CMA publishes Joint Venture Business Advice

Joint ventures have become increasingly important as a means of attracting private sector innovation and investment in the delivery of public services (public-private JVs), as well as means by which public authorities may combine resources in the delivery of their functions (public-public JVs). Some of the most common local government services provided through JVs are HR, finance, road repair and maintenance, and school catering.[1] More recently there has been a marked growth in the use of JVs in regeneration and strategic estates partnerships, housing developments, and consortia being created to bid for public sector contracts including in particular larger scale community health service contracts. 

On 12 April 2018 the Competitions and Markets Authority (CMA) published a short guidance note entitled Joint Venture Business Advice.

While noting that collaboration can deliver innovation and choice for customers, the CMA warns that certain forms of collaboration can breach competition law, specifically Article 101 of the Treaty on the Functioning of the European Union, and section 2(1) of the Competition Act 1998 ("the Chapter I prohibition") which prohibit "agreements between undertakings, decisions by associations of undertakings or concerted practices which may affect trade, and have as their object or effect the prevention, restriction or distortion of competition". Breaches can have serious consequences including substantial fines, director disqualification, reputational damage and – in the most serious cases – criminal sanctions.

The CMA guidance sets out a list of Dos and Don'ts to consider including:

Do:

• Define the true purpose of the collaboration and be precise about what it aims to achieve.
• Be clear, specific, and honest about the pro-competitive goals and the limits of the collaboration.
• Be clear on how the proposed innovation will directly benefit customers.
• Be clear that the proposed innovation could not be achieved by the collaborating businesses acting alone (the general starting point in competition law is that competitors should act independently of each other).
• Check whether the collaboration would reduce or get rid of existing competition between the collaborating businesses; the greater any reduction in competition, the higher the legal risk.
• Make sure that any reduction in competition brought about by the collaboration is no more than is absolutely necessary to achieve its goals.
• Regularly check your joint venture arrangements to ensure they are compliant with the law.
• Take independent legal advice.

Don't:

• Think that collaborative arrangements which try to mask what is otherwise price fixing, market sharing, output restriction or bid-rigging will escape detection and fines.
• Think that using an intellectual property licence as a framework for collaboration (or simply calling it a joint venture) will protect the arrangement from scrutiny. Sales restrictions agreed between competitors are likely to be seen as a market sharing arrangement and could attract significant fines.
• Share sensitive information that relates to business matters not covered by the joint venture.

For more information on this topic please contact Trevor Watt or David Owens.

[1]              Better together: Building a successful joint venture company, Grant Thornton, 2016