1 Regulating the Competitive Environment Chapter 22 © 2005 Thomson/West Legal Studies In Business

2 History of Antitrust Law U.S. preached the benefits after World War II (Sherman and Clayton Act since end of 1800”s) 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 Language of the Law: U.S. and EU 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

4 Case Windsurfing v. Commission E.C., Contract clauses invalid because a market restriction on competition European view more suspicious of patent holders monopoly (U.S. more flexible) EU more flexible on know-how transfer agreements but more likely to intervene to prevent vertical restraints

5 Abuse of Dominant Position Monopolize or attempt to monopolize Sherman Act Similar to U.S. Article 82

6 Abuse of Dominant Position Especially stringent when guilty party is foreigner

7 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?

8 Trilogy of Cases Court of First Instance (CFI) overturned Merger Task Force’s blocking of the mergers Airtours V. Commission Schneider Elec. SA v Commission Tetra Laval BV V. Commission What result of these 2002 cases? What is the status of the reforms?

9 U.S. Law Private cause of action Treble damages DOJ may review but can still litigate Implications for business? Encourages litigation But recent U.S. action against Microsoft was taken by states’ attorney generals

10 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?

11 EU EU has preapproval system Exemption system – individual –negative clearance –block exemption –De miminimis U.S. does not have comparable

12 Extraterritoriality U.S. : “effects test,” controversial “Direct substantial and reasonably foreseeable effect on U.S. commerce or on business of person engaged in exporting goods from U.S. to foreign countries” EU - territorial jurisdiction, “implementation test”, “single economic unit”? Blocking legislation?

13 Cases U.S.v Aluminum Hartford Fire Ins. v. Cal. Eskofot A/S v DuPont Aahlstrom Osakeyhito v. Com.

14 Conclusion Reflections on the Microsoft case What is happening in Europe now? Implications for international business?