IS THERE TOO MUCH TRAFFIC ON THE COMPETITION LAW ENFORCEMENT AUTOSTRADA: A ROLE FOR NEGATIVE COMITY?
Terry Calvani*
&
Justin Stewart-Teitelbaum**
In 1990, when one of the authors departed from the United States Federal Trade Commission (“USFTC”), American competition enforcement agencies investigated matters that were almost entirely domestic. The same was true of foreign competition enforcement agencies: the Americans investigated American matters; the Germans investigated German matters. There were few, if any, multijurisdictional pre-merger notification filings; there were no international cartel investigations. Moreover, there was little professional contact among enforcement officials except for the annual Fordham Conference, periodic United Nations Conference on Trade and Development (“UNCTAD”) competition meetings, and the Paris meetings of the Organization for Economic Cooperation and Development (“OECD”) (for those few countries that were members). While a good number of countries had competition laws and agencies to enforce them, antitrust was largely an American enterprise. The antitrust enforcement autostrada was a relatively open road with room to cruise.
* Of Counsel, Freshfields Bruckhaus Deringer US LLP; Lecturer in Law, Columbia University School of Law; formerly Commissioner of the United States Federal Trade Commission and Member (of the Board) of the Irish Competition Authority (holding criminal cartel portfolio). ** Senior Associate, Freshfields Bruckhaus Deringer US LLP. The authors would like to thank Sarah Melanson for her devoted assistance on this paper. The authors would also like to sincerely thank our colleagues at the Federal Trade Commission (Don Clark, Randy Tritell, and Russ Damtoft); the Australian Competition Commission (Marcus Bezzi, Nicholas Heys, Shannan Harrigan, Rami Greiss, and Suzie Copley); the Canada Competition Bureau (Dan Wilcock, Sultana Bennett, Dave Harding, David Wolinsky, and Leila Wright); and Margaux Dastugue and Charles Ramsey of Freshfields Bruckhaus Deringer US LLP for their time and input into this paper.
Illustration of Jurisdictions with Competition Laws in 1990
In 2013, when the second author departed from the USFTC, many more countries had antitrust laws and agencies to enforce them. It was no longer an American game. The work had changed too. A very large number of mergers and acquisitions involved review by multiple competition law enforcement agencies and most significant cartel investigations were transnational. The world of competition law had changed and done so dramatically.
Illustration of Jurisdictions with Competition Laws in 2013
Today it is not unusual to have a single merger reviewed by some 20 or more agencies. Similarly, the same cartel is often investigated by a large number of competition authorities. Using the analogy of the article’s title, today the competition autostrada is crowded with enforcement vehicles. With that increase in traffic, the opportunities for accidents, pile-ups, and other mishaps has increased. While the traffic is not yet to the point of crisis, is it now time for the international enforcement community to re-consider voluntary norms to assist enforcement agencies in deciding whether it is appropriate to investigate a particular matter? Are there cases where jurisdiction ought not to be exercised? Cases where another agency is best placed to investigate and where the interests of the other jurisdiction are nonetheless protected? We seek to explore these and related issues here.
Consider the following cartel matter:
The United States Department of Justice (“USDOJ”) is investigating a cartel where the undertaking made sales of the cartelized product from its plants in the United Kingdom to both Brazil and Libya. Assessing the volume of commerce for purposes of determining the penalty, the USDOJ includes sales made by the British company to its customers in Brazil and Libya. When questioned about the interest of the United States in those foreign sales, the USDOJ attorneys respond that invoices for those sales were mailed to an address inside the United States,
and that is sufficient to vest the United States with jurisdiction. Indeed, they assert that the United States could properly exercise jurisdiction even if the use of a United States financial intermediary to make payment was the only nexus to the United States.1
Assuming arguendo that the United States could properly assert jurisdiction, the question we seek to address is whether it ought to do so. This question becomes ever more important as additional enforcement agencies investigate the very same matters on the very same autostrada.
Background
These issues are not new. Although competition law convergence and agency cooperation were first mentioned in the negotiation of the restrictive trade practices provisions of the ill- fated Havana Charter in 1948,2 real interest surfaced when the late Lord Leon Brittan, then Commissioner of the European Union for competition, called for an effort to secure more convergence and cooperation at the Cartel Conference Reception hosted by the Bundeskartellamt at Sans Souci Palace in Berlin in 1990.3 Although the United States was initially unenthusiastic,4 the Attorney General’s International Competition Policy Advisory
1 The matter is not hypothetical. The same issues arise in a merger context as the following non-hypothetical demonstrates. Country X asserts jurisdiction to review the sale of a radio station located in Nevada – by its Boston-based newspaper parent company – in a transaction with the parent company of a Chicago newspaper, despite the fact that the radio station in question broadcasts only in the U.S. state of Nevada. Again assuming jurisdiction predicated on the sale of Chicago- and Boston-owned newspapers in Country X (rather than radio services), should the competition authority of Country X exercise jurisdiction in this case? 2 Final Act of the UN Conference on Trade & Employment, Havana Charter for an International Trade Organization (1948). See The Havana Charter for an International Trade Organization: An Informal Summary, World Trade Org. (Jan. 1, 1953), https://docs.wto.org/gattdocs/q/.%5CGG%5CSEC%5C53-41.PDF. 3 See generally T. Calvani, Devolution & Convergence, 2003 E.C.L.R. 415. 4 See Address of Assistant Attorney General Joel Klein, Cartel Conference, Berlin, May 9, 1999. The United States consistently opposed recommendations for greater convergence, fearing that it risked producing a “race to the bottom” for competition law enforcement regimes. See also Address of Assistant Attorney General Joel Klein, “A Reality Check on Antitrust Rules in the World Trade Organization, and A Practical Way Forward on International Antitrust,” OECD Conf. on Trade & Competition, Paris, June 30, 1999. Others within the U.S. enforcement community echoed these sentiments. See, e.g., Address of USFTC Commissioner Orson Swindle before the 8th World Business Dialogue, “Between Competition & Cooperation – Changing Business- to-Business Relations,” Cologne, April 4, 2001.
Committee took up the issue and made a similar recommendation.5 The International Competition Network (“ICN”) was born on October 25, 2001.6 It has been spectacularly successful.7
With the growth of the international enforcement community, serious discussion of negative comity8 soon followed. The United States Antitrust Modernization Commission (“AMC”) took up the issue in its 2007 Report.9 Early in its deliberations, a group of four distinguished competition lawyers, James Atwood, Calvin Goldman, Ilene Knable Gotts, and Robert Pitofsky,10
5 International Competition Policy Advisory Committee, Final Report, Ch. 6 (2000) (“...the Advisory Committee recommends that the United States explore the scope for collaborations among interested governments and international organizations to create a new venue where government officials, as well as private firms, nongovernmental organizations (NGOs), and others can consult on matters of competition law and policy. The Advisory Committee calls this the ‘Global Competition Initiative.’”). 6 The ICN provides opportunities for national and multinational antitrust authorities to cooperate through working groups and conferences, seek consensus on best practices, and advance toward policy convergence. The ICN does not exercise any rulemaking function, but allows representatives of established and newcomer agencies to learn from each other. See http://www.internationalcompetitionnetwork.org; see also generally, M. Coppola, One Network’s Effect: The Rise and Future of the ICN, 3 Concurrences 222-229 (2011); M. Coppola & C. Lagdameo, Taking Stock and Taking Root: A Closer Look at Implementation of the ICN Recommended Practices For Merger Notifications & Review Procedures, The International Competition Network at Ten, Origins, Accomplishments and Aspirations 297-319 (2011). 7 Coppola, One Network’s Effect, supra note 6; Coppola & Lagdameo, supra note 6. 8 The United States Supreme Court has defined comity as: “the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.” Hilton v. Guyot, 159 U.S. 113, 164 (1895). So-called “negative comity” applies this same principle, but rather utilizes a deferral of enforcement based on action taken outside a particular jurisdiction, which ultimately can have the same or similar result and efficacy without the necessity of further legal recourse. 9 Antitrust Modernization Commission, Report and Recommendations (2007), http://govinfo.library.unt.edu/ amc/report_recommendation/amc_final_report.pdf (“AMC Report”). The AMC was formed in 2002 to study and report to the President and to Congress on the state of American antitrust law and enforcement – with a particular focus on whether existing policies required modernization. Commissioners were appointed by the President and Congress and were required to consider the views of relevant third parties for the final Report. 10 Atwood is co-author of the international antitrust law treatise, “Antitrust and American Business Abroad;” Goldman previously served as the Director of the Canadian Competition Bureau; Gotts previously served as the Chair of the ABA Antitrust Section; and Pitofsky previously served as Chair and Commissioner of the United States Federal Trade Commission and Dean of the Georgetown University Law Center, where his research and teaching focused on competition law.
