Max-Planck-Institut für ausländisches und internationales Privatrecht Recent developments in EC Instruments in Conflict of Law Rules Riga, 1/2 March 2010 Competition delicts under the Rome II Regulation Dr. Christian Heinze, LL.M. (Cantab.) Max Planck Institute for Comparative and International Private Law Hamburg (Germany)

Max-Planck-Institut für ausländisches und internationales Privatrecht Fundamental distinctions Country of origin principle (Art 3 E-Commerce Dir 2000/31, Art 2, 2a Dir 89/552/EEC) Art 6(1) Rome II: Unfair competition (general) „ The law applicable to a non-contractual obligation arising out of an act of unfair competition shall be the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected.“ Art 6(2) Rome II: Unfair competition (exclusively targeting a specific competitor) „ Where an act of unfair competition affects exclusively the interests of a specific competitor, Article 4 shall apply.”. Art 6(3) Rome II: Restrictions of competition – General: Application of the law of the country where the market is affected (Art 6(3)(a) Rome II) – Exception: Concentration on lex fori (Art 6(3)(b) Rome II)

Max-Planck-Institut für ausländisches und internationales Privatrecht Country of origin principle as lex specialis Country of origin principle: Applicable to E-Commerce (Dir 2000/31) and television broadcasting activities (Dir 2007/65): Art 3(2) E-Commerce Dir: „ Member States may not, for reasons falling within the coordinated field, restrict the freedom to provide information services from another Member State.“ Exceptions: Art 3(3), Art 3(4) E-Commerce Dir Unclear whether this is a conflict of law or a substantive law rule (cp. Art 1(4) Dir 2000/31): „ This directive does not establish additional rules on p rivate international law”. Irrespective of its doctrinal qualification, the country of origin principle is lex specialis to Art 6 Rome II, either as a special conflict rule (Art 27) or as a rule of substantive law not affected by Rome II.

Max-Planck-Institut für ausländisches und internationales Privatrecht Act of unfair competition COM(2003) 427 final: “The purpose of the rules against unfair competition is to protect fair competition by obliging all participants to play the game by the same rules. Among other things they outlaw acts calculated to influence demand (misleading advertising, forced sales, etc.), acts that impede competing supplies (disruption of deliveries by competitors, enticing away a competitor's staff, boycotts), and acts that exploit a competitor's value (passing off and the like)”: Both B2B and B2C situations fall under Art 6(1) Rome II. Further inspiration may be drawn from the EU directives on unfair competition (Dir 2005/29; Dir 2006/114). Art 6(1) applies also to actions for injunctions brought by consumer associations (for delictual nature ECJ Case C-167/00 - Henkel). Art 6(1) covers both actions for damages and for (preliminary) injunctions (Art 2(2), Art 2(3) Rome II) Art 6 does not apply to infringement of (exclusive) intellectual property rights (cp. presentation in intellectual property delicts)

Max-Planck-Institut für ausländisches und internationales Privatrecht Unfair competition – general rule Recital 21: Art 6(1) Rome II not meant as an exception of the general rule (Art 4(1) Rome II), but rather a clarification of it. Conflict rules on unfair competition should protect competitors, consumers and the general public and ensure that the market economy functions properly. The modern competition law seeks to protect not only competitors (horizontal dimension) but also consumers and the public in general (vertical relations): three-dimensional function of competition law reflected in Art 6(1) Rome II. To satisfy these objectives, the law of the country where competitive relations or the collective interests of consumers are, or are likely to be affected, shall be applied. Due to three-dimensional function (protection of the market and the public in general), common residence and exception clause (Art 4(2), 4(3) Rome II) not applicable.

Max-Planck-Institut für ausländisches und internationales Privatrecht Unfair competition – Country where competitive relations or the collective interests of consumers are affected Application of the law of the State in whose territory "competitive relations or the collective interests of consumers are affected or are likely to be affected“. COM(2003) 427: “This is the market where competitors are seeking to gain the customer's favour. This solution corresponds to the victims' expectations since the rule generally designates the law governing their economic environment. But it also secures equal treatment for all operators on the same market. The purpose of competition law is to protect a market; it pursues a macro-economic objective. Actions for compensation are purely secondary and must be dependent on the overall judgement of how the market functions”. Collective interests of consumers: Concept taken over from Art 1(1) Dir 2009/22 on injunctions for the protection of consumer‘s interests, brought by consumer associations.

