Presentation on theme: "2014 ICN Cartel Workshop BOS 11 Daeyoung Kim Director, Int’l Cartel Div. Korea Fair Trade Commission 2014. 10. 3 Should jurisdictions seek to allocate."— Presentation transcript:
2014 ICN Cartel Workshop BOS 11 Daeyoung Kim Director, Int’l Cartel Div. Korea Fair Trade Commission 2014. 10. 3 Should jurisdictions seek to allocate cases to prevent double penalisation? * The views and opinions expressed in this presentation are those of the author and do not reflect the official policy or position of the KFTC
contents Ⅰ. Background Ⅱ. Issues Raised 2 III. KFTC’s Approach IV. Conclusion
3 Ⅰ. Background 1. Globalization of economy and competition law Economic activities are globally interdependent Trade liberalization, various economic reforms, increased foreign direct investment and offshoring are main reasons for horizontal and vertical economic globalization More and more jurisdictions are introducing competition law Over 120 countries have competition authority and law in place, and most of them have the law provision on extraterritoriality U.S. China Korea Germany France Japan Others Intermediary: 24.63 Intermediary: 80.05 Intermediary: 16.08 Intermediary: 3.25 Intermediary: 0.7 Intermediary: 62.79 Value added: 6.54 Producer sale price: 194.04 (retail price in U.S: 600) Global production network of iPhone 4(2011)
4 2. Example cases of overlapping jurisdiction More jurisdictions are engaging in extraterritorial application of competition law and law enforcements are interconnected Early 2000’s -> finished goods Graphite Electrode Cartel (1992-1998): Sanctioned by 4 jurisdictions(US, EU, Canada, Korea) Vitamin Cartel (1989-1999): Sanctioned by 5 jurisdictions(US, EU, Canada, Australia, Korea) Recent Cases-> intermediaries LCD panel (2001-2006): Sanctioned by 5 jurisdictions(US, EU, Japan, China, Korea) and other investigations continue Automobile parts (1996-2012): Sanctioned by 6 jurisdictions(US, EU, Canada, Australia, Japan, Korea) and other investigations continue Ⅰ. Background
6 General principle of extraterritorial application Anticompetitive behavior(cartel) + Effect to the domestic competition order + Causal link(direct and uninterrupted) between two Consumer protection vs. Protection of competition “Competition law aims at consumer protection” All types of import of cartelized goods (whether finished or intermediary) can be target of cartel enforcement Possibilities of overlapping jurisdictions are high “Protection of competition is the primary purpose of competition law” Extraterritorial enforcement should be limited to jurisdictions where first “trade”(delivery or invoice) takes place Slim possibilities of double penalization 1. What is the purpose of competition law?
7 Ⅱ. Issues Raised U.S. Alcoa case(1945): Effect doctrine Timberlane case(1976): Jurisdictional rule of reason(balancing theory) Hartford case(1993): Effect doctrine (w/ consideration of comity) EU Dyestuff case(1972): Single Economic unit doctrine Woodpulp case(1988): Place of implementation doctrine Japan CRT case(2009): Single Economic unit (of victim) doctrine ⇒ With absence of international hard law regulating extraterritoriality and the standard evaluating the effect to domestic market, each jurisdiction has developed its own legal theories ⇒ Risks of double penalisation are growing 2. There exists universally accepted legal principle?
88 Ⅱ. Issues Raised Indirect Sale International Benchmark Price 3. Tricky Issues Cartel (Intermediary) 1 st sanction Effect (Assembled in subsidiary A’ ) 2 nd sanction Headquarter of A 3 rd sanction Indirect import 4th sanction Indirect import 5th sanction Indirect import 6th sanction… Export Single unit Export of finished goods Global oligopolists International price institute Cartelized info Companies in country 1 Companies in country 2 Companies in country 3… Make reference in setting prices: Effect
10 III. KFTC’s Approach Korea’s Competition Law Article 2-2: The Act shall apply to activities carried out overseas when they are deemed to have effect on the domestic market Case Law Supreme Court(2014, Air cargo case): “domestic effect” means “direct, substantial, and reasonably foreseeable effect” Practices Invoice(bill to) or Delivery(ship to) Standard Refrain from claiming jurisdiction in indirect sale case Comity Respect jurisdiction where direct sale took place International cooperation Close coordination with other agencies in calculating relevant turnover Aircargo case: reduce 50% of total out/in-bound shipments between Europe and Korea considering the possibility of double counting after consultation
12 IV. Conclusion Active utilization of bilateral agreement Coordination and consultation of enforcement activities with respect to a specific case Korea-Canada FTA Competition Chapter: “The Parties shall consult from time to time about the effectiveness of measures undertaken by each Party” Close cooperation throughout all stages of investigation including calculation of affected commerce Information sharing plays a pivotal role in revealing the factual issues and thus contributes to harmonized enforcement among authorities Endeavor to apply laws in “clear effect” cases Extraterritorial application based on indirect, secondary, abstract effects on domestic markets can result in multiple penalisation Comity and respect to more directly affected jurisdiction 1. In the short term
13 IV. Conclusion Establishment of universally acceptable rule Common ground of case laws on extraterritoriality -> soft law Active discussion in international fora (OECD, ICN) and consensus building required Introduction of optimal sanction designing system To prevent over-deterrent level of sanction, simultaneously investigating authorities should check others’ penalties and reflect them accordingly Mutual trust is of utmost importance and more proactive co-operational mechanism(e.g., confidential information exchange) required 2. In the long term
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