Something for nothing? The standard of ‘originality’ in copyright law: The traditional common law approach (3/5)

This is part III of a series of blog posts looking at the concept of ‘originality’ in copyright law.

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

A. The Lockean inspired test of industriousness 

The amount of work expended in the creation of a work is one of the criteria which some judges have used as a test for originality1. This has been England’s traditional standard, drawing close analogies to Locke’s labour theory of ‘just desserts’, whereby the labourer deserves to be rewarded for his efforts in producing the work2.

Under this standard, if a work is created through the labour of an individual, irrespective of any lack of creative input or of mere statement of facts, the originality threshold will be met3, provided the input is not trivial4. There is perhaps no better case to illustrate this than Walter v Lane5, where copyright was found to have subsisted in the report of public speeches by Lord Rosebery. Shorthand notes had been taken by a reporter; they were then transcribed, revised and corrected before publication. The effort, skill and time expended by the writer was found to be sufficient for the work to be considered ‘original’.

This approach was confirmed as good law in Express Newspapers6. Similarly in Ladbroke7, Lord Pearce found the only requirement of originality to be: “[that] the work should not be copied but should originate from the author”8.This minimalist standard is also to be found in New-Zealand9 and South Africa10.

The two main arguments in favour of this approach, according to Cornish and Llewelyn11, are (i) a maximal reduction in the scope of the subjective element/qualitative requirements in deciding what is to be protected, and (ii) the protection of labour and investment. As outlined in Part II, I believe that the first argument is a valid concern and, I will, therefore, look at its implications when examining higher thresholds in Part IV. I shall now address the second argument.

B. The problem with mere labour

1. The protection of facts and tipping the scales in favour of the ‘creator’

In Feist (See Part III), whilst rejecting this approach, the US Supreme Court exposed the following flaw in the labour standard:

“[this extends] protection in a compilation beyond selection and arrangement — the compiler’s original contributions — to the facts themselves [by adopting the] “sweat of the brow” [test] courts thereby eschewed the most fundamental axiom of copyright law — that no one may copyright facts or ideas”12.

This critique was also cited and approved by Chief Justice McLachlin in the Canadian CCH case13.

BC Jockey Club v Standen14 provides us with a useful illustration of the dangers inherent in the overreach of copyright into facts. In this case, the claimants produced a publication outlining information on horse racing to take place for the day ahead. This work was adopted by the defendants. It was, however, in a different format and included additions and comments. The Court of British Columbia, finding for the claimants, based its decision on the cost and the “painstaking labour” involved15, thereby granting a ‘quasi-monopoly’ over the information at hand.

I use the term ‘quasi-monopoly’ since the information contained in this work is, theoretically at least, capable of being recorded, analysed and published by another, thereby circumventing liability. There are, however, situations where the possibility of independent discoverability is no more than a fiction, thus conferring this quasi-monopoly over facts16.

As noted by Craig17, this indirect grant of power over information runs contrary to fundamental values such as the free flow of knowledge and information into the public domain, thereby hindering social and scientific progress18. In response to this, it has been suggested19 that the doctrines of ‘fair use/dealing’ may be used to temper the effect of a low labour-based threshold. In light of the narrow construction of these doctrines20, I remain unconvinced by this argument.

Secondly, by requiring each author to independently discover the facts, this approach results in a duplication of effort, without providing any benefit to society nor adding any value to the work itself21.

It is conceded that an economic argument may be deployed to the effect that exclusivity should be granted over the collection of some information in order to encourage what may be a desirable activity22.

In any case, if such an argument were to hold sway it may be addressed by considering alternative means of protection.

2. The availability of alternative means of protection

As Hariani & Hariani convincingly argue, “it is not the mandate of copyright to protect all effort”23. As such, one may want to turn to other legal mechanisms for protection such as: (i) contractual confidentiality clauses; (ii) unfair competition rules24; (iii) trade secrets protection;  (iv) the tort of misappropriation; (v) sui generis legislation25.

One of the most effective sui generis protection systems is undoubtedly the European Database Directive26. This directive introduces a dual-layer system, under which any original form of presentation or selection of data is covered by copyright, while the data itself is granted sui generis protection.

