Joint Venture
10. Trade Practices, Competition
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 10 Aug 2015
- The Competition and Consumer Act 2010 (Cth) is an important set of legal rules to be aware of when considering whether to participate in a joint venture. This law ensures that healthy competition in a market that provides goods or services is maintained.
- A joint venture agreement that sees two competitors teaming up to obtain a commercial advantage in a particular market or to increase market dominance has the potential to breach provisions that prohibit what is known as ‘cartel conduct.’
- A cartel is established when two or more businesses act together instead of competing with each other in order to increase the profits of cartel members. For more information on what constitutes a cartel see our topic on Competition and Trade Practices .
- In particular the Competition and Consumer Act 2010 (Cth) prohibits a person or business from making a contract or arrangement that contains a cartel provision. This prohibition aims to prevent businesses from acting together to reduce competition in a market.
- A joint venture agreement that contains a cartel provision will generally be exempted from this prohibition because the provision is contained in the agreement for the purposes of a joint venture only and does not have the likely effect of lessening competition.
- Although this exemption will usually be available it is important to note that some joint ventures operating in particular markets may breach other provisions of the Competition and Consumer Act 2010 (Cth) if the joint venture has the effect or likely effect of lessening competition.
- The penalties for breaching these provisions are substantial. For example companies found guilty of cartel conduct will face a maximum fine or penalty that is the greater of:
- $10 million; or
- three times the total value of the benefits obtained that are reasonably linked to the offence or breach; or
- if the value of the benefits cannot be properly assessed, 10 percent of the annual turnover of the company (including its related corporate bodies) in the previous 12 months.
- To avoid the potential risk of breaching these trade practices provisions you should speak with a lawyer who can advise you on your potential liability before commencing any joint venture agreement.
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