Joint Venture Exception In Bid-Rigging

Author: LawSphereX

Category: General Law

Published: 2026-08-23T20:24:29.342244+00:00

Updated: 2026-08-26T17:10:57.523+00:00

JOINT VENTURE EXCEPTION IN BID-RIGGING

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

1 Seven deadly sins of joint ventures under competition law | Practical Law. (n.d.). Practical Law.

https://uk.practicallaw.thomsonreuters.com/w-019- ?transitionType=Default&contextData=(sc.Default)&firstPage=true#:~:text=Any%20cartel%20provision%20i s %20for,purpose%20of%20substantially%20lessening%20competition. 2 O. (2024, April 12). Bid rigging - Concurrences. https://www.concurrences.com/en/dictionary/bid-rigging 3 Ahlawat, N. (2016, September 20). Treatment of Joint Ventures under Indian competition law - Kluwer Competition Law Blog. Kluwer Competition Law Blog. https://competitionlawblog.kluwercompetitionlaw.com/2016/09/20/treatment-joint-ventures-indiancompetitionlaw/#_ftn17

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

JOINT VENTURE IN COMPETITION LAW

The term "joint venture" refers to a range of cooperative agreements between businesses, such as joint production, joint buying, joint selling, distribution and marketing, and joint research and development ventures. 5 Joint ventures (JVs) may be treated differently in competition law due to the demonstrable economic efficiencies they generate, which are more easily substantiated compared to other forms of collaborative agreements. Some of the advantages of this approach include the ability to take advantage of economies of scale, sharing the risks and costs of research and development, providing greater incentives for research and innovation, acquiring new technologies or skills, and benefiting from synergies created by combining complementary resources or capabilities.

However, joint ventures (JVs) can result in specific anti-competitive consequences, such as spillover collusion (when two independent entities coordinate their actions due to the formation or operation of a JV), collateral restraints (often included in JVs, such as non-compete clauses), barriers to entry and competition elimination, refusal to engage in business transactions, and reduced dynamic efficiency. 6 Joint ventures are not explicitly included within the scope of the Competition Act. Transfer of assets by one or more enterprises, also known as brownfield joint ventures, can be subject to notification if they meet the jurisdictional thresholds. Newly established joint ventures, which involve the contribution of capital by either one or more businesses also known as Greenfield joint ventures, are usually not required to notify the CCI.

7 According to the Indian Competition 4 Competition law considerations for joint ventures. (n. d. ). Global Law Firm | Norton Rose Fulbright. https://www. nortonrosefulbright. com/en/knowledge/publications/b4c4da42/competition-law-considerationsforjoint-ventures

5 Competition Commission - Overview - Competition and Anti-competitive Practices. (n.d.).

https://www.compcomm.hk/en/practices/what_is_comp/joint_ventures.html

6 Supra Note 3.

7 Kakkar, Sakle, & Singh Chauhan. (2024, February 8). India : Merger Control. In Global Competition Review. Global Competition Review.

regime, any joint venture (JV) must be reported under the Combinations regulation if it meets the necessary criteria specified in the Act. The Competition Commission of India (CCI) has approved joint ventures (JVs) under the Combinations regulations. In some cases, the CCI has provided reasons for its approval, such as when the JV has a low market share, when there is no overlap between the parent companies or the JV, or when the parent companies are not direct competitors. The recent APGDC/Shell joint venture was also evaluated by the CCI in terms of the market efficiencies it would bring. 8 Proviso to Section 3(3) states that: “Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services”.

9 An agreement through a joint venture is exempt from the provisions of Section 3(3) if it enhances efficiency in the production, supply, distribution, storage, acquisition, or control of goods or provision of services. It is not assumed that such agreement has an appreciable adverse effect on competition. It is important to highlight the treatment of Joint Ventures (JVs) under substantive provisions, particularly the presumption outlined in Section 3(3) of the Act. This provision does not grant complete immunity to a JV, but it does create a presumption in its favor. It is important to exercise caution as this assumption is only valid for Section 3, meaning that Joint Ventures (JVs) do not receive any special treatment in Section 4 cases. The definitions of 'acquisition' and 'control' can be found in Section 2(a) as well as Explanation (a) to Section 5 of the Act, accordingly.

