For any business seeking collaboration with other companies whether they take the form of mergers, acquisitions, joint ventures or formal partnerships, these are both the best of times and the worst of times. Global regulatory agencies have recently beefed up anti-competitive measures within the B2B marketplace against deals focused on strategic collaboration.
Bloomberg news recently reported that global spending on mergers and acquisitions in 2015 reached US$3.8 trillion, the largest amount on record, exceeding the previous record set in 2007.
Fourth quarter spending alone passed US$1.3 trillion, only the second time in history that quarterly M&A spending beat the trillion-dollar mark.
So, companies in nearly all industries in the B2B marketplace are seeking collaboration, partnerships and the benefits of joint ventures at an unheard of pace, and finding them with great success.
Antitrust enforcement is up against collaboration-focused deals
But there is still reason to be very cautious. The US Department of Justice (DOJ) and the Federal Trade Commission (FTC), which share jurisdiction in this area, as well as the European Commission have increased their enforcement of antitrust, anti-competitive and anti-cartel laws and regulations to unprecedented levels.
In the US, the fines and penalties obtained by the DOJ as a result of criminal antitrust prosecution topped US$1 billion a year during the past four years, reaching US$1.3 billion in 2014 alone, and resulted in criminal charges against 44 individual corporate executives and 18 companies for offences that included price fixing, bid rigging and fraud.
But that was in 2014, before the DOJ really accelerated its efforts. Analyses of DOJ statistics for 2015 show that its Antitrust Division secured about US$3.9 billion in criminal fines and penalties during 2015, almost three times its 2014 record.
The DOJ has been particularly vigorous in its prosecution of collusion among auto parts manufacturers, which has been underway for several years. As of mid-2015, the Antitrust Division had charged 34 companies and 52 individual executives, resulting in 29 individual guilty pleas that resulted in average jail sentences of 15 months and 34 corporate guilty pleas that resulted in US$2.4 billion in criminal fines.
These prosecutorial victories represent just the tip of the proverbial iceberg. Many other major corporations are under investigation for anti-competitive practices, both here and abroad.
In December 2015, the China State Administration for Industry and Commerce (SAIC) announced it would compel Microsoft to answer its questions and concerns resulting from the agency’s antitrust probe, which it launched in mid-2014.
More recently, in January 2016, American Airlines Group, British Airways parent IAG SA and Chile’s Latam Airlines Group SA signed joint venture agreements that seek the closest form of collaboration short of a merger. Antitrust approvals for the arrangement are expected to take 18 months or more and are far from assured.
Expert advice and guidance are vital in the b2b marketplace
So, the consequences for anti-competitive collaboration couldn’t be higher and the chances of escaping detection couldn’t be lower in the b2b marketplace. This makes the need for advice and guidance on the matter all the more important, especially considering the current enforcement environment, in which jail time is as likely as a stiff fine.
The Antitrust Guidelines for Collaborations Among Competitors issued by the FTC and the DOJ offers a template for potential and current business partners, defining the limits beyond which collaboration violates the spirit and letter of the law and becomes anti-competitive.
The greatest risk comes from the risk of collusion and “agreements that limit independent decision making or combine control or financial interests.” Such agreements may include, but are not limited to, production collaborations, marketing collaborations, buying collaborations and R&D collaborations. As none of these agreements automatically constitute criminal behavior, how can potential business collaborators know which side of the law their agreements might land?
The FTC’s online Guide to Antitrust Laws offers clear and succinct guidance regarding the difference between obviously criminal activity and when a seemingly innocuous collaboration agreement might cross the line.
“For the most blatant agreements not to compete, such as price fixing, bid rigging and market division, the rules are clear. The courts decided many years ago that these practices are so inherently harmful to consumers that they are always illegal, so-called per se violations. For other dealings among competitors, the rules are not as clear-cut and often require fact-intensive inquiry into the purpose and effect of the collaboration, including any business justifications. Enforcers must ask: what is the purpose and effect of dealings among competitors? Do they restrict competition or promote efficiency?”
As can be seen from the rigorous ongoing investigations of the auto parts industry, businesses seeking supply chain partners face intense scrutiny.
Find and collaborate with safe partners
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