submitted recommendations to the Commission on this subject (among others) on behalf of a group of companies.11 They recommended:
Agree to a presumptive deferral of a remedy where the deferring party’s interest is slight relative to that of the other party. The U.S. could agree with its trading partners that when a competition authority in a jurisdiction with a more substantial nexus to the transaction or conduct at issue orders a remedy, there will be a strong presumption that the other jurisdiction’s competition authority will defer to its counterparts.
Additional sponsors joined in what came to be known as the “Bertelsmann Letter” and the letter itself was augmented by a position paper, “Strengthening the Application of Comity Principles Relevant to Global Competition,” which, unlike the previous submission, focused exclusively on the comity issue. This paper amplified the argument for greater comity, but the essence was the same. The country with the greatest interest ought to “rule” on the case. Quoting former U.S. Assistant Attorney General R. Hewett Pate, the paper observed:
Comity – a certain degree of trust in each other's systems – is a realistic goal, however, and one that will become even more important as antitrust enforcement regimes spread around our shrinking world. . . . When a competent authority in a jurisdiction with which the parties have a particularly strong connection rules in a case, especially in situations where the relevant market conditions in other jurisdictions are similar to those that prevail in the jurisdiction that has acted on the deal, the global antitrust community should be willing to take "No" – or "Yes," for that matter– for an answer. . . . [W]hen a jurisdiction is trying to determine what action to take, it surely must count for something under basic principles of comity that a competent system with a clear nexus to a matter has already made a full effort to address it and has already come to a result.12
We suspect that the former Assistant Attorney General was viewing the landscape through U.S. rose-colored glasses when making this assessment, and one pauses to ask what would happen if Turkey and the United States had interests at stake—would the U.S. stand down and defer to
11 Letter of J. Atwood, C. Goldman, I. Gotts and R. Pitofsky to the Antitrust Modernization Commission, April 12, 2005, on behalf of Bertelsmann AG, Microsoft Corp., Pfizer Inc., Royal Philips Electronics, and Time Warner, Inc. (“Bertelsmann Letter”). 12 R.H. Pate, Current Issues in International Antitrust Enforcement, before Fordham Institute, Oct. 7, 2004, at 10- 11, https://www.justice.gov/atr/file/517931/download (emphasis added).
the Turkish assessment? The case being purely hypothetical, there is no complete answer. But one suspects that smaller countries might well fear that they would play “second fiddle” to the interests of the United States, the European Union, and perhaps a few others.
Comity was to become the touchstone in the effort to convince the larger competition law community of the need for norms that would suggest opportunities for competition agencies to stand aside in appropriate cases where other authorities were better placed to take charge of the matter and where interests of the deferring authority would otherwise be protected. Although the OECD years earlier had encouraged its member states to employ principles of comity in the discharge of their enforcement responsibilities,13 the idea had not been embraced.
The Bertelsmann Letter made seven specific recommendations that in its view would foster comity in the global competition enforcement context.
1. Revise existing comity agreements to recognize explicitly the importance of facilitating global trade, investment, and consumer welfare.14 2. Review the application of “comity” in other regulatory and transnational settings.15 3. Agreements to presumptively defer creation of remedy where the deferring party’s interest is slight relative to the others.16 4. Agreement to avoid inconsistent remedies.17
13 OECD, Recommendations of the Council Concerning Cooperation between Member Countries on Restrictive Business Practices Affecting International Trade of 5 October 1967, C(567)53/Final, 2. 14 Bertelsmann Letter, supra note 11, at 7. 15 Id. The report, for example, notes that comity has emerged as a much used tool in considering whether to grant relief to a foreign debtor and in fashioning a remedy for the most equitable and orderly distribution of the debtor’s transnational assets. Doubtless there are other examples and lessons to be learned. 16 Bertelsmann Letter, supra note 11, at 7. The report then notes that: “The EU and U.S. could agree that when a competition authority in a jurisdiction with a more substantial nexus to the transaction or conduct at issue orders a remedy, there will be a strong presumption that the other jurisdiction’s competition authority will defer to its counterpart.” Report of R. Pitofsky, C. Goldman, I. Gotts and J. Atwood, “Discussion Note: Strengthening the Application of Comity Principles Relevant to Global Competition” (on file with authors). Of course, they “could”; but would they? 17 Bertelsmann Letter, supra note 11, at 7. Perhaps recognizing the difficulty, the report also proposes a variation under which the parties would agree that when investigating a transaction or conduct previously
5. Agreement to jointly fashion remedies.18 6. Consultation at the request of the effected entities. 7. Benchmarking review in instances where both jurisdictions impose inconsistent remedies.19
The Modernization Commission took up the group’s challenge. Although the Commission recognized the positive contributions of greater convergence and cooperation to international competition law enforcement,20 it recommended greater attention be given to the employment of comity principles.
Convergence and cooperation are a significant, but not the sole, method of reducing conflicting approaches and outcomes that may result from having more than one country seek to apply its antitrust or competition laws to conduct. Regular application of principles of comity is a second critical component that calls for one enforcer to defer to another’s decisions, and not take parallel, potentially inconsistent decisions. Comity has been described as “a concept of reciprocal deference . . . [that] holds that one nation should defer to the law and rules . . . of another because . . . the other has a greater interest.” Principles of comity in the antitrust arena encourage “competition agencies to presumptively defer their own enforcement authority to that of jurisdictions with the greatest interest or center of gravity.21
Essentially the Commission called for “prosecutorial or investigatorial restraint”22 by placing “primary responsibility for enforcement ‘in the hands of the jurisdiction most closely associated with the alleged anticompetitive conduct.’”23 The Commission noted that while comity
examined by the other party’s competition authority, a competition authority should not impose divergent remedies without prior consultations with its Trans-Atlantic counterpart. Report of Pitofsky et al., supra note 16. 18 Bertelsmann Letter, supra note 11, at 8. 19 It might be noteworthy that the first two and last recommendations focus on comity generally while others are made with reference to the United States and the European Union. 20 AMC Report, supra note 9, at 216. 21 Id. at 220. 22 Id. 23 Id. at 221 (citations omitted).
provisions had been incorporated into bilateral competition law agreements24 with several countries, they had not been regularly invoked.25 It was time to get more serious.
Developing this theme, the Commission made several recommendations that at their core sought “to assign principal enforcement authority to the country with the greatest connection to the transaction or conduct at issue, but seek to ensure that other countries that have an interest in the merger or conduct also are assured that their interests will be taken into account.”26 Specifically, it made two recommendations relevant to this issue.
