Category Archives: Competition Law

“How Google beat the feds”

Google escaped from a nearly two-year federal antitrust probe with only a few scratches by proving that the best defense is a good offense.

Instead of ignoring Washington — as rival Microsoft did before its costly monopolization trial in the 1990s — Google spent about $25 million in lobbying, made an effort to cozy up to the Obama administration and hired influential Republicans and former regulators. The company even consulted with the late Robert Bork and The Heritage Foundation and met with senators like John Kerry to make its case. In other words, these traditional outsiders worked the system from the inside.

http://www.politico.com/story/2013/01/how-google-beat-the-feds-85743.html?hp=l16

A Tale of Legal Contortions: The Extraterritorial Application of EU Competition Law in the Global Economy: Conclusion (5/5)

This is the conclusion of a series of blog posts on the topic of the unilateral application of EU Competition Law beyond the confines of EU territory.

Go to: Introduction -> Part II -> Part III -> Part IV -> Conclusion

As we have seen, the European Courts have adopted various legal contortions in order to maintain a legal fiction that foreign agreements and conduct are actually European, thus denying their ‘extra-‘ territoriality.

The ECJ has, therefore, largely avoided dealing with the issue of extraterritoriality under public international law, moving from a relatively strict territorial approach, as seen in the ‘economic entity’ doctrine, to a looser interpretation of territoriality as can be seen in the ‘implementation’ criterion. The same cannot be said of the Commission, which has unambiguously embraced the effects doctrine in a number of its decisions. These contrasting approaches are quite telling of the institutional power dynamics within the EU.

The ‘economic entity’ or ‘implementation’ doctrines will be sufficient to deal with most situations, although some rare cases may well fall through the EU’s jurisdictional net. Indeed, the situation under the paradigm market access case remains unsure, and these will not be sufficient in the case of a remote cartel surcharge via a bona fide intermediary. Should these scenarios arise it is posited that, in light of its previous case-law, the ECJ is likely to simply relabel any qualified effects as ‘implementation’1. The most significant obstacle will, therefore, remain the practicalities of exercising enforcement jurisdiction beyond the coercive powers of the EU territory.

We have seen that the Merger Regulation gives the EU unprecedented power to control mergers between foreign firms. It is precisely the ‘long-arm’ of the Merger Regulation, and its controversial quantitative thresholds, which prompted the CFI to justify its jurisdiction, in addition to the implementation criterion, under the qualified effects doctrine. Furthermore, we have seen that the courts do not see negative comity as restraining these powers, relegating this issue to prosecutorial discretion or the remedy stage, unless the conduct is compelled by the foreign state.

Despite the limitations outlined above, and the proliferation of bilateral agreements and attempts at international harmonisation, the unilateral extraterritorial application of competition rules undoubtedly remains the most important weapon in the arsenal of EU competition law enforcers2.

  1. Van Bael & Bellis (firm), Competition law of the European Community (5th ed. Kluwer Law International 2010) at 276; Florian Wagner von Papp, ‘Competition Law, Extraterritoriality & Bilateral Agreements’ [2012] at 31 []
  2. Ibid. at 3; Alexander Layton and Angharad M Parry, ‘Extraterritorial Jurisdiction – European Responses’ [2004] 26 Houston Journal of International Law at 325 []

A Tale of Legal Contortions: The Regulation of Mergers: unlimited extraterritorial jurisdiction (4/5)

This is part IV of a series of blog posts on the topic of the unilateral application of EU Competition Law beyond the confines of EU territory.

Go to: Introduction -> Part II -> Part III -> Part IV -> Conclusion

Council Regulation 139/20041 applies to concentrations which have a ‘Community dimension’2. This will be the case when certain thresholds, relating to turnover worldwide and EU-wide, are met3). Once a concentration falls under this Regulation it will need to pre-notify the Commission (or face penalties4 ), so that the Commission may consider the compatibility of the proposed concentration with the internal market5.

It is clear that this approach will catch foreign undertakings which carry out only minimal activities within the EU, as well as certain entirely foreign-to-foreign concentrations6. This raises the question of whether, under international law, all the concentrations which meet these thresholds have a sufficient nexus to the EU to justify an assertion of jurisdiction?7

A. Gencor: the recognition of the effects doctrine under international law

In Gencor-Lonhro8, a proposed concentration, between the South-African interests of two undertakings, was deemed incompatible with the internal market as it would lead to a duopoly in the world platinum market. The Commission’s assertion of jurisdiction was challenged before the Court of First Instance on two grounds: (i) the territorial scope of the MCR9 and (ii) compatibility with public international law10.

