United States: Joint Ventures

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Many joint ventures are lawful under section 1 of the Sherman Act1 because they promote competition by bringing together independent and complementary resources that promote competition.2 But some ventures can reduce competition by bringing together competing resources and exercising market power. Once formed, joint ventures may be sufficiently integrated that their activity is akin to that of a single economic entity. As such, they may be beyond the reach of section 1 of the Sherman Act because section 1 requires an agreement among independent actors. But as recent developments show, successfully persuading a court that joint venture partners are a single economic actor and beyond the reach of section 1 is highly uncertain. Courts are still working through the application of the pertinent US Supreme Court precedent and are unpredictable in their treatment of joint ventures. For example, as explained below, in one Sixth Circuit case, the majority and dissent did not agree on the way to apply US Supreme Court precedent or how to weigh the facts. Also, two recent trial court judges have come to different views on whether a joint venture and its owners are capable of conspiring under section 1. Further, the lower courts have not always applied all the factors considered by the US Supreme Court. These developments suggest joint venture parties bear substantial risk if they rely on a court concluding they are incapable of conspiring to avoid section 1 liability.

Supreme Court precedent on the capacity of joint venture members to conspire

Section 1 of the Sherman Act prohibits agreements that unreasonably restrain trade. The elements of a section 1 violation are: (1) a contract, combination or conspiracy between two or more independent entities, (2) an unreasonable restraint of trade, and (3) an effect on interstate commerce.

Since 1984, the Supreme Court has addressed on three occasions whether companies or joint ventures are independent entities and capable of conspiring. In Copperweld Corp v Independence Tube Corp,3 the Court held that a parent and its wholly owned subsidiary were not legally capable of conspiring. Rather than focusing on the fact that a parent and wholly owned subsidiary were legally distinct entities, the Court analysed the functional relationship between the two entities. The key question in determining whether activity was unilateral or concerted was whether it united ‘economic power that was previously pursuing divergent goals.’4 The Court held that a corporation and its wholly owned subsidiary have a complete unity of interest. … [T]here is no sudden joining of economic resources that had previously served different interests … .’5

In Texaco, Inc v Dagher,6 the Court held that the price-setting was not per se unlawful activity of a joint venture where the parents had contributed all their competing assets and the joint venture operated as a single entity. In Dagher, the Shell Oil Company and Texaco contributed all of their downstream energy businesses to a joint venture. The joint venture sold Texaco and Shell-branded gasoline. Plaintiffs asserted the common setting of prices for the two brands constituted a per se violation of the Sherman Act.7 Defendants argued the conduct was to be judged by its overall impact on competition and the Court agreed. In so holding, the Court noted that ‘the pricing policy challenged here amounts to little more than price setting by a single entity – albeit within the context of a joint venture – and not a pricing agreement between competing entities with respect to their competing products.’8

In American Needle, Inc v NFL,9 the Court considered the question of whether joint venture partners are capable of agreeing under section 1. The defendants in American Needle included the National Football League (NFL), its 32 member football teams, and National Football League Properties (NFLP), an entity formed by the NFL and its members that developed, licensed and marketed the intellectual property of the NFL and its teams. Each NFL team had to approve each NFLP trademark licence. Plaintiff American Needle had been granted a non-exclusive licence to manufacture and sell NFL apparel until December 2000. When NFLP declined to renew American Needle’s existing licence, American Needle sued, alleging that the decision to refuse to license American Needle constituted an unlawful agreement between the NFL, NFLP and NFL teams.

According to the Court, the relevant inquiry is ‘whether there is a [conspiracy] amongst “separate economic actors pursuing separate economic interests,” such that the agreement ‘deprives the marketplace of independent centers of decisionmaking,’ and therefore the “diversity of entrepreneurial interests.”’10 The answer would be determined by ‘competitive reality,’ and not merely by the legal form of the entities in question.11

The Court found that the NFL teams did not possess a unity of interests. According to the Court, the teams competed in various ways – for fans, for tickets, for personnel, and also in the market for intellectual property.

The Court also concluded that NFLP was capable of conspiring. The Court was not persuaded by the fact that NFLP had its own management and the NFL teams shared NFLP profits on an equal basis. The Court explained that although agreements within a single firm are treated as independent action and beyond the reach of Section 1, this conclusion is based on the presumption that the firm and actors are maximising the firm’s profits.12 The court concluded that decisions of NFLP require the agreement of each owner, each NFL team continued to own its trademark, the teams were ‘separately controlled, … with economic interests that are distinct from the NFLP’s financial well-being.’13

Recent developments

We address three recent cases decided since 2014.

In Re Credit Default Swaps antitrust litigation14

Credit Default Swaps addressed whether an independent legal entity is capable of conspiring with one or more of its owners. The case involved an allegation that a number of financial institutions (referred to as ‘dealer-defendants’), which were broker dealers of credit default swaps (CDS),15 an association of broker-dealers and Markit Group Holdings Limited and its subsidiary Markit Group Ltd (collectively referred to as ‘Markit’) conspired to exclude new entry into the market for CDS. A CDS is a financial instrument based on a bundle of debt instruments (eg, a mortgage). The plaintiffs did not challenge the formation of Markit or the CDS market.

