The Structure of Antitrust Analysis: An Example

Because of the extensive variety of business practices and their settings, it is difficult to select a particular "example" that fully captures the craft of the antitrust lawyer. An example that might provide a useful glimpse at how an antitrust expert approaches a proposed course of conduct involves a common form of business enterprise -- joint ventures . How might an antitrust expert approach the antitrust law consequences of a joint venture that a client wishes to enter into with one of its competitors to develop a new product?

The antitrust counselor would assess whether the joint venture contained agreements not to compete on price, output or customers that are not reasonably related to the integration contemplated by the joint venture or reasonably necessary to achieve the venture's procompetitive benefits, so that " per se illegality" issues might be raised with respect to those provisions. If there is a significant question whether the agreements or provisions are not reasonably related or reasonably necessary, the antitrust advisor might want to explore the feasibility and workability of less restrictive options in order to minimize or eliminate antitrust risk.

If such restrictions do not raise per se illegality issues, procompetitive benefits, the counselor would then consider whether the joint venture's various provisions nonetheless unreasonably restrained trade under a "rule of reason" analysis, by focusing on the state of competition with, as compared to without, the joint venture and its various provisions, in an effort to determine whether the joint venture agreement would likely harm competition by increasing the ability or incentive profitably to raise prices or reduce output, quality, service, or innovation below what likely would prevail in the absence of the agreement and its provisions.

This "rule of reason approach" would involve a close examination of the proposed terms of the joint venture and their functions, an understanding of the businesses of the parties and of the relevant industry, including how the relevant market would be defined in light of commercial realities and applicable law, the identities of market participants , the market positions (i.e., shares of the market) accounted for the parties to the venture and others in the market, the barriers to entry and effective competition in the market, and the number and strength of other actual or potential sellers in the relevant product market in the market before and after the joint venture is formed and operating.

The purpose of the venture would be examined. For example, the parties may be interested in a joint venture because they have complementary assets or skills and believe that by bringing them together they will be able to better develop or manufacture a new product than if proceeding alone. These objectives would point to the legitimacy of the joint venture and can be referred to in justifying various undertakings and commitments that might otherwise be viewed with some suspicion.

In terms of dealing with government agencies, the counselor would determine whether this particular joint venture is reportable under the Hart Scott-Rodino Act, depending on its size, the size of the parties and the structure of the transaction. The counselor would plan with the lawyers representing the other party to the joint venture the best strategy for dealing with any significant foreseeable antitrust issues to the government agency that would be looking at it. Counsel would determine whether the customers of the companies would react favorably to the joint venture and, in that regard, may at an appropriate time wish to alert their customers about the transaction and explain why the proposed transaction makes sense from the customers' viewpoint. Depending on the level of risk and the seriousness of the antitrust issues, antitrust counsel might consider retaining an economist who could offer advice in a consulting capacity with respect to any issues that arise. The antitrust team would assess and analyze (revising as the process continues) what arguments and facts should be marshaled to present to government agencies to persuade them that no enforcement action (or even an extensive investigation) is necessary or appropriate.

Counsel will want to guide the parties not to take any actions prior to the transaction's closing that could be viewed as coordinating or carrying out the enterprise before the Hart-Scott-Rodino Act waiting requirements are met.