This leads us to the conclusion that a low threshold for originality cannot be justified on the basis alone that the creations, that would be excluded from a potentially higher threshold, would be without any protection at all.

3. A departure from the spirit of international law?

Furthermore, it may be argued that granting creations the status of ‘work’ on the basis of labour alone, goes against the spirit, if not the letter, of the Berne Convention27. It is, indeed, hard to reconcile such a standard with the term “intellectual creation”28.

  1. See for eg. Jeweler’s Circular Publishing Co., 281 F. at 88 []
  2. HUGHES, J. 1988. The Philosophy of Intellectual Property. Georgetown Law Journal. 77 (1988), at 6-28 []
  3. See Ladbroke v William Hill [1964] 1 All ER at 465; LADDIE, H, PRESCOTT, P, VICTORIA, M. 1995. The Modern Law of Copyright and Designs. 2nd ed. London: Butterworths. at 46; BAINBRIDGE, D. 2002. Intellectual Property. 5th ed. London: Longman. at 36 []
  4. Redwood Music v Chappell [1982] RPC 109 at 115 []
  5. Walter v Lane (1903) All ER Rep Ext 1666 []
  6. Express Newspapers v News (U.K.) Ltd. [1990] 1 W.L.R. 1320 at 365-366 []
  7. Ladbroke v William Hill [1964] 1 All ER []
  8. Ibid. at 291; but see Interlego AG v Tyco Industries Inc [1989] AC 217 (mere copying of drawings) []
  9. The University of Waikato v Benchmarking Services Ltd. (2004) 8 N.Z.B.L.C. 101. []
  10. Econostat (Pty) Ltd v Lambrecht 89 JOC (W); Klep Valves (Pty) Ltd v Saunders Valve Co Ltd 1987 2 SA 1 (AD) []
  11. CORNISH & LLEWELYN. 2007. Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights. 6th ed. London: Sweet & Maxwell. at 422-425 []
  12. Feist at 353 []
  13. CCH (supra) at 23 []
  14. British Columbia Jockey Club v Standen (c.o.b. Winbar Publications) [1985], 22 D.L.R. (4th) 467 []
  15. Ibid. at 470 []
  16. CRAIG, C. 2007. Resisting Sweat and Refusing Feist- Rethinking Originality After CCH. UBC Law Review. 40 (1), at 84 []
  17. Ibid. at 85 []
  18. See CRAIG, C. 2002. Locke, Labour and Limiting the Author’s Right: A Warning against a Lockean Approach to Copyright Law. Queen’s Law Journal. 28 (1); LITMAN, J. 1990. The Public Domain. Emory Law Journal. 39, at 965-1023 []
  19. Per Linden JA in CCH Canadian Ltd. v Law Society of Upper Canada, (Federal Court of Appeal) [2002] 4 F.C. 213 para 59 []
  20. SENFTLEBEN, M. 2010. Bridging the Differences between Copyright’s Legal Traditions – The Emerging EC Fair Use Doctrine. Journal of the Copyright Society of the U.S.A. 57 (3), at 521; see also NLA v Meltwater [2011] EWCA Civ 890 []
  21. See Rosemont Enterprises, Inc. v Random House, Inc., 366 F.2d 303 at 310 cited in Feist (supra) at 354 []
  22. See LANDES, W & POSNER, R. 1989. An Economic Analysis of Copyright Law. Oxford Journal of Legal Studies. 18 (325) []
  23. HARIANI, K & HARIANI, A. 2011. Analyzing “Originality” in Copyright Law: Transcending Jurisdictional Disparity. IDEA: The Intellectual Property Law Review. 51 (3) at 510 []
  24. Copyright used as a substitute for unfair competition: Exxon v Exxon Insurance, [1982] R.P.C. 69 []
  25. See for eg: Collection of Information Anti-piracy bill –  H.R. 2652 (105th US congress) []
  26. Directive 96/9/EC of the European Parliament and of the Council on the legal protection of databases []
  27. RICKETSON & GINSBURG. 2005. International Copyright and Neighbouring Rights: The Berne Convention and beyond. 2nd ed. Oxford: Oxford University Press. para. 8.03 []
  28. See part II.; GERVAIS, D. 2004. The compatibility of the skill and labour originality standard with the Berne Convention and the TRIPs Agreement. European Intellectual Property Review. 26 (2), at 10 []

Something for nothing? The standard of ‘originality’ in copyright law: An elusive yet essential requirement (2/5)

This is part II of a series of blog posts looking at the concept of ‘originality’ in copyright law.

