The creation and operating of JVs raises several competition law compliance questions and is a complex process to complete. Businesses can therefore better be well prepared when engaging in such a process. In the following pages, our experts examine the potential risk areas and select 10 key questions to avoid competition pitfalls.
1. Is the newly created JV full-functional?
The first question from a merger control perspective is whether the newly created JV (greenfield JV or previously owned asset contribution by the JV parents) will be fully functional i.e., whether the JV will be economically autonomous from an operational point of view to have independent market presence.
# Will the JV have a dedicated day-to-day management and sufficient resources and assets?
# Will the JV have activities beyond just taking over one specific function of the JV parents (i.e. it will for example not just take over R&D or production under a tolling agreement)?
# How substantial will be the purchase or sale relationship with the JV parents, or will the focus be on third parties sales and the JV play an active role on the market? We note that 20% third party sales can be sufficient to conclude on full functionality if sales by the JV to the JV parents will be on a truly arm’s length basis;
# Will the JV be intended to operate on a lasting basis?
2. Is the JV jointly controlled?