Antitrust in the United States and European Community: Toward a Bilateral Agreement


Antitrust in the United States and European Community:
Toward a Bilateral Agreement

I. INTRODUCTION

Citing dramatically increased imports and decreased exports in the
machine tool industry, semiconductor market, television market and
auto parts industries, a U.S. Senator recently described America's
industrial base as "in peril". 1 A widely held perception ascribes this
decline in American business to foreign rivals' immunity from American
antitrust laws.2 Specifically, it is felt that foreign business rivals are
permitted to prey on American consumers while remaining immune
from the antitrust burden borne by American companies, and that this
inequity renders domestic firms disadvantaged on the global market.'

These perceptions may be aggravated by the impending economic
union in Europe. By December 31, 1992, twelve European Countries
will join economic forces to become one of the most formidable entities
in the economic world, the European Economic Community (EEC). 4

Companies operating in the United States will find themselves trading
among and competing with a unified market of 325 million consumers
with an average per capita income of $14,500.- It is predicted that
European businesses will emerge in 1993 larger, more efficient, and
more profitable than ever before in world economic history.6 Given
that the largest commercial partner of the United States is the European
Community,' it is axiomatic that changes in the European Community

1. Hearing Before the Consumer Subcomm. of the Senate Commerce, Science, and Trans-
portation Comm., 101 Cong., 1st Sess. [hereinafter Hearings] (statement of Senator Bryan).

2. Id.
3. Id. at 2.
4. The following countries have joined the EEC: France, Italy, Germany,

Belgium, the Netherlands, Luxembourg, Denmark, Greece, Ireland, Portugal, Spain,
and the United Kingdom. Caterina Cregor, An Overview of the European Economic Com-
munity and Eastern Europe: Trade Opportunities, INTERNATIONAL LAW, ADVISING CLIENTS
TRADING WITH EEC AND EASTERN EUROPE, Indiana Continuing Legal Education Foun-
dation (1990) [hereinafter Cregor].

5. Id.
6. Id.
7. Id. In 1989, one of every four dollars of export earnings by United States

companies was earned in trade with Europe, for a total of $87 billion. Moreover,
direct world investment in the United States is led by Europe, as seven of the top
ten investing countries are European. European investments in the United States are
led by the United Kingdom, the Netherlands, and the Federal Republic of Germany.
Export sales of EEC companies in the United States are close to $400 billion. Id.



IND. INT'L & COMP. L. REV.

will affect foreign as well as domestic operations of United States
businesses.

While a strident commitment to free and open competition is one
of the historical bedrocks of U.S. economic success,8 the European
Community has just begun to enter the market regulation arena. Rel-
ative to institutionalized U.S. merger control policies and law, which
have matured throughout over a century of practical application, merger
control in the European Economic Community is a new and developing
phenomenon. Member states' commitment to free trade is evidenced
in their unifying treaty, which, in Article 3, proclaims, "[t]he activities
of the Community shall include... the establishment of a system
ensuring that competition shall not be distorted in the Common
Market. . . . "9 Given that the volume of international commercial ac-
tivity affecting both the United States and the European Economic
Community is worth close to a trillion dollars annually, 0 domestic firms
on both sides of the Atlantic are potentially subject to multiple antitrust
reviews which apply differing criteria.

Although the EEC Merger Control Regulation has been in force
just over one year," Sir Leon Brittan, Vice President of the Commission
of the European Communities, has already proposed a bilateral agree-
ment between the United States and the European Community to
provide for more uniform decisions in the competition field. 12

Approaches to such a bilateral agreement could take innumerable
shapes. This note will highlight the need for a bilateral agreement
between the United States and the European Economic Community
through an analysis of jurisdictional and substantive issues in the com-

8. The Sherman Act was passed over one hundred years ago, in 1890, in
response to rapid industrialization and increasing concentration in the petroleum,
tobacco, cotton oil, linseed oil, and paper industries. D.M. RAYBOULD & ALISON FIRTH,

COMPARATIVE LAW OF MONOPOLIES 11 (1991).
9. Treaty Establishing the European Economic Community (EEC), Mar. 25,

1957, 298 U.N.T.S. 11 [hereinafter Treaty of Rome] (elipse added).
10. Cregor, supra note 4.
11. Although the origins of the EEC Merger Control Regulations date to 1973,

when the Council of the European Communities considered a proposal by the Com-
mission of the European Communities to regulate the concentrations of undertakings
in the EC, Council Regulation 4064/89 of 21 December 1989 on the Control of
Concentrations Between Undertakings did not enter into force until September 21,
1990. See Mark Dassesse, Selected Aspects of the European Economic Community Law on
Investments and Acquisitions in Europe, 25 INT'L LAW., 375, 376 (1991) citing 1990 O.J.
(L 257) 13.

12. Id. at 386.

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petition field, with an emphasis on mergers and acquisitions. The
primary focus will be on the need to build a preliminary foundation
of understanding in the areas of antitrust enforcement jurisdiction,
substantive merger review, and international discovery needs. These
three basic foundations are proposed as fundamental prerequisites to
negotiations of a bilateral agreement; while by no means exhaustive,
clarification of these three areas is offered as a preliminary framework
upon which to base treaty discussions in the future.

II. ANTITRUST ENFORCEMENT: JURISDICTIONAL PREMISES

While the need for an agreement allocating jurisdiction between
U.S. and EEC authorities in competition cases has been expressed,13

fruitful discussions on the proposal cannot be held until jurisdictional
issues are viewed with uniformity by differing authorities within the
same country. Treaty negotiators cannot expect to exact consensus on
the allocation of jurisdiction between their respective states if they bring
to the table discordant views of their own country's approach to such
disputes.

A. Antitrust laws and jurisdiction in the United States

United States free market competition was recognized as an im-
portant foundation of commercial success in the United States as early
as 1890 with the passage of the Sherman Act.14 Today, those principles
are embodied in the U.S. antitrust laws, which solidly commit our
nation to a free market economy "in which the competitive process of
the market ensures the most efficient allocation of our scarce resources
and the maximization of consumer welfare."' 5 The primary thrust of
Section 1 of the Act is to prohibit contracts, combinations, or con-
spiracies in restraint of trade or commerce. 16 The Act supplies the basis
for extraterritorial application of the law by proscribing such acts as
"among the several states or with foreign nations."' 7 In Section 2, the
Act makes it illegal for anyone to either attempt to or to monopolize
any part of the United States interstate trade or commerce.18 The
Sherman Act is a criminal statute, but tends to be enforced in civil

13. Id.
14. RAYBOULD, supra note 8.
15. 6 THE DEPARTMENT OF JUSTICE MANUAL 7-1.100 (Supp. 1990-1).
16. RAYBOULD, supra note 8.
17. 15 U.S.C. S 1, Pub. L. No. 101-588, § 4(a), 104 Stat. 2880 (1988).
18. RAYBOULD, supra note 8.

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IND. INT'L & CoMP. L. REV.

proceedings brought by the Justice Department or by a State Attorney
General.1 9 Section 73 of the Wilson Tariff Act of 189420 prohibits an
importer of goods into the United States from combining or contracting
to create anti-competitive consequences in the domestic market. Section
5 of the Federal Trade Commission Act proscribes "unfair methods
of competition" and "unfair or deceptive acts or practices,' '21 vesting
enforcement authority under Section 5 with the Federal Trade Com-
mission, although no private action exists under this Section. 22

The most important antitrust statute to be passed after the Sherman
Act is the Clayton Act of 1914.23 Price discrimination by a seller of
commodities of like grade and quality is proscribed, as is the condi-
tioning of sales upon the agreement that the buyer not use or deal in
products of competitors of the seller. 24 The Clayton Act confers subject
matter jurisdiction over a "person engaged in commerce," and includes
in that definition those "corporations and associations existing under
or authorized by. . . the laws of any foreign country. "25 The burden
of proof under the Clayton Act is said to be lighter than the burden
under the Sherman Act, the latter requiring a showing of actual anti-
competitive consequences.2 6 In 1976, the Hart-Scott-Rodino Antitrust
Improvement Act added a new Section 7(a) to the Clayton Act, requiring
that plans for certain acquisitions and mergers be communicated to the

19. Id. at 13. Additionally, a private suit seeking three times the actual damages
may be brought by a victim harmed by the prohibited behavior. See also supra note
16, where the the role of the Antitrust Division of the Department of Justice is
established first as an enforcement agency, prosecuting civil and criminal violations

under the Sherman and Clayton Acts, and secondly as an advocater, appearing before
Congressional committees and federal regulatory agencies to articulate pro-competitive

policies.
20. 15 U.S.C. S 8 (1982). Violation of the Act is a misdemeanor, carrying a

maximum penalty of $5,000 and/or one year in jail. Section 11 provides for seizure
of the imported article. See also BARRY E. HAWK, UNITED STATES, COMMON MARKET,

AND INTERNATIONAL ANTITRUST: A COMPARATIVE GUIDE 33 (2nd ed. 1986), noting,
"The antitrust provisions of the Wilson Tariff Act have received little more than
passing comment from the courts. Courts have treated the Act as simply a more

specific application of the Sherman Act to import restraints."

21. 15 U.S.C. S 45(a)(1), Pub. L. No. 100-86, 101 Stat. 655 (1987).
22. Id.
23. 15 U.S.C. S 12, Pub. L. No. 94-435, 90 Stat. 1397 (1991).
24. Id.

25. Id. (elipse added).
26. RAYBOULD, supra note 8, at 61. This showing is not required in offenses

under Section 1 of the Sherman Act providing for per se presumptions of anti-
competitive effects. Id.

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U.S./E.EC. ANTITRUST

Federal Trade Commission and the Antitrust Division of the Depart-
ment of Justice."

The United States Department of Justice Antitrust Division and
the Federal Trade Commission (FTC) are responsible for enforcing the
federal antitrust laws. The Federal Trade Commission Act, provides
authority of the FTC in section 5, giving the FTC jurisdiction over
"unfair methods of competition in or affecting commerce.' '28 The FTC
also has enforcement responsibility under Sections 2, 3, 7, and 8 of
the Clayton Act, covering price discrimination, tying and requirements
contracts and anticompetitive acquisitions of stocks or assets, and inter-
locking directorates respectively.

The Antitrust Division of the Department of Justice is responsible
for coordinating enforcement efforts, with jurisdiction to enforce pros-
criptions against private restraints of trade (such as price-fixing, bid-
rigging, and other collusive arrangements among competitors) that
unreasonably impede the free forces of the market. 29 While enforcement
of the Sherman Act is the primary role of the Division, it also shares
concurrent jurisdiction over Section 7 of the Clayton Act (mergers)
with the FTC.30

These laws and enforcement authorities are not limited in their
effects to the United States. Enforcement efforts of the Antitrust Division
sometimes reach foreign defendants and conduct that occurs beyond
the territorial boundaries of the United States.' The Foreign Trade

27. Id. Title I (of the Act) is procedural: it amplifies the powers of the De-
partment of Justice given under the Antitrust Civil Process Act 1962 to issue a civil
investigative demand requiring disclosure of information prior to commencing any
antitrust proceedings. Title II amends the Clayton Act Section 7 by requiring pre-
merger notification. Title III provides for actions parens patriae on behalf of persons
residing in a State by the State Attorney-General in respect of violations of the Sherman
Act. Id.

