions be
related to the efficiency goals of the competitor collaboration?
Examples could include
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agreements that participants satisfy all of their input needs from the
collaboration or that participants refrain from competing with the
collaboration, either unilaterally or as part of another group.
When can information exchanges (including exchanges of
competitively sensitive data) among participants in a competitor
collaboration be necessary to achieving efficiencies?
How and under what circumstances do restrictions on membership in
or access to assets controlled by a competitor collaboration promote
efficiency? What criteria do firms employ in initially selecting co-
participants when establishing competitor collaborations?
Can reciprocal buying agreements among participants or restrictions
on participants' activities outside the collaboration's market have
efficiency rationales?
Under what circumstances do restraints in competitor collaborations
give rise to efficiencies that are experienced over the long run or
that affect competition in a dynamic sense (such as through incentives
for innovation) rather than in the short run?
What factors affect determinations to pursue business goals through
traditional joint ventures as opposed to alternative mechanisms such as
short-term contracts, long-term contracts, licensing and franchise
agreements, minority equity investments, strategic alliances, and asset
acquisitions? When are the various alternatives relatively good or
relatively poor substitutes in achieving efficiency goals?
Has the mix between traditional joint ventures, short- and long-
term contracts, licensing or franchising, minority equity investments,
strategic alliances, and asset acquisitions changed over time? If so,
what factors are responsible?
In what ways does the initial agreement as to the duration of a
competitor collaboration affect its ability to achieve efficiencies?
Antitrust law often considers whether efficiency goals might be
achieved with less competitively restrictive alternatives. What factors
must participants in competitor collaborations take into account (other
than potential antitrust liability) in determining the breadth of a
competitive restraint? Are there real-world examples in which
relatively narrow restraints were ineffective in achieving efficiency
goals?
To what extent has non-exclusivity--the ability of the participants
in a competitor collaboration to compete with the collaboration--
reduced the anticompetitive effects of competitor collaborations? What
factors tend to demonstrate that a competitor collaboration is non-
exclusive in fact as well as on paper?
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 have successfully dealt with issues raised by
competitor collaborations 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 the efficiencies of
competitor collaborations require clarification? For example, is
clarification required regarding the evaluation of efficiency
justifications for competitive restrictions, information exchanges, or
membership rules?
Have there been any circumstances in which the chosen form of
competitor collaboration (such as traditional joint ventures, short-
and long-term contracts, licensing and franchise agreements, minority
equity investments, strategic alliances, and asset acquisitions) has
been affected by uncertainty about antitrust rules or possible costs of
antitrust investigation or litigation?
Have there been any circumstances in which antitrust standards
regarding less restrictive alternatives, including burdens of proof,
have failed to take into account the difficulty in practical terms of
fashioning and implementing a theoretically less restrictive
alternative?
Antitrust standards for distinguishing legitimate competitor
collaborations from ``sham'' arrangements often have been articulated
in terms of ``integration'' rather than in terms of ``efficiencies.''
Have there been circumstances when the use of integration-based
standards has deterred the formation or impaired the operation of
competitor collaborations that could have enhanced competition? If so,
please give specific real-world examples (or explain in the context of
hypothetical facts). Under what circumstances might greater integration
signal greater potential for anticompetitive effects as opposed to a
greater likelihood of achieving procompetitive efficiencies? Should
more specific standards for distinguishing legitimate from sham
arrangements be considered in conjunction with particular types of
collaborative activity or particular industries?
To what extent, if any, should the expected evolution of a
competitor collaboration be taken into account in determining its state
of integration? For example, when, if ever, should rule of reason
treatment be accorded a collaboration that fails integration criteria
today on grounds that it may pass muster in the near future? How could
enforcement agencies evaluate such a likelihood? Would such dynamic
considerations be particularly relevant in certain industries or in
particular circumstances? If so, where and why?
Antitrust standards for distinguishing competitor collaborations
warranting rule of reason review rather than per se condemnation have
sometimes looked to whether the collaboration has created a new
product. What are the factors that should be included in a
determination that the fruits of a competitor collaboration constitute
a new product? What role should a determination that a competitor
collaboration produces a new product play in the assessment of the
collaboration's competitive effects?
What role should a determination that a competitor collaboration
adds capacity in a relevant market play in the assessment of the
collaboration's competitive effects?
What role should a determination that a competitor collaboration is
non-exclusive--that is, that it allows its participants to compete
independently in the joint venture market--play in the assessment of
the collaboration's competitive effects?
What mechanisms should be employed in assessing the net effects of
a competitor collaboration (or of a restraint associated with a
competitor collaboration) that would likely achieve efficiencies but
also would likely harm competition absent the efficiencies?
Are there instances when unusual cost or demand conditions might
make it appropriate to modify or qualify general antitrust policy with
regard to competitor collaborations? For example, should enforcement
policy concerning competitor collaborations be modified when there are
substantial scale economies from increasing group size or consumer
switching costs, such as may arise in network industries or in
standard-setting contexts?
Under what circumstances, if any, should participants be able to
assert that membership restrictions are necessary to ensure that
members of a competitor collaboration can use cost advantages or
innovation to compete more effectively in the output market?
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Are there any circumstances under which the competitive effects of
restraints associated with a competitor collaboration should be
analyzed like the competitive effects of single firm conduct?
Under what circumstances is a competitor collaboration less likely
than a merger of the same participants to restrict competition within
any relevant market? What adjustments to merger analysis could take
these considerations into account? Under what circumstances is a
competitor collaboration more likely than a merger to restrict
competition within any relevant market? What adjustments to merger
analysis could take these considerations into account?
Under what circumstances is a competitor collaboration more likely
than a merger of the same participants to achieve efficiencies within
any relevant market? What adjustments to merger analysis could take
these considerations into account? Under what circumstances is a
competitor collaboration less likely than a merger of the same
participants to achieve efficiencies within any relevant market? What
adjustments to merger analysis could take these considerations into
account?
FTC/DOJ Guidelines
If the Joint Venture Project were to result in the development of
guidelines applicable to competitor collaborations, what factors should
be considered in demarcating the division between transactions covered
by the new guidelines and transactions covered by the existing
Department of Justice and Federal Trade Commission Horizontal Merger
Guidelines?
DATES: Any interested person may submit written comments by December
12, 1997. Requests to participate in public hearings should be
submitted by October 17, 1997, or earlier if at all possible. Such
requests should identify the requesting party and briefly state the
matter than the party wishes to address at the hearings. Public
hearings will be held in November, 1997, at the Federal Trade
Commission, Sixth Street and Pennsylvania Avenue, N.W., Washington,
D.C. 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 and \1/4\ or 3 and \1/2\ inch computer disk, with a label on the
disk stating the name of the commenter and the name and version of the
word 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 submissions may be sent by
electronic mail to [email protected]. Submissions should be captioned
``Comments on Issues relating to Joint Venture Project--Second Federal
Register Notice'' and addressed to Donald S. Clark, Office of the
Secretary, Federal Trade Commission, Sixth Street and Pennsylvania
Avenue, N.W., Washington, D.C. 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.
SUPPLMENTARY 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. 97-24515 Filed 9-15-97; 8:45 am]
BILLING CODE 6750-01-M