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The Three Body Problem: Extraterritoriality, Comity and Cooperation in Competition Law

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Extraterritoriality of EU Economic Law

Part of the book series: European Union and its Neighbours in a Globalized World ((EUNGW,volume 4))

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Abstract

The three body problem in physics concerns the challenge of accurately calculating the interaction of three different bodies (e.g. planets), given the forces they each exert on the others. Examples include the motion of the Moon around the Earth as disturbed by the action of the Sun, or the movement of one planet around the Sun as disturbed by the action of another planet. Three body systems are chaotic, and despite centuries of work there is no general solution to this problem.

Understanding the extraterritorial effect of competition law raises challenges akin to the three body problem: while primarily governed by one dominant gravitational pull (a country’s rules on the scope of its competition law), in practice the extraterritorial effect of competition law is affected by other forces, particularly international comity and cooperation. This means that a thorough analysis of extra-territorial effects requires us to look not only at legal/formal structures concerning the scope of a country’s law, but must also take into account more or less ‘informal’ mechanisms—e.g. comity, cooperation and a set of common principles shared by competition practitioners across jurisdictions—that impact how law is applied in practice.

This paper reviews how jurisdictional rules, international comity and international practice interact in practice in the context of (EU) competition law. It will argue that, as with the traditional three body problem, no purely legal and formal conceptual framework can explain how competition law is applied extra-jurisdictionally. The best we can do is to approach such a question through the increasingly sophisticated application of three partially overlapping legal doctrines—the jurisdictional scope of competition law, international comity, and international cooperation—against a common epistemic background shared by global (and regional) competition communities.

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Notes

  1. 1.

    OECD (2017b), p. 144.

  2. 2.

    Bradley (2019).

  3. 3.

    OECD (2019), pp. 53–54.

  4. 4.

    Connor (2016). The average overcharge for the cross-border fined cartels in the Private International Cartels Database, for which this data was available, was approximately 20.5%. Overcharge amounts were available for 84 of the 240 cartels. Further, and as noted in OECD Business and Finance Outlook 2017 (OECD Publishing, Paris), p. 72: “this likely understates the total amount, as cartel conduct that ceased as a result of commitment decisions, where no fines were levied, is not included. Furthermore, average overcharges have been estimated in some studies to exceed 50% of sales.

  5. 5.

    E.g. for an overview of substantive differences between EU and US competition law, see Ginsburg and Taladay (2017), pp. 1071–1074.

  6. 6.

    OECD (2017a), p. 8.

  7. 7.

    Ezrachi (2016), p. 23.

  8. 8.

    Monti (2016), p. 315.

  9. 9.

    See Peale (2006), available at www.britannica.com (accessed on 5 February 2020).

  10. 10.

    Competition rules can be national, but they can also be regional. The EU is a good example of this, but it is not the only one: in the WAEMU (UEMOA)—West African Economic and Monetary Union, for instance, both legislative and enforcement are exclusive regional competences.

  11. 11.

    See OECD (2017a), pp. 4–5.

  12. 12.

    Whish and Bailey (2015), paragraph 12.04; Butterworths Competition Law Service, Division XII Extra-territoriality, para. 2.

  13. 13.

    E.g. Cases 6, 7/73 Commercial Solvents v EC Commission [1974] ECR 223, [1974] 1 CMLR 30.

  14. 14.

    Butterworths’ Competition Law Service, Division XII Extra-territoriality.

  15. 15.

    However, there have also been some debates about the correct scope of enforcement jurisdiction, particularly as regards fine calculations—see Huizing (2017), p. 365; Huizing (2018), p. 231.

  16. 16.

    Dabbah (2010), p. 420.

  17. 17.

    The doctrine finds its source in the judgment of the Permanent Court of International Justice in SS Lotus (France v Turkey) (1927) PCIJ ser A, no 10.

  18. 18.

    Papp (2012), pp. 57–58.

  19. 19.

    OECD (2017a), p. 5.

  20. 20.

    See United States v Aluminium Co of America, 148 F.2d 416 (2d Cir. 1945) (“Alcoa”); Hartford Fire v California 509 U.S. 764, 795-796 (1993); Hoffmann-La Roche v Empagran, 542 U.S. 155, 165 (2004); and US Department of Justice & Federal Trade Commission Antitrust Guidelines for International Enforcement and Cooperation, 13 January 2017, Section 3, https://www.ftc.gov/public-statements/2017/01/antitrust-guidelines-internationalenforcement-cooperation-issued-us (last accessed 5 March 2017).

