Can Working with Competitors Make You More Competitive?
Manufacturers are wary of getting too close with their competitors – and rightly so. Antitrust violations bring serious penalties, even jail. Yet those same laws allow, or even encourage, some types of cooperation with competitors.
Here are a few ways that working with your competitors might be legal, good for your business and good for your customers.
Joint research and development.
Research can be costly and time-consuming with plenty of dead ends. Sharing that pain with another company in your industry can reduce the cost and speed the results. Antitrust law recognizes those benefits and provides some protections under the National Cooperative Research and Production Act.
For example, GM, Ford and Chrysler (now part of Fiat Chrysler) have formed partnerships to conduct basic research on advanced batteries, new materials and joining technologies and other research topics.
Joint production.
Spreading the costs over the needs of a couple different companies, especially for a new product, can reduce both the risk and piece price. When those companies compete for sales and pass on those lower costs and new products, customers benefit, too.
When GM and Toyota started a joint production venture in California in the 1980s, it was a big antitrust deal. But that joint venture successfully assembled thousands of vehicles for its parents and gave customers more choices for over twenty years.
Joint lobbying.
The antitrust laws recognize that companies need to talk with their legislators and others in government. Those laws allow competing companies to get together to communicate with, and even lobby, any branch of government.
The best example here should be obvious to you: The MMA! Our association is a great example – but not the only one – of companies with common interests getting together to communicate their shared concerns to various governmental bodies.
Standards.
While manufacturers compete on product features and performance, standards can quickly assure customers that all the products at least meet some basic thresholds. When companies continue to compete on how to meet or exceed the standards, customers benefit. And who better to develop those standards than companies in the industry?
The Society of Automotive Engineers has been “setting the standard” in the automotive industry for decades. Engineers employed by all the competing manufacturers and suppliers develop the standards that allow automotive customers to drive their vehicles with confidence.
Now, these joint efforts among competitors are not risk-free and there are limits to all of them. You’ll need to consult an experienced antitrust lawyer before beginning one of these activities to ensure your idea follows the law. Seeking permission beforehand, not forgiveness afterwards, makes the most sense here.
Even after the joint effort begins, you’ll need to make sure you and your competitor don’t stray from boundaries set by the antitrust laws. Using a joint research meeting to fix prices will still be automatically illegal.
Still, getting together with your competitors in one of these areas can be rewarding, both to you and your customers. You owe it to your company to see if any of these options is right for you.