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Joint Production Ventures

July 1993

The lead article in our October 1991 issue observed that cooperative innovation was critical to U.S. industry’s ability to compete in the global marketplace, and suggested some amendments to the antitrust laws that would strengthen U.S. competition. In June 1993, Congress and President Clinton took a small step in the right direction by amending the National Cooperative Research Act to include joint production as well as research. This law, now called the National Cooperative Research and Development Act, allows the formation of joint production ventures without fear of exposure to treble damages in private antitrust suits, and requires the courts to evaluate the legality of qualified ventures under the “rule of reason” test, rather than the per se illegality rule.

Although this is a welcome expansion, the amended law contains a significant twist. With respect to joint production only, protection from treble damages is limited to joint ventures whose principal facility is in the U.S. In addition, every member of the venture must be free of non-U.S. control, or be from a country which accords “no less favorable” antitrust treatment than the U.S. to joint production ventures. Given the complexity of comparing U.S. and foreign antitrust laws, this aspect of the law may gratuitously negate the value of the Act for those many beneficial multi-national joint ventures which continue to be formed with U.S. companies as members.