• First, it called on jurisdictions to stand down unless the anticompetitive conduct under investigation “has a direct, substantial, and reasonably foreseeable effect” within that country.27 Instead, those jurisdictions ought to “defer to the enforcement efforts of other countries in which there was such an effect.”28
• Second, the Commission recommended that “when a competition authority in one country with a substantial nexus to a transaction or conduct has taken enforcement action, other countries with a lesser nexus should presumptively defer to that action.”29 Bottom line: “the country with a lesser ‘nexus‘ to the conduct or transaction should defer to the other country with a greater nexus.”30
The first ought to be uncontroversial. Similar guidance is today reflected in the ICN Best Practices for merger notification where an appropriate nexus to the transaction plays a key
24 In addition to bilateral agreements, competition authorities had also utilized other instruments to foster comity principles. See, e.g., Agreement between the Government of Canada and the Government of the United States of America on the Application of Positive Comity Principles to the Enforcement of their Competition Laws (2004), http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01269.html. 25 AMC Report, supra note 9, at 221. 26 Id. at 222. 27 Id. at 223. 28 Id. 29 Id. 30 Id. at 223-24.
role.31 The Commission reasoned that if “only a negligible effect exists, a country’s consumers are unlikely to be meaningfully affected.”32 Accordingly, “there is little reason for that country’s antitrust enforcer to seek relief against the conduct or transaction.”33 We agree. The only reasons a competition agency might investigate conduct absent this nexus are either to: (i) obtain monetary benefit, such as a filing fee or a fine; or (ii) participate in an international investigation as a means of raising its profile. We regard both as insufficient – and, indeed, poor justifications for asserting jurisdiction.
The second recommendation is more difficult as it involves the relative importance of the interests of different countries. The Commission states that this measurement can be made on the basis of generally accepted choice of law principles.34 Perhaps appreciating the sensitivity of the recommendation, the Commission recommends that the country with the greater interests consult with countries with lesser interests to insure that their interests are appropriately considered.35
The recommendations of the Commission in this regard have gathered dust. We suspect that the Report’s candid observation that “in many instances, larger jurisdictions, such as the European Union and the United States, are likely to have the most substantial nexus to the conduct or transaction”36 is one important reason that these recommendations never obtained significant traction in the international enforcement community.37
31 International Competition Network, Recommended Practices for Merger Notification (2002) (recommending that “[j]urisdiction should be asserted only over those transactions that have an appropriate nexus with the jurisdiction concerned” and that “[m]erger notification thresholds should incorporate appropriate standards of materiality as to the level of ‘local nexus’ required for merger notification”), http://www.internationalcompetitionnetwork.org/uploads/library/doc588.pdf. 32 AMC Report, supra note 9, at 223. 33 Id. 34 Id. at 224. 35 Id. 36 Id. 37 Others besides the authors of the Bertelsmann Letter and the later reports contributed to the Modernization Commission’s consideration of this issue and included the UK government, the Association for Competitive Technology, the International Chamber of Commerce, and the Business and Industry Advisory Committee to
The record of serious discussion of negative comity, while not a null set, is sparse. At this conference nine years ago, then Federal Trade Commission Chairman Deborah Majoras briefly touched on this subject during her remarks and highlighted a few cases that merit mention.38 The USFTC’s 1996 investigation of the “Parma Ham Case” provides an interesting example of where a U.S. enforcement agency deferred to the Italian competition authority. The USFTC had opened an investigation of possible anticompetitive practices, e.g., output restrictions, of the Italian Parma ham market that may have adversely affected U.S. buyers of the Italian produced products. Learning that the Italian authority had opened a similar investigation, the USFTC stepped aside. Important elements in the FTC’s decision to defer to the Italian authority were the facts that: (i) the Italian investigation was on a fast-track; (ii) the relevant conduct had occurred in Italy; and (iii) it was anticipated that the Italian remedy would protect the interests of the American buyers of the product.39 The case is a prime example of the appropriate employment of comity: the best-placed authority took the case and the interests of the deferring state were protected while its resources were conserved to be deployed most appropriately. Moreover, the case is also interesting because the deferring jurisdiction was both large and influential while the leading jurisdiction smaller.
As a comparative, Chairman Majoras also noted cases where comity principles may have been ignored, using In re Institut Merieux S.A. as an excellent example. The parties to the transaction were both foreign – French and Canadian. Their sales into the U.S. generated an obligation for a Hart-Scott-Rodino pre-merger notification. The USFTC conducted a full-phase investigation and ordered the divestiture of a vaccine manufacturing facility located in Canada without so much as notifying the Canadian authority of its intention to take action, much less order the divestiture of the Canadian facility – a prime example of lack of coordination and comity
the OECD. See International, Antitrust Modernization Commission, http://govinfo.library.unt.edu/amc/ public_studies_fr28902/international.htm (last visited July 21, 2016). 38 Remarks of Deborah Majoras, Convergence, Conflicts & Comity: The Search for Coherence on Competition Enforcement Policy, Fordham Corporate Law Institute, Sept. 27, 2007, New York, https://www.ftc.gov/public- statements/2007/09/convergence-conflict-and-comity-search-coherence-international-competition. 39 Id. at 30.
considerations.40 The problems associated with Institut Merieux are not simply a function of hindsight, but an issue identified in situ. In voting on the original Institut Merieux consent order, Commissioner Deborah K. Owen identified the issue and discussed the importance of considering the appropriate use of negative comity. In her dissenting opinion, Commissioner Owen explored the small nexus of the matter to the United States, in particular when compared to the nexus in Canada.41 Commissioner Owen questioned the USFTC’s decision to pursue an enforcement action, specifically stating that one of her concerns was “[w]hether, as a matter of prosecutorial discretion, in the interests of comity and other factors, the Commission should have taken any enforcement action in this matter.”42 Commissioner Owen not only viewed appropriate application of deference as important but also believed that the USFTC was “well poised to take comity considerations into account in the exercise of its prosecutorial discretion” given its relationships with other U.S. and foreign agencies.43 Majoras’s speech concluded that the topic of negative comity is important, such that it merits further study.44
Parma Ham is an example of the most committed use of negative comity, a case where a competition authority fully stepped aside to permit another, arguably better placed, authority to manage an investigation. Nonetheless, it is not the only encouraging instance of negative comity being utilized by competition enforcement agencies. Both the EC and several European national competition authorities have observed negative comity principles in certain matters. For example, in the Halliburton/Dresser merger (1998), the EC coordinated its investigation with that of the USDOJ. After reviewing the impact of the transaction, the Commission ultimately concluded that the divestitures and remedy commitments made to the USDOJ in the
40 In re Institut Merieux S.A., 113 F.T.C. 742 (1990). The FTC’s failure to notify the Canadian authority reflects the reality that comity was not even on the Commission’s radar at time of the USFTC investigation. This failure can be fairly laid at the feet of the first author. Majoras notes that the Canadian authority ultimately protested and the order was amended to better protect Canadian interests. 41 In re Institut Merieux S.A., 113 F.T.C. 742, 755 (1990) (“In particular, this agreement constrains an acquisition that involves two foreign entities, who, between them, maintain minimal relevant assets in the United States; yet the effects of the agreement may bear substantially more upon our neighbor to the north, Canada.”). 42 Id. 43 Id. at 756. 44 Remarks of Deborah Majoras, supra note 38. Majorias also laments that the topic was raised at the OECD in 2006 but failed to garner sufficient interest to warrant further study and discussion.
