Joint Venture Exception In Bid-Rigging

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Tejas Singh, The West Bengal National University of Juridical Sciences

INTRODUCTION

In the field of competition law, a joint venture (JV) refers to a business arrangement in which two or more companies agree to combine their resources for a particular project or activity. Joint ventures (JVs) can be classified as mergers according to the Competition Act, and may necessitate notification and authorization from competition authorities. The authorities are analyzing the potential anti-competitive consequences of the joint venture, specifically focusing on the sharing of sensitive information and the potential for market division or price fixing.1 Bid rigging is a type of collusion between companies that can have a negative impact on the outcome of any sales or procurement process involving the submission of bids. These processes frequently, although not solely, pertain to public procurement. Bid rigging can manifest in various ways, such as: Bid suppression refers to the agreement among one or more parties to refrain from bidding. Cover bidding involves parties agreeing to artificially inflate the bidding price. Bid rotation occurs when parties agree to take turns bidding or only bid at an artificially high price based on the number or value of contracts.2

A joint venture (JV) is defined by the OECD as a scenario in which participating companies, through a contractual agreement or other means, decide to pool together substantial tangible or intangible assets, with the intention of going beyond sporadic cooperation. A joint venture (JV) can be established either through the process of incorporation or through a contractual agreement. Therefore, according to competition law, joint ventures (JVs) encompass a wider range of arrangements and agreements than just a Split shareholding vehicle that is commonly observed in the marketplace.3 It is mandatory to notify about joint ventures to competition authorities in most regimes worldwide, including the European Union. This requirement applies to joint ventures that are considered "full-function," meaning they operate as independent businesses. Additionally, notification is required when the relevant jurisdictional thresholds are met. Notifying and obtaining clearance for a joint venture ensures certainty regarding the assessment of the joint venture's compliance with competition law. However, this process incurs costs and affects the parties' schedule and the timing of implementing the joint venture.4

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