Chinese Vitamins – Extraterritoriality and State Compulsion

This is a U.S. Supreme Court decision in the ‘Chinese Vitamins case’ (Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd, 585 U. S. [to be determined] (2018), available here). As to the facts of the case, in 2005 Animal Science sued Hebei Welcome. Animal Science manufactures livestock supplements, in which it uses Vitamin C. It alleged that Hebei and other Chinese manufacturers had fixed the prices of the Vitamin C that they sold to the United States. The Chinese sellers moved to dismiss the complaint on the ground that Chinese law required them to fix the price and quantity of vitamin C exports, thus shielding them from liability under U. S. antitrust law by the act of state doctrine, the foreign sovereign compulsion doctrine, and under principles of international comity. The Ministry of Commerce of the People’s Republic of China (the ‘Ministry’) filed an amicus brief explaining that it is the administrative authority authorized to regulate foreign trade,…

When is a rebate prima facie anticompetitive? Case C‑413/14 P Intel v Commission ECLI:EU:C:2017:632

This piece reviews the Court of Justice’s decision by the Grand Chamber in Intel (Case C‑413/14 P Intel v Commission ECLI:EU:C:2017:632), which can be found at http://curia.europa.eu/juris/liste.jsf?num=C-413/14. The facts of the case are relatively straightforward. Intel sells x86 CPUs processors. The x86 architecture is a standard designed by Intel for its CPUs, and can run both Windows and Linux operating systems. The European Commission found that Intel had engaged in two abusive conducts concerning these processers intended to exclude a competitor, AMD, from the market for x86 CPUs; and imposed a EUR 1.06 billion fine. The first conduct consisted in the grant of rebates to four original equipment manufacturers (‘OEMs’), namely Dell, Lenovo, HP and NEC. These rebates were conditional on these OEMs purchasing all or almost all of their x86 CPUs from Intel. The second conduct consisted in making payments to OEMs so that they would delay, cancel or restrict the marketing of certain products equipped with AMD CPUs….

Luis Ortiz Blanco and Jose Luis Azofra Parrondo ‘The Intel Case: Issues of Economic Analysis, Comity and Procedural Fairness’

According to the authors of this short pirce – which can be found here – the Intel judgment addresses three main issues: (i) the role that economic analysis – and the as-efficient-competitor test – should play in the context of abuses of dominant position in general, and loyalty rebates in particular; (ii) the jurisdiction of the European Commission and international comity; and (iii) procedural fairness and the rights of the defence. Looking at each in turn: The As-Efficient-Competitor (AEC) Test – This part of the paper describes the facts of the case and outlines the Court’s reasoning. For the authors, the main doubt concerning this judgment is: ‘whether the Court has willingly or unwillingly opened the door to an obligation to drive thorough economic analysis in all abuse-related cases without exception’. The Commission decided – and the General Court agreed – that Intel’s rebates were by their very nature capable of restricting competition. This was based on the EU Courts’…

Eleanor Fox “China, Export Cartels and Vitamin C: America Second?”

This paper, which can be found here, seems to argue that framing the issue in this case – which was described in the post below – as a matter of international comity misunderstands the matters at stake. The question is first, one of jurisdiction under the effects’ doctrine over a cartel implemented abroad, and, following this, about whether the US rules on the foreign sovereign compulsion defence apply. The correct interpretation of Chinese law may be relevant, but only in certain circumstances and only in the course of the normal application of US rules. She begins by pointing out that this is a case of a naked cartel, and that China’s sole role in it is to intervene before US courts in order to free its manufacturers from the consequences of violating the clear and well-known rule of US law forbidding price fixing. As such, the matter is not merely whether China alone can say what Chinese law is, which is…

Danny Crane “The Chinese Vitamins Case: Who Decides Chinese Law?’