When examining global practices and definitions, it is evident that joint ventures are classified within both Section 3 as well as Section 5 of the Act, based on the specific transaction details. However, assessing whether a joint venture improves efficiency and thus does not fall within the scope of Section 3 of the Act could present a substantial challenge. In its early years, the CCI may need to seek assistance from foreign legal precedents. If the provisions regarding combinations (Sections 5 and 6 of the Act) are implemented as is, a joint venture formed by acquiring shares in an existing company would be considered a combination under Section 5 of the Act. If the turnover thresholds are met, notification would be required. If the subject does not pass the test, it may be vulnerable to a

8 Supra Note 3.

9 Competition Act

legal challenge under Section 3 of the Act. This would still apply, even if it had been entered into before the Act was put into effect.10 A 'joint venture' is an agreement that is beneficial to both parties involved and aims to improve

the extent to which the parties involved collaborate and work together in order to achieve their goals. The exclusion of joint ventures is economically justifiable, and it is essential for businesses to enter into agreements that improve their efficiency and are beneficial to the businesses themselves. As a result of these efficiencies, collaborative research and development, innovation, cost advantages resulting from increased production and variety, and ultimately providing benefits to consumers are all possible outcomes. 11 Conversely, the European Union has a specific requirement regarding which joint ventures need to be reported under the European Union Merger Regulation (EUMR). Only a joint venture meeting both the necessary financial requirements and including a union component will be required to be notified.

A "full function" joint venture (JV) is characterized by having a management team solely focused on its daily operations and having adequate resources, such as finance, staff, and tangible and intangible assets, to sustain its business activities and operate independently in a market over a long period of time. The JVs, upon receiving notification, will be examined using the SIEC (significant impediment of effective competition) test to determine if any anticompetitive harm has occurred. 12 Joint production agreements can manifest in various forms. Production can be conducted by a single party or multiple parties. Alternatively, the parties involved can create a distinct legal entity specifically for the purpose of joint production. Typically, agreements that involve pricefixing or output limitation are intended to harm competition.

When it comes to joint production, the parties involved may mutually decide on a specific level of performance for the joint venture. The Commission will not deem this type of arrangement to be aimed at damaging competition, but rather will assess whether the production joint venture overall has a detrimental impact on competition. 13 10 Desai, K. S. , & Mohan, M. (2011, February 14). Joint ventures under India’s Competition Act. Lexology. https://www. lexology. com/library/detail. aspx? g=50beb24d-c359-458d-ad18-35a15c489ae0

11 Supra Note 6.

12 Supra Note 3.

13 Understanding the Legality of Bid-rigging and Joint Tendering Under the Competition Ordinance | Hong Kong Lawyer. (2018, December 1). https://www.hk-lawyer.org/content/understanding-legality-bid-rigging-andjointtendering-under-competition-ordinance

JOINT VENTURE AND BID-RIGGING

Joint tendering typically involves companies collaborating transparently in order to submit a joint bid. Bid-rigging, in contrast, typically involves collusion among competing bidders who still submit individual bids. There are numerous potential collaborations between businesses where they agree to collectively sell, distribute, or market specific products, known as "salesrelated joint ventures. " These arrangements can vary from collaborating on advertising or jointly providing after-sales service, to joint selling where key commercial parameters, such as price, are determined together. 14 Although joint ventures (JVs) can enhance competition by enabling parent companies to produce superior or more cost-effective products through the utilization of economies of scale or efficient resource integration, JVs can also impose limitations on competition.

In specific instances, joint ventures (JVs) can serve as a means for collusion, whereby the parties involved in the JV may engage in market division or price fixing. This risk may arise in the case of less stringent joint ventures, where their establishment has not been authorized as a joint venture by the competition authorities. 15 According to EU law, a joint bidding or consortia agreement is considered legal if the parties involved in the agreement are not current or potential competitors. Distinguishing lawful pro-competitive cooperation, such as teaming, joint bidding, and subcontracting arrangements, from illegal bid rigging agreements can be challenging. Prior to implementation, a concentrative joint venture that meets specific turnover thresholds must be notified to the European Commission in order to obtain consent.