28. 15 U.S.C. 5 45(a)(1) (1987).
29. HAWK, supra note 20, at 32.
30. Although beyond the scope of this discussion, it may be argued that the

FTC, since a legislatively mandated, independent agency, enjoys more autonomy than
the DOJ Antitrust Division, which, as a part of the Executive branch, may be more
susceptible to political persuasion.

31. ANTITRUST ENFORCEMENT GUIDELINES FOR INTERNATIONAL OPERATION, supra
note 15, at 7-244.99.

"Just as the acts of U.S. citizens in a foreign nation ordinarily are subject
to the law of the country in which they take place, the acts of foreign
citizens in the United States ordinarily are subject to U.S. law. The reach
of the U.S. antitrust laws is not limited solely to conduct and transactions
that occur within the United States, however. Conduct relating to U.S.

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478 IND. INT'L & COMP. L. REV. [Vol. 2:473

Antitrust Improvement Act provides that the Sherman Act applies to
anti-competitive export conduct of U.S. firms when that conduct would
have a direct, substantial, and reasonably foreseeable effect on trade
or commerce within the United States or on import trade or commerce. 32

B. Antitrust laws and jurisdiction in the EEC

The Treaty of Rome33 establishes a common market of goods,
services and agricultural products. The EEC is targeted to materialize
December 31, 1992 among twelve European countries.3 4 Article 3 of
the Treaty provides that the EEC will, among other activities, establish
''a system ensuring that competition shall not be distorted in the
Common Market." 35 Importantly, Community law is said to enjoy
primacy over national laws of the respective member states, each of
which have varying standards and interpretations of free market com-
petition. "By contrast with ordinary international treaties, the EEC
Treaty has created its own legal system, which, on the entry into force
of the Treaty, became an integral part of the legal systems of the
Member States and which their Courts are bound to apply. ' '

1
6

Promotion of free markets and the preservation of competition
within the European markets unified under the treaty fall largely under

import trade that harms consumers in the United States may be subject
to the jurisdiction of the U.S. antitrust laws regardless of where such
conduct occurs or the nationality of the parties involved.

Id.
32. Id. at 7-244.101. But cf. RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS

LAW OF THE UNITED STATES (1987) S 808-2 (Emergency Action to Protect Domestic
Producers):

Under the law of the United States, upon a finding by the International
Trade Commission that increased imports are a substantial cause of serious
injury or threat of serious injury to domestic producers, the President may
provide relief to affected domestic parties by (a) restricting imports through
tariffs or quantitative restrictions, or (b) negotiating an orderly marketing
agreement.

With respect to the latter, the Trade Expansion Act of 1962, 19 U.S.C. § 1982,
authorizes the President to negotiate marketing agreements with foreign countries,
while an agreement with private foreign producers is not within the President's authority
under the Act, and such an arrangement might constitute restraint of trade in violation
of the Sherman Act. Id., reporters' note 5, citing Consumers Union v. Kissinger, 506
F.2d 136 (D.C. Cir. 1974), cert. den., 421 U.S. 1004 (1975).

33. Treaty of Rome, supra note 9.
34. Cregor, supra note 4, at 4.
35. Treaty of Rome, supra note 9, art. III.
36. RAYBOULD, supra note 8, at 184, citing Case 6/64, Coasta v. Enel, C.M.L.R.

455, 456 (1964).



U.S./E.E.C. ANTITRUST

the ambit of articles 85 and 86. Article 85 declares agreements among
undertakings that substantially restrict competition within the EEC
void. 7 Prohibited are cartel-type arrangements between two or more
undertakings having an anti-competitive object or effect, and which
may affect interstate trade . 8 The prevention, restriction, or distortion
of competition within the common market is specifically prohibited. 9

Nevertheless, the prohibition may be declared inapplicable under par-
agraph 3 of article 85 when the activity contributes "to the improvement
of the production or distribution of goods or to the promotion of
technical or economic progress ... "40

Article 86 prohibits abuse of a dominant position within the EEC,4"
and unlike article 85 contains no exceptions for behavior the positive
effects of which outweigh the negative. 42 Article 86 prohibitions apply
to abuses which occur within the Common Market, prohibiting them
insofar as they may affect trade between Member States. 43

37. Marc Dassesse, Selected Aspects of European Economic Community Law on In-
vestments and Acquisitions in Europe 25 INT'L LAW. 375, 376 (1991).

38. RAYBOULD, supra note 8, at 186.
39. Treaty of Rome, supra note 9, art. 85 provides in relevant part:
1. The following shall be deemed to be incompatible with the Common
Market and shall hereby be prohibited: any agreements between enterprises,
any decisions by associations of enterprises and any concerted practices
which are likely to affect trade between the Member States and which have
as their object or result the prevention, restriction or distribution of com-
petition within the Common Market, in particular those consisting in:

a. the direct or indirect fixing of purchase or selling prices or of
any other trading conditions;
b. the limitation or control of production, markets, technical de-
velopment or investment;
c. market-sharing or the sharing of sources of supply;
d. the application of parties to transactions of unequal terms in
respect of equivalent supplies, thereby placing them at a competitive

disadvantage; or
e. the subject of the conclusion of a contract to the acceptance by
a party of additional supplies which, either by their nature or
according to commercial usage, have no connection with the subject

of such contract.
2. Any agreements or decisions prohibited pursuant to this Article

shall be null and void.
40. Treaty of Rome, supra note 9, art. 85, 3.
41. Dassesse, supra note 38, at 377.
42. Id. at 376.
43. RAYBOULD, supra note 8, at 187. The full text of Article 86 provides:
To the extent to which trade between any Member States may be affected

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IND. INT'L & COMP. L. REV.

The sufficiency of articles 85 and 86 in their ability to protect free
markets has been reviewed and found wanting. According to a European
professor of law, "[articles 85 and 86] are limited and technically
inadequate to do the job. For example, article 86 may not apply if
there is no preexisting dominant position, and article 85 may not apply
if there is no agreement between undertakings to start with." ' 44

Moreover, mergers of companies the effects of which reach beyond
the borders of the host nation have been potentially subject to review
by a number of EEC competition authorities, both at the Commission
and the Member State levels. 45 Perhaps arising from exigencies noted
above, the EEC Merger Control Regulation, which entered into force
on September 21, 1990, clearly delineates jurisdiction and authority
over mergers, providing circumstances under which the Commission
of the European Communities has sole jurisdiction over merger re-
gulations, subject to review by the Court of Justice. 46

The principal institutions of competition enforcement are the Coun-
cil of Ministers, the Commission, the Directorate General IV, and the

thereby, action by one or more enterprises to take improper advantage of
a dominant position within the Common Market or within a substantial
part of it shall be deemed to be incompatible with the Common Market
and shall hereby be prohibited. Such improper practices may, in particular,
consist in:
a. the direct or indirect imposition of any inequitable purchase or selling
prices or of any other inequitable trading conditions;
b. the limitation of production, markets or technical development to the
prejudice of consumers;
c. the application to parties to transactions of unequal terms in respect of
equivalent supplies, thereby placing them at a competitive disadvantage;
or
d. the subjecting of the conclusion of a contract to the acceptance, by a
party, of additional supplies which, either by their nature or according to
commercial usage, have no connection with the subject of such contract.
44. Dassasse, supra note 37, at 377.
45. Id. at 378.
46. Id., citing Council Regulation 4064/89 of 21 December 1989 on the Control

of Concentrations between Undertakings, 1990 O.J. (L 257) 33 [hereinafter Council
Regulation]. The Council Regulation provides, in art 21:

1. Subject to review by the Court of Justice, the Commission shall have
sole jurisdiction to take the decisions provided for in this regulation [for
mergers exceeding the minimum turnover criteria laid down by the Reg-
ulation and thus having a "community dimension".]
2. No member state shall apply its national legislation on competition to
any consideration [concentration] that has a community dimension.

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Court of Justice of the European Communities. 47 Competition rule-
making authority rests with the Council of Ministers. 48 Enforcement
of EEC competition policy rests with the Commission and the Direc-
torate General IV.49 Finally, as noted above, the Court of Justice has
the authority to review decisions rendered by the Commission.

C. Extraterritorial Jurisdiction and Customary International Law

Were international competition regulations in accord throughout
the world, and were extraterritorial jurisdictional provisions among the
states clearly and historically delineated, customary international law
would neatly prescribe jurisdictional and substantive disposition of in-
ternational merger disputes. "It would be difficult, perhaps impossible,
to find a national legal system the courts of which arbitrarily refused
to apply rules of customary international law not in conflict with
domestic law. .. ."50 However, there is relatively little customary in-
ternational law of economic relations, 51 and developing theories sup-
porting application of domestic law to foreign transactions reflect
ambiguous and sometimes conflicting approaches.

While the Sherman Act expressly applies to restraints of trade with
foreign nationals,5 2 a federal court first held the Sherman Act applicable
to conduct outside the United States where acts evidenced both an
intent to and an effect on United States domestic or foreign commerce. 5

Likewise, in Beguelin Import Co. v. S.A.G.L. Import Export, an action
challenging an exclusive distribution agreement between a Common
Market state and a non-common market state, the European Court of
Justice held, rather summarily, that effects felt within the European
Community sufficed to give the court jurisdiction to adjudicate the

47. 2 BARRY HAWK, UNITED STATES, COMMON MARKET, AND INTERNATIONAL

ANTITRUST: A COMPARATIVE GUIDE 3-5 (2d. ed. Supp. 1990).
48. Treaty of Rome, supra note 9, art. 87.
49. Hawk, supra note 48, at 4.
50. JOSEPH M. SWEENEY ET AL., THE INTERNATIONAL LEGAL SYSTEM, CASES AND

MATERIALS 9 (3d ed. 1988).
51. RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW OF THE UNITED STATES

261 (Introductory Note 1987).
52. See supra note 17 and accompanying text.
53. United States v. Aluminum Co. of America, 148 F.2d 416, 443 (2d. Cir.

1945), stating that "any state may impose liabilities, even upon persons not within its
allegiance, for conduct outside its borders that has consequences within its borders which
the state reprehends; and these liabilities other states will ordinarily recognize." Id.

(emphasis added).