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

A.  International conventions and statutes

International copyright conventions do not provide us with a definition of ‘originality’, nor do they expressly provide for such a requirement. There are, however, a number of statements in diplomatic records that confirm that this requirement is present1 and was not included in the Berne Convention as it was considered to be evident2. The Convention does provide us with hints as to the scope of protection by stating that “encyclopedias and anthologies which, by reason of the selection and arrangement of their contents constitute intellectual creations [emphasis added] shall be protected as such”3, thus implying that this is the threshold for originality4.

The requirement of ‘originality’ is, however, to be found, in various forms, expressly in legislation across many jurisdictions5. Yet none of these statutes define the concept or the scope of ‘originality’. This is why judicial interpretation of the requirement of originality is so important and warrants close examination.

B. What ‘originality’ is not: distinguishing originality from ‘novelty’

A dictionary definition of ‘originality’6 may draw us towards parallels with ‘novelty’ in patent law7. This is misleading, as ‘originality’ must be distinguished from the requirement that the creation be an inventive step beyond the current state of the art.

1) ‘Independent creation’ as a common starting point

It is postulated that at its most basic level, originality may be rephrased as ‘origination’. As Peterson J expressed in University of London Press8: “[the only requirement is that the creation] should originate from the author”. Indeed, according to Mummery LJ, originality does not require: ‘novelty, usefulness, inventiveness, aesthetic merit, quality or value”9.

The work must, therefore, be composed independently by the author and need not involve anything ‘novel’. It is postulated that this first and most basic requirement is a common feature of most judicial interpretations of originality10.

2) Why assimilating originality to novelty would be undesirable

I would argue that such a high standard is undesirable and, in my opinion, would not provide a desirable alternative to the lower standards I shall examine in this series of posts.

In Bleinstein v Donalson11), the US Supreme Court had to decide whether certain lithographs prepared as advertisements were copyrightable. Justice Holmes, on behalf of the majority, stated:

“it would be a dangerous undertaking for persons trained only to the law to constitute themselves judges of the worth of the pictorial illustrations, outside of the narrowest and most obvious limits”12.

This is, I would argue, a valid concern which would render any such threshold to be inherently unfair. Certain commentators such as Reytblat, have attempted to address these concerns by advocating for juries to pronounce judgements of originality. Yet this solution is clearly unsatisfactory, as the author recognizes when she concedes that this would do no more than to “[provide] a modicum of objectivity”13.

  1. WIPO. 1986. 1886-1986: Berne Convention Centenary. Geneva: WIPO []
  2. WIPO. 1988. Draft Model provisions for Legislation in the Field of Copyright. Memorandum prepared for the WIPO Committee of Experts on Model Provisions for Legislation in the Field of Copyright, document CE/MPC/I/2-III of Oct. 20, 1988, at 10 []
  3. Art. 2(5) of the Berne Convention for the Protection of Literary and Artistic Works, Sept. 9, 1886, as revised at Paris on July 24, 1971 and amended in 1979, S. Treaty Doc. No. 99-27 (1986); See also Art. 10(2) of the Agreement on Trade-Related Aspects of Intellectual Property, Apr. 15, 1994, 33 I.L.M. 1125 []
  4. GERVAIS, D. 1998. La notion d’oeuvre dans la Convention de Berne et en droit comparé. Geneva: Librairie Droz. at 45-49 and 55-65 []
  5. Copyright, Designs and Patents Act 1988: Chapter 48 – s.1(1)(a); 17 U.S.C. § 101; Copyright Act, § 2 (2) (F.R.G.). []
  6. Concise Oxford Dictionary of Current English. 1982. 7th ed. Oxford: Oxford University Press, ‘original’ []
  7. See 35 U.S.C. § 102 (2006); See also Synthon BV v Smithkline Beecham plc [2005] UKHL 59 []
  8. University of London Press Ltd. v University Tutorial Press Ltd, (1916) 2 Ch 601 at 609-10 []
  9. Per Mummery LJ in Hyperion Records Ltd v Sawkins [2005] EWCA Civ 565 para 31 []
  10. Feist Publications Inc. v Rural Telephone Service Co. Inc., 499 US 340 (1991) at 345; 
CCH Canadian Ltd. v Law Society of Upper Canada, (2004) 1 S.C.R. 339, 2004 SCC at 25; University of London Press (supra); IceTV Pty Ltd. v Nine Network Australia Pty Ltd. (2009) ALR 386 para 48 []
  11. Bleinstein v Donaldson Lithographing Co., 188 U.S. 239, 250 (1903 []
  12. Ibid. at 251 []
  13. REYTBLAT, J. 1999.  Is Originality in Copyright Law a ‘Question of Law’ or a ‘Question of Fact?’: The Fact Solution. Cardozo Arts & Entertainment Law Journal. 17, at 196 []