global market for drilling fluids were also sufficient to alleviate any competitive concerns in Europe.45 While not as stark as the deference employed by the USFTC in Parma Ham, in Halliburton/Dresser the EC relied on the USDOJ’s enforcement act as a means of protecting interests within its jurisdiction and did not feel obliged to “pile-on” with further remedial action. Furthermore, in other areas of competitive overlap among the merging parties, the EC retained its ability, and indeed exercised its power, to investigate fully – i.e., the Commission’s reliance on the USDOJ’s remedy in drilling fluids did not limit its authority to ensure other areas of the transaction did not result in competitive harm within the European Community.46 In Cisco Systems Inc./Tandberg ASA (2010), the EC and USDOJ inverted this approach, helpfully demonstrating a negative comity two-way-street, so to speak. After conducting its investigation, the USDOJ concluded that the proposed deal was not likely to harm competition due to “the evolving nature of the videoconferencing market” and the commitments made to the European Commission to facilitate interoperability. In an impressive demonstration of cooperation and alignment, the DOJ closed its investigation on the same day as the European Commission announced its clearance decision.47
45 Case No IV/M.1140 -HALLIBURTON /DRESSER. The Commission ultimately concluded that the divestiture of Halliburton’s 36% interest in a drilling fluids company in competition with Dresser obviated the need to consider drilling fluids an “affected market” within the definition of the Merger Regulation. U.S. v. Halliburton Co. and Dresser Industries, https://www.justice.gov/atr/case/us-v-halliburton-co-and-dresser-industries. 46 Indeed, the Commission examined whether the proposed transaction would raise competition concerns in the market for the provision of cementing services to oil rigs in the North Sea, ultimately determining the concentration would not raise any serious concerns (while noting the Commission would continue to monitor the segment). 47 In the press release announcing the closing of the investigation, the USDOJ provided additional informative context explaining that “[t]he EC also announced today that it has cleared the transaction. Cisco has made commitments to facilitate interoperability between its telepresence products and those of other companies as part of the EC’s merger clearance process. The commitments are designed to foster the development of open operating standards. The department views those commitments as a positive development that likely will enhance competition among producers of telepresence systems. Open standards lower barriers to entry, and can be especially procompetitive in rapidly evolving high technology markets. The department has taken the commitments into account, along with various market factors, such as the evolving nature of the telepresence business, in reaching its decision to close its investigation.” Press Release, U.S. Dep’t of Justice, Justice Department Will Not Challenge Cisco’s Acquisition of Tandberg (Mar. 29, 2010), https://www.justice.gov/ opa/pr/justice-department-will-not-challenge-cisco-s-acquisition-tandberg; see also R. Brandenburger, Twenty Years of Transatlantic Antitrust Cooperation: the Past and the Future, US Department of Justice, https://www.justice.gov/sites/default/files/atr/legacy/2012/01/11/279068.pdf.
Outside of the European Commission itself, National Competition Authorities (“NCAs”) have also demonstrated a willingness to observe negative comity principles in merger matters involving multi-jurisdictional review and competition remedies. In Federal Mogul/T&N (1998), the USFTC, and the NCAs of the UK, Germany, France, and Italy, all agreed that the combination could cause competitive harm in the markets for wall bearings used in automotive applications.48 In a coordinated investigation, the authorities mutually obtained a remedy – i.e., the divestiture of T&N’s thin wall bearing business – via the USFTC’s consent order. Furthermore, the USFTC was able to address the German NCA’s unique concerns – in the market for dry bearings – by including in its consent order an obligation to divest certain dry bearings units. The coordinated results obviated the need for the parties to submit to separate divestiture procedures and legal undertakings in the UK, Germany, France, and Italy, a useful and efficient outcome (the authors presume) for both the NCAs, and the merging parties. These cases demonstrate reassuring examples of an application of softer negative comity. However, the principles applies did not rise to the level of Parma Ham deference, where a competition agency stepped aside fully, permitting another authority to manage the case.
While encouraging as examples, the Parma Ham, Halliburton/Dresser, and Federal Mogul/T&N matters are now dated, and in the interim 18 years, there remains a dearth of examples (at least those released publicly) of the application of negative comity, even – as noted at the outset – in the midst of the ever-more-crowded competition autostrada, where a growing number of transactions/investigations have multi-jurisdictional touchpoints. Rather than converging further in the application of negative comity, is it possible competition authorities have instead diverged?
48 See, e.g., FTC Matter No. 9810011, Federal-Mogul Corporation and T&N; Federal Mogul Corporation, Off. of Fair Trading, http://webarchive.nationalarchives.gov.uk/20090127112201/http://www.oft.gov.uk/ advice_and_resources/resource_base/register-orders-undertakings/lieu/federal-mogul (last visited July 12, 2016); France, Org. for Econ. Co-operation and Dev. 21 (1997), https://www.oecd.org/france/1822673.pdf; see also Org. for Econ. Co-operation and Dev., OECD Global Forum on Competition: Merger Enforcement and International Co-operation, at 4 (Sep. 18, 2001), http://www.oecd.org/officialdocuments/ publicdisplaydocumentpdf/?cote=CCNM/GF/COMP/WD(2001)1&docLanguage=En.
Promising Initiatives
Despite the lack of publicly available examples of competition regimes observing negative comity principles, certain authorities provide policies and initiatives that are encouraging for the future potential of negative comity.
The Australian Competition and Consumer Commission (“ACCC”) and the Canadian Competition Bureau (“CCB”) seem to be the leading jurisdictions in the application of negative comity. For example, the ACCC has chosen to observe negative comity in various instances where the Commission concluded that: (i) the nexus to Australia of the competitive harm being investigated was not sufficient (including considerations of the level of involvement of Australian businesses); and (ii) possible enforcement actions by sister agencies would nevertheless result in the termination of the offending conduct and protection for Australian consumers. The ACCC has applied negative comity principles across its entire competition portfolio, including cartels, civil conduct, and merger control.
One of the reasons attributed to the failure of negative comity to gain traction in some competition authorities is that it is perceived by some to be “anti-enforcement.” Interestingly, a principal rationale for its implementation by the ACCC is their view that it aids enforcement by more effective management and deployment of agency resources. Essentially, the ACCC assesses the merits of a matter and its nexus to Australia and then chooses whether to selectively step aside as a means of ensuring its core mission is not compromised in the pursuit of matters with minimal nexus. For example, the ACCC has established an internal benchmark that seeks to limit its participation in international cartel matters to roughly 50% of its total cartel caseload, and therefore defers to other authorities to investigate the balance. Additionally, the ACCC thinks similarly about the costs and benefits of pursuing merger control matters before determining whether to launch an in-depth investigation. The underlying policy rationale is simple: to ensure the ACCC devotes sufficient resources to investigation and enforcement of domestic competition matters where it is not only best placed, but the only
authority capable of enforcement.49 The ACCC has thoroughly considered these policies and evolved its thinking based on reflection as to how best to achieve its core goals on behalf of its constituency – i.e., to protect Australian consumers.