The Court, besides holding that the quantitative thresholds of the MCR did not require undertakings to be registered or to produce in the Community, clarified that the implementation criterion, in merger cases, may be satisfied by ‘mere sales’11. This makes for an ineffective jurisdictional safeguard12, as any undertaking meeting the turnover thresholds will automatically be found to satisfy the implementation criterion13.

Furthermore, in light of the jurisdictional sensitivities involved14, it went on to justify its decision under international law, holding that the MCR may be applied extraterritorially under international law where a proposed merger will have an ‘immediate, substantial and foreseeable effect’ on the internal market15 (which it found in this case). When the quantitative thresholds are met, it is likely that immediate and substantial effect will be foreseeable in the EU. This will, however, not be automatic16. Indeed, in Gencor this required careful factual examination by the Court17.

B. The notification problem

We are then left with an uneasy situation under which concentrations, which have a Community dimension, must be notified to the Commission, under the threat of fines, even though they may not have an effect on the EU market structure18.

The Commission has sought to address this jurisdictional problem through the simplified notification procedure introduced for full-function joint ventures19), which have little or no impact on the EU market. This may prove too limited in scope, as can be seen in the Samsung case20, where non-notification was sanctioned by fines, even though there were no EU competition concerns raised21.

The Community dimension as a jurisdictional tool is a brute instrument, which, as Ezrachi convincingly argues22, has significant added costs for non EU undertakings. As such, a jurisdictional test based on economic analysis and not political compromise as to competence between Member States and the EU would be a welcome development23.

C. A limited role for negative comity

Neither the Commission nor the courts have shown any particular interest in adopting a doctrine of international comity (or ‘reciprocal courtesy’)24. In Gencor, the Court held that there is no conflict of jurisdiction where one state prohibits conduct and the other allows it,

but does not require it (as was the case with the merger)25. A similar response was given in Woodpulp, where the ECJ was faced with an export cartel which was legal under the Webb-Pomerene Act in the United States26.

The Boeing/McDonnell Douglas27 case makes it clear that the Commission will, nevertheless, take into account international comity when reviewing and formulating remedies. In this instance, the Commission agreed to exclude from further review the military operations of these undertakings28.

In GE/Honeywell (General Electric/Honeywell, Case No COMP/M. 2220 [2004] OJ L48/1)) , the Commission prohibited what would have been the biggest merger in US history. This provides us with an interesting illustration of the consequences of competing authorities asserting jurisdiction over the same matter29.

The comity analysis, therefore, seems to be extremely limited and will hardly prove to be a restraint in practice. It may be better formulated as a matter of prosecutorial discretion rather than a legal prerequisite for the assertion of jurisdiction30. I would argue that this reasoning is a logical necessity in light of the EU’s approach of attempting to bring extra- territorial matters within its territorial jurisdiction31.

  1. Council Regulation 139/2004 []
  2. Ibid. article 1 []
  3. Ibid. article 1(2) and 1(3 []
  4. Ibid. article 14 []
  5. Ibid. article 2 []
  6. Ibid. Recital 10; Mark Furse (ed), Butterworths Competition Law Service/Division XII Extra-territoriality [2011] at [133] []
  7. Florian Wagner von Papp, ‘Competition Law, Extraterritoriality & Bilateral Agreements’ [2012] at 31 []
  8. Gencor Ltd v Commission Case T-102/96, [1999] ECR II-753 []
  9. Ibid. at [78]-[88] []
  10. Ibid. at [89]-[111] []
  11. Ibid. at [87] []
  12. Brenda Sufrin, ‘Competition in a Globalised Marketplace: Beyond Jurisdiction’ in Patrick Capps, Malcolm Evans and Stratos Konstadinidis (eds), Asserting Jurisdiction (Hart Publishing 2003) at 116 []
  13. Ariel Ezrachi, ‘Limitations on the extraterritorial reach of the European Merger Regulation’ [2001] 22 European Competition Law Review at 138 []
  14. Christopher Bellamy, European Community Law of Competition (5th ed. Sweet & Maxwell 2001) at [2.157] []
  15. Gencor Ltd v Commission Case T-102/96, [1999] ECR II-753 at [90] []
  16. Ariel Ezrachi, ‘Limitations on the extraterritorial reach of the European Merger Regulation’ [2001] 22 European Competition Law Review at 138 []
  17. Gencor Ltd v Commission Case T-102/96, [1999] ECR II-753 at [92]-[101]; Brenda Sufrin, ‘Competition in a Globalised Marketplace: Beyond Jurisdiction’ in Patrick Capps, Malcolm Evans and Stratos Konstadinidis (eds), Asserting Jurisdiction (Hart Publishing 2003) at 117 []
  18. Andre R Fiebig, ‘International law limits on the extraterritorial application of the European Merger Control Regulation and suggestions for reform’ [1998] 19 European Competition Law Review 324; Brenda Sufrin, ‘Competition in a Globalised Marketplace: Beyond Jurisdiction’ in Patrick Capps, Malcolm Evans and Stratos Konstadinidis (eds), Asserting Jurisdiction (Hart Publishing 2003) at 116-117 []