Something for nothing? The standard of ‘originality’ in copyright law (1/5)

This is part I of a series of blog posts looking at the concept of ‘originality’ in copyright law.

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

“[T]o make the copyright turnstile revolve, the author should have to deposit more than a penny in the box.”1 

The standard of originality is one of the key determinants of the subsistence of copyright, and thus reflects the policy concerns which guide each jurisdiction’s copyright regime. For traditional forms of expression (such as novels, sculptures or plays) this standard is typically not an issue, as these are likely to satisfy even the most stringent of tests. As will become apparent throughout these posts, it does, however, matter with regards to the subsistence of copyright in more utilitarian works, such as factual compilations.

This series of blog posts will demonstrate that while there are different standards of originality, there is a growing convergence towards a standard based on “creative choices”. Whilst this standard often invites a balancing of both the public interest and those of creators, it shall be shown that this is not the case of the traditional labour based common law standard, which is thus low and inadequate.

To do so I shall first seek a definition of ‘originality’ by looking at international conventions and statutes, before settling on a common starting point based on ‘origination’ (part II). I shall then look at the traditional common law labour approach to originality and expose why it is inadequate (part III). Finally, I shall examine existing alternative standards and show that there is a growing convergence globally towards a similar comparatively higher standard (part IV).

  1. KAPLAN, B. 1967. An Unhurried View of Copyright. New-York: Columbia University Press. at 46 []

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: Articles 101 and 102: from ‘economic entity’ to ‘implementation’ (3/5)

This is part III 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

Articles 101 and 102 TFEU have a wide territorial ambit as they apply insofar as an agreement or conduct has a direct or indirect, actual or potential, appreciable effect on intra-state trade. They do, however, remain silent as to the matter of their extra-territorial scope15. Unsurprisingly, this has proven to be a ‘controversial question’1.

A) The single economic doctrine: a stop-gap solution?

In Dyestuffs, the Commission, investigating alleged price fixing amongst three non-EEC producers of dyes, relied upon the effects doctrine, holding that its jurisdiction could be based on the effects of the concerted practice in the EEC2. One of the undertakings appealed the decision. The Commission, in its reply, relied not only on the effects doctrine but also on the claim that the EEC subsidiaries were ‘mere extensions’ of the foreign undertaking3.

Advocate General Mayras recommended the adoption of the effects doctrine in cases where the restriction of competition was ‘direct, substantial and foreseeable’4. The ECJ was silent on the AG’s application of this qualified effects doctrine. Instead, it considered the EEC subsidiaries as part of a single economic entity under the control of their parent companies5.

This doctrine is now well established and has been frequently relied upon by both the ECJ and the Commission6. It does, however, present a considerable limitation, as it may only arise if the foreign undertaking has a subsidiary in the internal market7.

It has been posited that, faced with two options, the ECJ simply adopted the least controversial, and that by not disapproving of the effect doctrine it tacitly encouraged the Commission to rely on it. Commentators have been critical of the fact that the test looks at whether the parent was able to control the subsidiary, not whether it actually did so8, and that this doctrine disregards the characterisation of the subsidiary as a separate legal entity9.

B. ‘Implementation’: a sui generis criterion

Wood Pulp involved alleged price-fixing in the wood pulp industry, in which all producers were incorporated outside of the EC, but nevertheless had some form of presence within the EC10. Upon appeal, AG Darmon, echoing Mayras’ position, recommended that the Community should adopt a qualified effects based approach to jurisdiction11.

