Sunday, October 22, 2006

Joint ventures and oligopolies One of the areas where competitors come close together is in joint ventures. These are all over the map. Petroleum giants BP and Exxon Mobil work together in some areas. Film studios regularly take on the some of the funding for other studios' films. Steel giant Mittal works with rivals Nippon Steel and Shanghai Baosteel. Cingular was owned jointly by Bell South and SBC (AT&T), until they were all the same company. Rivals Boeing and Lockheed-Martin work together in developing military space vehicles. Comcast, Time Warner Cable, and Cox Communications, the three biggest cable TV companies, are in the cellphone service business together. Toshiba and Canon, competitors in many areas, work jointly on flat-screen display technology. NEC and Panasonic, often rivals, work together on cellphone technology development. And so on. Working on joint ventures requires that two companies mingle personnel, products, and methods. It fuses a common interest that has to persist even when the two companies are strong competitors in other areas. It's a fast way to make enemies into "friendly enemies." It also creates murky borderline issues. Antitrust regulators try to detect when cooperation in the joint venture spills over into an area in which two firms should be competing strenuously. The Federal Trade Commission (FTC), for example, has elaborate guidelines for what is and is not acceptable behavior in a joint venture. But attempting to fix a firewall between what joint partners can discuss (related to the venture), and what they can't discuss (such as the prices and costs of the rest of their business) is no easy task. Surely, for legal purposes, the written correspondence and witnessed conversations bend over backward to preserve the rules; but over a few drinks or on the golf course, who knows what might get discussed? And if not ending in direct collusion, joint ventures allow even further transfer of business methods and therefore more homogenization. 9:26:42 PM

comment []