STATUS AND EFFECT OF COOPERATIVE JOINT

VENTURES UNDER INDIAN COMPETITION LAW

Sudipto Sircar
1



I. INTRODUCTION

Cooperative Joint ventures (or Contractual Joint Ventures, as they are also known) are a
vexatious issue under competition law. They may and often do combine defining aspects of
both a regular combination (which can be analysed by a competition regulatory authority to
determine whether the combination would inhibit competition in the relevant market), as well
as an agreement (which would require the competition regulatory authority to determine
whether the agreement is anti-competitive or an abuse of dominant position under the
respective competition law of that particular jurisdiction).

This conflict and confusion is probably the reason why after much pendulous debates and
Orders, the European Commission finally decided to enact a separate regulation for
cooperative joint ventures. But as we shall see below, even the provisions of this regulation
are often criticised and dissected on a regular basis. Needless to say, the issue will in all
probability also arise before the Competition Commission of India (CCI) as Indian
competition jurisprudence begins to gradually develop overtime.

The aim of this paper is to elaborate in detail the competition law regarding cooperative joint
ventures and to present the measures and methods which may be adopted by the Commission
when it is finally called upon to handle such issues. Part I being the introduction, Part II shall
elaborate upon the concept of cooperative/contractual joint ventures (hereinafter referred to
as CJVs). It shall provide a definition for the phrase and elaborate as to what exactly would
constitute a cooperative joint venture. Part III shall elaborate in detail the EU law regarding

1
V Year, B.A. LLB. (Hons.), Amity Law School, Delhi (GGSIP University), India

cooperative joint ventures, including the important Orders and Judgements in EU competition
law on the same. Part IV shall then focus on the competition law (or anti-trust law) in the
United States of America (U.S.A.) regarding such agreements. Part V shall deal with the
problem of cooperative joint ventures under the Competition Act, 2002
2
and suggest the
preferred method of analysis which may help the Commission best analyze such ventures or
agreements.


II. COOPERATIVE/CONTRACTUAL JOINT VENTURES: CONCEPT AND
SCOPE OF DEFINITION

To be fair, most competition law jurisdictions choose not to specifically define the term
cooperative joint venture. The definition is generally interpreted through the definition of a
concentrative joint venture. For example, the European Commission has defined the term
under Article 3(2) of the Regulation on the Control of Concentration between Undertakings
of 1989
3
(herein after referred to as the Merger Regulation) which states that an operation,
including of a joint venture, which has as its object or effect the coordination of the
competitive behaviour of undertakings which remain independent shall not constitute a
concentration within the meaning of paragraph 1(b).
4
Similarly in the U.S., the Federal
Trade Commission (FTC) has defined such agreements under the term competitor
collaboration and defines such an agreement which comprises a set of one or more
agreements, other than mergers agreements, between or among competitors to engage in
economic activity, and the economic activity resulting there from Competitors
encompasses both actual and potential competitors. Competitor collaborations involve one or
more business activities, such as research and development (R&D), production, marketing,
distribution, sales or purchasing. Information sharing and various trade association activities
also may take place through competitor collaborations.
5
Obviously, as per this definition,

2
The Competition Act, 2002 (12 of 2003)
3
Council Regulation (EEC) No. 4064/89 On The Control of Concentrations Between Undertakings [1989] OJ
L395/1
4
Id., Article 3(2)
5
Antitrust Guidelines for Collaboration Among Competitors, Issued by the F.T.C. and the Department of Justice
(D.O.J.) [2000], available at <http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf>, (viewed on 15.11.2012)
competitor collaborations can be infinite in variety.
6
Such agreements can range from
agreements for Research and Development (R & D) to, production agreements and
commercialisation agreements to even standardisation agreements. These definitions
however, as we shall see below, are sufficient for the purpose as the only requirement is to
differentiate between a concentrative and cooperative joint venture for the purpose of
evaluation by competition authorities. Once an agreement is established to be not a
concentrative joint venture, it is implied that the agreement between the companies is a
cooperative joint venture.


