COMPETITION • EUROPEAN AND FRENCH LAW • RESTRICTIVE AGREEMENTS
A spill-over effect is defined as all the restrictions on competition tied to the creation and operation of a joint venture that may arise from the relations between the parent companies and between the parents and their subsidiaries. The spill-over effect, which is expressed by the coordination of behaviors can be assessed in the context of merger control when the joint undertaking is “full-function” or under Articles 101 TFEU or L. 420-1 of the Commercial Code if it is not full-function. Spill-over effects may arise from express undertakings by the parent companies and the joint venture or be inferred from organic and operational ties they have forged. In practice, spill-over effects will likely occur whenever the various parties involved operate in the same market or on geographically or materially close markets. On the other hand, the withdrawal by the parent companies from the sector of activity of the subsidiary is a decisive indicator of the absence of any spill-over effect.
The coordination of behavior can take different forms. The creation of the joint venture may have the effect of limiting competition between the parent companies. Indeed, the equal distribution of capital between the founders, often provided in the statutes of a joint venture, is, according to the Commission, characteristically a factor of concertation between the parent companies. In the context of the exercise of their joint control, the latter are required to jointly participate in important decisions taken by the new company. Capital allocation like this prevents the partners from being able to establish any autonomous calculation of costs and prices, which is the hallmark of independent business. Besides the joint venture, the incentive for coordination also extends to the relationship between the parent companies on the economically connected or geographically close markets where they continue to exercise independent operations. The coordination of related activities is made possible by the intimate and continuous cooperation between operators and allows a two-way exchange of strategic information. The effects disappear on the other hand if the parent companies are neither effectively nor potentially competing outside the area of activity of the joint venture.
Restrictions of competition are also likely to arise in the relationship between the joint undertaking and its founders. Indeed, according to the Commission, “[p]arties who hold significant stakes in a joint venture will not in general within the field of such a joint venture compete with each other’s activities or with the activities of the joint venture, even if they are contractually free to do so”.
Finally, restrictive effects may occur in the group’s relations with third parties. This is the case when one of the parent companies is bound by an exclusive purchasing commitment to the joint venture.