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IND. INT'L & COMP. L. REV.

matter within article 85 of the Treaty of Rome.5 4 While the Beguelin
Court was primarily concerned with whether the parent-subsidiary
company relationship satisfied the article 85 requirement of an agree-
ment between undertakings and whether the exclusive dealership was
amenable to an exception provided in an implementing regulation, it
simply concluded that the fact that one of the firms involved was a
Japanese firm was of no importance so long as it was established that
competition within the territory of the Community suffered and that
the agreements in question affected trade between Member States. 5

1 In
this case, a Japanese firm, Oshawa, had granted exclusive distribution
rights to Beguelin Imports5 6 for the distribution in France and Belgium
of lighters bearing the Oshawa mark. The European Court of Justice
found the exclusive agency agreement between a non-EEC member
producer and EEC distributor prohibited by article 85 (1) when it
obstructs, "de jure or de facto" the distributor's re-exportation of the
products in question to other member-states, or when it prevents the
product from being imported from other member-states into the pro-
tected zone and being distributed there by persons other than the
concessionnaire or his customers.5 7

Both the United States Alcoa case and the European Court of
Justice Beguelin Import case support application of domestic antitrust
laws to conduct involving foreign firms pursuant to the "effects doc-
trine." Both approaches are consonant with international law as artic-
ulated in the Restatement of Foreign Relations, which provides that
"[A] state has jurisdiction to prescribe law with respect to . . . conduct
outside its territory that has or is intended to have substantial effect
within its territory.' '58

Within this broad parameter, however, remains a great deal of
latitude for weighing when and in what circumstances domestic antitrust

54. Case 22/71, Beguelin Import Co. v S.A.G.L. Import Export, 1971 E.C.R.
949, 1972 C.M.L.R. 81.

55. Id. at 954.
56. While the original agreement was with the Belgian parent company, the

French subsidiary Beguelin Import Co. of France, took over the exclusive concession
in France. The dispute arose when Beguelin sought injunctive relief to prevent a third
company, G.L. Import Export, of Nice, from marketing the articles in France. G.L.
Import Export responded to the injunction by asserting that the exclusive concession
between Oshawa and Beguelin France violated Art. 85, as constituting an obstacle to
freedom of trade within the Community. Id. at 950, 951.

57. Id. at 970.
58. RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED

STATES § 402 (1987).

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laws will be applied to conduct occurring within the territory of another
nation when the interests of both (or multiple) nations are affected. It
is in this arena- where dual and equal grounds exist to support
application of jurisdiction- where the most difficulty lies. It follows
that a firm understanding of the varying approaches to answer this
question is an absolute prerequisite to any bilateral agreement preemp-
tively allocating jurisdiction between European Community and United
States fora.

In 1984, in Timberlane Lumber v. Bank of America, the United States
Court of Appeals sanctioned a seven-step balancing approach to de-
termine whether to apply domestic antitrust laws in a private action
seeking damages from an alleged conspiracy instituted and conducted
in Honduras.5 9 While ultimately declining to exercise jurisdiction, the
decision on review kept intact a seven-step weighing approach for-
mulated in the earlier decision. 6° In weighing whether to exercise ju-
risdiction, the Ninth Circuit Appellate Court considered: the degree of
conflict with foreign law or policy, the nationality or allegiance of the
parties and the locations of principal place of business, the extent to
which enforcement can be expected to achieve compliance, the relative
significance of effects on the United States as compared with those
elsewhere, the extent of explicit purpose to harm or affect American
commerce, the foreseeability of such effect, and finally, the relative
importance to the violations charged of conduct within the United
States as compared with conduct abroad.6"

Within the year, a conflicting decision eschewing this balancing
approach was handed down by another United States Court of Appeals,
this time from the District of Columbia.6 2 In Laker Airways v. Sabena,
Belgian World Airlines, a British airline operating in the United States
was allegedly forced into bankruptcy by antitrust violations by other
airlines, and sought remedy under U.S. antitrust laws. In a series of
rather complicated maneuvers, three months after Laker Airways filed
the antitrust action in the United States, several of the defendants
sought and were granted an injunction by the High Court of Justice
of the United Kingdom to forbid Laker Airways from proceeding with

59. Timberlane Lumber Co. v. Bank of America, 749 F.2d 1378 (9th Cir.

1984) (Timberlane II) cert. den., 472 U.S. 1032 (1985).

60. Timberlane Lumber Co. v. Bank of America, 549 F.2d 597 (9th Cir. 1976)
(Timberlane I).

61. Timberlane v. Bank of America, 749 F.2d 1378, 1383-1386 (9th Cir. 1984).
62. Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C.

Cir. 1984) [hereinafter Laker].

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IND. INT'L & COMP. L. REV.

its American antitrust claim against them. 63 Fearing that the remaining
two defendants would seek similar relief, Laker Airways sought and
was granted injunctive relief from the U.S. District Court which barred
the remaining defendants from seeking British injunction to force Laker
to dismiss its suit against them. 64

Then, on May 20, 1983, the High Court of Justice held that the
application of the American antitrust laws to companies carrying on
business in the United States was not contrary to British sovereignty, with
the disclaimer that in the event the English Secretary of State should
declare that Britain's trading interests were negatively implicated, that
holding could change. 65 Such a determination was made, 66 and in the
next month the British Government invoked the British Protection of
Trading Interests Act, 67 requiring all persons conducting business in
the United Kingdom to "disobey all foreign orders and cease all
compliance with the foreign judicial or regulatory provisions designated
by the Secretary of State.' ' The Act sought to prevent United Kingdom
courts from cooperating with foreign tribunals' requests for documents,
and forbade enforcement of treble damage awards or antitrust judgments
as specified by the Secretary of State.

In deciding to proceed with the United States antitrust suit, the
District of Columbia Circuit acknowledged that sufficient contacts ex-
isted within both the United States and England to support concurrent
prescriptive jurisdiction. 69 The court noted that "the mere existence of
dual grounds of prescriptive jurisdiction does not oust either one of
the regulating forums. Thus, each forum is ordinarily free to proceed
to a judgment." 7 0 However, in examining both the motive of the
defendants in seeking injunctive relief from the British High Court,7"

63. Id. at 915.
64. Id.
65. Id. at 919, (emphasis added).
66. Id. at 920.
67. Protection of Trading Interests Act, 1980, ch. 11, Appendix of Record

Excerpts Submitted on Behalf of Appellants Sabena and KLM at Tab 5, cited in Id.
at 918.

68. Id. at 920.
69. Id. at 926.
70. Id.
71. Id.
"Appellants ...are not interested in concurrent proceedings in the courts
of the United Kingdom-they want only the abandonment or dismissal of
the American action against them. . . [that they did not pursue a limited
injunction that would have permitted the United States proceedings to

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and in reasoning that the result of granting jurisdiction to England
would be to render the plaintiff without remedy,72 the Court found
that it could not decline jurisdiction without totally abdicating its re-
sponsibility to protect businesses operating in the United States. Rec-
ognizing the opposition of the British Government to the right of the
United States to apply its antitrust laws to British air carriers operating
in the United States, the court held the antisuit injunction to be
necessary to protect United States jurisdiction.73 In giving what it termed
serious consideration to comity principles, the court held:

When the foreign act is inherently inconsistent with the policies
underlying comity, domestic recognition could tend either to
legitimize the aberration or to encourage retaliation, under-
cutting the realization of the goals served by comity. No nation
is under an unremitting obligation to enforce foreign interests
which are fundamentally prejudicial to those of the domestic
forum. Thus, from the earliest times, authorities have rec-
ognized that the obligation of comity expires when the strong
public policies of the forum are vitiated by the foreign act.7"

While the court literally dismissed the balancing approach of Tim-
berlane as inadequate as a basis for selecting one forum's prescriptive
jurisdiction over that of another,75 it could be argued that the Laker
analysis also involves an interest balancing approach, albeit of a different
color. Essentially, the Laker court employed an interest balancing ap-
proach in juxtapositioning the intent behind the defendant's seeking
injunctive relieve from the British tribunal and the British motive in
supporting it against the interest of the United States in enforcing its

continue] indicate[s] that they are only interested in interfering with the
antitrust action, and not in adjudicating the existence of an unlawful
conspiracy under British law."

Id. at 930.
72. Id.
"Appellants characterize the district court's injunction as an improper
attempt to reserve to the district court's exclusive jurisdiction an action
that should be allowed to proceed simultaneously in parallel forums. Ac-
tually, the reverse is true. The English action was initiated for the purpose
of reserving exclusive prescriptive jurisdiction to the English courts, even
through the English courts do not and can not pretend to offer the plaintiffs
here the remedies afforded by the American antitrust laws."

Id.
73. Id. at 934.
74. Id. at 937.
75. Id. at 948.

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IND. INT'L & COMP. L. REV.

antitrust laws. In finding the latter outweighed other considerations,
including that of comity, the court's result rested on a weighing analysis. 6

Of particular importance to a discussion on the need for a bilateral
jurisdiction agreement in antitrust cases are tribunals' reluctance to
decide the relative merits of the antitrust laws of the United States and
England. "We are in no position to adjudicate the relative importance
of antitrust regulation or nonregulation to the United States and the
United Kingdom. . . the judiciary. . .must weight these issues in the
limited context of adversarial litigation. . . ."" This language supports
resolution of these disputes not in the judicial forum, but in the forum
best equipped to weigh foreign policy proposals. Both tribunals' re-
luctance to formulate foreign policy with respect to antitrust matters,
and their frustration in having to adjudicate in an area fraught with
diplomatic complexities lends much credence to the call for a bilateral
agreement in this area. In short, by refraining from deciding which
nation's interests should prevail, the court declined to do by judicial
fiat what arguably must be done by a bilateral treaty.

D. Conclusion

In visiting some of the existing jurisdictional disputes, it is clear
that while they are not voluminous to date, the frustration illustrated
in Laker suggests that similar jurisdictional dilemmas may become more
prevalent in the future. While the United States has the benefit of over
100 years of application under the Sherman Act, the EEC's competition
regulation dates back only to 1957 and the Treaty of Rome, prior to
which competition was regulated individually by the respective member
states. Application of domestic antitrust laws has not been limited to
acts occurring in the domestic territory of either the United States or
the EEC. As discussed, the textual provisions of the relevant statutes
of both sides provide language which, if the other criteria are met, will
allow for extraterritorial application of the law.

While principles of international comity dictate a weighing of factors
prior to extraterritorial application of laws, these factors are not always
dispositive of the question: with which nation should jurisdiction over
this case rest? That is because a sound and objective weighing can

76. But see Deborah K. Owen and John J. Parisi, International Mergers and
Joint Ventures: A Federal Trade Commission Perspective, 8 FORDHAM CORPORATE
LAW INSTITUTE (B. Hawk, ed., 1991), supporting the reading of Laker as rejecting
the interest balancing analysis adopted by the Ninth Circuit in the Timberlane cases.

77. Laker, 731 F.2d at 949, 950.

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U.S./E.E.C. ANTITRUST

result in a decision that both have equal grounds for prescriptive and
enforcement jurisdiction. Specifically, parties may reside and conduct
business in both jurisdictions, and the importance to each of the re-
spective authorities in challenging or leaving intact the activity may be
equal. This anomaly rests equally with the classic "effects doctrine"
of international law, under which a nation has jurisdiction to enforce
its laws in response to activities causing substantial effects within its
territories. Again, assuming measurability, economic effects of business
actions can have an impact in several national economies, thus elevating
all parties to equal status in putative disputes.

A classic discussion of why judicial resolution of antitrust juris-
dictional disputes on principles of international law is inadequate was
provided in Laker, where tacit support for discussions between the
executive branches of the governments involved was evident. The courts
on both sides expressed frustration at being faced with an issue that
clashes in the judicial setting due to a failure to act on the part of the
executive: both were merely carrying out legislative and administrative
directives of their respective countries, and both expressed perceived
inadequacies of this approach.

