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On September 20, 2000, in order to resolve the competitive concerns identified by the Commission, the parties committed themselves to the following concessions: (1) To put in place a mechanism pursuant to which Bertelsmann would progressively exit from AOL Europe and AOL France; (2) To put in place measures until such exit is complete to ensure that Bertelsmann neither exercises control over the two joint ventures, nor affords non-arm’s-length treatment to AOL; (3) To forgo certain rights under the marketing agreement with Bertelsmann; and (4) To appoint an independent compliance monitor to ensure compliance with the concessions until Bertelsmann exits from the two joint ventures. On October 11, 2000, the Commission approved the merger.
The Commission’s regulation on this merger is less controversial than the Boeing case in three ways: First, AOL had physical presence (two joint ventures) in EU and thus a closer connection to the common market than Boeing or MDS. Second, the agreement between AOL and Bertelsmann arguably was “implemented” within the Community. Third, both the FTC and the Federal Communication Commission (“FCC”) approved the merger with certain conditions. Considering the remarkable concessions make by the parties, however, the case still conveys an unmistakable message to the U.S. companies that they are facing increasing restrictions on their flexibility in making mergers, and that if they want to continue their business with Europe, they must abide by European competition rules, particularly the Merger Regulation.
III. Possible Solutions: Comity, Agreement or WTO?
The vigorous enforcement activities of the Commission under the Merger Regulation have added to the conflicts between EU and U.S. in the antitrust area. As seen in the Boeing case, the Commission’s assertion of authority almost hindered the international relations between the two entities. The likelihood of similar conflicts in the future warrants a careful consideration of possible solutions.
A. International Comity
Comity refers to “courtesy among political entities”. It is not a legally binding limitation, but more like an act of altruistic deference or an acknowledgement of superior foreign interests in the matter at hand. The extraterritorial enforcement of antitrust laws may give rise to comity issues, especially when an antitrust authority seeks to regulate a transaction already reviewed by the antitrust authority in the home state. For example, in the Boeing case, the FTC approved the merger without condition before the Commission completed its review. Under comity principles, the Commission would have been obliged to give some deference to the opinion of the FTC, its rationale for approving the merger, and the overall interests of the U.S. in seeing the merger go forward.
Although comity can serve to minimize the conflicts in the antitrust enforcement arena, it does not seem to have been taken seriously by the EU. In Wood Pulp, where it offered its most recent test for the extraterritorial application, the ECJ declined to consider international comity arguments, or even to give a reason why comity did not preclude the exercise of EU jurisdiction over the non-EU producers. The whole decision devotes only a single sentence to international comity:
“As regards the argument relating to disregard of international comity, it suffices to observe that it amounts to calling in question the Community’s jurisdiction to apply its competition rules to conduct such as that found to exist in this case and that, as such, that argument already has been rejected.”
Similarly, the Commission has held that comity does not militate in favor of declining the exercise of jurisdiction where the application of Community law does not require any of the undertakings concerned to act in any way contrary to the requirements of their domestic law, nor would the application of Community law adversely affect important interests of a non-member state. For comity to win, such interests would have to be so important as to prevail over the fundamental interest of the Community that competition within the common market is not distorted. It has been criticized that such a qualification virtually ensures that comity will almost never be a factor in the extraterritorial application of antitrust laws. There might be some exaggeration in that critique, but it is true that the Commission believes consideration of international comity to be a matter of prosecutorial discretion, and not a legal prerequisite to the exercise of jurisdiction.
B. Bilateral Agreement
On September 23, 1991, the United States and the European Commission signed a bilateral agreement which aimed to promote cooperation and avoid conflicts in their antitrust enforcement activities. This agreement was labeled “executive ” or “administrative”, not legislative, and therefore did not purport to alter the existing laws of either party. It was believed to be an evolutionary step from the 1986 recommendations relating to restrictive business practices and the prior U.S. antitrust consultation agreements with Australia, Canada, and Germany.
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