If there are no significant issues that need to be resolved, a formal authorization decision could be obtained within one month from the time of notification. If the joint venture was focused on concentration but did not meet the specified turnover thresholds, it would be subjected to the competition laws of the EU Member States, to the degree that these laws applied to such agreements. However, in the case of a cooperative joint venture, regardless of the turnover thresholds, the parties must decide whether the agreement falls under the EU's equivalent of

14 Supra Note 13

15 le Grange, A., & May, R. (n.d.). The regulation of joint ventures under the Competition Act: Is your joint venture compliant with the Competition Act? Cliffe Dekker Hofmeyr. https://www.cliffedekkerhofmeyr.com/news/publications/2023/Practice/Competition/competition-law-alert- 15february-2023-the-regulation-of-joint-ventures-under-the-competition-act.html

Section 3 of the Act, and if so, whether the conditions for exemption are met. Before 2004, the parties were also required to assess the advantages or disadvantages of notifying the European Commission to confirm that the agreement was not in violation of competition laws or that the conditions for exemption were met. Acquiring a negative clearance or exemption decision from the European Commission can be a lengthy process, often spanning several months or even years, even for relatively straightforward issues. As a result, numerous businesses attempted to organize their joint ventures in a "concentrative" manner to take advantage of a predetermined regulatory schedule.

16 Presently, it is necessary to evaluate a joint venture that doesn't meet the "full function" criteria mentioned earlier in order to determine if it falls under the EU's version of Section 3 of the act concerning anti-competitive agreements. A joint venture that fails to meet the turnover criteria outlined in the Merger Regulation may still be subject to the corresponding regulations of the European Union nations. 17 In the case of Danish Road Marking, the Danish Road Marking Consortium received requests for proposals for road markings in three separate districts. In response, two prominent organisations submitted a joint proposal that covered all three districts. Each party had the requisite resources to submit a bid for a solitary lot.

The Danish Supreme Court has upheld the decision of the Danish Competition Council, which concluded that the parties in the consortium agreement were, in fact, competitors. This conclusion was derived based on the fact that both parties had the requisite financial resources, skill, and entry to the necessary equipment and personnel to submit bids for a specific lot. Consequently, their decision to establish prices and distribute contracts was intrinsically against fair competition, thereby breaching Article 101(1) of TFEU. 18 In the case of In Re: Association of Third Party Administrators vs. General Insurers’ (Public Sector) Association of India and others, the Court analysed the notion of Joint Venture. The Association of Third Party Administrators has lodged a formal grievance towards the General Insurers' (Public Sector) Association of India.

This association is a voluntary organisation comprising four public sector general insurance companies: National Insurance Co. Ltd, The New India Assurance Co. Ltd, The Oriental Insurance Co. Ltd, and The United India Insurance

16 Supra Note 10.

17 Supra Note 10.

18 Supra Note 2.

Co. Ltd. The Association of Insurers was formed as a Joint Venture with the intention of establishing a Third Party Administrator (TPA) to collectively offer health insurance management services and perhaps take advantage of its dominant position. 19 However, the CCI completed the investigation and issued the following statement: "The proposed joint venture clearly aims to enhance efficiencies and shouldn't be misconstrued as conduct resembling a cartel. " Moreover, it is not exerting any substantial adverse influence on the competition between various insurance companies, as stated in section 19(3) of the Act. If the proposed joint venture proves as ineffective, customers will gradually shift to alternative insurance companies, and the market position would ultimately be determined by the competition among different brands.

”20 In the Zee-Star case, the complainant claimed that the joint venture had an unfair advantage in the market, which would harm other players and also have negative consequences for consumers. The regulatory authority for fair trade has stated that the joint venture is prohibited from establishing any obstacles for new participants in the market, as well as from impeding competition by hindering new players from entering the market, in accordance with the current market conditions and TRAI regulations. According to CCI, there was no foreclosure due to the joint venture. CCI also took into account the unique characteristics of a highly regulated market such as broadcasting and media. They determined that the joint venture is a dominant player in the relevant market of aggregating and distributing TV channels to MSOs, DTHOs, and IPTVOs in India.