That jurisdictional issues must play a dominant role in bilateral
treaty negotiations is therefore evident. Very recently, Sir Leon Brittan,
Vice President of the European Economic Community Commission,
has called for such bilateral agreement between the United States and
the EEC. It is hoped that discussions pursuant to this proposal will
prevent a recurrence of judicial frustration of Laker magnitude in the
future. Granted, consideration of ex ante jurisdiction allocation in the
antitrust area will be a delicate and difficult task absent the use of a
tangible set of circumstances such as is present in a judicial setting.
Any attempt to determine-in advance of a dispute-which nation's
laws will prevail must mix the established international doctrines of
effect and comity, and leaven them with reasonableness premised upon
a desire to promote economic health between the parties. Nonetheless,
domestic economies depend upon reasonable certainty for their growth;
before domestic businesses operating abroad can plan to accommodate
competition regulations, they must know under whose jurisdiction their
conduct will fall. To that end, discussions of a bilateral agreement are
imperative."'

78. For a perspective limiting these concerns due to overriding practical con-
siderations, see Owens and Parisi, supra note 76, at 6. (Referring to foreign parties'
willingness to accommodate the U.S. Federal Trade Commission in its investigations
of antitrust activity, through the use of a consent agreement, as a way to smooth entry
into the U.S. business arena).

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IND. INT'L & COMP. L. REV.

III-SUBSTANTIVE VARIATIONS IN MERGER CONTROL REGULATIONS

Part II explored conflicting approaches to assertions of domestic
jurisdiction to antitrust behavior conducted by foreign actors. While
the difficulty in judicial resolution of antitrust jurisdiction issues may
lie, as suggested, in the reality that antitrust policy is customarily set
by executive directives, an equally problematic area lies in the sub-
stantive approach of the differing jurisdictions. Part III will be devoted
to an exploration of the substantive considerations that support decisions
on either side of the Atlantic to either challenge or leave intact potentially
monopolistic plans. Discussion in this section is limited to the area of
mergers. Discussion of merger review in the United States is largely
drawn from the Department of Justice Merger Guidelines;7 9 discussion
of activity in the European Economic Community is drawn from the
EEC Regulation on the Control of Concentrations Between
Undertakings. 80

A. Product and Market Definition in the United States

Although critical to any analysis of the possible effects of proposed
or enacted mergers, there is little conformity on the identification of
domestic and international geographic markets or suitable product al-
ternatives. Thus little uniformity exists in predicting how international
markets will react in response to mergers, since these predictions are
ordinarily based upon market and product considerations.

In establishing the groundwork fundamental to bilateral treaty
discussions in the area of antitrust, an understanding of substantive
criteria used by the respective authorities to measure the legality of
proposed activity is essential."' Recalling from Part II that the United

79. DEPARTMENT OF JUSTICE MERGER GUIDELINES, supra note 31, at 7-19.
80. Council Regulation, supra note 46.
81. For a discussion of United States Department of Justice antitrust analysis

of mergers having international dimensions, see generally, ANTITRUST ENFORCEMENT GUIDE-
LINES FOR INTERNATIONAL OPERATIONS, in 6 THE DEPARTMENT OF JUSTICE MANUAL, supra
note § 15, at 7-243. (Recognizing that some mergers present procompetitive efficiencies,

the Department outlines a four step analysis to identify potential anticompetitive harms.

The first step focuses on the markets in which the merged operations operate; step

two focuses on other markets in which the parties are actual or possible competitors;
step three assesses whether anticompetitive effects of any vertical restraints may arise
from the merger [even if parties to the merger are not competitors, vertical relationships
can create horizontal problems- see infra note 891; and if steps one through three
uncover significant anticompetitive risks, step four allows the Department to consider
any efficiencies which would result from the transaction.) Id. at 7-244.3.

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States Department of Justice enforces antitrust policy pursuant to the
Sherman Act and the Clayton Act, acquisitions and mergers are subject
to section 1 of the Sherman Act 82 and section 7 of the Clayton Act. 83

A quick glance at the language in these Acts reveals the latitude left
in determining whether activities fall into the proscriptions; virtually
no guidance in determining violations is given in either Act. Accord-
ingly, the Department of Justice's (the Department) Merger Guidelines
set forth merger enforcement policies.

Any review of a proposed merger requires an analysis of market
power, which is a function of the firms' product market and geographic
market. The Department employs these two concepts to assess the
economic impact of a proposed merger to determine whether competition
will be lessened as a result of the merger. To focus the analysis on
the companies involved in the review, the Department restricts its
analysis to economically meaningful markets. The essential inquiry is
whether the merged firms could impose and sustain price increases in
those markets.84 Four factors influence whether price increases would
be tolerated by the market, and therefore must be assessed in merger
reviews: 1) consumers may switch to other products; 2) they may use
the same product produced by other firms in other areas; 3) producers
of other products could switch existing facilities to the production of
the product; or 4) producers could enter into the production of the
product by modifying existing facilities or constructing new facilities.8 5

1. Product Market Definition

To assess potential effects on competition of proposed mergers,
the Department first measures the market for each product (or service)

82. 15 U.S.C. § 1 (1982). Section 1 prohibits mergers comprising a "contract,
combination. . ., or conspiracy in restraint of trade" among the several states of with
foreign nations." Id.

83. 15 U.S.C. § 18, Pub. L. No. 98-443, 98 Stat. 1708 (1982). Section 7
prohibits mergers if their effect "may be substantially to lessen competition, or to tend
to create a monopoly." Id.

84. MERGEP GUIDELINES, supra note 15, at 7-31-32.
"Formally, a market is defined as a product or group of products and a
geographic area in which it is sold such that a hypothetical, profit-maxi-
mizing firm, not subject to price regulation, that was the only present and
future seller of those products in that area would impose a 'small but
significant and nontransitory' increase in price above prevailing or likely

future levels."
Id. at 7-32.

85. Id. at 7-32.

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IND. INT'L & COMP. L. REv.

of the firms involved."6 They create as a tool for their an analysis a
hypothetical firm which as the only present and future seller of those
products could "profitably impose a small but significant and non-
transitory" price increase . 7 The inquiry here is whether there are
sufficient product substitutes to enable consumers to switch to other
products. If sufficient shifting occurs in the analysis, the Department
adds to the product group the next best substitute for the merging
firm's product, and goes through the same analysis again. This continues
until a group of products is identified for which the hypothetical mo-
nopolist could impose the price increase. In general, prevailing market
prices are used in the analysis; the price increase applied is five percent
and it is presumed to last one year.

For purposes of this discussion, it is important to note the evidence
employed by the Department in these analyses. Fundamental to an
understanding of how these measurements work is the concept of using
historical data as indicators of future activity. In using present market
price, the Department acknowledges that changes in price may occur
irrespective of the proposed merger. Namely, prices may change in an
ultimate reflection of changes in product or environmental regulations.
The Department's analysis of the effects of price increases is inferential,
and is based on several types of circumstantial evidence, including
purchasing trends, historical analyses of pricing, comparisons of char-
acteristics of the products, and evidence of sellers' perceptions regarding
whether the products are or are not substitutes. Finally, the Department
includes firms in the hypothetical market which could easily convert
existing productive and distributive facilities to produce and sell the
relevant product within one year in response to the price increase.M8

2. Geographic Market Definition

A similar approach is employed to define the boundaries of the
geographic market which would be affected by the merger. First, the
Department determines the geographic market (markets) in which that

86. Id.
87. Id.
88. Id. at 7-34-35. The manual notes that some firms could easily convert their

facilities from the production of one product to another, but that these same firms

may have difficulty in establishing distribution or marketing strategies in such a short
time. These firms are not included in the market analysis. For a discussion of the

Department's methods in identifying foreign firms whose production capacity does
suggest the ability to convert to production of the product in question, see infra note
107.

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U.S./E.E.C. ANTITRUST

firm sells; the geographic boundaries could be atomistic or as large as
the entire world.8 9 Again, the analysis seeks to identify the geographic
area such that the hypothetical firm, as the only present or future
producer or seller of the product in that area, could profitably impose
a "small but significant and nontransitory" 90 price increase. If there
are plenty of other firms located elsewhere which could provide the
relevant product to the consumers at a similar price (building in the
cost of transporting the goods into the area) the geographic area will
be expanded to include those firms. The analysis continues adding
firms from surrounding locations in this manner until the geographic
area in which the price increase could be imposed is obtained.

In United States v. Waste Management,9' the Second Circuit cited the
Merger Guidelines in their reversal of a district court's decision that
a merger of two commercial waste haulers violated section 7 of the
Clayton Act.92 While agreeing with the District Court's finding that
the relevant geographic market was Dallas County excluding Fort Worth
as part of the relevant geographic market, 93 the Second Circuit none-
theless considered whether firms located outside Dallas County could
successfully enter the Dallas County geographic market. 94

The Second Circuit acknowledged there would be increased costs
of daily travel between Fort Worth and Dallas which would not be
present for Dallas-based companies, but found "no barrier to Fort
Worth haulers' acquiring garage facilities in Dallas" which would permit
the Fort Worth companies to keep some of their trucks stationed in
Dallas .9

What Waste Management indicates with respect to the geographic
market definition is that the ease of entry analysis will not be confined
to those firms already or potentially operating in the court-defined
geographic market. Indeed, the relative ease of entry into the trash
collection business was sufficient to overcome the district court's finding
of a post-merger share of 48.8% of the market, which is sufficient to
establish prima facie illegality under Section 7 of the Clayton Act. 96

Invoking the Merger Guidelines, (Guidelines) the Second Circuit held

89. Id. at 7-36.
90. Id.

91. United States v. Waste Management, 743 F.2d 976 (2d Cir. 1984).

92. Id. at 982.
93. Id. at 980.
94. Id. at 983 (emphasis added).
95. Id.
96. Id. at 977.

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IND. INT'L & COMP. L. Rv.

that ease of entry is so relevant to determining how a merger will affect
competition that it "may override all other factors. '

Again, the quality of the evidence used in the geographic market
definition process is critical to an accurate assessment of the merger's
effects. The Department, in using the "small but significant and non-
transitory" price increase as an objective guide considers historical
evidence of: shipment patterns of considered firms and their competitors;
evidence that consumers have shifted their purchases to sellers at dif-
ferent locations; differences or similarities in the price movements of
the relevant product which are not caused by causative factors in the
differing areas; transportation costs; local distribution costs; and excess
capacity of those firms outside the merging firms' location.9" Foreign
competitors are included in the geographic market, if relevant, and
market shares are assigned to them in the same manner they are assigned
to domestic firms (e.g., dollar sales, shipments to the relevant market,
physical production capacity, reserves, or dollar production). 99

3. Market Shares and Market Concentration

The primary index of a firm's market power is the statistical
evidence reflecting its shares of the respective market, computed by
using the factors outlined above. Concentration of the market is the
lead indicator of market power; controlling for other factors, the larger
the percentage of total product supply controlled by one firm, the more
readily the firm can restrict output in order to support a price increase
in that product.'00

After defining the appropriate product and geographic market, the
Guidelines provide a three-tiered threshold by which to assess prelim-
inarily the competitive effects of the proposed horizontal merger. For
these purposes, mergers of firms in the same product and geographic
market are considered horizontal. 10 1 The three level approach uses the

97. Id. at 982.
98. See supra note 15, at 7-38.
99. Id. at 7-38. It is noted that while quotas may prohibit the increase of

imports of the relevant product, those quotas may be offset by production in countries
not subject to the quota. Thus quotas do not per se exclude any country from the
geographic definition, and the effects of quotas are considered separately in Section
3.23 of the manual. Id. at 7-44.

