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The European Commission's Extraterritorial Powers in Merger Control

The Court of First Instance's Judgment in Gencor v. Commission

Published online by Cambridge University Press:  17 January 2008

Morten P. Broberg
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Extract

Within the field of competition law the question of jurisdiction is able to ignite an extremely heated debate. For example, when the American company Boeing decided to acquire the American company McDonnel Douglas both the US and the EU competition authorities engaged in an investigation of the transaction. The fact that the Community commenced an investigation, and even appeared to consider a prohibition, of the merger caused an uproar amongst some American politicians. These politicians claimed that the merger was a purely American matter and that the Community's competition authorities had no jurisdiction over the merging parties.

Type
Shorter Articles, Comments and Notes
Information
International & Comparative Law Quarterly , Volume 49 , Issue 1 , January 2000 , pp. 172 - 182
Copyright
Copyright © British Institute of International and Comparative Law 2000

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References

1. See Broberg, Morten P., The European Commission's Jurisdiction to Scrutinise Mergers, Kluwer Law International, The Hague (1998), p.249.Google Scholar

2. Council Regulation (EEC) 4064/89 of 21 Dec. 1989 on the control of concentrations between undertakings (O.J. 1989 L395/1, corrected version in O.J. 1990 L257/13) as amended by Council Regulation (EC) No.1310/97 of 30 June 1997 (O.J. 1997 L180/1).

3. Case IV/M877, O.J. 1997, L336/16.

4. Case T–102/96, judgment of 25 Mar. 1999, not yet reported.

5. Para.90.

6. See likewise Peder Christensen and Philip Owen, “A Comment on the Judgement of the Court of First Instance of 25 March 1999 in the merger case IV/M.619—Gencor/Lonrho.” Competition Policy Newsletter 1999, no.2. pp.19–23 at p.23. One may note that at para.64 of the judgment in Gencor v. Commission the Commission argues that it has jurisdiction over the merger both on the basis of the principle of territoriality (the effects principle) and on the basis of nationality (ratione personae) as Lonrho is incorporated under the laws of England. The Court of First Instance did not comment on whether it agreed that the Commission could have taken jurisdiction on the basis of the principle of nationality.

7. Joined cases C–68/94 and C–30/95, [1998] E.C.R. 1–1375.

8. France and others v. Commission, supra n.6 at para. 178. This issue of Gencor v. Commission has been analysed by Brian Sher in “Comment—Links, weak links and judicial review of merger control”. In Competition, Vol.7, issue 4, May 1999, pp.1–3.

9. Personally, I do not agree with this interpretation as is clear from my article “Merger Control in the European Community—A Summary of the Five Years since the Introduction of the Merger Regulation”, World Competition, Vol.19, no.l, pp.5–24 at p.22. Also, it appears strange that in Gencor v. Commission the Commission is defending itself by holding that it has no power to accept behavioural commitments whilst it has done so in a considerable number of cases such as for instance Boeing/McDonnel Douglas, supra n.2, (which the Commission decided subsequently to its decision in Gencor/Lonrho).

10. Para.207.

11. Commission decision in Case No.IV/M619, Gencor/Lonrho, O.J. 1997 L11/30.

12. Para.76.

13. Paras.78–79.

14. Paras.81–86.

15. Joined cases 89, 104, 116, 117 and 125–129/85, Ahlström Osakeytiö and others v. Commission, [1988] E.C.R. 5193.

16. Para.87.

17. Para.90.

18. Paras.93–95.

19. Paras.96–99.

20. Para.100.

21. Case C–286/90, Anklagemyndigheden v. Peter Michael Poulsen and Diva Navigation Corp, [1992] E.C.R. 1–6019 at point 9. See also Karl Matthias, Meessen, “The Application of Rules of Public International Law within Community Law”, Common Market Law Review, Vol.13, 1976, pp.485–501Google Scholar, Bourgeois, Jacques H. J., “EEC Control Over International Mergers”, Yearbook of European Law 1990 (Barav, A. and Wyatt, D. A., eds), Clarendon Press, Oxford 1991, pp.103–132 at p.131Google Scholar. SirLeon, Brittan, Competition Policy and Merger Control in the Single European Market, Grotius Publications Ltd., Cambridge 1991, pp.2–3Google Scholar and Andre, Fiebig, “The Extraterritorial Application of the European Merger Control Regulation”, Columbia Journal of European Law, Vol.5, 1998. pp.79–100 at p.86.Google Scholar

22. This principle is so far-reaching that it is far from enjoying universal recognition. Indeed hitherto it has not even been generally accepted by all Member States. In particular, the United Kingdom has been reluctant to accept the effects principle and it is therefore somewhat surprising that, initially, it intervened in support of the Commission in the present case. Later, however, it withdrew its intervention. For a discussion of the different bases of jurisdiction under international law with particular regard to merger control, see Fiebig, Andre R., “International Law Limits on the Extraterritorial Application of the European Merger Control Regulation and Suggestions for Reform”, European Competition Law Review, 1998, no.6. pp.323–331 at pp.325–326.Google Scholar

23. The effects principle is sometimes referred to as the objective territoriality principle, though this equation does not enjoy universal support. In the Wood Pulp judgment the Court of Justice at para.18 held that the Community's jurisdiction to apply its competition rules to the conduct in question “is covered by the territoriality principle as universally recognised in public international law.”