III. CJVS UNDER E.U. COMPETITION LAW

The European Union clearly distinguishes between concentrative joint ventures and
cooperative joint ventures, and has clear regulations to regulate both. In fact, much has been
discussed and laid down with regards the competition law on cooperative joint ventures in
Europe. It has been acknowledged by the Commission that competition laws simply cannot
prohibit all horizontal agreements and that the efficiency gains which follow from
cooperation are sufficient any restriction of competition that it might entail.
7
The accepted
verdict among jurists is that while the experience there (in the EU) has shown that while
some bright line indicators can be developed in terms of the boundaries between
cooperative and concentrative arrangements, in some cases an element of pragmatism is
required.
8
However, it is important to clarify for context that there has been a difference in
the European Commissions approach before and after the Regulation on The
Implementation of the Rules on Competition Laid down in Articles 81 and 82 of the Treaty
of 2003 came into force.
9
Before this regulation, European competition law, including that
related to cooperative joint ventures, was governed under Article 81 to Article 85 of the
Consolidated Version of The Treaty Establishing the European Community (hereinafter

6
G. J. Werden, Symposium: Antitrust Scrutiny of Joint Ventures: Antitrust Analysis of Joint Ventures: An
Overview, Antitrust Law Journal, Vol. 66, No. 3, 1998 , p.730
7
Richard Whish and David Bailey, Competition Law, 7
th
Edn. ,Oxford University Press, New York, 2012, p.
585
8
Suzanne Rab, Indian Competition law: An International Perspective, Wolters Kluwer (India) Pvt. Ltd.,
Gurgaon, 2012, p. 22
9
Council Regulation (EC) No. 1/2003 on The Implementation of The Rules on Competition Laid Down in
Articles 81 and 82 of the Treaty [2002] OJ 1/1
known as the E.C. Treaty).
10
However, after the enactment of the above mentioned
regulation, European competition law is administered under Articles 101 to 106 of the
Treaty of the Functioning of the European Union (hereinafter referred to as the T.F.E.U.).
11

As per the 2003 regulation, the Commission was allowed to formerly decide whether the
criteria under Article 101(3) were satisfied in the case of cooperative joint ventures only by
adopting a declaration of inapplicability under Article 10 of the Regulation.
12
However, it has
till date declined to do so.
13
Hence, all decisions of the Commission discussed below are
those decided under Article 85 of the E.E.C. Treaty.

Under European Competition law today, cooperative joint ventures are primarily evaluated
under Article 101 of the Treaty of the Functioning of the European Union (TFEU).
14
Other
than the above, they are also partially regulated under the Regulation on the Control of
Concentration between Undertakings of 1989.
15
These must be read together with three

10
Consolidated Version of The Treaty Establishing the European Community [2006] OJ C321/E37
11
Consolidated Version of The treaty of the Functioning of the European Union [2008] OJ C115/47
12
Richard Whish and David Bailey, Competition Law, 7
th
Edn. ,Oxford University Press, New York, 2012, p.
587
13
Id.
14
Article 101 states as follows:
1. The following shall be prohibited as incompatible with the internal market: all agreements between
undertakings, decisions by associations of undertakings and concerted practices which may affect trade between
Member States and which have as their object or effect the prevention, restriction or distortion of competition
within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices
or any other trading conditions; (b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other
trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject
to acceptance by the other parties of supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.

3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
any agreement or category of agreements between undertakings,
any decision or category of decisions by associations of undertakings,
any concerted practice or category of concerted practices,

which contributes to improving the production or distribution of goods or to promoting technical or economic
progress, while allowing consumers a fair share of the resulting benefit, and which does not:

(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these
objectives;(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part
of the products in question.
15
Council Regulation (EEC) No. 4064/89 On The Control of Concentrations Between Undertakings
[1989] OJ L395/1
other official documents which have been released by the European Commission on
cooperative joint ventures. Firstly, the Information Notice of the Commission on the
distinction between concentrative and cooperative joint ventures under the above mentioned
1989 Regulation.
16
Secondly, the Guidelines on The Applicability of Article 101 of the
Treaty on the Functioning of the European Union to Horizontal Co-operation Agreements.
17

