Exporting EU Competition Law
Giorgio Monti
Agenda
• Topics
– Extraterritorial reach of EU competition law
– Models for cooperation in enforcement
– The EU’s export strategy for competition law
– Sites to develop global approaches
• Themes
– Competition among competition systems
– Convergence
– Cooperation
2
Competition Law overview
• Competition Authorities have three functions:
– Detect & deter anti-competitive conduct
• Price fixing cartels
• Abuse of monopoly power
– Control mergers
– Scrutinise anti-competitive state action
• Powers vary significantly
– Commission: state aid, state monopolies, internal market
– Italy: declare certain state action anti-competitive (e.g. failure to
comply with public procurement rules by local authorities)
– UK & Italy: consultation on anti-competitive effects of
actual/proposed state laws (e.g. minicab regulation)
3
Cartels: global dimension
Enforcement procedure
– Leniency application
usually triggers case
– Inspection of
premises/information
requests
– Fines imposed by agency
for harm sustained in its
jurisdiction
• Some agencies prosecute
under criminal law (US)
• Follow-on damages claims
typical (e.g. Motorola v AU
Optronics, CA 7th Cir. 2015)
Issues
– Cartel’s effects across
several jurisdictions
– Some may lack credible
antitrust laws
– Some may lack jurisdiction
to enforce the law
– Export cartels may be
authorised by some states
– Leniency applicants require
multiple filings in all
possible jurisdictions which
may prosecute a cartel
4
Abuse of dominance: global dimension
Enforcement procedure
– Complaint normally
triggers investigation
– Inspection pf
premises/information
requests
– Decision types
• Fines
• Behavioural remedy
• Commitment decision
– EG Art 9 Reg.1
• Issues
– Different standards for
controlling dominant firms
• EU stricter than US
– Different remedies across
jurisdictions
– Under-enforcement harms
non-enforcing jurisdiction
and consumers outside it
– Over-enforcement deters
pro-competitive conduct
by other players globally
5
Merger policy: global issues
Enforcement procedure
– Compulsory ex ante
notification in several
jurisdictions
– Time limits for review
– Most mergers authorised
• Some Ok’d subject to
remedies
EG Boeing/MDD: Ok’d in EU
subject to the merged
entity rescinding exclusive
dealing obligation with
some airlines (allowing
others to compete)
Issues
– Different procedures
• Notifications, timetable
– Different standards of
assessment
• Economic welfare
– Boeing/MDD
» FTC: MDD not a
viable competitor
» COM: merger
creates giant
• Employment concerns
– (e.g. South Africa)
– Remedies resolve domestic
competition concerns
6
Cooperation
1. Among Commission and National
Competition Authorities in the EU
2. Between Commission and EFTA States
3. Between the Commission and the United
States authorities
(Department of Justice and Federal Trade Commission)
7
Regulation 1/2003
• National Competition Authorities (NCAs) &
Commission have ‘parallel competence’ in
application of Arts. 101 & 102 TFEU
• European Competition Network: cooperation
& joint policy-making
8
Cooperation on individual cases
• Case re-allocation
– NCAs + COM discuss who is best placed to take a case
• Few reallocations, usually lead authority keeps it
– Notable reallocation: E-Books from UK NCA to COM
– COM may remove case from NCAs (Article 11.6)
• NCA parallel application possible (‘lead authoriity’ desirable)
• Assistance with cross-border investigations (Arts
20 and 22)
• Information exchange (Art 12)
• Article 11: regular updates on stages of a case
9
Results of this arrangement
Alexander Italianer (ex DG Comp): ‘We have
taken only 134 decisions. The NCAs an
impressive 736’ between 2004 and 2014
A closer look shows:
 Most NCA decisions based on effects in own
territory
 Few reallocation of cases
 Level of NCA cooperation undisclosed
10
Joint work: Booking.com
 Issue
– Booking.com secures contracts preventing hotels from
offering cheaper rooms to other on-line travel agents
& on hotel own website
 Procedure
– Swedish, French and Italian NCA investigate jointly &
identify workable commitment
– Commitment satisfies all NCAs save Germany
 Politics
– Loi Macron (France); Italian Annual Competition Law
• Render void all limits on hotel pricing of rooms
11
Booking.com’s commitment
Hotel
No price parity
Hotel website
Booking.com
Expedia
Loyal customers
on-line
Offline sales
12
Salami slices: Case C-428/14
DHL v Italian Competition Authority
• DHL sends leniency application to COM regarding
cartel in air, sea and road freight forwarding +
summary application to Italian NCA (with less
detail)
– COM pursues international freight market
– Italian NCA pursues road freight market in Italy
• DHL’s summary leniency did not cover this market & DHL lost
immunity
o Question: since NCAs cooperate in the ECN,
should there not be a holistic reading of all
leniency papers?