  21. 21.

    OECD (2015a); OECD (2017a), pp. 5–6.

  22. 22.

    United States v Aluminium Co of America, 148 F.2d 416 (2d Cir. 1945) (“Alcoa”).

  23. 23.

    Popofsky (2008), p. 2422.

  24. 24.

    Examples of countries that passed blocking statutes include South Africa, Australia, France, UK and Canada. See Fugate (1996), p. 279ff; Born (1996), p. 587ff; Popofsky (2008), p. 2423 and the judgments referred to therein.

  25. 25.

    See French law 68-678 of 26 July 1968 (the “French Blocking Statute”). This statute prohibits any communication of economic, commercial, industrial, financial, technical documents or information for the purposes of use as evidence in legal proceedings outside of France, subject to mechanisms afforded under international agreements or treaties such as The Hague Evidence Convention. Violations are criminally punishable by fines up to €18.000 for individuals and €90.000 for legal entities, and/or up to six months’ imprisonment.

    Likewise, in the UK, The Protection of Trading Interests Act 1980 not only assigns powers to the Secretary of State to prohibit disclosure of evidence in certain cases, but also includes a claw-back provision. Under s. 6, ‘qualifying defendants’, i.e. British citizens or companies and persons carrying on business in the UK who have paid (whether voluntarily or by execution levied against their property) an amount on account of a multiple damages award, either to the plaintiff or to a co-defendant, are entitled to a remedy. The remedy is that the qualifying defendant has an absolute right, under s 6(2) of that Act, to recover the non-compensatory portion of any damages paid by him from the plaintiff by an action in the UK courts. According to s 6(5), the British court must entertain the action for recovery even if the person against whom the action is brought is not within the jurisdiction of the court.

  26. 26.

    Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454-55 (2007). More recently, see in a patent law context Life Techs. Corp. v. Promega Corp., 580 U.S. (2017).

  27. 27.

    Hartford Fire Ins. v. California (91-1111), 509 U.S. 764 (1993).

  28. 28.

    OECD (2017a), p. 6.

  29. 29.

    OECD (2015b), www.oecd.org/daf/competition/cartels-involving-intermediate-goods.htm.

  30. 30.

    Joined Cases 89/85, A. Ahlström Osakeyhtiö and Others v Commission [1988] ECR 5193, para. 11-23 (Woodpulp).

  31. 31.

    Case C-48/69 ICI Ltd v EC Commission [1972] ECR 619, [1972] CMLR 557 (Dyestuffs). The court came to the conclusion that Geigy, Sandoz and ICI, three non-EU undertakings, had participated in illegal price fixing within the EU through subsidiary companies located in the EU and under their control.

  32. 32.

    Case C-22/71 Béguelin Import EU:C:1971:113, paras. 12-13, holding that as long as an agreement is ‘operative’ in a Member State, in particular by preventing a distributor from importing or re-exporting products coming from outside the EEA into other Member States, it falls within the scope of the EU’s competition provisions.

  33. 33.

    Prete (2018), p. 489.

  34. 34.

    Case T-102/96 Gencor Ltd ν Commission of the European Communities ECLI:EU:T:1999:65 para 90-92.

  35. 35.

    Case T-422/14 Viscas v. European Commission EU:T:2018:446 (‘Viscas’); Case T-441/14 Brugg Kabel AG and Kabelwerke Brugg AG Holding v.European Commission, EU:T:2018:453 (‘Brugg’);Case T-447/14 NKT Verwaltungs GmbH, formerly nkt cables GmbH and NKT A/S, formerly NKT Holding A/S v. European Commission, EU:T:2018:443 (‘NKT’) (collectively referred to as ‘Power Cables’). This judgment was issued after the Intel decision by the CJEU.

    The Court found the effects of the cartel in the EU, including in relation to projects for the installation of power cables outside the EU, to be: (1) foreseeable, in that there were ‘probable effects’ of the cartel on competition within the EU; (2) immediate, because direct influence on the supply of high and extra high voltage power cables in the EU was ‘the object of the various meetings and contacts’; and (3) substantial, in view of the number and size of the producers participating in the cartel, which accounted for almost all of the market, the broad range of products affected by the various agreements, the gravity of the practices in question, as well as the significant duration of the practice (over ten years). See Shah et al. (2019), p. 82.