  19. Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) 139/2004; (2005) OJ C 56/4, art 5(a []
  20. Samsung Case No IV/M.920 [1998] CMLR 494 []
  21. Brenda Sufrin, ‘Competition in a Globalised Marketplace: Beyond Jurisdiction’ in Patrick Capps, Malcolm Evans and Stratos Konstadinidis (eds), Asserting Jurisdiction (Hart Publishing 2003) at 117 []
  22. Ariel Ezrachi, ‘Limitations on the extraterritorial reach of the European Merger Regulation’ [2001] 22 European Competition Law Review at 138-139 []
  23. Jacques HJ Bourgeois, ‘EEC Control Over International Mergers’ [1990] Yearbook of European Law at 103 []
  24. Aluminium Imports from Eastern Europe [1985] OJ L92/1, [1987] 3 CMLR 813; Contra: 1986 OECD recommendation for Extraterritorial application of competition law []
  25. Gencor Ltd v Commission Case T-102/96, [1999] ECR II-753 at [106] []
  26. A Ahlström Oy v EC Commission Case 89/85 [1988] 4 CMLR 901 at [22]; Joseph Griffin, ‘Extraterritoriality in US and EU Antitrust Enforcement’ [1999] 67 Antitrust Law Journal at 179 []
  27. Boeing/McDonell Douglas IV/M877 [1997] OJ L/336/16 []
  28. Andre R Fiebig, ‘International law limits on the extraterritorial application of the European Merger Control Regulation and suggestions for reform’ [1998] 19 European Competition Law Review at 323 []
  29. Alison Jones and Brenda Sufrin, EU Competition Law (4th ed, Oxford University Press 2010) at 1255 []
  30. Van Bael & Bellis (firm), Competition law of the European Community (5th ed. Kluwer Law International 2010) at 140 []
  31. William Sugden, ‘Global Antitrust and the Evolution of an International Standard’ [2002] 35 Vanderbilt Journal of Transnational Law at 1015 []

A Tale of Legal Contortions: The concept of extraterritoriality: bases of jurisdiction and the effects doctrine (2/5)

This is the part II to a series of blog posts on the topic of the unilateral application of EU Competition Law beyond the confines of EU territory.

Go to: Introduction -> Part II -> Part III -> Part IV -> Conclusion

A state’s, and by analogy the EU’s1, ability to apply its competition laws extraterritorially is governed by public international law2. Accordingly, a state has the power to make laws governing conduct within its territory (the territoriality principle3 ), as well as to regulate the conduct of its citizens and undertakings abroad (the nationality principle4 ). Objective territoriality recognises the State’s jurisdiction where the infringing conduct originates abroad but is then completed or implemented within the State’s territory5.

Applying the latter principle to competition law, especially if based solely on the effect of an agreement or conduct which has not been committed within the territory of the state asserting jurisdiction, has proven extremely controversial6 ).

It has long been the position of the United States7 that their competition rules may be applied where foreign conduct is show to have an effect on US commerce8 ).

This has led a number of countries, including the United Kingdom9 ), to pass ‘blocking statutes’ which attempt to counter excessive assertions of jurisdiction10.The EU institutional response towards extra-territorial applications of US laws can be said to be equally hostile11. As a result of this viewpoint, the EU institutions have had to find more palatable justifications for addressing the anti-competitive conduct of foreign undertakings which have an effect within the EU12.