The global Autoparts investigations provide a prime example of the ACCC’s reasoned use of negative comity in cartel enforcement – a massive investigation covering numerous manufacturers and components at various levels of the global auto supply chain in which at least 11 competition enforcement authorities have participated.50 Assessing the scope of the investigation, the nexus to Australia, and likelihood of sufficient enforcement by sister agencies (including the USDOJ and the EC), the ACCC concluded that its finite resources were best spent elsewhere and elected not to participate in every facet of the matter. However, when alerted by its sister agencies (specifically the USDOJ) to a sub-set of auto parts cartel activity (i.e., bearings used in aftermarket applications) with a substantial Australian nexus, the ACCC pursued that conduct successfully, levying fines on multiple defendants.51
In the mergers context, the ACCC has increased its focus on assessing – at an early stage – the appropriateness of conducting an in-depth inquiry into multi-jurisdictional transactions. For example, the ACCC has demonstrated a willingness to allow sister agencies to take the lead52 in
49 See Remarks of Rod Sims, ICN Plenary Session: Cartel Detection and Deterrence, Singapore, April 27, 2016; see also, 2016 ACCC Compliance and Enforcement Policy (Feb. 2016), https://www.accc.gov.au/about- us/australian-competition-consumer-commission/compliance-enforcement-policy. 50 See 2015 Mid-Year Criminal Antitrust and Competition Law Update, Gibson Dunn (July 13, 2015), http://www.gibsondunn.com/publications/pages/2015-Mid-Year-Criminal-Antitrust-and-Competition-Law- Update.aspx. 51 See Press Release, ACCC, $3 million penalty for bearings cartel conduct (May 13, 2004), (“The case was brought to the ACCC’s attention following other investigations arising out of the U.S. Department of Justice’s investigation into auto-parts cartels. The ACCC thanks other international competition agencies, and in particular the U.S. Department of Justice, for their assistance during this investigation.”), http://www.accc.gov.au/media-release/3-million-penalty-for-bearings-cartel-conduct. 52 For example, in the 2013 OECD Policy Roundtable paper “Remedies in Cross-Border Merger Cases,” the ACCC explains its stance regarding the importance of identifying lead authorities: “The ACCC is conscious that the effectiveness of the remedies it obtains from merger parties is often dependent on remedies obtained by the lead regulator. A lead regulator is generally the regulator in the jurisdiction in which the relevant key merger and divestiture assets are based, or in which the transaction will have the greatest competitive impact . . . In a global merger matter where a remedy is offered, it is crucial that the ACCC identify the lead regulator and work closely with them, in order to obtain a remedy that addresses competition concerns in both jurisdictions.” http://www.oecd.org/daf/competition/Remedies_Merger_Cases_2013.pdf.
global merger control analysis, saving resources from burdensome parallel investigations where Australia’s interests are likely to be protected by any enforcement actions – in particular with respect to remedial action – taken by other jurisdictions. The ACCC’s procedural rules (i.e., merger filings are non-mandatory) has further enabled this approach, allowing the agency flexibility to assess which mergers are most salient to Australian interests and which others are likely to have the same result globally regardless of the intensity of ACCC involvement. The ACCC has demonstrated it flexibility in the global merger matters choosing to step aside during the Hard Disk Drive cases53 – in which the Australian interests were smaller and likely to be protected by foreign enforcement – while vehemently pursuing an investigation into the Rio Tinto/BHP Billiton merger – in which Australia’s interests were core and the ACCC was uniquely positioned to act.54 The ACCC’s approach to negative comity can also be observed in the remedies arena, in particular in the three simultaneous transactions between GSK and Novartis. The ACCC investigated the matter and concluded the following: (i) the Consumer Health transaction had local impact and thus a full Australian remedy was required; (ii) the Vaccines transaction resulted in sufficient EC action that the ACCC required only an acknowledgement by the parties to abide by the EC commitments; and (iii) the competitive issues present in the Oncology transaction were sufficiently remedied by sister agencies so as to require no Australia-specific commitments.
These examples demonstrate that the appropriate application of negative comity coupled with competition authority cooperation can result in the optimal outcomes while avoiding under- enforcement. The authors understand that the ACCC’s experience with its negative comity-
53 See Western Digital Corporation – Proposed Acquisition of Hitachi Global Storage Technologies Holdings Ltd, Austl. Competition & Consumer Commission (Dec. 13, 2011), (stating that the ACCC would not challenge Western Digital Corporation’s acquisition of Hitachi Global Storage Technologies given the European Commission’s decision to allow the transaction after a divestiture), http://registers.accc.gov.au/ content/index.phtml/itemId/1022166/fromItemId/751043; Seagate Technology PLC – Proposed Acquisition of the Hard Disk Drive Business of Samsung Electronics Co Ltd, Austl. Competition & Consumer Commission (Dec. 13, 2011) (outlining the ACCC’s finding to not challenge Seagate’s acquisition of Samsung’s hard disk drive operations), http://registers.accc.gov.au/content/index.phtml/itemId/1022164/fromItemId/751043. 54 See BHP Billiton Ltd and Rio Tinto Ltd – Joint Venture in Western Australian Iron Ore Production, Austl. Competition & Consumer Commission (Oct. 18, 2010) (showing that the parties abandoned the proposed transaction several months after the ACCC opened an investigation and required additional information from the parties), http://registers.accc.gov.au/content/index.phtml/itemId/952207/fromItemId/751043.
policies has been hugely successful. The ACCC has demonstrated an ability to leverage negative comity to deploy resources most effectively, focusing expenditure on matters with the most significant nexus to Australia, while still enjoying the protection of multi-jurisdictional enforcement in instances where its sister authorities are best-placed to act.
The CCB is also a leader in the area of international cooperation, often observing negative comity principles. In the cartels arena, the CCB has very recently demonstrated its sophisticated (and perhaps evolving) approach to negative comity. In the Nishikawa Rubber Co. matter, the CCB relied on “unprecedented cooperation” with the USDOJ in deferring enforcement action in a bid-rigging conspiracy involving body-sealing parts for automotive use.55 According to the CCB, “[a]fter discussions between the agencies, it was agreed that the matter would be addressed by the Antitrust Division as the conduct primarily targeted US consumers.” In the mergers context, while the CCB is obligated by law to investigate mergers triggering technical filings in Canada, if the CCB’s competition concerns are effectively remedied by another jurisdiction’s action, the CCB may choose not to act in the appropriate circumstances. For example, in multi-jurisdictional merger control investigations, the CCB has deferred to remedies mandated by sister agencies, enhancing efficiency and avoiding unnecessarily “piling-on” to sufficient enforcement actions. In several recent merger control investigations — including GSK/Novartis, Continental/Veyance, Thermo Fisher/Life Technologies, and UTC/Goodrich56 – the CCB has intentionally deferred on remedy actions, allowing a sister jurisdiction’s divestitures and attendant consent agreements to protect competition in Canada.57
55 See Press Release, Canada Competition Bureau, Unprecedented cooperation with US antitrust enforcement authority leads to major cartel crackdown (July 20, 2016), http://www.competitionbureau.gc.ca/eic/site/cb- bc.nsf/eng/04122.html. 56 See FTC, Novartis AG, In the Matter of (GlaxoSmithKline), https://www.ftc.gov/enforcement/cases- proceedings/141-0141-c-4510-c-4498/novartis-ag-matter-glaxosmithkline (April 8, 2015); DOJ, U.S. v. Continental AG and Veyance Technologies, Inc. (March 30, 2015); FTC, In the Matter of Thermo Fisher Scientific Inc., https://www.ftc.gov/enforcement/cases-proceedings/131-0134/thermo-fisher-scientific-inc- matter (April 2, 2014); see also, CCB, United Technology Corporation’s Acquisition of Goodrich Corporation, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03483.html. 57 For additional examples of CCB remedial deference, see generally Wakil, Canada’s Approach to Remedies in International Mergers, Mondaq (Dec. 17, 2007),
The considered approaches of both the ACCC and the CCB in the areas of negative comity and competition enforcement cooperation are promising exemplars of the best practices recommended by the authors – namely, authorities should think critically about deference in the appropriate circumstances, enhancing efficacy and ensuring efficient allocation of global investigatory and enforcement resources.