Thirdly, the Commission notice Concerning the Assessment of Cooperative Joint Ventures
Pursuant to Article 85 of the EEC Treaty (now Article 101 of the TFEU).
18
Over and above
these, the European Union also provides Block Exemptions on applicability of Article 101 for
certain categories of vertical agreements
19
, R & D Agreements
20
, Specialisation Agreements
21

and Technology Transfer Agreements.
22
The primary ground for such exemptions is
efficiency and indispensability and benefit to consumers.
23
Faull
24
has explained the
indispensability test well as cited below:

"...The indispensability test under Article 85(3) seems to call for a second
analysis of the possibility that the parents might have done alone what the
joint venture was set up to do. However, this is to misunderstand Article
85(3). The indispensability which must be shown is that of the agreement in
breach of Article 85(1) to the attainment of the objectives set out in Article
85(3). Therefore the joint venture must be the only way in which the parties
could have contributed so well or so much to improving the production or

16
Commission Notice on the Distinction Between Concentrative and Cooperative Joint Ventures under Council
Regulation (EEC) No. 4064/89 On The Control of Concentrations Between Undertakings [1994] OJ
C385/1
17
Commission Guidelines on the Applicability of Article 101 of the treaty of the Functioning of the European
Union to Horizontal Cooperation Agreements [2011] OJ C11/1
18
Commission Notice Concerning the Assessment of Cooperative Joint Ventures Pursuant to Article 85 of the
EEC Treaty [1993] OJ C43/2
19
Commission Regulation (EU) No. 330/2010 on The Application of Article 101(3) of the Treaty of the
Functioning of the European Union to Categories of Vertical Agreements and Concerted Practices [2010] OJ
L102/1
20
Commission Regulation (EU) No. 1217/2010 on The Application of Article 101(3) of the Treaty of the
Functioning of the European Union to Categories of research and Development Agreements [2010] OJ L335/36
21
Commission Regulation (EU) No. 1218/2010 on The Application of Article 101(3) of the Treaty of the
Functioning of the European Union to Categories of Specialisation Agreements [2010] OJ L335/43
22
Commission Regulation (EU) No. 1218/2010 on The Application of Article 101(3) of the Treaty of the
Functioning of the European Union to Categories of Technology Transfer Agreements [2010] OJ L123/11
23
Supra, note 11 and Infra, note 23
24
Faull, Joint Ventures Under the EEC Competition Rules, E.C.L.R., 1984, p. 358.
distribution of goods or to promoting technical or economic progress, while
allowing consumers a fair share of the resulting benefit. Article 85(1) asks:
could they have done it separately? Article 85(3) asks, assuming a positive
answer to the first question: could they have achieved the benefits mentioned
in Article 85(3) in any less restrictive way?
25


The Commission has adopted a number of procedural and substantive distinctions in the
regulation and analysis of concentrative and cooperative joint ventures. Firstly, cooperative
joint ventures are classified into two categories: structural and non-structural ventures,
whereas there is no such distinction with concentrative ventures.
26
J. P. Griffen has defined
Structural CJVs as follows:

"A cooperative joint venture of a structural nature is one that involves an
important change in the structure and organization of the business assets of the
parent companies or because it undertakes new activities on their behalf. Such
operations are characterized by the commitment of significant financial,
material and/or non-tangible assets such as intellectual property rights and
know-how. Structural joint ventures are therefore normally intended to
operate on a medium- or long-term basis. This concept includes certain
partial function' joint ventures which take over one or several specific
functions within the parents' business activity without access to the market, in
particular research and development and/or production.
27


Non-structural joint ventures, on the other hand, are what we commonly consider to be
agreements of joint cooperation for efficiency, or research and development between
enterprises. Now other than the above, there are other procedural distinctions such as that a
decision on a concentrative venture must be given within a maximum period of five months
whereas a decision on a cooperative joint venture may be kept pending for upto eighteen