100. Id.
101. Id. at 7-40. Vertical mergers involve firms at different levels of the production

scheme; conglomerate mergers involve everything else. Although by definition non-
horizontal mergers will not change the HHI concentration level, they are still subject
to challenge because the merger of a firm already in the market with a firm that could
enter the market after the merger may affect competition as well.

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Herfindahl-Hirschman Index (HHI) to compute market concentra-
tion.10 2 Simply put, the HHI sums the squares of the individual market
shares of all the firms identified as part of the market (including in
the computations the proposed merger). Thus, a market of four firms
with market shares of 40 percent, 30 percent, 20 percent, and 10
percent would yield an HHI of 3,000. (402 +302 +202 + 102 =3,000.)
The Guidelines provide that the thresholds are characterized as un-
concentrated when the HHI is below 1,000, moderately concentrated
when the HHI is between 1,000 and 1,800, and highly concentrated
when the HHI is above 1,800.103 Additionally, the Department evaluates
the increase in concentration that would result from the merger. Simply,
the market shares of the merging firms are multiplied, then doubled.' 0 4

Armed with these two calculations, the Department in general
follows these standards: For post-merger HHI below 1000, the De-
partment will usually not challenge the merger. For post-merger HHI
between 1,000 and 1,800 the Department will not likely challenge the
merger, unless the increase in HHI is greater than 100. '05 Finally, for
post-merger HHI over 1,800 and producing an increase of over 50
points, the Department will likely challenge the merger.10 6

However, in re Echlin Manufacturing Co., a case decided after pub-
lication of the Merger Guidelines, the Federal Trade Commission found

102. Id.
103. Id. at 7-41. Note in the hypothetical that the market is highly concentrated.

This is presented for simple illustrative purposes only; a realistic merger analysis would
have many more firms, ascribing a lower market share to each. Thus, the first blush
impression that under this analysis virtually all mergers would be suspect is illusory,
and made so only by the simple four firm illustration.

104. Id. The guidelines provide this example: The merging firms have shares
of 5 percent and 10 percent; the HHI is increased by 100 from the merger. (5 X 10
X 2 = 100). It explains: "In calculating the HHI before the merger, the market
shares of the merging firms are squared individually: (a)2 + (b)2. After the merger,
the sum of those shares would be squared: (a + b)2 , which equals a2 + 2ab + b2 .
The increase in the HHI therefore is represented by 2ab." Id.

105. Id. .7-50. This challenge will be made only after taking into account various
other factors that affect the significance of market shares and concentration, like
changing market conditions, financial conditions of firms in that market, and domestic
or foreign firms' ability to enter or increase their presence in the market. Also, and
importantly, the Department recognizes that some mergers in this rating will enhance
efficiencies, thus, the parties' showing by clear and convincing evidence that a merger
will achieve significant net efficiency may ameliorate this rating and reduce the likelihood

of challenge. Id.
106. Id. The same factors outlined in supra note 105 are taken into consideration

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IND. INT'L & COMP. L. REV.

no violation even where these thresholds were exceeded by the merger. 1,7

In Echlin, the top six firms in the industry accounted for 95% of sales,
for a postmerger HHI of around 3,000 and a concentration increase
as a result of the merger of around 750 points.1 0 8 In Echlin, the com-
bination of a high HHI and high concentration increase was outweighed
by considerations of ease of entry, with the court taking a very narrow
view of barriers to entry.1°9 While Echlin has been noted as reflecting
the Federal Trade Commission's enforcement policy under the Merger
Guidelines, '10 how the ease of entry analysis will be viewed against the
HHI thresholds in different fact situations remains to be seen.

4. Cross-elasticity of Product and Demand

As noted, the ability of consumers to switch products, and the
ability of other players to enter the market in response to a price
increase, is the underlying economic construct of these analyses. The
importance of a high HHI may be totally obviated if other firms can
switch their production and distribution plans quickly enough to ac-
commodate the customers that would otherwise have been harmed by
a price increase.

The potential market power possessed by a group of producers
functioning as a cartel is summarized by the elasticity of
demand they face. Typically, the elasticity of demand facing
a potential cartel increases as members of the group are placed
outside the cartel. Thus, in specifying the smallest profitable
cartel, the Guidelines are implicitly specifying a critical value
for the elasticity of demand facing the cartel. Since economic
theory predicts that the viability of a cartel is negatively
correlated with the numbers of its members, focusing on the
smallest profitable cartel will usually be dispositive on the
likelihood of anti-competitive effects."'

107. Robert Pitofsky, New Definitions of Relevant Market and the Assault on Antitrust,
90 COLUM. L. REV. 1805, 1825 (1990) citing Re Echlin Manufacturing Co., 105 F.T.C.
410 (1985).

108. For a discussion of HHI calculations, See supra note 104 and accompanying
text.

109. Pitofsky, supra note 107. The court in its formulation listed only government
licenses and patents as barriers to entry. Id.

110. Id. at 1825.
111. David Scheffman and Pablo Spiller, Geographic Market Definition Under the

U.S. Department of Justice Merger Guidelines, 30 J.L. & ECON. 123, 126 (1987).

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U.S./E.E.C. ANTITRUST

However, no single source exists to identify potential foreign sources
of competition- either from existing firms' abilities to alter their facilities,
or from new firms' potential to enter the market. Limitations on data
available concerning foreign firms' capacity to devote new, revised, or
increased production outputs to export to the United States make these
analyses indefinite, and, perhaps unavoidably, quantitatively imprecise.
Thus, qualitative assumptions about potential foreign responses must
be made. In general, the Department "attempts to identify those foreign
firms whose output may be relevant to the analysis, by talking to the
professionals involved in the proposed merger and consulting relevant
Trade Associations." 

112

B. Merger Control in the European Economic Community

The EEC Merger Control Regulation (Regulation)' which became
effective in September, 1990, was implemented to satisfy the questions
of conflicting applications and voids of articles 85 and 86 of the Treaty
of Rome noted in part II. 1

4 Significantly, article 2 of the Regulation
provides for a one-step appraisal, whereas under article 85, two inquiries
were made. The inquiry sought first to establish prohibited activity
under 85(1), then to exempt the prohibition in circumstances where
the activity improved the production or distribution of goods or technical
progress under 85(3)."'

1. Dominant Position within the Relevant Geographic Area

The preamble to the regulation suggests that the regulation will
be applied "according to the geographical area of activity of the un-
dertakings concerned and be limited by quantitative thresholds in order
to cover those concentrations which have a Community dimen-
sion. .... "1116 Article 2(3) provides that a merger will be declared in-
compatible with the common market if:

112. Telephone Interview with Charles Stark, Chief of the Foreign Commerce
Section, Antitrust Division, United States Department of Justice (October 18, 1991).
According to Mr. Stark, the Antitrust Division is confident that persons working in
the firm under evaluation can be readily relied upon to identify actual and potential,
domestic and foreign competitors. Emphasis added.

113. MERGER GUIDELINES, supra note 15. The regulation provides much of the
basis for discussion in this section.

114. See supra note 39 for the full text of Art. 85; supra note 43 for the full text
of art. 86.

115. Treaty of Rome, art. 85, art. 86, supra note 9.
116. Council Regulation, supra note 46.

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IND. INT'L & COMP. L. REV.

the merger creates or strengthens a dominant position with the
result that effective competition would be significantly impeded in the
common market (or in a substantial part of it).

Within the geographic market boundaries established, a concen-
tration meeting the certain threshold criteria will be subject to review
by the Commission, and will be declared incompatible with the common
market if it creates or strengthens a dominant position resulting in a
significant impediment to competition. Nowhere in the Treaty or Reg-
ulation is dominance defined. As Sir Leon Brittan, Vice President of
the Commission, recently expounded regarding the amorphous phrase
"dominant position":

Let there be no doubt: the fundamental analysis to be carried
out by the Commission is whether the merger impedes com-
petition. A dominant position analysis, [pursuant to article
861 will be necessary in all cases in order to see whether the
merged company has a sufficient degree of market power to
stand in the way of competition by acting without the restraints
which competition imposes in normal circumstances. . . our
concern will be whether the merged company could raise
prices, discriminate unfairly or restrict output with impunity
or in a way which would not be possible in normal competitive
conditions. 117

2. Allocation of Jurisdiction according to Turnover

The quantitative thresholds alluded to in the preamble essentially
provide a division of jurisdiction between Member States and the
Commission of the European Communities, reserving to the latter
jurisdiction over concentrations having a Community dimension, de-
fined where: 1) the combined aggregate worldwide turnover of all the
undertakings concerned totals more than 5,000 million ECU;18' and 2)
the aggregate Community-wide turnover of each of at least two of the
undertakings involved is more than 250 million ECU, unless each of
the undertakings achieves more than two-thirds of its aggregate Com-

117. Sir Leon Brittan, Vice President of the Commission of the European
Communities, The Law and Policy of Merger Control in the EEC, Address Before
the Bar European Group, (May 3, 1990) in 15 Eur. L. Rev. 351, 352. Sir Brittan
commented, "In my view, we are at the beginning of a new legal development and
the Council did not wish to create a pure dominant position test." Id.

118. The E.C.U. was valued at ECU = $1.31 in September, 1990. Cregor,
supra note 4, at 8.

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U.S./E.E.C. ANTITRUST

munity-wide turnover within "one and the same Member State." 1 9

Concentrations in this context refer to mergers and acquisitions of joint
control. 2o

The Commission, in determining whether the proposed concen-
tration is compatible with the common market preservation goals ar-
ticulated in article 2 of the Treaty of Rome,' will consider the structure
and position of the markets concerned, including that of actual and
potential competition both within and without the Community, the
availability of product (or service) alternatives,' 2 and historical market
trends. Calculations of turnover are conducted within a geographical
reference market, defined as an area

[I]n which the undertakings concerned are involved in the
supply and demand of products or services, in which the
conditions of competition are sufficiently homogeneous and
which can be distinguished from neighboring areas because,
in particular, conditions of competition are appreciably dif-
ferent in those areas. This assessment should take account in
particular of the nature and characteristics of the products or
services concerned, of the existence of entry barriers of of
(sic) consumer preferences, of appreciable differences of the
undertakings' market shares between the area concerned and
neighboring areas or of substantial price differences. 123

Data supporting the turnover calculations are amounts derived by
the involved firms' sales and services from the preceding financial year.
The amounts are those after deduction of sales rebates and of taxes
directly related to the turnover.'2 4

119. Council Regulation, supra note 46, art. I. Pursuant to 3, however, these
ceilings will be reviewed and possibly lowered by the end of 1993.