  1. Reparations for Injuries Suffered in the Service of the United Nations [1949] ICJ Rep 174; article 47 Treaty on European Union; Case 22/70 Commission v Council (ERTA) [1971] ECR 263; Robert Lane, EC Competition Law (Longman 2001) at 278 []
  2. Richard Wish, Competition Law (6th ed. Oxford University Press 2008) – Chapter 12: The International Dimension of Competition Law – at [12.4] []
  3. S.S. Lotus (Fr. v. Turk.), 1927 P.C.I.J. (ser. A) No. 10; Robert Lane, EC Competition Law (Longman 2001) at 179 []
  4. Andre R Fiebig, ‘International law limits on the extraterritorial application of the European Merger Control Regulation and suggestions for reform’ [1998] 19 European Competition Law Review 326 []
  5. Ibid. []
  6. Joseph Griffin, ‘Foreign Governmental Reactions to US Assertions of Extraterritorial Jurisdiction’ [1998] George Mason Law Review 505 []
  7. United States v Alcoa, [1945] 148 F.2d 416 (2d Cir.); Hartford Fire Insurance Co. v California [1993] 113 S.Ct. 2891 []
  8. See now: 15 U.S.C. § 6(a)(1) (conduct involving trade or commerce with foreign nations []
  9. See now: 15 U.S.C. § 6(a)(1) (conduct involving trade or commerce with foreign nations []
  10. Mark Furse (ed), Butterworths Competition Law Service/Division XII Extra-territoriality [2011] at [363]; Joseph Griffin, ‘Foreign Governmental Reactions to US Assertions of Extraterritorial Jurisdiction’ [1998] George Mason Law Review at 506 []
  11. For eg. Council Regulation (EC) No 2271/96; Alexander Layton and Angharad M Parry, ‘Extraterritorial Jurisdiction – European Responses’ [2004] 26 Houston Journal of International Law 315 []
  12. Joanna Goyder and Albertina Albors-Llorens, Goyder’s EC Competition Law (5th ed, Oxford University Press 2008) at 581; Richard Wish, Competition Law (6th ed. Oxford University Press 2008) – Chapter 12: The International Dimension of Competition Law – at [12.5] []

A Tale of Legal Contortions: The Extraterritorial Application of EU Competition Law in the Global Economy (1/5)

This is the introduction to a series of blog posts on the topic of the unilateral application of EU Competition Law beyond the confines of EU territory.

Go to: Introduction -> Part II -> Part III -> Part IV -> Conclusion

“The picture before us is that of an international society made up of adjacent cells, separated by frontiers; the concept of territory… illustrates that division between separate entities by physical and geographical boundaries. But it is clear… that frontiers are not only barriers, but also crossing points and economic life makes light of such barriers.”1

In these posts, I shall argue that the European Courts have, unlike the Commission, for the most part, been cautious in dealing with extraterritoriality, devising various tests with the aim of bringing offending foreign conduct within the purview of EU law. This concern explains their reluctance to rely on contentious interpretations of international law, such as the effects doctrine, in favour of more ‘European’ principles, such as the implementation criterion and economic entity doctrine.

In examining the ways in which the EU has been able to surmount the limitations of its territorial jurisdiction in order to address conduct by foreign entities which have an impact on the internal market, I will focus on the unilateral application of EU competition law extraterritorially, as opposed to other methods such as bilateral cooperation and multilateralism, which are beyond the scope of this essay.

To do so, I shall first briefly outline the bases for assertions of jurisdiction under public international law (part II). I shall then analyse the evolving bases used for the extraterritorial application of articles 101 and 102 (part III), before evaluating whether the implementation criterion is a sufficient base of jurisdiction, and reviewing the practical limitations of enforcement. I will then turn to the Merger Regulation and consider its controversial quantitative jurisdictional test (part IV), before examining whether negative comity has constrained the EU’s extraterritorial application of competition rules.

  1. Professor Prosper Weil, L’application extraterritoriale du droit économique (Montchrestien 1987) at 11 – quoted by Advocate General Darmon in A. Ahlström Osakeyhtiö and others v Commission (‘Woodpulp’) [1988] European Court Reports 5193 at [47] []