Max-Planck-Institut für ausländisches und internationales Privatrecht Unfair competition – multi-state infringements and de minimis clause If a single act (via Internet, TV broadcast) affects the competitive relations or the collective interests of consumers in several countries, the laws of several countries apply. This may be problematic if injunctive relief is requested – may lead to strictest competition law imposing its standards. Unclear whether a de minimis exception may be invoked at the choice of law level, i.e. whether the law of those countries is not applied where only minimal effects occur. An earlier Commission draft included a restriction (“only direct substantial effects”), but it has been dropped. On the other hand, foreseeability and legal certainty may require not to apply the law where only minimal effects occurred.

Max-Planck-Institut für ausländisches und internationales Privatrecht Unfair competition targeting a specific competitor An act of unfair competition may target a specific competitor, e.g. by enticing away a competitor's staff, corruption, industrial espionage, disclosure of business secrets or inducing breach of contract. While such conduct may also have a negative impact on the market, these situations have a much more bilateral nature than general competition delicts. Therefore, Art 6(2) Rome II refers back to the general provision of Art 4 Rome II, giving the parties the benefit of application of the law of common habitual residence (Art 4(2) Rome II) and of the exception clause (Art 4(3) Rome II). The application of Art 4(1) Rome II will normally refer to the place where the victim of unfair competition has his business seat, as this will be the place where the damage occurred. Unclear: should a choice of law (Art 14 Rome II) be possible in such a situation, i.e. Art 6(4) Rome II not be applied to unfair competition targeting a specific competitor?

Max-Planck-Institut für ausländisches und internationales Privatrecht Restrictions of competition – definition (I) Recital 23 Rome II: „ … the concept of restriction of competition should cover prohibitions on agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition within a Member State or within the internal market, as well as prohibitions on the abuse of a dominant position within a Member State or within the internal market, where such agreements, decisions, concerted practices or abuses are prohibited by Articles 81 and 82 of the Treaty or by the law of a Member State.“ Recital 22 Rome II: „The non-contractual obligations arising out of restrictions of competition in Article 6(3) should cover infringements of both national and Community competition law“.

Max-Planck-Institut für ausländisches und internationales Privatrecht Restriction of competition – definition (II) Art 6(3) Rome II does not apply to public law or criminal law sanctions for competition violations (Art 1(1) Rome II) Unclear: does it cover third state competition law? Probably yes, see Art 3 Rome II. Unclear: does it cover only the civil law remedies for the infringement of competition law (damages, injunctions) or also the question whether a particular behaviour is infringing as well? Art 15 lit a Rome II („basis and extent of liability“) suggests that it covers both, but at least for an infringement of the Art 101, 102 TFEU, the hierarchy of norms suggests that these define their scope of application themselves

Max-Planck-Institut für ausländisches und internationales Privatrecht Restriction of competition – concentration on a single law Art 6(1)(b) Rome II permits a concentration on a single law, if the market is affected in more than one country. Purpose: Foster private enforcement of competition law. Possible to base claim on the law of the court seised (lex fori), provided that 1) claimant sues in the court of domicile of the defendant, 2) that Member State is amonst those directly and substantially affected by the restriction of competition. If claimant sues more than one defendant (Art 6 No 1 Brussels I), claimant can only choose to base his or her claim on the lex fori if the restriction of competition on which the claim against each of the defendants relies directly and substantially affects also the market in the Member State of the court seised.

Max-Planck-Institut für ausländisches und internationales Privatrecht Final word: Choice of law In principle, Art 6(4) Rome II excludes any choice of law, even as far as the calculation of damages is concerned. Justification: Competition delicts aim at protection of the market and the public at large and should thus not be subject to a choice of law This justification does not hold true for Art 6(2), if delict is targeted at at specific competitor, which may justify to allow choice of law in such a situation.