Given the current TRAI regulations, there is very little opportunity for aggregators or broadcasters to engage in restrictive behaviour. 21 In the case of K Sera Sera, the Competition Commission of India (CCI) reviewed a complaint made by an informant regarding DCI, a joint venture between six Hollywood enterprises. The complaint was related to the release of their films in Indian theatres. CCI dismissed the allegations against DCI, citing reasons related to market scope, piracy, IP protection, and efficiencies. 22 The most thorough analysis of a joint venture was recently conducted in the HIPTA JV case, in which the CCI examined the efficiencies achieved by a third-party administrator (TPA) established by the four PSU insurance companies. CCI acknowledged the PSUs' arguments regarding the improvement in efficiency achieved by a joint venture third-

19 CCI Case No. 107 of 2013 on 14.01.2016

20 Supra Note 7.

21 CCI Case No. 31 of 2011 on 21.03.2013

22 CCI Case No. 30 of 2015 on 08.06.2016

party administrator (TPA) in the public insurance sector, resulting in overall benefits for consumers. 23 The European Commission's jurisprudence regarding a Section 3 joint venture is notably intricate. It is founded on general principles, guidance notes, case law, automatic exemptions (which are determined by market shares), and "non-materiality" rules that also depend on market shares. Market share thresholds present a dilemma for both regulators and the business community. On one hand, they offer a level of certainty in terms of rules, even though this may result in some cases being treated unfairly. On the other hand, an effects-based analysis would require evaluating each case individually, which could lead to a lack of certainty. Both certainty and the ability to adapt based on outcomes can be achieved.

Within the EU, there exists a de minimis market share threshold, below which the European Commission would not take action. However, if a complainant brings the matter to their attention, they may consider intervening. If certain conditions are satisfied, a specific exemption is automatically granted. However, the authority has the power to revoke this exemption and there is guidance available that explains the requirements to be met if the market share threshold is exceeded. 24 It would be intriguing to observe how CCI handles the "single economic entity" doctrine in relation to joint ventures. If joint ventures (JVs) and their parent companies are not regarded as a single entity, they may be held accountable for violations under Section 3. However, if a JV and its parent companies behave collectively, they may avoid liabilities under Section 3.

It is uncertain whether CCI will adopt the EU approach or develop a distinct interpretation. Enterprises must exercise greater caution when establishing and developing a joint venture. It is necessary to clarify the purpose of the JV and its interactions with parents, as well as address any specific overlaps. Companies seeking independence from their joint venture could benefit from implementing compliance trainings and inner firewalls. 25 The precise delineation and categorization of the concepts of "control" and "group" form the foundational pillars of the Indian merger regulation framework. The reason for this is that a significant number of the exemptions mentioned in Schedule I are centered on these terms. The CCI has analyzed different degrees of regulation in the domain of competition law. The CCI

defines the initial level of control as "material influence," which is the least amount of control

23 CCI Case No. 107 of 2013 on 04.01.2016

24 Supra Note 10.

25 Supra Note 3.

and gives a company the ability to influence the day-to-day activities and leadership of another company. The CCI defines the next level of control as de facto control that occurs when a company has less than the majority of the voting rights but still manage to control more than half of the votes cast in a meeting. The CCI recognizes a third level of control known as de jure or 'controlling interest'. This situation arises when an organization possesses a shareholding that confers upon it a voting power exceeding 50 percent. The CCI requires the parties to thoroughly analyze the practical facets of their business in order to determine when they need to obtain authorization from the CCI.

Moreover, as the definition of a group classifies entities as group entities according to control, and the CCI requires details of the business conduct of the parties in a notice, the determination of the group and its members holds great importance. 26 If the public authority had not provided the opportunity for bidders to submit individual bids for each road marking project, and instead only offered a contract for all three projects combined, the outcome would have been different if the two tenderers lacked the resources to submit separate bids for the combined project. A more complex inquiry arises as to whether the two bidders had foreseen offers from third parties for the consolidated contracts, and consequently concluded that the actual competition was for the consolidated package.

In such a scenario, should their collaborative bidding arrangement be regarded as a violation of the law? While it was technically possible for them to bid for the individual contracts, the prevailing economic and business conditions made it clear that the competition was actually focused on the entire project as a whole. 27

CONCLUSION

India's competition regime must be tailored to accommodate the specific business requirements of its economy. Nevertheless, it is advantageous to ensure that the regime remains aligned with the competition principles and practices observed globally. Over the past ten years, there has been a significant increase in the number of multinational corporations making investments in India. These investments are often made through joint ventures, either voluntarily or due to sector-specific foreign direct investment regulations. Resolving any ambiguities regarding the handling of joint ventures will help both Indian enterprises and the foreign direct investment (FDI) community. The European Union framework faced uncertainties while handling joint

26 Supra Note 7.

27 Supra Note 2.

ventures; nevertheless it implemented measures to tackle them. India has the ability to navigate such unforeseeable circumstances, and it would be beneficial for the both Indian and international business sector to encourage the government to address this issue.