1. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. CHAPTER 22 Regulating the Competitive Environment

2. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 Historical Development of International Competition Law In U.S., “antitrust” law has existed since the late 1800’s, with the Sherman and Clayton Antitrust Acts. EU created a Directorate of Competition Policy. Antitrust law is to prevent monopolies and other business practices which injure competition. EU name more descriptive- Competition law.

3. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 Basic Regulatory Framework Antitrust laws differ from nation to nation, but they tend to prohibit two types of activities: –Agreements between competitors that restrict competition , and –The abuse of “dominant market” position. 

4. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 Prohibitions Against Agreements to Restrict Competition Sherman Act Broad prohibition Every contract… in restraint of trade or commerce… is illegal Art. 81 (1) prohibits agreements..may affect trade..which have as their object.. prevention, restriction or distortion of competition Lists specific prohibited conduct

5. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 Abuse of Dominant Market Position Monopolize or attempt to monopolize Sherman Act Similar to U.S. Article 82 See the Microsoft Corp. v. Commissioner of the European Communities case.

6. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 EU Merger Regulation, 1990 Review. Community dimension?(aggregate worldwide sale 5 billion Euros, aggregate sales within EU 250 million Euros). Is it compatible with Common Market? Recent examples 

7. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Antitrust Cases Court of First Instance (CFI) overturned Merger Task Force’s blocking of the mergers: – Airtours v. Commission case (European Court 2002). CFI annulled the prohibition against the merger. And see the Schneider Elec. SA v. Commission case Airtours V. Commission Tetra Laval BV v. Commission case. What result of these 2002 cases ? What is the status of the reforms?

8. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Distinctions of Non-U.S. Law and Competition Law Private Causes of Action for Damages and Criminal Prosecution. –Treble damages and attorneys fees available. –EU pushing to enhance private (non-governmental) causes of action. US law may impose criminal liability, which is not possible under EU or Japanese law.

9. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Article 81(3) and the Rule of Reason Per se wrong versus the rule of reason in the U.S.. Is the rule of reason used in the EU?

10. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 Preapproval Procedures Versus Litigation EU has preapproval system. Exemption system. – Individual. –Negative clearance. –Block exemption. – De miminimis. U.S. does not have comparable preapproval system.

11. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 Extraterritorial Effect of Competition Laws U.S. : “effects test,” first set forth in the “ American Banana ” case. And see the United States v. Aluminum Co of America (ALCOA). Hartford Fire Insurance Co. v. California case: foreign insurers are subject to Sherman Antitrust Act.

12. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 European “Implementation” Test EU - territorial jurisdiction, “implementation test”, “single economic unit”? Blocking legislation? EU courts can achieve jurisdiction over foreign companies if there is a “material influence” over an EU competitor. What is “objective territoriality”? What was the holding of the “ Wood Pulp ” case?

13. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13Conclusion What is “Blocking Legislation” and what impact would it have on international trade? What is happening in Europe now? What is happening in China now? See the Anti- Monopoly Law of the People’s Republic of China, which takes effect August 1, 2008.