Summer 2018 joint ventures The JV balancing act Businesses should go into joint ventures with their eyes wide open and do their homework when it comes to competing fairly Strategic business collaboration can be beneficial, but it mustnt tip over into collusion Joint ventures have a lot of appeal for businesses and for good reason. When acting together, companies can secure greater access to markets, share expertise, and ease the burden of risks and costs. This is especially true for new and smaller firms that are looking to establish themselves or expand. Businesses that join forces can pool goods, services and funds to innovate, and achieve commercial success that they could not have done alone. From construction to the arts and fashion, a whole range of businesses have enjoyed the advantages of teaming up and, according to research by PWC and McKinsey, the number of joint ventures (JVs) is on the rise. So if youre considering a JV for your business, its best to get clued up on the rules. The Competition and Markets Authority (CMA) supports collaboration that results in a better quality of product or service for customers. However, businesses should go into joint ventures with their eyes wide open and do their homework when it comes to competing fairly. Matters can turn sour if collaboration strays into collusion in other words, if a JV is used as a cover for avoiding the rules on how businesses should compete nBefore entering into a JV, clearly define true purpose of against each the other. the collaboration and how it will benefit your customers nBe certain that you couldntBreaking achievecompetition the same result law on can have significant repercussions, including: your own, and that you dont reduce competition or share commercially sensitive information than nH efty fines more up to 10 periscent of worldwide turnover necessary to achieve the result nReputational damage nOnce the JV is up and running, monitor it to ensure it (up to 15 years) nDirector disqualification continues to comply with competition nPrison, for law up to five years, in the most serious criminal cartel cases nBe aware of changes in external circumstances that could affect the alliance; keep anend eye of on2017, changes to fined two businesses 1.7m for market sharing At the the CMA your arrangements, the marketplace and the under the cover of law. a JV. Be Both businesses had been trading under the same brand particularly alert to changes at key a business joint venture agreement. When they signed since themoments 1980s in afor long-standing for example, a merger new agreements in 2012, they could have been competing against each other nSet up a competition law compliance programme. For up between themselves. instead of dividing the country more information, see our guidance Credit: Mary Riley, campaigns nDont and be compliance, fooled into thinking that you can use a JV to The rewards of getting a joint venture right are worth the effort but it is a fine CMA Images: / malerapaso price hideiStock.com what is otherwise fixing, market sharing or bid balancing act that requires careful management. rigging nRemember, JVs come under the same legal scrutiny as all To find out more about what is and isnt Under UKbusiness law, businesses must other arrangements allowed when you collaborate, check out genuinely compete each by nIf in doubt, seekagainst independent legal advice the CMAs Joint ventures and competition Ensuring your JV runs the book other to offer the best deal for their law: dos and donts. customers. Commercial decisions must be taken independently, not by coordinating with those with whom Cartel feels the heat with 3.4m fine they should be in competition. When businesses compete unfairly, Two the main to theirof actions harmsuppliers law-abiding large UK supermarkets and petrol companies that play by the rules, stations ofbagged potentially squeezinghousehold out more fuels innovative includingor barbecue charcoal, coal efficient competitors and fire logs them werefrom fined a total or preventing entering theof 3.4m thefirst CMA for taking part in marketby in the place. a market-sharing cartel. would deliberately submit a higher bid that was designed to lose. This helped the existing supplier to retain its customer. This type of activity is known as bid rigging and it allows competitors to share out a market between them. bid rigging are illegal. They skew the market so businesses dont have to compete for customers, who are then cheated out of a fair deal and can end up paying higher prices, or having to make do with poorer quality products or services. The CMA has a dedicated hotline for The businesses reporting cartelscame 0203under 738 6888 investigation after a tip-off to the and recently launched a campaign CMAs cartelsmore hotline, 0203 738 6888 to encourage people to come (click on with Cartels hotline, below). The forward information that will help authority then carried out surprise it stamp out illegal activity. inspections at their premises. If you think your business may have They beenadmitted involved inrigging a cartel,competitive notify the tenders supply TescoBy and CMA as to soon as possible. being the Sainsburys, agreed that for first to comehaving forward, you may benefit each the tenders one of them fromof lenient treatment, including The fuel suppliers also exchanged sensitive, confidential pricing information, in breach of competition rules. Disclosing such data means competitors have inside information and can adjust their plans accordingly. Stephen Blake, the CMAs senior legal director, cartels and consumer protection, said: Market sharing and protection for your directors from CMA disqualification proceedings. Always Cartels hotline seek independent legal advice. For further information on cartels contact the CMA Credit: Mary Riley, campaigns and compliance, CMA. Images: Adobe stock / ungvar