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B. Notification, Investigation and Decision
The Merger Regulation establishes a system of prior notification. A concentration with a Community dimension must be notified to the Commission no later than one week after the conclusion of the merger agreement, the announcement of a public bid, or the acquisition of a controlling interest. The parties may not put the transaction into effect within the following three weeks, and the Commission may at its discretion extend the waiting period until it reaches a final decision. Failure to notify the Commission or supply correct and complete information in the notification may result in substantial fines and/or periodic penalty payments.
After receiving the notification, the Commission has thirty days to conduct a preliminary examination to decide whether the transaction is subject to the Merger Regulation and whether further investigation is needed. At the end of the preliminary examination, The Commission may concluded that: (1) the transaction does not fall within the scope of the Regulation; (2) it falls within the scope of the Regulation but does not raise serious questions as to its compatibility with the common market; or (3) it falls within the scope of the Regulation and raises serious compatibility questions. In the first two cases, the transaction will be cleared; in the last case, however, the Commission will initiate a more formal investigation of the competitive effects of the transaction.
The Commission then has four months to make substantive appraisal of the transaction and issue a final decision as to whether it is compatible with the common market. At the core of the appraisal is the “dominant position” test. A concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared incompatible with the common market, otherwise it will be held compatible with the common market. If the Commission concludes that the qualifying concentration is incompatible with the common market, it may simply prohibit the transaction, or require the parties to modify the original plan according to the conditions and obligations imposed by the Commission. It may also require divestiture and other relief where the transaction has already been consummated.
II. Extraterritoriality in EU Competition Laws and the Expansion under the Merger Regulation
A. Concept of Extraterritoriality and the U.S. Approach
Extraterritoriality pertains to the operation of laws “upon persons, rights or jural relations, existing beyond the limits of the enacting state or nation, but still amenable to its laws.” The problem of extraterritorial jurisdiction arises when nations advance conflicting claims in an attempt to apply their own policies and laws to regulate extraterritorial conduct in a way which may undermine and conflict with the laws and policies of a foreign government. This problem confronts many spheres of public international law, and is not confined solely to competition law.
It has been well established for many years that the U.S. antitrust laws have extraterritorial application. The original 1890 Sherman Act asserted jurisdiction over commerce “with foreign nations”. In 1945, in the Alcoa decision, the U.S. Court of Appeals for the Second Circuit, acting for the Supreme Court, announced an “effects” test of jurisdiction under the U.S. antitrust laws. According to Judge Learned Hand, the United States had jurisdiction over wholly foreign conduct if that conduct had an intended effect within the United States. Despite the subsequent judicial and legislative attempt to add certain qualifications on it, the effects test remains valid and active in today’s enforcement of antitrust laws.
In Hartford the Supreme Court, like Congress in enacting the FTAIA, specifically declined to express a view on the question whether a court with jurisdiction under the Sherman Act should abstain from exercising such jurisdiction on the ground of international comity. Justice Souter declared that the Court did not need to decide the question because even assuming an affirmative answer, “international comity would not counsel against exercising jurisdiction in the circumstances alleged here.” (id, at 798)
(In 1988, the Attorney General for several states, as well as many private plaintiffs, brought antitrust suits against American and English insurance companies, contending that they had violated the Sherman Act by agreeing to alter certain terms of insurance coverage and not to offer certain types of insurance coverage. Including among the defendants were a number of London-based reinsurers that agreed to: (1) restrict theterms on which reinsurance would be written and refuse to reinsure certain risks; (2) write all North American casualty reinsurance agreements with a pollution exclusion; and (3) boycott retrocessional reinsurance agreement that included certain North American property risks, unless the original insurance contained certain exclusions. The British defendants moved to dismiss the complaint as to them, arguing that, as a matter of international comity, the U.S. courts should not hear a complaint challenging conduct by non-Americans that took place entirely outside the U.S. and was lawful where it occurred, even though there was an effect in the U.S.
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