The ECJ, cleaving to the territoriality principle, adopted an ‘implementation’ test – according to which the decisive factor was not where the agreement was formed, but where it was implemented12. The location of the parties, or where the agreement was made, was, therefore, immaterial13.

The court made it clear that direct sales into the internal market are sufficient to trigger the implementation test, regardless of the lack of recourse to marketing or sales organisations within the EC14. Certain commentators have, whilst accepting the concept of implementation, criticised the court’s finding on the basis that there is not a sufficient nexus for direct sales to fall under the territoriality principle15.

C) ‘Implementation’ vs effects

Is ‘implementation’ merely an ‘effects doctrine in disguise’16, or are there substantive limitations involved in the reliance on ‘implementation’? At first sight, the test seems analogous to the effects doctrine insofar as where an agreement is implemented in the EU, it clearly has an effect there17 – although the reverse will not necessarily be true.

What of a collective refusal to supply customers within the EU by foreign undertakings? It has been argued that ‘implementation’ could include such negative conduct18. The preponderant view does, however, seem to be that this would not be covered by the ‘implementation’ criterion19, whereas it would be covered under the effects doctrine20.

Similarly, let us consider a cartel which is formed outside the EU by non-EU producers of a raw material, which is then processed outside the EU by an unaffiliated and bona fide non-EU intermediary21. This cartel surcharge would result in higher prices within the EU, yet it is hard to see how this original cartel can be said to be ‘implemented’ (as a result of remoteness), whereas this would certainly be ‘direct and produce effects’ within the EU22.

The Commission’s Guidelines on ‘the effect on trade concept’23 unambiguously state that articles 101 and 102 may be applied extraterritorially, provided the conduct or agreement produce effects inside the EU24. These guidelines, whilst being a non-regulatory document, provide welcome guidance as to what constitutes an ‘effect’ and can be taken as a clear endorsement of the effects doctrine by the Commission25.

As such, if confronted with one of the above scenarios it is likely that the Commission would simply rely on the effects criterion26, as it has previously done, yet how the ECJ would respond remains an open question.

D. Enforcement as a limiting factor

Besides the question of prescriptive jurisdiction, the practical matter of enforcement must be considered. Once one goes beyond the ‘economic entity’ doctrine, and, therefore, beyond the powers of coercion of the EU territory, enforcement becomes a factor inhibiting assertions of jurisdiction27.

Indeed, attempting to recover a fine outside of the EU would be “the exercise of power… in the territory of another State”28 which is prohibited under international law and was recognised as so by the AGs in ICI and Wood Pulp29. Nevertheless, one may posit that few undertakings will be willing to forfeit access to the EU market, which may be “too big to give up”((Chie Sato, ‘Extraterritorial Application of Competition Law – Is It Possible for Japanese Companies to Steer Clear of EU Competition Law?’ [2010] 11 Keio Journal of Political Science and Sociology at 40; Robert Lane, EC Competition Law (Longman 2001) at 290)). Perhaps the biggest obstacle lies in the Commission’s ability to investigate30 and serve decisions31, for which it will have to rely on the assistance of the third party State32.