13
The Court’s answer: No!
• ECN’s Model Leniency Programme is not legally
binding
• Cartels may have effects across Member States
– May give rise to multiple NCA interventions [59]
– Each leniency programme is autonomous [60]
– No provision of EU Law requires NCAs to read leniency
application in light of COM leniency application [62]
• Undermines incentives for leniency applicants [63]
• Would create hierarchy among leniency applications [65]
14
Current project: ECN Plus
 Project
o enforcement tools: need strengthening
o fining powers: need harmonisation
o leniency programmes: needs improvement
o guarantees of independence and resources
 COM’s Motivation
‘NCAs should, like the Commission, act in the
general interest of the EU’
(DG COMP, Inception Impact Assessment, 2015)
15
Cooperation between EU and EFTA
• EEA Agreement
Similar substantive
competition rules as in
TFEU
16
Allocation of jurisdiction 1:
cartels and abuse of dominance
• Cartels
– ESA has jurisdiction if
• effect on trade is between EFTA
States, or
• Trade between EU and EFTA is
affected & turnover of the
undertakings in EFTA states is above
33%
– EU COM has jurisdiction
• Effect of trade in EU, or
• Trade between EU & EFTA is affected
& turnover of the undertakings in
EFTA States is less than 33%
• Effect on trade and on competition
within the EU is appreciable
Article 56 EEA Agreement
• Abuse of Dominance
– Jurisdiction rests where the
dominant position is found to exist
– If dominance is in both EFTA and
EU:
• COM has jurisdiction if trade is
affected btw EU & EFTA and turnover
in EFTA State < 33%
• ESA has jurisdiction otherwise
EG Prokent-Tomra (2006)
‘Since the practices of Tomra may
have had an effect on trade between
Member States and Contracting
Parties to the EEA Agreement, the
Commission is competent in this case
to apply both Article [102] of the
Treaty and Article 54 of the EEA
Agreement’
17
Cooperation modalities
(Protocol 23: Cooperation Between Surveillance Authorities)
• ESA and COM forward complaints received in mixed
cases to each other
• Transfer of cases to competent authority
• Non-competent authority assists with inspections in its
territory
• Consultation and comment on proposed action by
either authority
• Non-competent agency right to see documents &
comment
• Invitation to other agency to be present at hearings
18
Allocation of Jurisdiction 2: mergers
(Protocol 24, EEA Agreement)
• Commission has competence in cases falling within the EU
Merger Regulation
– With cooperation protocol when impact on EFTA States is
significant (Article 2)
– ESA informs COM of its assessment of the impact of merger in
the EFTA States
– Referral of part of a transaction to EFTA State (e.g. Aker
Maritime/Kvaerner: oil & gas activities on the Norwegian
Continental Shelf).
• ESA has competences in cases without an EU dimension but
with EFTA dimension
– w/o prejudice to national merger law of a Member State of the
EU to apply also
19
Cooperation with the United States
Purpose: to promote cooperation and coordination and lessen the possibility or
impact of differences between the Parties in the application of their competition laws
(Art I)
Art II: Notification of enforcement activities that may affect important interests of the
other
EG1: in 2005: 82 notifications by COM; 27 notifications by US
EG2: in 2012 and 2013, COM cooperated with non-EU agencies in 62% of its enforcement
decisions, and in 58% of merger cases (Vestager, Enforcing competition rules in the global village,
20/4/2015)
Art III: Information exchange to facilitate application of each other’s laws; promote
understanding of enforcement activities; twice yearly meetings (Cf. Art VIII:
confidentiality)
Art IV: coordinated enforcement when desirable
requires parties to waive confidentiality to work best: common in merger cases
20
Example of ordinary cooperation
UTC/Goodrich merger (2012)
– Anticompetitive risk in markets
for aircraft components:
generators, engines and engine
control systems
– Cooperation in examining the
effects of the merger (also w
Brazil, Mexico & Canada)
– Coordinated remedy:
divestitures in US, Canada and
UK
– Coordinated date of decision
btw EU & US
– Canadian Competition Bureau
satisfied with EU & US decision
“The Antitrust Division’s dialogue
with our international
counterparts around the world
facilitated our investigation,”
“In particular, the division’s close
cooperation with the European
Commission and Canadian
Competition Bureau resulted in a
coordinated remedy that will
preserve competition in the
United States and
internationally.”