120. Id. art. III.
121. Treaty of Rome, supra note 9.
122. Included in the availability analysis will be a consideration of the alternatives'

access to the markets, which necessarily invokes consideration of barriers to entry.
Council Regulation, supra note 46, art. II.

123. Id. art. IX, 7.
124. Id. art. V. Included in the calculations are the respective turnovers of (a)

the undertaking concerned; (b) those undertakings in which the undertaking concerned,
directly or indirectly owns more than half the assets, has the power of over half the
voting rights, has power of appointment of over half the members of the controlling
board, or has the right to manage the undertakings' affairs. However, sales and services
as provided between these undertakings are not included in the turnover calculations.

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IND. INT'L & CoMP. L. REV.

3. Practical Application of the EEC Merger Criteria

A practical assessment of the Regulation's effects is made difficult
due to its relative newness. However, the Regulation cannot abrogate
the Treaty of Rome, as it was specifically promulgated pursuant to it,
as evidenced by the recitals found at the beginning of the text. Given
that the Treaty is the Constitution of the EC and thereby the preeminent
authority,1 25 an assessment of how articles 85 and 86 have been con-
structed by the courts in the past is helpful to a projection of how they
will be handled under the new Regulation.

The Regulation's relationship to articles 85 and 86 of the Treaty,
and its effect on national authorities' sovereignty to handle internal
mergers is a developing area. The three-tiered threshold recognizes
implicitly that some mergers, the effects of which are confined to one
member state, are better left to that state to handle; concomitantly,
mergers affecting several member states are more suitably dealt with
by a supranational institution. 26 Recall that article 85 prohibits any
agreement among undertakings that significantly restricts competition
within the EEC, but provides an exception, while article 86 prohibits
the abuse of a dominant position but provides for no exemptions.127

Indeed, it has been held 28 that an "infringement of Article 85 can
precede and thereby facilitate infringement of Article 86. 129

In addition, the Regulation expressly provides that a previously
passed regulation 3 ° regarding concentrations will not apply to concen-
trations as defined in article 3 of the new Regulation, echoing the 1986
Ministere Public v. Asjes decision.' 3' Ministere Public held that national
courts had no authority to declare void an agreement or concerted
practice under article 85, paragraph I of the Treaty, as long as article
87's requirement of implementing rules for article 85 had not been
adopted. 132 The upshot of this provision is to make third party challenges

125. Dassesse, supra note 37, at 380.
126. Brittan, supra note 117.
127. See supra notes 39 and 43, and accompanying text.
128. Italian Flat Glass, 4 C.M.L.R. 535 (1990). (Censuring parties' formation

of a cartel and preventing customers from bargaining on prices.)
129. RAYBOULD, supra note 8, at 190.
130. Dassesse, supra note 37, at 380, citing Council Regulation No. 17/62, O.J.

Eng. Spec. Ed. 1959-62, at 87.
131. Id. at 381, citing Ministere Public v. Asjes and Others (Nouvelles Frontieres)

E. Comm. Ct. J. Rep. 1425 (1986).
132. Id.

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U.S./E.E.C. ANTITRUST

pursuant to article 85, of concentrations authorized by the national
control authorities, impossible.' 3

However, article 86, which requires no implementing authority, 134

may still be applicable even though parties are exempt under article
85, as evidenced by a recent appeal of a Commission decision in Tetra
Pak.135 In that case, appellants' proposed acquisition of an exclusive
license to filling equipment for liquid food products, through purchase
of a company holding the license, was held to constitute an infringement
of article 86, even though an exemption pursuant to article 85(3) had
been granted. Although Tetra Pak had abandoned all claims to the
exclusivity of the license after the Commission objected, the Commission
issued the decision afterward to clarify its position. On appeal, appellants
urged the Court of First Instance to hold that article 86 could not be
applied to conduct which had been exempted pursuant to article 85.
Appellant relied in their argument on an earlier decision in Europem-
ballage Corporation and Continental Can, 136 which held that articles 85 and
86 could not be interpreted in a contradicting way, since they both
serve to achieve the same goal. The Continental Can decision reasoned:

Articles 85 and 86 seek to achieve the same aim on different
levels, viz. the maintenance of effective competition within
the Common Market. The restraint of competition which is
prohibited if it is the result of behavior falling under Article
85, cannot become permissible by the fact that such behavior
succeeds under the influence of a dominant undertaking and
results in the merger of the undertakings concerned... In
any case Articles 85 and 86 cannot be interpreted in such a
way that they contradict each other, because they serve to
achieve the same aim.137

In addition, the appellants argued that while the court in Hoffimann-
LaRoche and Company v. E. C. Commission3 8 held that the operation of
article 86 was not precluded if agreements fell within the ambit of

133. Dassesse, supra note 37, at 381.
134. Id. at 382.
135. Id. citing Case T-51/89, Tetra Pak Rausing SA v. E.C. Commission, 4

C.M.L.R. 334 (1990) [hereinafter Tetra Pak].
136. Tetra Pak at 345 citing Case 6/72, Europemballage Corp. and Continental

Can Co. v. E.C. Comm'n, E.C.R. 215, C.M.L.R. 199, 25 (1973).
137. Id.
138. Tetra Pak at 342 citing Case 85/76, Hoffman-La Roche and Co. Ag. v.

E.C. Comm'n, 13 E.C.R. 461, 3 C.M.L.R. 211 (1979).

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IND. INT'L & COMP. L. REv.

article 85, the Hoffman court concomitantly suggested that the conduct
might be saved by the exemption proviso of article 85(3). 139

The Tetra Pak court was not persuaded, and invoked Article 3(f)
of the Treaty of Rome, holding that the common aim of both provisions-
the institution of a system to ensure undistorted competition in the
Common Market must prevail. 14° Accordingly, the court held that the
two provisions had to be interpreted pursuant to that objective, and
that it would be sufficient for that purpose for only one provision to
be applied.

Extraterritorial application of the regulation is textually implicit as
well in the aggregate turnover criteria. Recall that concentrations will
have "community dimensions," thus engaging the jurisdiction of the
Commission, where the aggregate worldwide turnover amount is more
than 5,000 million ECU and the Community-wide turnover is more
than 250 million ECU.'4 ' This language does not limit the application
to mergers taking effect within the EEC territory; rather, EEC juris-
diction will be engaged if the net sales (turnover) are sufficiently high
on a global and community scale. "By this test, the Community
apparently claims jurisdiction over operations which have significant
effects in the Community: any concentration between two undertakings
situated outside the Community which meet the ECU five billion test
and which have ECU 250 million turnover in the Community will...
require notification. '142

Indeed, in 1988 in Alstrom v. Commission (Wood Pulp), 14 it was
made clear that concentrations located entirely outside the territory of
the EEC can have an EEC dimension and thus invoke the jurisdiction
of the Community. 144 While it is clear that the Regulation is concerned
only with effective competition within the Community, 14 it is equally
clear that competition may be affected by activities conducted entirely

139. Id.
140. Tetra Pak at 445.
141. See supra note 113 and accompanying text for relative U.S. valuation.
142. Christopher Jones, The Scope of Application of the Merger Regulation, INTER-

NATIONAL MERGERS AND JOINT VENTURES, FORDHAM CORP. L. INST. 385, 387. (B.
Hawk, ed., 1990).

143. Alstrom v. Commission, E. Comm. Ct. J. Rep. 5193, 1985 O.J. (L 85/
1).

144. Id.
145. Bernd Langeheine, Substantive Review Under the EEC Merger Regulation, IN-

TERNATIONAL MERGERS AND JOINT VENTURES, FORDHAM CORP. L. INST., 481, 493. (B.
Hawk, ed., 1990).

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U.S./E.E.C. ANTITRUST

outside of the EEC, where the threshold criteria and abuse of dominant
position test are met.

C. Comparative Analysis

The willingness of courts both in the United States and the EEC

to assert jurisdiction to activity occurring outside the boundaries of
their domestic territories makes imperative an understanding of how
the substantive review criteria employed in each of the regulations
concur and diverge.

The general tenor of both the EEC Merger Regulation (regulation)
and the U.S. Merger Guidelines (guidelines) are the same: consumers
are best protected when producers vying for their dollars have to compete

for them. Both instruments attempt to gauge the merger's future effect
on the domestic market by evaluating underlying, and largely historic,
economic indicators. Thus, in both approaches the accuracy of pred-
ictions of future market reactions depends on the accuracy of the data
built into the economic formulae as well as the validity of the models'
assumption: that past activity is an accurate indicator of future behavior.
Unfortunately for this discussion, nothing in the literature suggests that
merger control decisions (whether to challenge or leave intact) are
routinely inserted back into the formulae, after sufficient passage of

time, to check the accuracy of the assumptions or the model supporting
the decision. Nonetheless, underlying premises of the two models are,
at least in concept, in accord.

Likewise, the data supporting the analyses are similar. The Merger
Guidelines instruct that specific sales, import-export trends, market
trends, and historical pricing trends in the respective industry will be
evaluated to infer likely competitive effects of the merger. The Merger
Regulations also specify that the sales volumes, pricing trends, import-
export figures, and historical pricing indices will be taken into account
in assessing the impact of the merger. Both attempt to take into account
the ability of firms not then competing in the relevant market to enter
the market, either through adjustments to then extant production fa-
cilities or through the creation of new production facilities.

The numeric thresholds employed in each regulation are, however,
different both in the mathematical relationships reflected and in the
purpose behind the exercise. Regarding the relationships reflected, un-
der the U.S. guidelines, the Hershman-Hinderfahl Index reflects total
market concentration, taking into account all those products which are
similar enough to function as product substitutes in the event of a price
increase, and limiting the inquiry to the geographic region deemed
most reflective of the true market, be it a portion of a city or the

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IND. INT'L & CoMP. L. REV.

entire world. The index is essentially a test of market concentration.
Both the existing concentration levels and the increase in the concen-
tration levels resulting from the merger are employed in the analysis,
which is supported by the proposition that the more highly concentrated
the market already is, and the more the merger increases that con-
centration level, the more readily a hypothetical firm could manipulate
the market and raise prices.

In contrast, the numerical threshold employed by the EEC Merger
Regulations takes no account of shares of market presented by the
parties to the merger. Rather, the turnover criteria provided in the
regulation take an overall measurement of sales or services provided
in the preceding year by the firms in question, again after taking steps
to insure that those companies competing in the market are accounted
for in the analysis. Here the assumption is largely parallel to the U.S.
counterpart: the larger the firms' shares in the market under evaluation,
the more ability those firms will have to exercise their market power
and raise prices at the expense of the consumer. However, the regulation
is based on an outright measurement of the market activity without
regard to concentration levels. A finding that the firms involved pro-
duced the requisite turnover the preceding year will invoke the juris-
diction of the Commission, regardless of the degree to which that market
is concentrated. So, the measurements employed by the two jurisdictions
vary in this way: the U.S. index reflects a measurement of market
concentration, while the EEC thresholds reflect a quantitative meas-
urement of market activity.

