June 17, 1990
"Little Change from Fiddling with Antitrust"
San Jose Mercury News
By Timothy Taylor
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ECONOMIC competition can be the enemy of innovation and increased
productivity. That is the premise behind the National Cooperative Production Amendments
of 1990, which were approved by the House of Representatives two weeks ago.
This idea may seem out of step with the times. After all, one could probably
wallpaper the USSR with recent articles pointing out how the Soviets need to learn
that market competition stimulates new inventions and products.
But when competition is intense, firms may have reason to shy away from investment
in some new technologies. After all, if they invest heavily and fail to make a
discovery, their competitors may eat them up. If they succeed, their competitors
may be able to copy the innovation without the need to invest their own money,
and the original innovator might still end up behind.
A joint venture can reduce these risks of competition. In addition, firms may
be able to pool their different skills to attempt projects that no individual
firm would be able to try on its own.
Thus, the issue is striking a balance between cooperation and competition.
Back in 1984, these concerns led to the passage of the National Cooperative Research
Act. The act specified that cooperative research efforts should not automatically
be held illegal under antitrust law, but instead will be judged on a case-by-case
basis for their effect on competition.
In addition, the NCRA allows companies to register their joint-research efforts
with the federal government. If a registered venture is later found to have violated
antitrust laws, it will be subject only to paying actual damages. Companies that
violate antitrust laws and are not covered by this exemption can be required to
pay treble damages.
The National Cooperative Production Amendments simply extend the legal standards
and registration procedure of the NCRA to cover joint production ventures, as
well as joint research.
Politically speaking, the cooperative production amendments are big-time. The
Bush administration has put a high priority on pushing this sort of antitrust
reform. Silicon Valley's own Norman Mineta, D-San Jose, called the amendments
"a large step toward helping United States high-tech industries resume their
Although the bill had bipartisan support in the House, a battle may be brewing
in the Senate, where some senators apparently feel that cooperative production
may tip the balance too far away from competition. The Judiciary Subcommittee
on Antitrust, Monopolies and Business Rights is scheduled to hold hearings on
the bill in July.
But the cooperative production amendments are generating much more action in
Washington then they are likely to in the business world. You see, production
joint ventures are already legal and fairly common; all the recent bill does is
to codify into law the standard already being applied by the courts.
In fact, more than 150 joint production ventures have been announced in the
last three years, even without the registration procedure.
It is tempting to wish, along with Mineta and many others, that the cooperative
production amendments will be "a large step" toward triggering a surge
of American productivity growth. After all, tinkering a bit with antitrust laws
is so much easier than trying to train more scientists and engineers, increase
the rate of saving and investment, raise research and development spending, or
persuade American management and investors to take a long-term perspective.
America's competitive problems go far, far deeper than companies misperceiving
the legal boundaries between cooperation and an antitrust violation, but that's
really the only problem the National Cooperative Production Amendments addresses.
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