  1. Mark Furse (ed), Butterworths Competition Law Service/Division XII Extra-territoriality [2011] at [116] []
  2. Commission Decision 69/243/EEC [1969] OJ L 195/11 []
  3. Richard Wish, Competition Law (6th ed. Oxford University Press 2008) – Chapter 12: The International Dimension of Competition Law – at [12.27] []
  4. ICI Ltd EC Commission (‘Dyestuffs’) Case 48/69 [1972] ECR 619 at 696 []
  5. Ibid. at [130]-[140]; Brenda Sufrin, ‘Competition in a Globalised Marketplace: Beyond Jurisdiction’ in Patrick Capps, Malcolm Evans and Stratos Konstadinidis (eds), Asserting Jurisdiction (Hart Publishing 2003) at 110 []
  6. For eg. Continental Can Co Inc [1972] CMLR D11; Commercial Solvents [1974] ECR 223 []
  7. Leigh Davison and Debra Johnson, ‘The EU’s Evolving Stance on the International Dimension of Competition Policy: A Critical Commentary’ [2002] 37 Intereconomics at 250 []
  8. Joanna Goyder and Albertina Albors-Llorens, Goyder’s EC Competition Law (5th ed, Oxford University Press 2008) at 582; Acevedo, ‘The EC Dyestuffs Case: Territorial Jurisdiction’ [1973] 36 MLR at 317 []
  9. Brenda Sufrin, ‘Competition in a Globalised Marketplace: Beyond Jurisdiction’ in Patrick Capps, Malcolm Evans and Stratos Konstadinidis (eds), Asserting Jurisdiction (Hart Publishing 2003) at 111 []
  10. Alison Jones and Brenda Sufrin, EU Competition Law (4th ed, Oxford University Press 2010) at 1243 []
  11. A Ahlström Oy v EC Commission Case 89/85 [1988] 4 CMLR 901 at 923 []
  12. Ibid. at [16] []
  13. Christopher Bellamy, European Community Law of Competition (5th ed. Sweet & Maxwell 2001) at [2.156] []
  14. A Ahlström Oy v EC Commission Case 89/85 [1988] 4 CMLR 901 at [17]; Robert Lane, EC Competition Law (Longman 2001) at 285 []
  15. Walter Van Gerven, ‘EC Jurisdiction in Antitrust Matters: The Wood Pulp Judgement’ [1989] Annual Proceedings of the Fordham Corporate Law Institute at 470 []
  16. Jurgen Basedow, ‘International Antitrust: From Extraterritorial Application to Harmonization’ [2000] 60 Louisiana Law Review at 1040 []
  17. Leigh Davison and Debra Johnson, ‘The EU’s Evolving Stance on the International Dimension of Competition Policy: A Critical Commentary’ [2002] 37 Intereconomics at 250 []
  18. Jose Perez Santos, ‘The Territorial Scope of Article 85 of the EEC Treaty’ [1989] Annual Proceedings of the Fordham Corporate Law Institute at 571; Florian Wagner von Papp, ‘Competition Law, Extraterritoriality & Bilateral Agreements’ [2012] at 29 []
  19. See Gencor Ltd v EC Commission [1999] 4 CMLR 971 at [87]; Walter Van Gerven, ‘EC Jurisdiction in Antitrust Matters: The Wood Pulp Judgement’ [1989] Annual Proceedings of the Fordham Corporate Law Institute at 451 []
  20. Furse M, Butterworths Competition Law Service/Division XII Extra-territoriality [2011] at [120] []
  21. Robert Lane, EC Competition Law (Longman 2001) at 288 []
  22. Florian Wagner von Papp, ‘Competition Law, Extraterritoriality & Bilateral Agreements’ [2012] at 29 []
  23. Guidelines on the effect on trade concept contained in Article 81 and 82 of the Treaty (2004/C 101/07), OJ C 101/81, para. 37-43 []
  24. Ibid. paras 100-101 []
  25. Chris Noonan; Chie Sato, ‘Extraterritorial Application of Competition Law – Is It Possible for Japanese Companies to Steer Clear of EU Competition Law?’ [2010] 11 Keio Journal of Political Science and Sociology at 39 []
  26. Joseph Griffin, ‘Extraterritoriality in US and EU Antitrust Enforcement’ [1999] 67 Antitrust Law Journal at 187 []
  27. Robert Lane, EC Competition Law (Longman 2001) at 289 []
  28. S.S. Lotus (Fr. v. Turk.), 1927 P.C.I.J. (ser. A) No. 10 at 18 []
  29. Brenda Sufrin, ‘Competition in a Globalised Marketplace: Beyond Jurisdiction’ in Patrick Capps, Malcolm Evans and Stratos Konstadinidis (eds), Asserting Jurisdiction (Hart Publishing 2003) at 111; Mark Furse (ed), Butterworths Competition Law Service/Division XII Extra-territoriality [2011] <www.lexisnexis.com/uk/legal/> at [128] []
  30. Articles 18 and 20 of Regulation 1/2003; articles 11 and 13 of Regulation 139/2004 []
  31. But see: Europemballage and Continental Can v Commission Case 6/72 [1973] CMLR 199 []
  32. Van Bael & Bellis (firm), Competition law of the European Community (5th ed. Kluwer Law International 2010) at 135 []