Jamillia Ferris, DOJ (26/7/2012)
21
Impact of multiple cartel cases
• Fines imposed in one jurisdiction (e.g. US) do not
prevent Commission’s capacity to impose a fine
– C-289/04 P Showa Denko v Commission [50-63]
• Other states penalise cartel form harm in their jurisdiction
• COM attacks cartels for harm to internal market
• No principle of international law requires COM to lower its
fines because of other antitrust prosecutions of the same
cartel
• COM may, at its discretion, take into account fines imposed
by other agencies
22
Comity in the EU-US agreement
Negative comity (1991)
‘each Party will seek, at all stages in
its enforcement activities, to take
into account the important interests
of the other Party’
Positive comity (1995 Agreement)
1997 DOJ notifies concern about
operation of Amadeus (EU computer
reservation system for airlines run by
Air France) harming Sabre (US
system run by American Airlines)
EG Commission amicus curiae in re
Payment Card (2010): blocking
disclosure of confidential COM
documents in US class action lawsuit
DoJ indicates COM is best placed to
act as conduct occurred in the EU
1998: Senate committee complains
of delays
‘Comity sounds good and does very
little work’
Eleanor Fox ‘Antitrust Without
Borders’ 2010
2000: code of good behaviour agreed
by Air France
23
(Extra)territorial scope of antitrust
• Subject matter jurisdiction
– Open a case
– Issue a decision
• Enforcement jurisdiction
– Serve summons
– Request information
– Demand payment of a fine/enforce remedies
24
Subject matter jurisdiction: bases
• Territoriality
– Case C-48/69 ICI v Commission [128-142]
• International cartel with US firms involved
• Subsidiary in the EU implements parent’s policy
– Improved consideration of unity between
parent/subsidiary
• Joined Cases 6&7/73 Commercial Solvents v Commission
– Case C-89/95 Woodpulp 1 [16-18]
• Overseas cartel
• Formation overses, implementation in the EU (sales in the
market)
25
Scope of EU territoriality 1: imports
• Ansac (1991): US-based cartel importing into the EU:
exemption denied (exempted in US)
• Gas Insulated Switchgear (2007): EU & Japanese firms
agree not to bid for projects in their ‘home market’
– Japanese firms have an effect on trade: automatic
diversion of trade patters (314)
– Evidence that Japanese firms refused requests to bid in EU
market (316)
– When setting the fine for Japanese firms, COM looks at
global turnover, otherwise COM would ‘substantially
underestimate’ the role of Japanese firms (481)
Aff’d Case T-112/07 Hitachi v Commission
26
Scope of territoriality 2: exports
• Agreements concerning exports may fall within EU
competition law
– Distribution agreements for Chanel watches (1994). COM
requests withdrawal of a ban on exporting outside the
EU… for countries with which the EU has concluded a free
trade agreement
– Greater nuance in Case C-306/96, Javico v YSL
• Distributor forbidden to re-import goods from Ukraine & Russia
back into EU
• Is there an effect on trade?
–
–
–
–
Structure of EU market
Differences in prices btw EU and Russia/Ukraine
Risk of appreciable effects in EU markets
Restriction may be efficient in allowing penetration of foreign markets
27
Who needs effects?
• What is the General Court in Gencor saying?
• What is the difference between territoriality
and effects?
28
Case T-286/09 Intel
• Intel pays Lenovo (China) to delay, then cease
altogether launch of AMD-computer
– Likely that Lenovo would sell into the EU
– COM: Intel’s actions are an abuse of a dominant
position within the internal market
• Approach of GC
– Territoriality/implementation (232)
– Qualified effects: ‘immediate, substantial, direct and
foreseeable effects’ (233-234)
Appeal pending, C-413/14 P
29
Enforcement jurisdiction
• Initiating proceedings
– Summons may be served abroad
• Case 52/69 Geigy v Commission
– Statement of objection posted to Swiss offices
• Securing information
– Information request (w/o or w/penalty for non compliance)
– Subsidiaries in the EU (LCD cartel)
– Blocking Statute (Russia/Gazprom)
• Final decision
– Dyestuffs cartel: (i) diplomatic channels tried to serve abroad
(iii) sent to subsidiaries in the EU
– Assets in EU may be seized
30
Brussels effect?
• Bradford’s conditions:
– Market power of the
jurisdiction
– Regulatory capacity
– Preference for strict
rules
– Inelastic targets
– Nondivisibility of
standards
• Applied to antitrust
– Strictest antitrust law
prevails (19)
– EU fear of false negatives
(20)
– EU often gets to dictate
the code of conduct for
dominant companies
worldwide (20)
– Not all antitrust
decisions as nondivisible (n.80 & p.61)
31
Three scenarios for
Transnational Governance
Experts
OECD
Statist
WTO
Community
ICN
Rule makers/rule
followers
Separate
Separate
Combined
Product of
governance
process
Standards
Binding rules
Beliefs/workbooks
Logic of rule making Expertise
Political negotiation Negotiations w
with expert
experts
Mode of rule
monitoring
Expert ‘awe’
coercion
Plus and minus
Strong legitimacy of Efficient but likely
expert body
to require many
necessary
exceptions
Socialisation
Easy to start but
few constraints on
members
32