25
Id.
26
J. P. Griffen, Concentrative and Cooperative Joint Ventures, available at <http://www.morgan
lewis.com/pubs/6A3A8F88-3CAA-44C0-974B0CE51F4672F2_Publication.pdf>, (Viewed on 15.11.2012), p. 2
27
Id., p. 2
months.
28
Furthermore, structural ventures require only a comfort Letter for their validity.
29

Also, importantly, whereas an approval for a concentrative venture is permanent once
granted, approval for a cooperative venture is granted only for a fixed time period and can be
revoked or modified in case the Commission later feels that it is resulting in a competition
abuse in the market.
30


A look at some decisions of the Commission helps us to better understand the EU position on
cooperative joint ventures. In ECR 900 Konsortium
31
it was held that an agreement for joint
development, manufacture and distribution of pan-European digital cellular mobile telephone
system would not be caught by Article 85(1) as "development and manufacture by individual
companies would not take place because of the high cost involved."
32
In Screensport/EBU
33
,
where the venture was disqualified as anti-competitive, the court observed that "any incentive
for Sky to offer substantive competition to Eurosport was eliminated and that any potential
competition between the two parents in the form of rival transnational satellite television
channels dedicated to sport ceased as a consequence of their agreement to establish Eurosport
together."
34
Furtheremore, in International Private Satellite Partners
35
, where certain
companies proposed to create a limited partnership under U.S. law to provide international
business telecommunications services to businesses in Europe and North America, the
Commission held that the creation of the partnership was outside the scope of Article 85(1)
because none of the partners were actual or potential competitors in the relevant market.
There are very high barriers to entry and none of the partners could reasonably be expected to
assume the financial burden and risk to enter the market alone. Similar was the reasoning in
Iridium.
36
Also, the Commission has looked into both express restrictions
37
and implied

28
Id., p. 2
29
Id., p. 3
30
Id., p. 3
31
O.J. [1990] L228/31; [1992] 4 C.M.L.R. 54
32
Id.
33
O.J. [1992] L63/32; [1992] 5 C.M.L.R. 273
34
Id.
35
O.J. [1994] L354/75; [1995] 4 C.M.L.R. 306
36
O.J. [1997] L16/87; [1997] 4 C.M.L.R. 1065
37
For example, in Mitchell Cotts/Sofiltra, O.J. [1987] L41/31; [1988] 4 C.M.L.R. 111
restrictions
38
during its assessments. Lastly, in Elopak/Metal Box - Odin
39
, the Commission
concluded that the venture between the undertakings to design a new kind of carton did not
violate Article 101(1) since they were not actual or potential competitors.

Other than the Commission, the E.U. Courts have had little opportunity to adjudicate on
cooperative joint ventures. There are notable judgements of the General Court on the subject.
The first is European Night Services v. Commission
40
where an appeal against the decision of
the Commission, wherein it has attached certain obligations and conditions to the approval
was successful. The Court observed that the Commission had failed to demonstrate that the
agreement would appreciably restrict competition, and the decision of the Commission was
declared null and void. The second is that of O2 (Germany) GmbH & Co. OHG v.
Commission
41
wherein the petitioners successfully persuaded the Court that national roaming
agreements in the mobile telephony sector did not restrict competition under Article 101(1),
and therefore did not need authorisation under Article 101(3).

However, despite this robust jurisprudence on cooperative ventures, a number of jurists and
commentators are of the opinion that the distinction between concentrative and co-operative
joint ventures continues to cause difficulties and uncertainty. While many joint ventures
clearly fall into one or other category, the classification remains far from straightforward in a
significant number of cases.
42