At its inception, the CDS market was not liquid, making trading difficult. Markit, a private financial information company, standardised aspects of the CDS market creating greater liquidity in that market. Markit’s profits grew with CDS trading volume. Dealer-defendants were traders in the CDS market and benefited by facing less competition in the CDS market. Dealer-defendants held board seats on Markit.

All of the defendants moved to dismiss the complaint on several grounds. The issue of relevance here was whether Markit was capable of conspiring with its owners, certain dealer-defendants. Markit provided two arguments to support its contention. First, relying on Copperweld and lower court decisions, Markit argued it was incapable of conspiring with its owners. In rejecting the argument, the court noted that Copperweld’s holding was limited to its fact and did not ‘consider under what circumstances, if any, a parent may be liable for conspiring with an affiliated corporation it does not completely own’.16 Turning to the allegations of the complaint, the court noted that the plaintiffs did not allege that the defendant banks dominated the governance of Markit to create a unity of interest. Rather, the complaint alleged that as a market maker, Markit had interests distinct from its dealer-defendant owners because Markit would welcome new entrants to the CDS market. The court also highlighted that Markit allegedly joined the conspiracy not only through its ownership by dealer-defendants but by dealer-defendants’ position as customers of Markit.17 The court concluded by explaining that Markit had not cited any persuasive authority for the proposition that Copperweld had been extended to ‘all forms of corporate control.’18

Second, Markit argued that the allegedly unlawful conduct created a ‘single center of economic power’. The court rejected that argument noting that the question was not whether conspirators are legally distinct entities or participants in a joint venture. Rather, citing American Needle, the court held that the correct question is whether the allegedly unlawful agreement ‘joins together independent centers of decision making.’19 Although Markit had created a centralised and standardised CDS clearing process, this was not persuasive to the court because the challenged conduct involved Markit and its owners to exclude competition from the CDS market, not the decision to create the market.

In our view, the challenged conduct did not go solely to the ownership of Markit; rather, such conduct went, at least in part, to the way the owners and Markit operated outside the venture and, as the court described, is an agreement ‘between independent centers of decision making.’20 The decision is notable because of the way the court parsed the unlawful conduct from the joint venture operation. It is also notable in that the court focused on the ‘centralized decision making’ aspect of American Needle and gave little or no weight to some of the other factors articulated in the decision, such as the lack of competition between Markit and the defendant-dealers.

Top Rank Inc v Alan Haymon21

In contrast to Credit Default Swaps, a district court judge concluded that a defendant and its investor were not capable of conspiring under section 1. One set of defendants was a group of affiliated limited liability companies that promoted boxing matches and managed professional boxers (Haymon). Another set of defendants was affiliated companies engaged in asset management and investment advisory services (Waddell). One of the Waddell entities was a member (owner) and sat on the board of one of the Haymon entities. The purpose of the investment was for Waddell to provide funding, business expertise and operational supervision to Haymon.

The complaint alleged, among other things, that Waddell and Hayman conspired to exclude the plaintiff from the market to promote professional boxing and manage professional boxers. The defendants moved to dismiss the complaint on several grounds, one of which was that the defendants were incapable of conspiring. The court explained Copperweld focused on the parent and wholly owned subsidiary having a complete unity of interest, having common not disparate objectives, and with or without any agreement one was acting on behalf of the other. There was no sudden joining of resources. In American Needle, according to the court, the parents continued to compete with NFLP with regard to the licensing of intellectual property, the teams did not act like the components of a single firm and they remained ‘separately controlled, potential competitors with economic interests that are distinct from NFLP’s well-being.’22

According to the court, Waddell and Haymon share a complete unity of interest as it related to the promotion of boxing matches and managing professional boxers. As investors, the court held, Waddell was similar to ‘components of a single firm that act to maximize the firms’ profits.’23 Moreover, as an asset management and advisory concern, Waddell did not compete with Haymon and deprive the market of independent centres of decision-making.

As in Credit Default Swaps, one defendant in Haymon had a seat on the board of another defendant. But unlike Credit Default Swaps, the court found a unity of interest because conduct that was the subject of the complaint was central to the functioning of the joint venture and did not deprive the market of actual or potential competition. The court’s discussion of the defendants operating as a single firm maximising the profits of the firm is relatively short and provides little guidance.

Medical Center at Elizabeth Place, LLC v Atrium Health System24

While Credit Default Swaps and Haymon addressed the question of whether an entity can conspire with one or more owners, Medical Center addressed the question of whether competing entities are capable of conspiring after delegating their management to a single entity but excluding their assets from the venture.

Four competing hospitals entered into a joint operating agreement, whereby a newly formed entity Premier Health Partners (Premier) would operate the hospitals. The plaintiff was a competing hospital that alleged Premier conspired with the four hospitals to coerce health insurers to exclude from their networks the plaintiff’s hospital and physicians from referring patients and participating with the plaintiff’s hospitals. The district court found that Premier and the hospitals were incapable of conspiring and dismissed the case.

