Drawing the Boundary between Joint and Unilateral Conduct: Parent–Subsidiary Relationships and Joint Ventures

Abstract

Competition law systems typically draw a fundamental and basic distinction between concerted and independent action. In particular, the former is viewed more skeptically and considered to be more ‘inherently fraught with antitrust risk’ than unilateral conduct.

The question of which set of rules applies in a given antitrust case (those governing agreements or those governing unilateral conduct) is frequently straightforward and uncontroversial. In some situations, however, it may be more difficult. For example, it may not be easy to determine whether an apparently unilateral act of a firm actually forms part of a contractual arrangement with another firm or firms.Further agreements concluded between members of the same corporate group and acts of joint ventures (‘JV’s) may be difficult to characterise. Although firms within the same corporate group may constitute separate legal entities, agreements or arrangements between them may more closely resemble the internal workings of a firm than the collusive activities the antitrust laws are designed to prevent. Conversely, a separate JV company may display concerted as well as unilateral characteristics.

Even though these lines between firms, cartels and joint ventures are indistinct, they are nonetheless crucially important as the determination will profoundly affect the antitrust analysis applied. A challenge for an antitrust system is therefore to draw a clear line between concerted conduct falling within the scope of rules designed to prohibit anticompetitive agreements and unilateral conduct falling outside it. Nonetheless, different jurisdictions adopt different approaches to the issue, creating complexity for firms.

Section B commences by introducing the single economic entity or economic unit doctrines which have been developed in the US and EU respectively and their relevance for determining whether the conduct of a parent and its subsidiaries should be treated as joint or unilateral for the purposes of the competition law rules. Section C then considers whether, and if so when that doctrine might have relevance to the characterisation of the conduct of a JV. Section D concludes that the the exact boundaries of the ‘single entity’ principles developed in the US and EU are not clear and create uncertainty for firms in circumstances where the characterisation may result in significantly different exposure to antitrust liability. It consequently makes some proposals for evolution of the law.

Keywords: Antitrust law, distinction between concerted and unilateral conduct, corporate groups, joint ventures

JEL Classification: K21, L40, L41