IV. CJVS UNDER UNITED STATES ANTITRUST LAW


38
For example, in GEC Weir Sodium Circulators, O.J. [1977] L327/26, 31; [1978] 1 C.M.L.R. D42
39
O.J. [1991] L209/15; [1991] 4 C.M.L.R. 832
40
Cases T-374/94 etc. [1998] ECR II-3141, [1998] 5 C.M.L.R. 718
41
Case T-328/03 [2006] ECR II-1231, [2006] 5 C.M.L.R. 258
42
Adrian Brown, Distinguishing Between Concentrative and Cooperative Joint Ventures: Is it Getting Any
Easier?, E.C.L.R., 1996, p. 249. Also see Anand S. Pathak, The EC Commission's Approach to Joint
Ventures: A Policy of Contradictions, E.C.L.R., 1991 and Horst Peter Gotting and Werner Nikowitz, ECC
Merger Control: Distinguishing Concentrative Joint Ventures From Cooperative Joint Ventures, Fordham
International Law Journal, Vol. 13, No. 2, 1989
As of now there does not exist any specific legislation or special law to govern cooperative
joint ventures in the United States. The Federal trade Commission regulates cooperative joint
ventures under the existing anti-trust laws in the United States, i.e., Section 1 and Section 2 of
the Sherman Antitrust Act
43
, Section 7 of the Clayton Act
44
and Section 5 of the Federal
Trade Commission Act.
45
There are also certain enforcement guidelines issued by the Justice
Department and the Federal trade Commission,
46
the most important document of which is
the Antitrust Guidelines for Collaboration Among Competitors released by the Federal
Trade Commission (F.T.C.) in 2000.
47
As a result, while concentrative joint ventures are
regulated under merger control, cooperative joint ventures (or contractual joint ventures, as
they are better known there) are often regulated and investigated under the provisions related
to anti-competitive agreements and abuse of dominant positions, including cartels. When a
joint venture is not acting as a single economic entity, its actions are necessarily the product
of an agreement among competitors. This subjects those actions to Section 1 of the Sherman
Act.
48
However, cooperative joint ventures between government contractors are also subject
to government procurement laws.
49
Also, despite their being no specific legislation, certain
authors are of the opinion that current antitrust law in the United States needlessly inhibits
inter firm agreements designed to develop and commercialize new technology.
50
Thomas
Jorde believes this is so because the elements of rule of reason analysis are quite muddled

43
Sherman Antitrust Act, 1890 (15 U.S.C. 1-7)
44
Clayton Act, 1914 (15 U.S.C. 12-27)
45
Federal Trade Commission Act, 1914 (15 U.S.C 41-58)
46
The Justice Department and the F.T.C. have issued merger guidelines that provide useful discussions of how
the enforcement agencies will define relevant markets and measure market power in reviewing collaborative
ventures. See Department of Justice, Merger Guidelines [1984]; Federal Trade Commission, Statement
Concerning Horizontal Mergers [1982]. In addition, the Justice Department's guidelines concerning research and
development joint ventures, non price vertical restraints, and international operations provide considerable
insight into how the Department will evaluate collective endeavours by private firms. See Department of Justice,
Antitrust Guide Concerning Research Joint Ventures [1980]; Department of Justice, Vertical Restraints
Guidelines [1985]
47
Antitrust Guidelines for Collaboration Among Competitors, Issued by the F.T.C. and the Department of
Justice (D.O.J.) [2000], available at <http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf>, (viewed on
15.11.2012)
48
G. J. Werden, Symposium: Antitrust Scrutiny of Joint Ventures: Antitrust Analysis of Joint Ventures: An
Overview, Antitrust Law Journal, Vol. 66, No. 3, 1998 , p.705
49
W. E. kovacic, Antitrust Analysis of Joint Ventures and Teaming Arrangements Involving Government
Contractors, Antitrust Law Journal, Vol. 58, No. 3, 1989, p. 1066
50
Thomas M. Jorde and David J. Teece, Antitrust and International Competitiveness in the 1990s: Acceptable
Cooperation Among Competitors in the Face of Growing International Competition, Antitrust Law Journal,
Vol. 58, No. 2, 1989, p. 540. Also see Thomas M. Jorde and David J. Teece, Innovation, Cooperation and
Antitrust: Balancing Competition and Cooperation, HIGH TECH. L.J. Vol. 4, (1989)
when it comes to such ventures.
51
He is of the opinion that while some clarity exists for
vertical arrangements, horizontal and hybrid (elements of both vertical and horizontal)
cooperative arrangements face greater uncertainty because the economics literature has not
hitherto provided the courts with plausible theories of horizontal cooperation other than
cartels.
52
He also believes that while simple "scale economy" or "risk reduction" theories are
often discussed, these notions do not capture but a fraction of the variety of the circumstances
where social benefit can arise from inter firm agreements.
53
To try and address these
concerns, the Congress recently passed the National Cooperative Research Act, 1984.
54