24. As noted above, the vires are Arts.83 and 308.

25. See in this respect Krimphove, Dieter, Europäische Fusionskontrolle, Carl Heymanns Verlag KG, Köln 1992, pp.398–403.Google Scholar

26. Para.16 of the Wood Pulp judgment, underlining added.

27. Para.87.

28. In my book, supra note 1, at pp.251–253 I show that a merger between two non-Community undertakings may meet the turnover thresholds while at the same time not producing any appreciable effects in the Community. It is also worth of note that the Wood Pulp judgment has received a number of critical remarks on this point, see for instance Walter, Van Gerven, “EC Jurisdiction in Antitrust Matters: The Wood Pulp Judgment”, in 1989 Fordham Corp. L Inst. 451 at pp.470–471.Google Scholar

29. See Art.2(2) and (3) of the Merger Regulation.

30. See in particular para.93.

31. Para.94, underlining added. Advocate General Darmon in his opinion in the Wood Pulp case proposed that the Court applied the effects principle. At para.53 he required that these effects should be “…direct and immediate…” (underlining added).

32. For instance by being the catalyst of some other anti-competitive transactions which the merging parties are not involved in.

33. See in this respect Broberg, Morten, “The De Minimis Notice”, European Law Review, 1995, pp.371–387.Google Scholar

34. See para.22 of the judgment.

35. See para.20 of the judgment.

36. Para.103, underlining added.

37. Joined cases of Hartford Fire Insurance Co. and Other Petitioners v. California and Others and Merrett Underwriting Agency Management Ltd. and Other Petitioners v. California and Others, 113 S.Ct. 2891 (1993).

38. See for instance Demeriou, Marie and Robertson, Aidan, “US Extra-territorial Jurisdiction in Antitrust Matters: Recent Developments”, European Competition Law Review, 1995 pp.461–468.Google Scholar

39. See for an example JCSAT/SAJAC, case IV/M346, decision of 30 June 1993.

40. See Drauz, Götz, “EEC Merger Control—The First year” in Papers of Antitrust Keynote Speakers—Section on Business Law,10th Biennial Conference,Hong Kong,Committee C, Antitrust and Trade Law,October 1991,Google Scholar who at p.36 writes that “[t]he Commission has always taken the view that it can claim jurisdiction on mergers and joint ventures which take place outside the EC or to which non-EC companies are a party, provided that they are likely to have a direct and substantial effect on competition within the common market” (underlining taken from the original). See also A. Fiebig, supra n.21 at pp.328–329.

41. Likewise, A. Fiebig, supra n.20 at p.93 points out that, “[i]f properly applied, the proportionality principle would prevent the Commission from sanctioning undertakings for failure to notify the Commission of a non-European concentration with a Community dimension if that concentration had no actual or potential effect in the Community.”

42. Art.6(l)(a) of the Merger Regulation. See likewise Schäfer, Helge, Internationaler Anwendungsbereich der präventiven Zusammenschuβkontrolle im deutschen und euro-päischen Recht, Peter Lang, Frankfurt a.M. 1993 at p.222.Google Scholar

43. See also H. Schefer, supra n.41 at p.224 and Edward, David, “The practice of the Community Institutions in relation to the extraterritorial application of EEC competition law” in Die Dynamik des Europäischen Gemeinschafts/The Dynamics of EC-law—Die Auslegung des Europäischen Gemeinschaftsrechts im Lichte nachfolgender Praxis der Mitgliedstaaten und der EG-Organe (Bieber, Roland and Ress, Georg, eds), Nomos Verlagsgesellschaft, Baden-Baden 1987 pp.355–376 at p.372Google Scholar. But contrast with Lampert, Thomas, Die Anwendbarkeit der EG-Fusionskontrollverordnung im Verhältnis zum Fusionskontrollrecht der Mitgliedstaaten—rechtsvergleichen zum Verhältnis zwischen dem US-Antitrustrecht des Bundes und der Einzelstaaten, Carl Heymanns Verlag KG, 1995 at pp.160–188Google Scholar, in particular 186–188 and J. H. J. Bourgeois, supra note 21 at p. 129.

44. Case 48/69, ICI v. Commission, [1972] E.C.R. 619. In the earlier case 22/71, Béguelin Import v. G. L. Import Export, [1971] E.C.R. 949, the Court held that “[t]he fact that one of the undertakings which are parties to the agreement is situate in a third country does not prevent application of that provision since the agreement is operative on the territory of the common market.” As is clear, this only concerns a situation where some (but not all) undertakings are situated outside the Community, and one should therefore not attach too much importance to it.

45. See e.g. the Commission's Eleventh Report on Competition Policy—1981, Brussels 1982 at point 34, and its Fourteenth Report on Competition Policy—1984, Brussels 1985 at point 60.