The purposes for which the respective threshold levels are used
are fundamentally different as well. In the United States, the HHI is
used primarily as an indicator, after weighing other factors regarding
whether the merger is likely substantially to lessen competition, of the
probability that the merger will be challenged. In contrast, the turnover
thresholds provided in the EEC's guidelines were conceived as a way
to allocate merger regulation jurisdiction between the authorities of the
member states and the EEC Commission. Simply stated, a low turnover
or a community-wide turnover which is confined primarily to the
boundaries of a single member state will be regulated by that member
state.

Perhaps the most substantive comparison is that of the concept
used to express the likelihood that the merger will have undesirable
effects on competition. In the United States, the HHI and all the other
considerations discussed are tools of inquiry to answer this question:
Will this merger threaten competition? Inherent in that question is the
subquestion, "could a 'monopolist' profitably impose a small but sig-

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U.S./E.E.C. ANTITRUST

nificant and nontransitory price increase?" If the answer is yes and
the requisite HHI level is met, the merger is likely to be challenged.
In the EEC, the turnover thresholds and the other considerations taken
into account in the merger analysis are employed to answer: Will this
merger impede competition? The subquestion here is whether the merg-
ing firms hold a sufficiently dominant position in the market that they
could engage in restrictive behavior. Fundamental to both inquiries is
an assessment of whether enough market power is present to enable
the firm to exploit consumers; the semantic differences notwithstanding,
the concepts underlying the substantive goals are the same.

D. Conclusion

Because international mergers are common and likely to become
more so, an understanding of where the two approaches agree and
diverge is important not only to business operating in the international
sphere but to negotiators embarking on a treaty that could dramatically
change the way international mergers are conducted. While application
of both regulations involves complexities and a Herculean assessment
of what could happen given a hypothetical merger, the United States'
guidelines are perhaps more sophisticated. This may be attributed to
the relative maturity of the U.S. antitrust system, as well as to a
function of the EEC Regulation that is entirely missing from the U.S.
Guidelines: a division of jurisdiction over mergers. The three-tiered
turnover threshold of the EEC's regulation represents not a likelihood
of challenge of the merger, as provided in the U.S. HHI, but an
indication of which authority-that of the member state or that of the
European Commission-will preside over any challenge to the merger.

Even though there are quantitative differences between the two
approaches, the spirit is the same: to apprehend those mergers which,
due to significant market power presented by the merger, may be able
to exert enough influence on the market to impede free competition.
Given that any bilateral agreement between the EEC and the United
States is not likely to succeed if it attempts to unravel what is on both
sides the culmination of years of internal debate, it behooves convention
negotiators to come to the table well versed in the nuances reflected
in merger policies of both sides.

IV. DISCOVERY PROBLEMS IN INTERNATIONAL ANTITRUST

.ENFORCEMENT

As alluded to in Part III, collecting specific information regarding
internal production capabilities and marketing strategies of companies

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IND. INT'L & COMP. L. REV.

is preliminary homework to an investigation of a proposed merger
involving those companies or their competitors. However, in an inter-
national context, companies located abroad are sometimes reluctant to
comply with discovery information requests of foreign origin. This
section will highlight some of the problems existing in international
merger control with respect to obtaining information necessary to con-
duct a merger analysis, and will examine the need for an agreement
in this area between the United States and the European Community.

Foreign discovery conducted by the United States pursuant to
antitrust statutes, whether through the government or private parties,
has caused conflicts for some time.1 1

6 Specifically, several foreign gov-
ernments have invoked commercial secrecy laws or adopted blocking
statutes in response to American antitrust discovery. These statutes bar
foreign discovery by either controlling or prohibiting companies located
within their territory from complying with information requests of
foreign enforcement authorities or courts. In 1980 France enacted a
statute imposing criminal liability, subject to an exception provided
under international treaties, on any foreign national seeking discovery
in connection with foreign judicial or administrative proceedings; 147 the
United Kingdom enacted the Protection of Trading Interest Act in
1980;14 and Switzerland specifically forbids the transmission of or
attempt to obtain a manufacturing or business secret in order to make
it available to a foreign private or official body, to name a few such
statutes. 149

Because some foreign governments view subpoenas as an intrusion
and, worse, an infringement of their sovereignty, the Bureau of Com-
petition of the Federal Trade Commission strives to seek only that
information which cannot be obtained domestically. Voluntary coop-
eration is the preferred avenue for obtaining information and evidence
located abroad. However, "[the Bureau's] experience has not been
trouble-free. Foreign discovery has caused delays and occasionally com-
plicated investigations and adjudicative procedures. . . subpeonas for
testimony of foreign nationals or for documents located abroad continue,
on occasion, to generate strong objections, and have resulted in motions
to quash." 150 Those motions to quash contest the Commission's exercise

146. Hearings, supra note 1, at 8 (statement of Kevin J. Arquit, Director, Bureau
of Competition, Federal Trade Commission).

147. Id. at 14, n. 6, 7, 8.
148. Id. at 15, n. 7.
149. See fn. 148, n.8.
150. Id.

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U.S./E.E.C. ANTITRUST

of personal jurisdiction and its method of service of process. While one
tool at the Commission's disposal is to issue subpeonas to the foreign
corporation and serve process on the firm's American subsidiary, these

avenues are time-consuming and are said to highlight the Commission's

difficulty in effecting extraterritorial service directly on foreign firms

and foreign nationals.15"' In sum, the appropriate procedure for obtaining

foreign discovery in countries with commercial secrecy laws is not yet

certain.

A. Organization for Economic Cooperation and Development

The U.S. antitrust enforcement agencies have entered into agree-

ments with foreign authorities in an effort to ameliorate some of these

discovery problems. These voluntary bilateral and multilateral agree-

ments, whose terms cover discovery procedures, provide for prior no-

tification, consultation, and cooperation in antitrust enforcement actions

which could affect foreign interests. No country which is a party to

such an agreement has invoked a blocking statute since entering into

the agreement. 15 The multilateral agreements have been in existence

for some time, having first been issued in 1967, and revised in 1973,
and 1979."'1 The agreements are currently under the Organization for

Economic Cooperation and Development (OECD), adopted by the

Council of the OECD on May 21, 1986.114 The current OECD agree-

ment specifies that competition agencies notify foreign party states, if
at all possible, in advance of taking any action which could affect
interests of those states. The latest version also includes an appendix

containing guiding principles on restrictive business practices which
affect international trade, providing for notifications, exchanges of in-

formation, and consultation recommendations.' 55 Also included are

guidelines for conciliation between states who are unable to agree on

a particular matter, and the provision of the use of the Committee on

Competition Law and Policy. 156

151. Id. at 18.
152. Id. at 16.

153. Edward F. Glynn, Jr., International Agreements to Allocate Jurisdiction Over

Mergers, INTERNATIONAL MERGERS AND JOINT VENTURES, FORDHAM CORP. L. INST 35,

38 (B. Hawk, ed., 1990).
154. Id.
155. Id. at 38.

156. Id. To date, there is no public record of any members having taken advantage

of the office of the Committee to settle disputes. Id. at 39.

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IND. INT'L & CoMP. L. REV.

The OECD agreement, multilateral in nature, is different from
existing bilateral agreements. Currently, the United States is party to
only one bilateral agreement with a European Community state-
Germany' 5 7-while both the United States and the EEC are parties to
the 1986 OECD Recommendation. What is unclear, however, is how
such bilateral agreements of the future will be affected by the Treaty
of Rome and the Merger Regulation discussed herein. Given the thres-
holds providing exclusive jurisdiction of some mergers with the Eur-
opean Commission rather than the enforcement agencies of member
states, it is likely that notification requirements under existing bilateral
agreements will cede to a future agreement between the United States
and the EEC. This is necessarily so under the Merger Regulation,
because if member states' jurisdiction to review mergers is vested with
the Commission after a certain monetary threshold is met, it follows
that procedures pursuant to the merger review will vest with the Com-
mission as well. The extent to which the Commission will proceed to
comply with information agreements entered into by individual member
states and nonmember states is at present unknown.

In addition, the existing agreements provide for consultation and
notification under a "quasi-adversarial" scheme. 158 When one party
who is in charge of investigating or prosecuting antitrust breaches
submits a notification, it will typically be submitted not to that country's
antitrust enforcement agency but to its commercial or foreign affairs
ministry. That is because the "protective interests" in the nation's
own commercial, economic or legal interests generally fall under a
different organ than that country's antitrust enforcement agency. For
this reason, the EEC itself rarely if ever receives the notification from
an investigating OECD member. Rather, because these protective in-
terests rest primarily with the national member states of the EEC, the
commercial ministry of the country where the involved company is
located receives the notice. "There is, in short, no 'protective interest,'
at least under existing rules, that would trigger an obligation to notify
by the United States. The notification of proposed investigation or
enforcement action goes not to the Community but to the national
authority." "9

157. Id. at 37, citing Bilateral Agreement with the Federal Republic of Germany,
reprinted in 4 Trade Reg. Rep. (CCH) 13,501.

158. Id. at 42.
159. Id. at 45.

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B. Hart-Scott-Rodino

As mentioned in Part II, the Hart-Scott-Rodino (HSR) Act 160

provides assistance in merger and acquisition discovery procedures.
Pursuant to HSR, parties to mergers amounting to certain dollar levels
are required to give notice in advance to the Federal Trade Commission,
and to wait a specified period before proceeding with the merger. Given
foreign firms' desire to conduct business in the United States, their
cooperation with this procedure has been good. As noted before a
Senate hearing on the matter, "[i]n general, foreign governments per-
ceive the HSR filing requirements as a legitimate prerequisite to any
foreign firms wishing to make an acquisition affecting the U.S. market.
Because parties cannot complete their deal without submission of the
appropriate material, they have strong incentives to comply with re-
quests for information."'' However, difficulties in obtaining all the
necessary information pursuant to the merger analysis persist due to
foreign discovery problems encountered when seeking to complete doc-
uments supplied domestically with sources located abroad. 162

A larger problem in HSR discovery, alluded to in Part III, is that
of obtaining information from third parties to the merger. Recall the
discussion of market and production elasticity, and the importance of
projecting not only how consumers would respond to a price increase,
but how other firms would respond. Some firms which are totally out
of the computations of market share and competition might find it
profitable to either alter or switch production facilities entirely in order
to enter the market following such a price increase. While third parties
are routinely surveyed for information about market shares and ease
of entry, 163 these firms usually have an interest adverse to the acquisition,
and so have no incentive to help the merger be accomplished quickly.
As explained, "[f]oreign competitors may view as overly intrusive
discovery requests for sales and production information, including future
plans; such data is often needed in merger investigations to define the
relevant market in which to predict competitive effects.' 1 64

160. Hart-Scott-Rodino Act of 1975, 15 U.S.C. 5 18(a), Pub. L. No. 101-73,
103 Stat. 529 (1989).

161. Arquit, supra note 146, at 19.
162. Id. at 20. "However, as with the substantive response, it is difficult to

prove a negative: that relevant documents were omitted from the submission." Id. n.

13.
163. Id. at 21.
164. Id. In these cases, the Commission resorts to subpoena enforcement pro-

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IND. INT'L & COMP. L. REV.