As already stated above
55
, any two or more entities would enter into a cooperative or
contractual joint venture primarily only for the purposes efficiency or for research and
development. For example, the National Football League (NFL) is essentially a group of
competing team owners which acts collectively as a single entity in certain administrative
decisions regarding the game such as the designating an official league ball or establishing
the play-off system for determining a league champion. Therefore, while analysing such
venture agreements
56
, the Courts of the United States have evolved a unique test to determine
whether such an agreement would be anti-competitive or not. This is called the test of
ancillarity.
57
The test was first introduced in the case of United States v. Addyston Pipe &
Steel Co.
58
The Court in this case expressly observed as follows:

"...no conventional restraint of trade can be enforced unless the covenant
embodying it is merely ancillary to the main purpose of a lawful contract, and

51
Id.
52
Id.
53
Id.
54
For a detailed analysis of the same, see Thomas M. Jorde and David J. Teece, Antitrust and International
Competitiveness in the 1990s: Acceptable Cooperation Among Competitors in the Face of Growing
International Competition, Antitrust Law Journal, Vol. 58, No. 2, 1989
55
Supra, p. 1
56
For a detailed discussion on analytical trends, see W. E. kovacic, Antitrust Analysis of Joint Ventures and
Teaming Arrangements Involving Government Contractors, Antitrust Law Journal, Vol. 58, No. 3, 1989
57
Id.
58
85 F. 271 (6th Cir. 1898). The decision was later affirmed by the U. S. Supreme Court in Addyston Pipe &
Steel Co. v. United States, 175 U.S. 211 (1899)
necessary to protect the covenantee in the full enjoyment of the legitimate
fruits of the contract, or to protect him from the dangers of an unjust use of
those fruits by the other party."
59


In simple terms, an ancillary restraint is one that is reasonably necessary to the
accomplishment of a venture's efficiency-enhancing purposes.
60
Therefore, any agreement
forming such a cooperative/contractual joint venture should be analyzed in terms of the
legality of the joint venture itself by understanding the ancillary consequences of it. The
F.T.C. or the courts are supposed to apply the rule of reason and to also analyse the pro-
competitive impact of such an agreement in the relevant market. Also, what is ancillary to the
purposes agreement would have to be purely determined on the basis of the facts and
circumstances of each particular case. For example, in Citizen Publishing Co. v. United
States,
61
the owners of the two daily newspapers formulated a joint operating agreement,
under which the advertising, circulation, and production departments of the papers were
merged but editorial and news operations were not. The joint venture company controlled the
pricing of circulation and advertising of both papers, and profits were distributed according to
an agreed ratio. The Court observed that the "price fixing" and "profit pooling" were non-
ancillary to the joint venture, and ordered the cessation of price fixing and profit pooling
agreement.
62


However, this is not to say that the per-se rule is not at all applicable in the U.S. while
evaluating such ventures. For example, in Blackburn v. Sweeny
63
, the per se rule was applied
in a case relating to the restraint on territories in which advertising was permissible, where
the court found that such provisions were not ancillary to the agreement to dissolve a law
partnership. Similarly, in General Leaseways, Inc. v. National Truck Leasing Ass'n
64
, the

