FDI and EU Competition Law – Achieving Legal Certainty When Creating Korean-European Joint Ventures

Posted by D. Daniel Sokol

Simon Baier (Hankuk University of Foreign Studies) analyzes FDI and EU Competition Law – Achieving Legal Certainty When Creating Korean-European Joint Ventures

ABSTRACT: Korea’s foreign direct investment in the European Union is expected to increase as a consequence of the Korea‐EU FTA. Korean companies planning to invest in the European market will often choose the form of a joint venture as the preferred business vehicle.

This article analyzes the formation of joint ventures under EU competition law and shows that two areas can be concerned with it – European antitrust law and merger control law. The article argues that by creating the joint venture as ‘concentrative full-function undertaking’ the founders will be able to achieve a high and satisfactory level of certainty about the legality of their intended business, because the formation process will be subject to merger control proceedings with the possibility of a pre-clearance by the European Commission. Over such a joint venture parent companies must maintain common control, and they have to ensure that it operates independently from them in the market on a lasting basis. In addition, the founders need to fully withdraw from the joint venture’s market and any adjacent markets.

The article also points out that joint ventures which only take over one specific function within the parents’ business activities or which induce ‘spill-over effects’ can hardly be subject to merger control but will be dealt with Art 101 TFEU exclusively and will thus forego the chance of receiving a ‘clean bill’ by the European Commission.