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Although the British defendants and the British Government argued the challenged conduct was consistent with the British law and policy, the Court found there was no “true conflict” between U.S. and British law. The majority held that a “true conflict” arises only when foreign laws requires the defendant to act in a fashion prohibited by U.S. law or compliance with the laws of the U.S. and the defendant’s country is otherwise impossible (e.g. compliance with U.S. law would constitute violation of foreign law). id, at 798-99. The latter situation will exist in very few cases. In the vast majority of cases litigated to date, the foreign conduct has been permitted, encouraged, or otherwise approved by foreign law but has not compelled by a foreign law. Thus, the defendant’s compliance with U.S.law would not constitute a violation of foreign law.)
In the 1995 International Guidelines (U.S. Department of Justice & Federal Trade Commission, Antitrust Enforcement Guidelines for International Operations (1995)), the enforcement agencies address the issue by taking into account whether significant interests of any foreign sovereign would be affected by a potential enforcement action. Their analysis considers all relevant factors, including: (1) the relative significance to the alleged violation of conduct within the U.S, as compared to conduct abroad; (2) the nationality of the persons involved in or affected by the conduct; (3) the presence or absence of a purpose to affect U.S. consumer, markets, or exporters; (4) the relative significance and foreseeability of the effects of the conduct on the U.S. as compared to the effects abroad; (5) the existence of reasonable expectations that would be furthered or defeated by the action; (6) the degree of conflict with foreign law or articulated foreign economic policies; (7) the extent to which the enforcement activities of another country with respect to the same persons, including remedies resulting from those activities, may be affected, and (8) the effectiveness of foreign enforcement as compared to U.S. enforcement action. Section 3.2. (See also note 38 and accompanying test.)
B. The EU Approach: Effects v. Implementation
Before specifically discussing the application of the Merger Regulation, a review of the general attitudes of the Commission and the European Court of Justice (“ECJ”) towards the enforcement of competition laws is instructive.
Since the 1960’s, in the enforcement of Article 85(1) and 86 (now Article 81(1) and 82, respectively), the Commission has espoused a broad notion of jurisdiction similar to the U.S. notion of “effects”. For example, in the Aniline Dyes Cartel, the Commission explicitly stated that “this decision is applicable to all the undertakings which took part in the concerted practices, whether they are established within or outside the common market…The competition rules of the Treaty are, consequently, applicable to all restrictions of competition which produce within the common market effects set out in Article 85 (1)”.
By contrast, the ECJ’s opinions traditionally have been rooted in the “economic unit doctrine”, a variant of the traditional territorial requirement, thus avoiding the discussion of extraterritorial jurisdiction. Under this doctrine, the ECJ will not assume jurisdiction over a party that is not in an economic unit with another party which has conducted an anti-competition act on the EU territory. A typical situation for this doctrine would be a non-EU based firm exporting into the common market through its branches or subsidiaries within EU. For example, in Imperial Chem. Indus. v. Commission, the ECJ ignored the Commission’s insistence on explicitly adopting the effects test, and deliberately based its decision solely upon the economic unit doctrine and found that, because the defendants owned subsidiaries within the Community, jurisdiction was appropriate.
The resulting tension between the Commission and the ECJ became apparent and was partly resolved in favor of the Commission in the Wood Pulp case, where the court replaced the economic unity doctrine with the new-coined “implementation test”. In that case, non-EU producers were charged with an Article 85 price-fixing violation for concertation on the prices announced and actual transaction prices charged to customers in the Community. A number of those producers had no branches or subsidiaries with the Community and one, KEA, was a U.S. Webb-Pomerene export association. The Commission, applying the effects test, found that two-thirds of total shipments and 60% of consumption of the product in question in the Community had been affected by such concertation, and concluded that: “The effect of the agreements and practices on prices announced and/or charged to customers and on resale of pulp within the EEC was therefore not only substantial but intended, and was the primary and direct result of the agreements and practices.” The defendant argued the Commission lacked jurisdiction over them because they were located outside the Community. KEA further argued that the application of EU competition laws to it would be a breach of the public international law duty of non-interference, because its existence as a Webb-Pomerene association reflected the U.S. Government’s policy of promoting exports and exempting exporter cartels from the U.S. anti-trust laws.
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