59
Id., at 282
60
G. J. Werden, Symposium: Antitrust Scrutiny of Joint Ventures: Antitrust Analysis of Joint Ventures: An
Overview, Antitrust Law Journal, Vol. 66, No. 3, 1998 , p.705
61
394 U.S. 131 (1969)
62
In 1970 Congress effectively reversed the decision by enacting the Newspaper Preservation Act, 1970 (15
U.S.C. 1801-04).
63
53 F.3d 825
64
830 F.2d 716
contractual restraints were found to be per se anticompetitive as there was no "organic
connection between the restraint and the cooperative needs of the enterprise". Therefore, we
find that once a particular provision of the contractual joint venture is found to be ancillary,
the adjudicatory authorities apply the rule of reason to analyse the provisions anti-
competitiveness and in the case where the provision is found to be non-ancillary, the courts
may (and often tend to lean towards) apply the per se rule of competition. This is best
highlighted by the case of Sewell Plastics, Inc. v. Coca-Cola Co
65
, where certain Coca-Cola
bottlers decided to form a cooperative to supply their plastic bottle requirements. On a
challenge to this arrangement, the Court held that the arrangement was not the sort of conduct
which could be considered a per se unlawful group boycott and furthermore rejected several
rule of reason claims as the venture had not been shown to possess market power or to have
had an adverse impact on competition.
However, the rule is generally confined to cases where it is suspected that the cooperative
venture is leading to or is actually a cartel in disguise. The Supreme Court in Timken Roller
Bearing Co. v. United States
66
, expressly observed that:

...Nor do we find any support in reason or authority for the proposition that
agreements between legally separate persons and companies to suppress
competition among themselves and others can be justified by labeling the
project a 'joint venture.' Perhaps every agreement and combination to restrain
trade could be so labelled."
67


Before proceeding to the next section of this paper, it is pertinent to take note the concept of
open market access which has been developed under U.S. anti-trust law, particularly
regarding cooperative joint ventures. A landmark judgement for understanding this concept
and its relation with cooperative joint ventures is the case of United States v. Terminal R.R.
Ass'n of St. Louis.
68
This concept would apply specifically to cases where there are
enterprises which choose not to become part of the cooperative but yet compete in the

65
912 F.2d 463
66
341 U.S. 593, 598 (1951)
67
Id.
68
224 U.S. 383 (1912)
relevant market. In the above mentioned case certain railroad companies formed an
association for acquiring various independent terminal facilities and bridges. Despite the
association managing to gain a monopoly, the court was of the opinion that the efficiency
achieved through such control would out weight the restraints provided that all railroads
participated in the association.
69
Consequently, it passed a decree for admission of other
railroads to the association and non-discriminatory treatment for other non-members.

V. THE COMPETITION ACT, 2002 AND COOPERATIVE JOINT
VENTURES

The Competition Commission of India (C.C.I.) has till date not come out with any guidelines
or regulations for either cooperative or concentrative joint ventures. In fact, it has until now
not had an opportunity to analyse or taken an opportunity suo moto to analyse the anti-
competitive effects, if any, of such ventures. Therefore, any discussion on cooperative joint
ventures under Indian competition law shall have to be limited to the Act itself.

A cooperative joint venture could be analysed under Section 3 of the Act. It could be
analysed under Section 3(1) of the Act which is a general and broad provisions on anti-
competitive agreements and reads as follows:

[N]o enterprise or association of enterprises or person or association of
persons shall enter into any agreement in respect of production, supply,
distribution, storage, acquisition or control of goods or provision of services,
which causes or is likely to cause an appreciable adverse effect on competition
within India.


Such a venture could also be analysed under the provisions of Section 3(3) of the Act which
reads as follows:



69
Id. at 405-06.
[A]ny agreement entered into between enterprises or associations of
enterprises or persons or associations of persons or between any person and
enterprise or practice carried on, or decision taken by, any association of
enterprises or association of persons, including cartels, engaged in identical or
similar trade of goods or provision of services, which
(a)....
(b) Limits or controls production, supply, markets, technical development,
investment or provision of services;
(c)....
(d)....
Shall be presumed to have an appreciable adverse effect on competition:

Provided that nothing contained in this sub-section shall apply to any
agreement entered into by way of joint ventures if such agreement increases
efficiency in production, supply, distribution, storage, acquisition or control of
goods or provision of services.