As a final note, it may help in the analysis to understand some
of the practical requirements involved in complying with merger en-
forcement regulations in both the United States and the EEC. First,
both jurisdictions require that certain plans to merge be made known
to the reviewing authority before the merger takes place. In the EEC,
a merger with a Community dimension must be notified not more
than one week after the conclusion of the agreement, the announcement
of the public bid, or the acquisition of a controlling interest, whichever
is earlier. 165 In the United States, a thirty-day waiting period exists
before the acquisition can take place. The United States provides for
time extensions; the EEC does not. Both entities require that a standard
form be used in the pre-notification, and the volume of information
required on the forms makes it prudent to start collecting the necessary
data well in advance of the deadline. 166

With respect to confidentiality, in the United States, pre-merger
notification filings may not be made public, unless relevant to admin-
istrative or judicial actions. Disclosure can also be made to Congress. 67

In the EEC, professional secrecy rules dictate that information received
can only be used for purposes related to the request, investigation, or
hearing. The Commission has to provide copies of all notifications to
authorities of the member states, and must publish the fact of notification
(where the merger falls under the scope of the Regulation). Included
in that publication are the names of .the parties, nature of the merger,
and the economic sector involved. However, the publication must take
into account the legitimate professional secrecy interests of the under-
takings involved.' 68

C. Information Agreements in the Competition Area: Possible Approaches

An understanding of some of the problems encountered in antitrust
foreign discovery efforts, and an overview of what pre-merger filing
requirements exist in the United States and EEC, permits now a look

ceedings in federal district court, sometimes taking months before the order is issued.
Id.

165. J. William Rowly, International Mergers: Antitrust Notification Requirements, IN-

TERNATIONAL MERGERS AND JOINT VENTURES, FORDHAM CORP. L. INST. 221, 236 (B.
Hawk, ed., 1990), previewing Rowly, INTERNATIONAL MERGERS-ANTITRUST GUIDE (Sweet
& Maxwell, eds.).

166. Id. at 236, 265.
167. Id. at 268 citing 15 U.S.C. § 18(a)(h).
168. Id. at 240.

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U.S./E.E.C. ANTITRUST

at some of the options which could afford greater cooperation in this
area between the United States and the EEC.

Perhaps at the modest end of the scale, competition authorities
involved might explore how to improve their communication among
themselves. 169 This may help alleviate the anomalous reality mentioned
above where the dialogue exists between the competition authority of
one state and the commerce ministry of the other under the "protective
interest" analysis. However, the Justice Department has noted,

[t]he amount of information that can be shared among au-
thorities is severely limited by confidentiality provisions in our
respective national laws. Accordingly, if much additional in-
formation is to be shared by the various merger control au-
thorities, the types of information sought to be exchanged
would have to be identified with some specificity, and national
laws would have to be amended. 7 '

An assessment of the various confidentiality laws extant in members
of the EEC, and the relationship of those laws to the Merger Regulation
and ultimately to the Treaty of Rome, would require analysis of sensitive
member state sovereignty issues; while worthy of exploration, this is
clearly beyond the scope of this discussion.

Another option presented is to rely more heavily on obtaining
foreign information from parties other than the competition authorities,
while at the same time seeking an agreement among competition au-
thorities to help their foreign counterparts by producing locally held
information."' Again, however, this appears to beg the question, for
ultimately the information comes not from foreign antitrust authorities
but from parties outside the merger agreement. This is obviously so
in terms of relying on third party information to evaluate elasticities.

Proposals for information sharing agreements pursuant to com-
petition regulation have not been one-sided. Preeminent in this dis-
cussion must be the recent United States-EEC antitrust cooperation
proposal by European Commission Vice President Sir Leon Brittan.
In a speech at Cambridge University, Sir Brittan said:

I personally favour, to start with, a treaty between the Eur-
opean Community and the U.S.A. It would provide for con-

169. Charles Stark, International Mergers and Joint Ventures: A View from the Justice
Department, INTERNATIONAL MERGERS AND JOINT VENTURES, FORDHAM CORP. L. INST.,

21, 31 (B. Hawk, ed., 1990).
170. Id.
171. Id.

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IND. INT'L & COMp. L. REV.

sultations, exchanges of non-confidential information, mutual
assistance, and best endeavours to cooperate in enforcement
where policies coincide and to resolve disputes where they do
not. Disagreements should be discussed frankly and, wherever
possible, only one party should exercise jurisdiction over the
same set of facts. 172

While this language imparts greater purpose to the agreement than the
exchange of notifications and consultations under OECD and the bi-
lateral agreements discussed above, it is clear that a prominent feature
of any US/EEC bilateral agreement in the area of antitrust must include
information sharing provisions.

It could be that with the passage of time, parties will perceive
their notification and consultation needs met through existing channels
of the OECD agreement. However, as already discussed, information
from third parties remains a critical issue, as they, not the parties to
the transaction, have "the most reliable evidence on entry barriers,
the ability of customers to substitute, and ability of foreign parties to
enter the market in response to a price increase and other matters
which drive the elasticity analysis."' Elasticity concerns are not con-
fined to analyses under the U.S. Merger Guidelines; as noted in part
I, article 2 of the EEC's Merger Regulation requires the European
Commission to factor in "the structure of all the markets concerned
and the actual or potential competition from undertakings located either
within or (outside of) the Community."'17 4 Specifically, the Commission
is to consider the market positions of the firms concerned, the alter-
natives available to suppliers and users, their access to supplies or
markets, and any barriers to entry in assessing whether the proposed
merger is compatible with the Common Market. 17 5

One approach recommended to establish a ready supply of third
party information to foreign discovery requests is that of an international
convention providing for mutual provision of product and market in-
formation sought by foreign authorities. 7 6 Again, however, given the
passage of time this approach may duplicate provisions under the

172. GLYNN, supra note 153, at 44, citing Jurisdictional Issues in EEC Competition
Law, Address by the Right Honorable Sir Leon Brittan, Hersch Lauterpacht Memorial
Lecture, Cambridge University (February 8, 1990).

173. Id. citing Glynn & Tahyar, Obtaining Data on Elasticities and Foreign Competitors
under Hart-Scott-Rodino, 1988 FORDHAM CORP. L. INST. 3-1 (B. Hawk, ed., 1989).

174. COUNCIL REGULATION, art. II, supra note 46.
175. Id.
176. GLYNN, supra note 153, at 48.

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U.S./E.E.C. ANTITRUST

OECD. It may be possible to simply amend the OECD to bring third

parties to mergers under the proposal, and to provide that data from

those firms routinely will be made available to requests from other
member states.

Ancillary to these proposals is a review of the procedures under
which results of antitrust investigations are reported to the public. The

factors supporting a competition authority's decision in individual merger

cases, thumbs up or down, should be made available to to help guide
involved parties' future conduct. In this arena, there is room for

improvement within the United States, as explained thusly in a panel
on international mergers and joint ventures:

If (the Department of Justice or the Federal Trade Commis-
sion) elects not to challenge a transaction, there will be no
complaint and no published opinion, and the basis on which
(they) elected to bring a challenge will typically be known
only to (them), and to some extent, to the lawyers and econ-
omists for the merging parties who participated in persuading
(them) not to bring the action. On the other hand, if the
(Department of Justice or the Federal Trade Commission

elects) to challenge a transaction, in most instances the parties
will call off the transaction.'

This shroud of secrecy is a side effect of the unique nature of merger
control in the United States, as explained in Part II. Because of the
court's limited role in merger reviews, the reviews generate relatively
few judicial opinions. While there may be indirect ways of learning
what factors drove the decisions to challenge or leave intact the proposed
mergers, "[In the final analysis, while the main instrument of merger
policy in the United States is the agency's decision whether or not to
prosecute, there is no regular mechanism for reporting the analysis
that underlies such a decision.' 1 8 Even though none of the proposals
reviewed calls for the uniform sharing of factors that underlie enforce-
ment decisions, it is a safe bet that parties to the agreement who provide
information will want to witness the use of that information when it
produces a result adverse to the providing parties' interests.

Whether any of these proposals or conventions could serve as a

catalyst for an international commerce ministry is unknown. Such a

177. George Hay, Panel Discussion: International Mergers and Joint Ventures, IN-

TERNATIONAL MERGERS AND JOINT VENTURES, FORDHAM CORP. L. INST., 95, 97 (B.
Hawk, ed., 1990).

178. Id.

1992]



IND. INT'L & CoMP. L. REV.

ministry could be responsible for documenting production facilities of
all firms located in party states, and could serve as a central repository
for import-export data. In addition, depending on the sophistication
and level of automation of such a ministry, a data base built on
international product characteristics and consumer profiles could be
maintained. If market prices and trends are built into the data base,
it should be possible to quantify product elasticity to project international
market responses in a more standardized fashion. Indeed, the devel-
opment of such a data base would lend itself greatly to an after-the-
fact analysis of the effects of merger decisions, an exercise not routinely
performed now, as mentioned earlier. Given limitations on domestic
data sources, however, it may be difficult to conceive of how such a
model could be built in an international setting, accommodating dif-
fering languages, different units of measurement, differing currencies,
and qualitatively different consumer cultures. Nonetheless, it is con-
vincing that since market and product data are at the core of merger
analyses, the trend in the future will be away from ad-hoc assessments
of elasticity, which take into account whatever information happens to
be available, and toward uniform, international assessments driven by
sophisticated and well maintained data bases.

V. CONCLUSION

It is clear that both the United States and the European Community
recognize that anticompetitive activity abroad can profoundly affect
domestic economies. As a result, there is authority on both sides to
apply domestic antitrust regulations to foreign activity. Under inter-
national law, countries exercise jurisdiction only when sufficient effects
within the acting state are felt from the activity under review. As a
principle of comity, as well, states will respect the sovereignty of other
nations and refrain from exercising jurisdiction under certain circum-
stances. As shown, however, neither of these principles is adequate for
addressing which state should exercise antitrust enforcement where
grounds for asserting jurisdiction are equally divided.

In analyses conducted under both the EEC Merger Regulation
and the U.S. Merger Guidelines, it is clear that markets and suppliers
of firms are becoming increasingly international in nature. Thus, the
likelihood that merger reviews conducted internally will focus on factors
located outside domestic boundaries is increasing. It is clear that before
jurisdiction can be allocated, sufficient discovery must be conducted to
see where the predominant acts and effects take place. Likewise, sub-
stantive review relies entirely on the accuracy of the data utilized in
computing market share, geographic markets, product profiles, and

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U.S./E.E.C. ANTITRUST

market elasticity. Especially in the latter category, it is critical that data
from foreign firms, often third parties to the merger under review, be
obtained. The difficulty experienced in procuring these data from foreign
sources underscores the necessity for a bilateral agreement to cooperate,
(or at minimum not obstruct through blocking statutes) in antitrust
investigations. It is hoped that, through the exploration of the com-
plexities involved in international regulatory schemes, skepticism about
the possibilities of an agreement have been preempted by an under-
standing of the need to agree, if on nothing else than to agree, before
1993 arrives.

Sabrina Haake*

* J.D. Candidate, 1993, Indiana University School of Law-Indianapolis.

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