In addition to the ACCC and CCB approach, the imposition of individual sanctions in cartel cases poses another example of the application of negative comity in competition law enforcement. Illustrative is the decision of the USDOJ to abandon its prosecution of three British cartelists when the U.K.’s Office of Fair Trading (“OFT”) prosecuted the same individuals in the Marine Hose cases.58 The Marine Hoses cases are a weaker example of negative comity than the Parma Ham investigation, as the U.S. authority did not abandon its investigation or its prosecution of other non-UK individuals.59 Moreover, the U.S. authority conditioned its deferred action on the imposition of certain sanctions by the UK courts.60 Nonetheless the criminal prosecutions in the Marine Hose Cases are an example, albeit more limited, of one national competition authority
http://www.mondaq.com/canada/x/55432/Trade+Regulation+Practices/Canadas+Approach+To+Remedies+In +International+Mergers. See also Scott, A Canadian Perspective on the Role of Comity in Competition Law Enforcement in a Globalised World, Bennett Jones Competition Law International (April 2011), http://www.bennettjones.com/uploadedFiles/Publications/Articles/scott_article.pdf. 58 See Press Release, U.S. Dep’t of Justice, Italian Marine Hose Manufacturer and Marine Hose Executives Agree to Plead Guilty to Participating in Worldwide Big-rigging Conspiracy (July 28, 2008), https://www.justice.gov/archive/opa/pr/2008/July/08-at-663.html. This was a transnational investigation and subsequent prosecution on an international cartel in the marine hose industry by the European Union and the national competition authorities of Australia, Brazil, Japan, Korea, the United Kingdom, and the United States. 2014 Year-End Criminal Antitrust and Competition Law Update, Gibson Dunn (2015), http://www.gibsondunn.com/publications/Pages/2014-Year-End-Criminal-Antitrust-and-Competition-Law- Update.aspx. For the results of the UK prosecution, see Regina v. Whittle, Brammer & Allison at https://www.gov.uk/cma-cases/marine-hose-criminal-cartel-investigation. See also E.M. Daly, Dunlop to Pay $4.54M for Role in Marine Hose Cartel, LAW360 (Dec. 1, 2008, 12:00 AM), http://www.law360.com/articles/78572/dunlop-to-pay-4-54m-for-role-in-marine-hose-cartel. 59 The Antitrust Division brought criminal proceedings against five companies and 13 individuals. C. Hockett et al., United States: Anti-cartel Enforcement, Global Competition Review, The Antitrust Review of the Americas 2015 9, 11 (2015). See, e.g., United States v. Dunlop Oil & Marine Ltd., No. 0:08-CR-60338 (S.D. Fla. 2009). 60 Under the terms of a plea agreement entered into between the three UK individuals and the Antitrust Division, the U.S. agreement to dismiss its proceedings was conditioned on the defendants pleading guilty to the UK charges and the imposition by the British court of sentences at least as severe as those the Division was prepared to recommend to the U.S. court if the matter were to proceed in the US.
stepping aside and permitting a sister agency to address the case.61 This case could provide a useful model for the application of negative comity among those jurisdictions that now impose custodial sanctions for cartel conduct.62
With the increasing number of jurisdictions that impose criminal sanctions, cartel cases are particularly important. John Terzaken, formerly a senior official at the U.S. Department of Justice, has recognized the issues that now arise.
The increasingly crowded enforcement environment is causing growing pains for authorities, as the seemingly boundless extraterritorial reach of national laws continue to complicate coordination efforts and create risks of duplicative penalties. Recent investigations into auto parts and LIBOR highlight the problems—namely, multiple agencies in scores of countries more frequently pursuing and punishing the same basic conduct, but under different laws and with no regard to concepts like successive prosecutions and double jeopardy.63
The problem is not hypothetical and will doubtless become more serious. In the recent Air Cargo cases, authorities considered for purposes of calculating the appropriate fine whether to include both in-bound and out-bound commerce. This could effectively penalize the company twice for the same sales.64 Terzaken observes that “[m]oving forward, authorities will face questions on whether there is a better way to coordinate global enforcement matters to achieve appropriate deterrence without tipping the balance toward over-punishment.”65
61 The decision of the Antitrust Division to step aside in the prosecution of the three individuals was probably motivated in part by a desire to assist the OFT in commencing criminal enforcement of the Enterprise Act. This case permitted the OFT to bring its first case assured of a victory – sending a dramatic signal to the UK business community of its intention to enforce the new law. 62 Some 27 jurisdictions have criminalized cartel conduct generally; a few have criminalized cartel conduct in special circumstances. For example, Germany criminalizes only conduct that amounts to bid-rigging. 63 Remarks of John Terzaken, International Cartel Enforcement: Growing Pains of Globalization, ABA Antitrust Section, Antitrust Masters Course VII, Williamsburg, Oct. 9. 2014, at 1. 64 “The risk of overlapping punishment is equally present in cases involving semi-finished products…. In such cases, revenue based on resale or end product sales in one country may overlap with import revenues already taken into account for the fine calculation in another jurisdiction.” Id. 65 Id. Later in his paper Terzaken presents the question more starkly: “Simply put, the question for enforcers has become ‘how much is too much?’ when it comes to multiple jurisdictions seeking to punish corporations and individuals for the effects of the same cartel offense.” Id.
The interactions of the European Commission with its Member States, and of the U.S. federal antitrust authorities with their counterparts in the offices of the state attorneys general also present aspects of negative comity, but in the context of “federal” jurisdictions.66 The EU situation, while presenting a case where authorities “step aside” to defer to a better-placed authority to proceed, does not present a case of voluntary comity. Rather it is compelled by a binding Regulation that has optimal case assignment between and among the Member States and the Commission as an important objective. Nevertheless, it is an important case study because it stands as a clear recognition of the problems associated with too many disparate authorities chasing the same cases and mandates. Instead, the EC has devised a rational method for allocating cases among the European competition authorities.67 In contrast, the experience of the U.S. federal authorities and the state attorneys general presents true issues of negative comity, albeit in the context of the confines of one nation state. Generally, state attorneys general in the United States have the power to investigate the very same matters as
66 We use the term “federal” to include both the European Union, where many would quarrel with our use of the term, and those jurisdictions that are more truly federal where the national competition authority and those of the states or provinces must interact such as Germany, Spain, and the United States. Federal jurisdictions have handled these issues in various ways. For example, in Germany, Spain, and the United States, the national competition authority and those of the constituent parts must interact. In Canada, competition law is the province of the federal government. In Australia, competition law is the province of both the states and federal government, however the states have ceded their power to the federal government in return for a say in federal competition policy – e.g., appointments to the ACCC. 67 Regulation 01/2003 (often referred to as “Modernisation”). Central to this initiative was the desire to vest more authority to enforce European competition law in the national competition authorities of the Member States and to provide a rational method of allocating cases among the Member States and between the Member States and the Commission. It has other objectives as well – e.g., better allocation of Commission resources. In determining which authority is best placed to investigate, the European Competition Network composed of the Commission and the Member States provides a forum for consultation. There is a presumption that the first authority to take action is well placed to handle the case. However, first-mover action is only a presumption, and consultation may produce different outcomes. The Regulation also provides that in appropriate cases, multiple authorities may jointly undertake an investigation, often with one authority as the lead. However, when four or more jurisdictions are impacted by the investigation there is the presumption that the Commission is well placed to take the matter, and when it does so the Member States lose their jurisdiction to proceed. Similarly when the matter poses a significant issue of European-wide competition policy, the Commission may be best placed to handle the case. Importantly the Commission is empowered to seize a case if it deems that appropriate – e.g., the investigating authority is making insufficient progress. Although this power has seldom been invoked, its existence provides an important case management discipline on the Member States.