On appeal, a majority of the Sixth Circuit reversed. The majority interpreted American Needle as requiring an inquiry into the ‘actual conduct’ of the joint venture entity and whether the parties were ‘separate, competing entities’ or was ‘a single center of decision making.’25 In reviewing the actual conduct of the venture, the court focused on the intent of the parties in relation to the plaintiff. It held that the evidence showing intent to deny the plaintiffs access to healthcare networks and physicians was anticompetitive. According to the majority, this was sufficient to conclude the venture was a vehicle for concerted activity and sufficient to raise a triable issue as to whether the parties could conspire.26

Next, the court examined whether the relationship between the hospitals was that of ‘separate, competing entities’ or that of ‘a single center of decision making.’27 The majority’s analysis began by explaining that establishing Premier as a separate corporate entity was not dispositive under American Needle.28 The court was also unpersuaded by the revenue-sharing arrangement that allocated revenues regardless of the sales of individual hospitals reasoning that if such revenue-sharing immunised joint venture conduct then ‘any cartel could evade the antitrust laws simply by creating a joint venture to serve as the exclusive seller of their competing products.'29 Rather, the majority was ultimately persuaded that the parties themselves considered themselves to be separate and competing entities. That is, the hospitals held their own assets,30 continued to compete as independent hospitals,31 and made public statements promoting themselves as separate entities.32 Accordingly, the court believed there was a material issue of fact whether the parties were a single centre of decision-making.

The dissent disagreed with the legal and factual analysis of the majority. The dissent noted that when accounting for the actual conduct of the parties, the focus is not on the treatment of the plaintiff but rather the way the parties conducted operations among themselves.33 The dissent argued the best way to determine such an issue was by analysing the joint operating agreement.34 The dissent found that the joint operating agreement granted Premier operational authority over each partner hospital, which included granting Premier the authority to control each defendant’s strategic plans, budgets and business plans and the responsibility for developing capital budgets for the system, requiring each hospital to implement the Premier-developed budget, requiring each hospital’s chief executive officer to report to Premier’s chief operating officer, requiring the management of each hospital to report to Premier, among others.35 As such, the dissent concluded that the hospitals did not compete with each other, even though each hospital maintained ownership of its assets.36 The dissent highlighted that such degree of integration allayed concerns that the venture was a way to sidestep antitrust liability.37


Although decided in 2010, the establishment of a consistent and coherent application of American Needle continues to be elusive. The Sixth Circuit could not come to a common view on how to apply the legal standards set forth in American Needle. And Haymon and CDS show that courts will closely examine many factors beyond common ownership to determine whether parties are capable of conspiring under section 1.


  1. 15 U.S.C. section 1.
  2. Fed. Trade Comm’n & U.S. Dep’t of Justice, Antitrust Guidelines for Collaborations Among Competitors (2000), www.ftc.gov/os/2000/04/ftcdojguidelines.pdf (last visited June 6, 2016).
  3. 467 U.S. 752 (1984).
  4. Id. at 769.
  5. Id. at 771. The Court limited its holding to a parent-wholly owned subsidiary situation. Id. at 767.
  6. 547 U.S. 1 (2006).
  7. An agreement among competitors to fix prices is presumptively unlawful. Other agreements are judged under the rule of reason to determine their overall impact on competition.
  8. Id. at 6.
  9. 560 U.S. 183 (2010).
  10. Id. at 195 (citations omitted).
  11. Id. at 196.
  12. Id. at 200.
  13. Id. (citations omitted).
  14. No. 13md2476 (DLC), 2014 U.S. Dist. LEXIS 123784 (S.D.N.Y. Sept. 4, 2014).
  15. Like the Credit Default Swaps decision, we use the abbreviation ‘CDS’ to refer both to a singular ‘credit default swap’ and plural ‘credit default swaps.’
  16. Id. at *32 (citing Copperweld, 467 U.S. at 769) (internal quotations omitted).
  17. Id.
  18. Id.
  19. Id. at *34 (citing American Needle, 560 U.S. at 196).
  20. Id. at *35.
  21. No. CV 15-4961-JFW (MRWx), 2015 U.S. Dist. LEXIS 164676 (C.D. Cal. Oct. 16, 2015).
  22. Id. at 48 (citing American Needle, 560 U.S. at 201).
  23. Id. (citing American Needle, 560 U.S. at 201).
  24. No. 14-4166, 2016 U.S. App. LEXIS 5214 (6th Cir. Mar. 22, 2016).
  25. Id. at *18.
  26. Id. at *14-15.
  27. Id. at *18.
  28. Id. at *19.
  29. Id. at *20 (quoting Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 335 (2d Cir. 2008)).
  30. Id. at *21.
  31. Id. at *21-22.
  32. Id. at *22.
  33. Id. at *35-36 (Griffin, J, dissenting).
  34. Id. at *38.
  35. Id. at *40-41.
  36. Id. at * 44.
  37. Id. at *40-41.

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