However, these provisions will in all probability raise certain obstacles in the analysis of
such ventures as well as hinder competitive business through such ventures in the future,
mostly due to the fact that such cooperative ventures were probably not seriously considered
when the act was first drafted. For example, any agreement which is considered to limit or
control technical development or investment shall be presumed to have an appreciable
adverse effect on competition, and hence void.
70
But cooperative joint ventures inherently
tend to initially limit or control such technical development and investment as it requires two
or more enterprises in the particular market to coordinate to create long term benefit for both
the enterprises and the consumers through such cooperative development. This contradiction
has already been recognised by the European Commission.
71
Section 3(3)(b) will
unfortunately ensure that such cooperative joint ventures remain inherently anti-competitive
and will consequently hinder innovation and growth in the market, which is the primary
objective of a competition law in the first place. The same issue would also arise under
Section 4(2)(b) which describes the abuse of dominant position.


70
Section 3(3)(b), The Competition Act, 2002 (12 of 3003)
71
Supra, note 6
Secondly, even though the proviso to Section 3(3) states that nothing in the sub-section shall
apply to an agreement entered into by way of a joint venture if such agreements increase
efficiency in production, supply, distribution, storage, etc., the term joint venture has not
been defined within the Act. The accepted legal definition of the term only includes
concentrative joint ventures and not cooperative joint ventures, hence the proviso is
ambiguous on the status of cooperative joint ventures under the Section. Furthermore, since
cooperative joint ventures generally tend to lead to the innovation of new products or
services, and consequently, new patents and trademarks, the status of such cooperative
ventures as against the exceptions listed under Section 3(5) would also need to be clarified.

There are two solutions available to the Competition Commission of India and the Central
Government. The Central Government may either bring about amendments to the Act or the
Commission may draft regulations to govern both concentrative and cooperative joint
ventures, including enunciating clear legal distinctions between the two. In the solution to be
engaged are amendments to the Act, then the Government should amend Section 3(3) of the
Act by adding a proviso on cooperative joint ventures which may state that such cooperative
agreements shall be analysed under Section 3(4) of the Act, hence ensuring that they are not
presumed to be anti-competitive. A similar amendment by way of the insertion of a proviso
would also be required under Section 4(2)(b) of the Act.

The author, however, believes that a more appropriate and less cumbersome method to tackle
the problem would be the framing of regulations under the Competition Act. If such
regulations were to be framed, they should be similar to and should take inspiration from the
Guidelines on The Applicability of Article 101 of the Treaty on the Functioning of the
European Union to Horizontal Co-operation Agreements
72
drafted by the European
Commission and the Antitrust Guidelines for Collaborations Among Competitors
73
drafted
by the Federal trade Commission in the U.S.A. Also, the author considers it advisable that
the Regulations lay down clear tests to be conducted to determine whether such an agreement
would be anti-competitive rather than only following the criteria as enumerated under
Section 19 of the Act. This is so because experience with the C.C.I. till date has shown that

72
Commission Guidelines on the Applicability of Article 101 of the treaty of the Functioning of the European
Union to Horizontal Cooperation Agreements [2011] OJ C11/1
73
Antitrust Guidelines for Collaboration Among Competitors, Issued by the F.T.C. and the Department of
Justice (D.O.J.) [2000], available at <http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf>, (viewed on
15.11.2012)
investigations by the Director General based on Section 19 as well as the final Order of the
Commission may result in a proportionately high amount of discretion in the members of the
C.C.I. while evaluating such agreements.


VI. CONCLUSION

Cooperative Joint Ventures play an important role in encouraging innovation in the market
and comparatively cheaper costs, thus resulting in a win win situation for both consumers
and producers. Therefore, it is best not to discourage but rather only regulate them to ensure
that the benefits out of such ventures outweigh the costs to competition in the market. With
the gradual development of competition law jurisprudence over India, the C.C.I and
competition law practitioners will eventually have to learn to analyse and understand such
agreements. It is recommended that whenever the C.C.I. decides to draft regulation on the
subject, it takes inspiration from the foreign regulations and guidelines mentioned above and
take full advantage of the experience which has been gained over time by more mature
competition law jurisdictions.