  36. 36.

    Case C-413/14 P Intel v Commission ECLI:EU:C:2017:632, para. 45.

  37. 37.

    Opinion by Advocate General Wahl Case C-413/14 P, Intel v Commission ECLI:EU:C:2016:788, paras. 291–293.

  38. 38.

    Case T-286/09 Intel v Commission, ECLI:EU:T:2014:547, paras. 279–295. See Shah et al. (2019), p. 82.

  39. 39.

    Case C-413/14 P Intel v Commission ECLI:EU:C:2017:632, paras.46-51. Prete (2018), p. 491, notes that it is yet to be clarified how strictly the qualified effects criterion is to be applied.

  40. 40.

    Case T-286/09 Intel v Commission, ECLI:EU:T:2014:547, paras. 231–258: opinion by Advocate General Wahl in Case C-413/14 P, Intel v Commission ECLI:EU:C:2016:788, paras. 294–305. See also, and previously, Commission Decision 69/243/EEC, OJ 1969 L 195/11 (Dyestuffs); Advocate General Mayras’s opinion in Case 48/69, ICI v Commission, ECLI:EU:C:1972:32, paras. 688–691; Commission Decision 85/202/EC OJ 1985 L 85/1, para. 79 (Woodpulp); Advocate General Darmon’s Opinion in Joined Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85 Ahlström v Commission ECLI:EU:C:1988:258, para. 7 et seq.; obiter in Case T-91/11 InnoLux v Commission ECLI:EU:T:2014:92, para. 62, finding that the implementation test was satisfied in the case at hand; see also opinion of Advocate General Wathelet in Case C-231/14 P InnoLux v Commission ECLI:EU:C:2015:292, who, however, considered the effects not sufficiently direct in the component case in question; the Court eventually did not consider the question to be relevant.

  41. 41.

    Case 48/69 Imperial Chemical Industries Ltd. v Commission ECLI:EU:C:1972:70.

  42. 42.

    Joined cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85, Ahlström v Commission ECLI:EU:C:1988:447, paras. 16–18 (“Wood Pulp I”).

  43. 43.

    von Papp (2017), available at https://ssrn.com/abstract=2961721, pp. 9–10.

  44. 44.

    OECD (2017a) Executive Summary of Roundtable on The Extraterritorial Reach of Competition Remedies DAF/COMP/WP3/M(2017)2/ANN1, p. 2.

  45. 45.

    Papp (2012).

  46. 46.

    Geradin et al. (2010), pp. 29–30.

  47. 47.

    Guzman (2010), pp. 345–362; Guzman (2004), p. 355.

  48. 48.

    U.S. Department of Justice and Federal Trade Commission ‘Antitrust Enforcement Guidelines for International Operations’ § 3.2 (1995); and the new U.S. Department of Justice and Federal Trade Commission ‘Antitrust Guidelines for International Enforcement and Cooperation’ § 4.1 (2017).

  49. 49.

    OECD (2014b), p. 8.

  50. 50.

    Yntema (1966), p. 9.

  51. 51.

    Bradley (2019).

  52. 52.

    OECD (2015c), Provisions on Positive Comity, www.oecd.org/daf/competition/competition-inventory-provisions-positive-comity.pdf.

  53. 53.

    OECD (2017a), pp. 14–15.

  54. 54.

    OECD (2014a).

  55. 55.

    Even though negative comity concerns do not typically arise as regards enforcement jurisdiction—since the principles governing enforcement jurisdiction are perceived to provide sufficient constraints to its exercise—some competition law remedies have been criticised for restricting business conduct in multiple jurisdictions, or even across the world. See, for example, the remedy imposed by the Korean competition authority against Qualcomm—KFTC’s decision of 20 January 2017 (Qualcomm), Case number 2015Sigam2118, translated by the American Consumer Institute Center for Citizen Research, www.theamericanconsumer.org/wp-content/uploads/2017/03/2017-01-20_KFTC-Decision_2017-0-25.pdf—and the international tension that it created as discussed in OECD (2017a), pp. 21–22.

  56. 56.

    Timberlane Lumber Co. v. Bank of Am., 549 F.2d 597, 613 (9th Cir. 1976).