do the U.S. federal authorities.68 The cartel area has largely remained free from conflict. State authorities have not been particularly active in the cartel area, and when they have usually it has been as a partner of the USDOJ. That said there are cases recently closed by the USDOJ that remain open within the state attorneys’ general offices, and it remains to be seen whether this signals any change in direction. The merger experience has been mixed, with state authorities at times taking issue with transactions that were dismissed by the investigating federal agency,69 or by imposition of remedies by state attorneys general that were rejected out-of-hand by the federal agency.70 Unlike Modernisation in Europe, there is no mechanism for case allocation between the national and state authorities in the United States and inconsistent results have occurred. That said, in recent years cooperation among the U.S. federal and state authorities has improved. Where there have been multiple investigations, remedies have been more consistent although one must still ask why it is necessary to have fifteen different jurisdictions investigating the same matter. While improving, the U.S. federal- state experience is not the “poster child” for the effective use of negative comity.71
68 In mergers and acquisitions, the U.S. Supreme Court has held that state attorneys general may also investigate the same matters that are being, or have been, investigated by the federal authorities. Indeed they may bring actions to enjoin such transactions notwithstanding a decision that the transaction does not present competition law issues. See California v. American Stores Co., 495 U.S. 271 (1990). 69 See id. 70 Compare In the matter of Chevron Corp., and Texaco Inc., 133 F.T.C. 1 (2002) (FTC consent order), with Final Judgment, California v. Chevron Corp., No. 01-07746 (C.D. Cal. Sep. 13, 2001) (California consent order). 71 This poses the important question of why states investigate the same matters that are under investigation by the federal authorities. During the Reagan Administration, the states argued that state merger enforcement was necessary because of the abrogation of merger enforcement by the federal authorities. One wonders whether this was the rationale employed by state attorneys general for their enforcement agenda during the Clinton and Obama Administrations. More cynical observers have thought that state enforcement was more motivated by political considerations. Sufficient numbers of state attorneys general have used their offices as stepping stones for high political office that their national association, NAAG, was referred to as the “National Association of Aspiring Governors” rather than the National Association of Attorneys General. State antitrust enforcement garners headlines in the local press and may present opportunities to reward important local constituents or constituencies. In addition many state attorneys general seek the payment of fees by the merging parties that are used to fund the state antitrust enforcement effort.
A Proposal
The dramatic increase in the number of competition authorities investigating the same merger and conduct cases today makes consideration of negative comity an increasingly important topic.
Cartel Case Example
The cartel case example outlined at the beginning of this article posed a real opportunity for the U.S. authority to forsake sales made from the U.K. to Libya and Brazil from its consideration of U.S. harm. Indeed, given the environmental restrictions that severely limited the use of marine hoses in U.S. waters, the entire case may have posed an opportunity to step aside. One could have argued when the Marine Hose Cases first arose that it was important for the U.S. authority to take a lead role. How likely was it that Libya or Brazil would initiate investigations? Perhaps given its jurisdictions it was important for the U.S. authority to assume the mantle of global cartel enforcement police officer?72 Whatever the merits of that argument at the time, it has less merit today.
The USDOJ may be ahead of the curve. In addressing the issue, Terzaken, while Director of Criminal Enforcement at the Antitrust Division, observed that the Division has articulated a four-step analysis it will employ in assessing whether to employ negative comity in transnational cartel investigations.
1. Is there a single, overarching international conspiracy?
2. Is the harm to U.S. business and consumers similar to the harm caused abroad?
3. Does the sanction imposed abroad take into account the harm caused in U.S. businesses and consumers?
72 Brazil opened an investigation one year later in 2007. Libya does not have either a competition law or enforcement agency. However, Libya is member of the Common Market for Eastern and Southern Africa (“COMESA”) which has had a law since 2004. However the law did not take effect until November 2012 when the enforcement agency became operational.
4. Will the sentence imposed abroad satisfy the deterrent interests of the U.S.?73
This thought leadership by the U.S. is most welcome. However, since the U.S. is often the first jurisdiction to take action in cartel cases it is unlikely that Question 3 will be posed by U.S. authorities in a large number of cases. Therefore it is important that the Antitrust Division exercise its leadership to make other jurisdictions equally sensitive to these issues.
Merger Case Example
The merger case posed at the beginning of the article presents an even stronger case for the authority to step aside. This exercise of authority has already been addressed by the international competition community in the context of ICN “Best Practices” which encourage competition enforcement authorities to require a showing of nexus between the transaction and the investigating authority.74 But what if instead of the sale of a Nevada radio-station, where there was precious little if any nexus, it was the sale of one of the papers to the other, where the transaction does have some connection as both papers were sold within the jurisdiction? This poses what is likely an excellent case for the authority to step aside and to defer to sister authorities with more at stake.
It is now timely for the international competition enforcement community to seriously consider the issue – a small but potentially powerful step to help alleviate the congestion on the competition law autostrada. In particular, the experience of the ACCC illustrates that stepping aside from an investigation where jurisdiction is present is not necessarily “anti-enforcement” but may be an exercise in sound case selection. Enforcement requires resources, and few competition authorities have an abundance of unused capacity. Sound case selection and management should be important objectives.
73 Remarks of John Terzaken, Judicial Activism in Cartel Cases: Trend or Aberration, ABA Antitrust Section Spring Meeting, Washington, March 29, 2012. 74 The ICN Best Practices recommend that competition authorities make a jurisdictional claim only if a nexus exists and outline the “local nexus” that must exist in their jurisdiction before the notification threshold is met. ICN, supra note 31.
This is particularly true in light of the contemporary enforcement costs. Investigatory and enforcement costs have increased dramatically both due to the scale of global commercial conduct and the size and complexity of transactions, and most notably evidentiary discovery in the modern era. In the age of eDiscovery, it is not uncommon for competition authorities to receive hundreds of thousands, if not millions of records to review and evaluate in order to make an informed assessment of a matter and establish evidentiary thresholds required for successful enforcement. While empirical data regarding costs per investigation/enforcement action of competition authorities are lacking in the public sphere, it is not uncommon for private parties in multi-jurisdictional cartel and merger investigations to expend millions to double-digit millions of dollars in resources (depending on the size of the matter). While governmental authorities may not have the same costs as those incurred by private parties, the costs associated with complying with investigations and defending enforcement actions provide a useful, if loose, proxy for the resource dedication necessary to properly assess multi- jurisdictional competition issues.
A generation ago, when investigatory and enforcement costs were dramatically lower, most competition authorities’ case selection was governed by their “in box.” In the intervening years, the work of Professor William Kovacic and others have focused on issues of institutional design and management.75 Optimal allocation of enforcement resources has garnered attention, as we have seen in the ACCC case selection process. Proper utilization of negative comity can optimize enforcement – not curtail it.
We propose that the international competition enforcement community consider a “best practice” that competition enforcement authorities ought to consider with reference to selection of cases with an international dimension. To be very clear, we do not propose or suggest that authorities ought to step aside in deference to a sister agency or agencies when particular criteria are met. Authorities must be free to initiate investigations and bring cases when consistent with their jurisdiction and international law. We do propose that competition
75 See, e.g., Hyman & Kovacic, Institutional Design, Agency Life Cycle, and the Goals of Competition Law, 81 Fordham L. Rev. 5 (2013).
enforcement authorities seriously consider whether they ought to exercise their jurisdiction in their selection of transnational cases where it is apparent that other competition authorities will be investigating the same matter.
Some cases present separate and distinct issues for different jurisdictions. For example, a merger may present very different markets in different jurisdictions or applicable law may differ sufficiently to result in one jurisdiction pursuing an enforcement action while others conclude no action is warranted.76 What is potentially harmful in one may be benign or even procompetitive in another. A remedy in one may be ill suited for another. Stepping aside in such cases may result in a failure to protect national consumers.
