The Extraterritorial Application of EU and US Competition Laws: Conflicts and Solutions

Abstract: Because corporations trade on the international markets and the governments regulate on domestic markets, conflicts between government regulations are difficult to avoid. Several authors have introduced different ways to avoid this type of conflict. One alternative, which is also proposed by the EU Commissioner Monti, is the inclusion of minimum regulation in the World Trade Organization, by which all member nations are required to implement this minimum standard of competition regulations. This is a proposition that I, in this paper, do not favor. In this paper I define the problems associated with these conflicts. I will also bring forth a possible solution, which would be more effective and less intrusive on the members' sovereignty than the one proposed by the EU. Extraterritorial jurisdiction can be divided into legislative and enforcement jurisdiction. The former deals with the extent the legislator claims jurisdiction with the specific law and the latter deals with the extent the government can enforce its decisions concerning investigations and other decisions. This paper focuses on legislative jurisdiction. The EU competition regulations are sometimes applied extraterritorially. There are two methods for doing so: the group economic unit doctrine and the effects doctrine. The group economic unit doctrine is a method for piercing through the corporate veil by attributing the actions of a subsidiary in the EU to the non-EU controlling corporation. The effects doctrine is a method for applying jurisdiction on conduct abroad, affecting the common market. The limits to the effects doctrine as used in the EU, is at present unclear. The limits depend on whether the Woodpulp case or the Gencor case has precedent. The US antitrust regulations base the extraterritorial application on the effects doctrine. This is limited to when the effect is intended, substantial and foreseeable. It is however, unclear to what extent comity considerations should be practiced by the courts when determining the extraterritorial reach of the regulations. The GATT does not have any express competition regulations. The principle of national treatment applies to competition regulations. The national treatment principle means that the regulations in a country should be the same for foreign products that have cleared customs as for domestic products. The Kodak-Fuji case dealt with anti-competitive conduct and the GATT. However the opinion is not conclusive. For example it is unclear whether it is a GATT violation in a situation where the government tolerate anti-competitive behavior by domestic firms in violation of the domestic competition regulation. When two or more countries exercise jurisdiction on the same company for the same conduct, conflicting remedies might be demanded. This is a conflict of competition regulations and has occurred in among others the Boeing- McDonnell-Douglas merger. It could be, as in that case, one country clearing the merger and the other demanding concessions and this leads to conflicts. A solution to the problem is proposed in this paper. If extraterritorial jurisdiction would only be claimed when there is an economic efficiency goal behind the regulation, it will not lead to conflicts, since the economic efficiency goal is common to most nations' competition laws. A problem occurs when the meaning of economic efficiency is unclear. The World Trade Organization (WTO) would be a possible forum for nations to agree upon principles which should be regarded as ''economic efficient'', and these should be the fundamental principles of all competition regulations. Another problem that still could occur is when one jurisdiction is claiming economic efficiency goals and the other is claiming non-economic efficiency goals. This problem will be solved if countries claim extraterritorial jurisdiction for non-economic efficiency goals only within the boundaries of the public international law. This way conflicts are minimized. Above this, when there is a situation, where one nation has territorially claimed non-economic efficiency regulation, which is in conflict with an extraterritorially claimed economic efficiency claim, the latter shall prevail above the former. In essence my proposition will be a way for countries to indirectly harmonize its competition regulations, without transferring its sovereignty. The most difficult thing that the nations will have to accept is the economic efficiency goal's dominance over non-economic efficiency goals.