Consortium

What Is a Consortium?

A consortium is a group made up of two or more individuals, companies, or governments that work together to achieving a common objective. Entities that participate in a consortium pool resources but are otherwise only responsible for the obligations that are set out in the consortium's agreement. Every entity that is under the consortium, therefore, remains independent with regard to their normal business operations and has no say over another member's operations that are not related to the consortium.

Consortiums Explained

Consortiums are often found in the non-profit sector, for example, among educational institutions. Educational consortiums often pool resources such as libraries, research activities, and professors and share them throughout the members of the group to benefit their students. Several groups of North American colleges and universities operate as consortiums.

For example, the Five College Consortium in Massachusetts includes the University of Massachusetts Amherst, Mount Holyoke College, Hampshire College, Smith College, and Amherst College as members. Students attending any of those institutions can attend classes at any other partnered school for credit at no extra cost. Such educational consortiums involve partnerships between institutions that are close to one another. Other college consortia include The Quaker Consortium, The Claremont Colleges, and the Big Ten Academic Alliance.

Special Considerations

Consortiums and For-Profit Businesses

Corporate, for-profit consortiums also exist, but they are less prevalent. One of the most famous for-profit consortiums is the airline manufacturer Airbus Industrie GIE. European aerospace manufacturers collaborate within the consortium to produce and sell commercial aircraft.

Illustrating the complexity of such an arrangement, the four partner companies in Airbus (British Aerospace, Aérospatiale, Construcciones Aeronáuticas SA, and DASA) were simultaneously subcontractors to and shareholders of the consortium. This arrangement resulted in some conflicts of interest and inefficiencies as well as the eventual shift to Airbus SAS in 2001, which saw a consolidation of the original consortium members and a reduction in overheads.

In the United States, the video streaming service Hulu is a consortium of big media companies including Comcast, Time Warner, the Walt Disney Company, and 21st Century Fox.

Fast Fact

In contrast to a joint venture, consortiums act independently in their day-to-day operations.

Consortiums and Government

Governments and private enterprises often collaborate to formulate standards for manufacturing, food production, product compatibility, consumer safety, and more. In such collaborations, a government leverages its buying power as a consumer to create standards.

Countries that develop standards have a competitive advantage over those that do not, and countries and industries that agree to a worldwide standard are often leaders in international trade. The creation of standards can lead to potential abuse and antitrust concerns, however. In the United States, the legal groundwork for collaborations and consortiums is found in the Department of Justice and Federal Trade Commission's Antitrust Guidelines for Collaborations Among Competitors.

Governments and private enterprises often collaborate to formulate standards for industries; in doing so, the government leverages its buying power as a consumer to create standards.

Consortiums Versus Joint Ventures

While consortiums tend to share resources, they act independently when it comes to day-to-day operations. In a joint venture (JV), two or more parties generally share ownership in a venture, along with risks, profits, losses, and governance.