|
The ECJ disagreed with the defendants, holding that the jurisdiction under EU competition law existed where firms “implemented” a price-fixing agreement formed outside the Community by selling to customers within the Community. According to the ECJ, the “decisive factor” factor was the place where the challenged agreement was implemented, not the place where it was formed: “The producers in this case implemented their pricing agreement within the common market. It is immaterial in that respect whether or not they had recourse to subsidiaries, agents, sub-agents, or branches within the Community in order to make their contacts with purchasers within the Community.” Accordingly the Community’s jurisdiction to apply its competition rules to such conduct is covered by the territoriality principle as universally recognized in public international law. The court also rejected the “non-interference” argument by KEA: the 1918 Webb-Pomerene Act merely exempted export cartels from the U.S. antitrust laws, but didn’t require such cartels to be concluded, so that there was no “true conflict” that would raise the issue of non-interference.
Although the ECJ didn’t directly address the concept of effects and tried to find room for its implementation test in the traditional territoriality theory, the new test would make not much practical difference from the effects test. Admittedly there are situations covered by the effects test but not by the implementation approach—such as concerted refusal to buy from, or export to, the EU or agreement to restrict non-EU production to create a scarcity outside the EU that would have the effect of raising prices within the EU—but they are rare. Furthermore, even if it happens to be one of these exceptional situations, the Commission probably would utilize the effects doctrine if it really wanted to challenge the conduct. The Commissioner in charge of Competition Policy, Sir Leon Brittan, has indicated that as “the Court [of Justice] has never rejected the effect doctrine, … the Commission remains free to employ it, and … will do so in future cases”.
Theoretically the Commission’s decisions are subject to review by the ECJ and the narrower interpretation of the ECJ may prevail, but one should not count too much on that. First, history has shown that ECJ rarely invalidated a Commission decision in a competition issue; second, under the Merger Regulation, the ECJ will only review decisions where the Commission has fixed a fine or periodic penalty payments, and the remedy is limited to the cancellation, reduction or increase of the penalty. Third, the merging corporations must fully weigh the costs of appealing a Commission decision: not only the legal costs of litigating in a foreign legal system, but more importantly, the time delay in approval of the merger. The time delay, combined with the financial instability of one or both of the parties, could leave the corporation no choice but to accept the Commission’s decision.
C. Expansion of Commission powers under the Merger Regulation: Boeing and AOL Time Warner
The enactment of the Merger Regulation armed the Commission with another forceful weapon. Although the regulation is silent on whether the Commission has extraterritorial enforcement jurisdiction, given the two tests mentioned above, it seems safe to say that the regulation could reach firms without physical presence in the Community so long as their worldwide and EU sales meet the required financial thresholds. The Commission has apparently taken this position. Shortly after the adoption of the Merger Regulation, Sir Brittan conveyed his willingness to address competition in the world markets, stating that “if companies in third countries are competing within the [EU], their market share or other manifestation of competitive pressure should of course be considered in any assessment of competition in the [EU] market”. Speaking for the Commission, he expressed “no hesitation” to “include foreign companies in the analysis of a merger before [him]”. In practice, the Commission has been consistently exercising jurisdiction over transactions outside the EU. As a matter of fact, the first transaction prohibited under the Merger Regulation concerned an asset acquisition outside the Community. The tremendous impact of this regulation on U.S. firms can be clearly seen in the two “Mega Mergers” in the U.S.: the Boeing/McDonnell Douglas merger and the AOL/Time Warner Merger.
1. Boeing/McDonnell Douglas
On December 14 1996, Boeing and McDonnell Douglas (“MDC”) proposed merging through a share exchange whereby MDC would become a wholly owned subsidiary of Boeing. The merger itself was to take place within the U.S. borders. The U.S. Federal Trade Commission (“FTC”), which had prime jurisdiction over the merger, approved the merger on July 1, 1997, without any conditions. The proposed merger was notified to the Commission on February 18, 1997. Even though the parties’ actual presence in the EU was limited to selling U.S.-made products, the Commission exerted jurisdiction because it found the parties met the financial thresholds of the Merger Regulation. During the preliminary examination, the Commission extended the suspension of the concentration until the final decision was made. On March 19, 1997, it decided that the merger fell within the scope of the Regulation and raised serious compatibility questions, and initiated the second-phase, formal investigation into its market compatibility.
|