On the other hand, there are cases where the markets are the same and where a necessary remedy is the same. Such cases may present opportunities for comity considerations, but even here there may be limitations on the ability to completely defer to another jurisdiction. For example in many cases, a determination about the relevant competition issues cannot be made until the investigation is well underway. Therefore it may be irresponsible to step aside too early. Similarly, an authority may be concerned that its sister agency or agencies may be either unwilling or incapable of enforcing a remedy that is necessary to the protection of the deferring jurisdiction. These considerations may require some level of participation at various stages of an investigation. But this does not make the consideration of negative comity unwise. Rather it suggests that application may need to be tailored to fit the facts of specific cases. In some cases as in Parma Ham, it may make sense to step aside early in an investigation and defer to a sister agency. In others, it may be necessary to investigate for some time before one can truly assess whether deferral to another authority is sensible. And yet in others, it may be necessary
76 For example, the CCB and FTC recently collaborated on a review of a cross-jurisdictional merger but reached different conclusions as to the ultimate competitive effect of the proposed transaction. See Canexus/Superior Plus, http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04110.html (“The Competition Bureau has determined that the proposed acquisition of Canexus Corporation by Superior Plus Corp. will likely result in a substantial lessening of competition for the supply of various industrial chemical products in Canada. However, the Commissioner will not be opposing the acquisition due to the efficiency exception in Canada’s Competition Act. In conducting its review, the Competition Bureau cooperated closely with the United States Federal Trade Commission (FTC). Each authority reviewed the effects of the transaction under its distinct legal framework. On June 27, 2016, the FTC filed an administrative complaint challenging the transaction.”).
to step back, but not aside, in order to ultimately obtain legally enforceable remedies in the authority’s home jurisdiction.
We do not seek to diminish or otherwise cabin the jurisdiction or its exercise of any competition authority – quite the opposite. We seek to establish a “best practice” that authorities will seriously consider both the costs and benefits to their participation in particular transnational merger and conduct cases.
The adoption of custodial and other sanctions against individuals presents a special case for negative comity. The Marine Hose cases provide a model for the application of negative comity among those jurisdictions that impose custodial sentences for cartel conduct. While we believe that the criminalization of cartel offences is necessary to adequately deter such conduct,77 imposition of consecutive custodial sentences by multiple jurisdictions is generally unnecessary. The marginal deterrent benefit of additional years of imprisonment doubtless decreases in a cartel context since it is the fact of imprisonment for a non-trivial term that matters most.78 Moreover, the costs to the exchequer are not insignificant.79 As more jurisdictions impose custodial sentences for cartel conduct, we would hope to see widespread application of negative comity with reference to prosecution of individual cartel participants.80 Such cases present compelling opportunities.
77 See T. Calvani & T. Calvani, Cartel Sanctions & Deterrence, 56 Antitrust Bull. 185 (2011); cf. E. Combe & C. Monnier, Fines Against Hard Core Cartels in Europe: The Myth of Over Enforcement, 56 Antirust Bull. 235 (2011). 78 See J. Collins Coffee, Jr., Corporate Crime and Punishment: A Non-Chicago View of the Economics of Criminal Sanctions, 17 Am. Crim. L. Rev. 419, 431 (1980) (stating that imprisonment has decreasing marginal utility in that a defendant views every additional year of prison time as less of a punishment than the previous year). See also D. Ginsburg & J. Wright, Deterrence and Punishment in Antitrust: Antitrust Sanctions, 8 Competition Pol’y Int’l 46, 70 n.63 (2012) (“We think it unlikely that the reputational effect of a jail sentence continues to increase when the sentence exceeds some modest threshold–perhaps the one year that denotes a felony.”). 79 The U.S. Bureau Prisons estimates the average cost to incarcerate a prisoner in a federal prison is approximately $31,000 per year. See Federal Register (March 9, 2015), https://www.federalregister.gov/ articles/2015/03/09/2015-05437/annual-determination-of-average-cost-of-incarceration. 80 Some jurisdictions may be precluded by restrictive interpretations of double jeopardy protections or ne bis in idem from subsequent individual prosecutions such that the exercise of negative comity is not only unnecessary but precluded by law, e.g., EU member states cannot bring multiple enforcement actions of completed criminal prosecutions. N. Bourtin, et al., Double Jeopardy: Coordinating Cross-Border Corruption
Although there is no record why the recommendations of the U.S. AMC never gained traction, one suspects that the question of which country’s interest is sufficiently important to warrant the mantle of leader is much more difficult than some would have liked to believe. Several problems are apparent. First, calculation of respective interests may not be straightforward. It may even be more difficult when an investigation is in its early phases, and the issues and potential areas of affect are not as yet patent. Second, the proposals seem to convey a benefit on the first competition authority to open an investigation. We know of no reason why the quickest to open a file is necessarily the best placed agency to take the leadership role – in fact, as additional facts come to light, the initiating authority may discover it has a comparatively lesser nexus to the conduct in question. Third, the suggestion that consultation will ameliorate the interests of the deferring jurisdictions strikes us as overly optimistic. And, lastly, one suspects that smaller countries may view the proposal – coming as it did from the United States – as a unilateral power grab by larger countries with more established competition regimes that may not have the best interests of the deferring jurisdictions at heart.
Does this suggest that the idea today will fail to gain support as it did a bit over ten years ago? We think not. We recognize the difficulties, but as the number of active enforcement agencies increase it is important that individual competition authorities consider the costs and benefits associated with their participation in international competition investigations. This appears to be part and parcel of both the Australian and Canadian competition enforcement agenda with no discernible adverse consequences to balance against the apparent husbandry of enforcement resources.
A “softer” approach
The authors acknowledge the difficulties associated with fully deferring one’s legally valid jurisdiction to investigate, and if necessary enforce, a nation’s competition laws. When national sovereignty and potential domestic economic impact are at stake, relinquishing – or even the
Investigations, 248 N.Y.L.J. 4 (2012). In many other jurisdictions, e.g., the U.S., the principles do not preclude separate sovereigns for subsequent prosecutions of the same persons for the same offenses. M. Morosin, Double Jeopardy and International Law: Obstacles to Formulating a General Principle, 64 Nordic J. of Int’l L. 261, 262-63 (1995).
appearance of relinquishing – self-protection can be exceptionally difficult substantively and politically. Additionally, the idea of a sudden shift from limited application of negative comity to an explicit global norm for applying the concept to real-life matters can be a daunting leap of faith. To the extent the international competition community is not yet ready to fully-embrace “best practices” to be applied in multi-jurisdictional competition investigations that might include Parma Ham-style deference, softer uses of negative comity may be appropriate. In particular, jurisdictions should consider utilizing the remedies approach often employed by the CCB. Conducting a full investigation and deferring only the remedial portion to a sister authority already taking action can hardly be described as weak enforcement. Rather, cooperating to ensure one’s interests are protected without forcing additional expenditure of agency or party resources is ideal. Additional and repetitive remedial action is unnecessary and the CCB has demonstrated that relying on a sister authority’s remedy in the appropriate circumstances can result in positive sum outcomes for all interested parties; a “me too” consent is a reasonable and achievable middle ground without authorities truly “standing down.”
Conclusion
With the competition law autostrada growing ever more crowded, and the need for competition authorities to pursue investigations and remedial actions as efficiently as possible, the international competition enforcement community ought to consider methods to alleviate the congestion. Use of negative comity principles long-discussed but never effectively implemented provide a practical solution to inefficient and divergent results while enhancing the efficiency and efficacy of competition enforcement for all authorities who choose to apply the concept. The international competition community has an opportunity to align on this common goal and seriously consider “best practices” in this area.