  57. 57.

    The court’s understanding of comity in Timberlane largely followed the Second Restatement of Foreign Relations, which was extended in the Third Restatement. See Ginsburg and Taladay (2017), p. 1082.

  58. 58.

    Hartford Fire Co. 509 U.S. 770, at 798-99.

  59. 59.

    Compare Den Norske Stats Oljeselskap As v. Heeremac VOF., 241 F.3d 420, 427-28 (5th Cir. 2001) (finding no jurisdiction existed because the injury did not “give rise’ to [plaintiff’s] (domestic) antitrust claim”), with Kruman v. Christie’s Int’l PLC, 284 F.3d 384, 399-400 (2d Cir. 2002) (concluding that a domestic injury is not required in order to meet the “‘give rise’” requirement).

  60. 60.

    F. Hoffmann-La Roche Ltd. v. Empagran S.A. 542 U.S. 155, 159 (2004).

  61. 61.

    See Ginsburg and Taladay (2017), pp. 1084–1085.

  62. 62.

    U.S. Department of Justice and Federal Trade Commission ‘Antitrust Enforcement Guidelines for International Operations’ § 4.1, at 27-28 (2017).

  63. 63.

    OECD (2017) Executive Summary of Roundtable on The Extraterritorial Reach of Competition Remedies DAF/COMP/WP3/M(2017)2/ANN1, p. 2.

  64. 64.

    Rill and Seidl (2017).

  65. 65.

    Monti (2016), p. 319.

  66. 66.

    von Papp (2017), available at https://ssrn.com/abstract=2961721, p. 18.

  67. 67.

    See http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=887029&siteid=190&rdir=1, 10 May 2017: “The pace of leniency applications related to international cartels appears to be slowing, competition officials from Brazil, Japan, the EU and the US said today. This might be due to the burden and costs associated with filings in multiple jurisdictions, they said, adding that agencies should do more to target their investigations and coordinate witness interviews and document requests.”

  68. 68.

    OECD Inventory Of International Co-Operation Agreements On Competition (between governments), www.oecd.org/daf/competition/inventory-competition-agreements.htm.

  69. 69.

    OECD (2017c), www.oecd.org/competition/inventory-competition-agency-mous.htm.

  70. 70.

    OECD (2017a), pp. 17–18.

  71. 71.

    This database references the 283 FTAs that have either been notified, or for which an early announcement has been made, to the WTO as of 1 July 2019 (excluding agreements setting up customs unions or genuine regional organizations such as MERCOSUR or the Caribbean Community and Common Market [CARICOM]). The sample used included only 267 of these 283 FTAs. The reasons for this discrepancy are two-fold. First, the sample excludes three FTAs that could not be retrieved online (Chile-Vietnam; Iceland-Faroe Islands; and the Pan Arab Free Trade Area [PAFTA]). Second, the FTAs between the Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua), on the one hand, and Panama and Chile, on the other, were counted as two (rather than ten) agreements. Likewise, separate agreements for trades in goods and trades in services between the same parties were counted together.

  72. 72.

    Laprévote (2019), p. 5.

  73. 73.

    Id., pp. 23–24.

  74. 74.

    OECD Inventory Of International Co-Operation Agreements Between Competition Agencies (MoUs), www.oecd.org/competition/inventory-competition-agency-mous.htm; and OECD Inventory Of International Co-Operation Agreements On Competition (between governments), www.oecd.org/daf/competition/inventory-competition-agreements.htm.

  75. 75.

    https://ec.europa.eu/competition/international/bilateral/, accessed on 15 July 2020.

  76. 76.

    See Antitrust Cooperation Agreements, DEP’T OF JUSTICE, www.justice.gov/atr/antitrust-cooperation-agreements (accessed 8 June 2020).

  77. 77.

    Laprévote (2019), p. 23.

  78. 78.

    Regardless of the reason for this lack of systematic confidential information sharing (including legislative limitations and differing procedural safeguards), it may be hampering efforts to prevent, detect and punish cross-border cartels—see OECD (2017b), p. 147.

  79. 79.

    OECD (2018), p. 4.

  80. 80.

    https://ec.europa.eu/competition/antitrust/nca.html.

  81. 81.

    https://ec.europa.eu/competition/ecn/mergers.html.

  82. 82.

