Strategic Alliances - Highlights to Guide Firms Considering Strategic Alliances

• Most strategic alliances do not raise issues under the Act.
• Vertical and conglomerate alliances are less likely than horizontal alliances to raise issues under the Act.
• The few strategic alliances which may raise competition issues are more likely to involve those sections of the Act which involve a test of market power.
• Firms acting as sellers will hold market power when they have the ability to increase price above competitive levels (or reduce output, quality, choice, service, promotional activity, innovation or other significant dimensions of rivalry, below compet itive levels) for a sustained period of time.
• In the few cases where an alliance may result in market power, caution should be exercised by the parties to ensure that their behaviour does not involve or give rise to either an undue lessening or prevention of competition under the criminal conspir acy provisions of the Act, or a substantial lessening or prevention of competition under the civil reviewable provisions.
• The greater the market power collectively held by the parties to an alliance, the more likely is behaviour which is potentially injurious to competition and the greater the likelihood of an inquiry under the conspiracy provisions of the Act.
• Where strategic alliances involve behaviour which would be particularly injurious to competition, such as agreements in respect of prices, output, marketing strategies or other areas important to rivalry, an inquiry under the conspiracy provisions of the Act may be initiated even if the market power held by the parties to the alliance is not so considerable.
• Alliances that involve the future acquisition of control will be reviewed under the civil merger provisions rather than the criminal conspiracy provisions of the Act unless there is a basis for believing that the acquisition of control is a sham.