    Directive 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market OJ L 11, 14.1.2019, p. 3–33.

  83. 83.

    E.g. the Andean Community, MERCOSUR or CARICOM—the Caribbean Community.

  84. 84.

    E.g. CEMAC—the Central African Economic and Monetary Community, COMESA—Common Market for Eastern and Southern Africa, EAC—East African Community, ECOWAS—(CEDEAO) Economic Union of West African States and WAEMU (UEMOA)—West African Economic and Monetary Union. There is also an informal network of agencies: the African Competition Forum. See http://www.compcom.co.za/african-competition-forum.

  85. 85.

    Eurasian Economic Union or ASEAN.

  86. 86.

    Cernat (2005), pp. 16–17, examines 300 Regional Trade Agreements and find that there is a direct correlation between the level of economic integration and inclusion of competition related provisions.

  87. 87.

    OECD (2018), pp. 7–11.

  88. 88.

    OECD (2017) Executive Summary of Roundtable on The Extraterritorial Reach of Competition Remedies DAF/COMP/WP3/M(2017)2/ANN1, p. 3.

  89. 89.

    OECD (2017b), p. 149.

  90. 90.

    OECD and ICN (2020), section 3.2.4.

  91. 91.

    An example is the co-ordinated investigation carried out in 2007 by the Competition Commission of South Africa (CCSA) together with the EU and the US DoJ, in relation to a cartel involving freight forwarding companies. The three authorities conducted simultaneous raids.

  92. 92.

    OECD and ICN (2020), section 4.1.1.

  93. 93.

    Papp (2012), pp. 23–24.

  94. 94.

    This may be particularly problematic as regards private enforcement, where no exercise of discretion as regards prioritisation and enforcement is allowed. We discussed above how the US courts incorporated elements of negative comity into its legal assessment of the jurisdictional scope of the Sherman Act and FTAIA, following complaints about the expansive interpretation of such jurisdictional scope in earlier decisions. On the other hand, some countries where private competition enforcement is more recent seem to be adopting expansive interpretations of their own. For example, the UK Court of Appeal recently held that it may, in principle, award damages in respect of cartel conduct that has taken placed entirely outside the EU for an infringement of EU competition law—see iiyama (UK) Ltd and others v. Samsung Electronics Co Ltd and others [2018] EWCA Civ 220; [2018] 4 C.M.L.R. 23.

  95. 95.

    Shah et al. (2019), pp. 84–85, 87.

  96. 96.

    Wong-Ervin et al. (n.d.), https://ssrn.com/abstract=2870505, pp. 4–5, accessed on 20 January 2017.

  97. 97.

    Bradley (2019).

  98. 98.

    von Papp (2017), available at https://ssrn.com/abstract=2961721, pp. 18–19.

  99. 99.

    The practices include: (a) fixing prices, terms or conditions to be observed in dealing with others in the purchase, sale or lease of any product; (b) excluding enterprises from, or allocating or dividing, any territorial market or field of business activity, or allocating customers, or fixing sales quotas or purchase quotas; (c) discriminating against particular enterprises; (d) limiting production or fixing production quotas; (e) preventing by agreement the development or application of technology or invention whether patented or unpatented; (f) extending the use of rights under patents, trade marks or copyrights granted by any Member to matters which, according to its laws and regulations, are not within the scope of such grants, or to products or conditions of production, use or sale which are likewise not the subject of such grants.

  100. 100.

    Lee (2017), pp. 6–8.

  101. 101.

    OECD (2017b), p. 148.

  102. 102.

    von Papp (2017), available at https://ssrn.com/abstract=2961721, pp. 18–19.

  103. 103.

    Id., p. 2.

  104. 104.

    Id., p. 2.

  105. 105.

    Haas (1992), p. 3.

  106. 106.

    van Waarden and Drahos (2002).

  107. 107.

    Id., p. 929; Wilks (2007), pp. 440–443; Townley (2018), p. 105.

  108. 108.

    Id., pp. 154–155.

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Caro de Sousa, P. (2021). The Three Body Problem: Extraterritoriality, Comity and Cooperation in Competition Law. In: Cunha Rodrigues, N. (eds) Extraterritoriality of EU Economic Law. European Union and its Neighbours in a Globalized World, vol 4. Springer, Cham. https://doi.org/10.1007/978-3-030-82291-0_7

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