This paper – which can be read here – begins by summarising the background to the case. In short, since the 1970s, when China began its transition to a market economy, the Chinese government has maintained export controls in the Vitamin C market in order to maintain a competitive edge over producers from other countries. In part due to the regulatory activities of the Chinese government, Chinese companies control about 60% of the worldwide Vitamin C market. A class of vitamins’ purchasers alleged that the defendant Chinese vitamins companies conspired to fix the price of vitamin C sold to U.S. companies, in violation of Section 1 of the Sherman Act. Rather than contest the facts, the defendants enlisted the aid of the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) which submitted an amicus curiae brief in the district court asserting that defendants’ output reduction agreements were directed by MOFCOM itself and were mandatory. Two main questions arose…

Marek Martyniszyn ‘Foreign State’s Entanglement in Anticompetitive Conduct’ (2017) 40 World Competition, Issue 2, pp. 299–321

This paper – which can be found here – argues that legal scholarship on the extraterritoriality of competition law examines this phenomenon predominantly through two lenses. The first strand of research focuses on defences and doctrines that remove a situation from competition law control due to State involvement (such as foreign State compulsion or the act of state doctrine). The second strand analyses the applicability of domestic competition laws to anticompetitive conduct by state-owned firms. The article seeks to bring these two strands together and to develop a typology of State’s entanglement in conduct causing competitive harm abroad. He holds that competitive harm arising from commercial practices should be subject to competition law regardless of the character of the party involved (i.e. be it a firm or a foreign State), unless there are overriding reasons justifying abstention such as national security or the strategic interests of the State that is exercising jurisdiction over an anticompetitive practice. The paper is structured…

Competition Appeal Tribunal – Written evidence (CMP0042) to the House of Lords in the context of the House of Lord’s inquiry concerning Brexit and competition law and policy

I am linking to this document here  because it addresses the appropriate jurisdictional scope of UK competition law, and how one of the unintended (unconsidered?) effects of Brexit is to increase the exposure of UK markets to foreign conduct with cross-border effects. This is a consequence of the different jurisdictional tests that the UK and the EU apply as regards competition law. As noted in the submission, the UK prohibition against anticompetitive collusive practices: “applies only if the agreement, decision or practice is, or is intended to be, implemented in the United Kingdom (…)There is no corresponding provision in the TFEU as regards Article 101. Moreover, [EU law adopts] a “qualified effects test” as a basis of jurisdiction to apply EU antitrust law: i.e. when it is foreseeable that the multilateral or unilateral conduct in question will have an immediate and substantial effect in the EU.  As the Court explained, this has the objective of preventing conduct which, while not…

Filomena Garcia, Jose Manuel Paz y Mino, Gustavo Torrens ‘Of Course Collusion Should be Prosecuted. But Maybe… (Or the case for international antitrust agreements)’ (2017) CPI

This paper – which can be found here – was written by a number of economists at University of Indiana, and it looks at the incentives of competition authorities to pursue international cartels. A benevolent competition authority with a mandate to maximize national welfare might prefer to delay the prosecution of domestic firms when those firms will benefit from anticompetitive conduct at the expense of foreign consumers. To demonstrate this, the paper develops a simple two-country model of collusion and antitrust policy where there is an industry comprised of two multinational firms that operate in countries with competition agencies. In a first variant of this model, the competition agency of the country where the effects of an anticompetitive practice are felt (country B) will discover this practice only if the agency of the country where the companies are based (country A) starts an investigation. The authors show that country B always prosecutes the colluding firms as soon as there is…

Pierre Huizing ‘Fining Foreign Effects: A New Frontier of Extraterritorial Cartel Enforcement in Europe?’ (2017) World Competition 40(3) 365

This paper – which can be found here – asks whether national competition agencies in Europe (NCAs) have the power to sanction anticompetitive activity taking place outside their territory. The question went unaddressed in Regulation 1/2003, which set up the system of decentralized competition enforcement currently in place in the EU. According to this paper, the members of the European Competition Network (ECN) used to proceed on the basis of a common understanding that each authority would only pursue cross-border cartels for their domestic effects – with the Commission pursuing EU-wide cartels. However, in recent cases some NCAs have departed from this practice and imposed fines that took into account the EU-wide effects of cartels. This article reviews the NCA’s practice as regards the sanctioning of extra-territorial cartel activity, and the academic and political debate about whether this practice is legitimate and appropriate. It does so as follows: Section 2 reviews the enforcement practices of a number of NCAs. It…

Doug Ginsburg and Joshua Hazan ‘Extraterritoriality and Intra-territoriality in US Antitrust Law’ Concurrences No. 3 – 2016, pp. 32

This short paper – which can be found here – looks at case law on the US Foreign Trade Antitrust Improvements Act (FTAIA), which regulates the extra-territorial effects of US antitrust law. A first section provides an overview of how US law has dealt with the issue of extraterritoriality of its antitrust law over time. It notes that: ‘The antitrust laws protect U.S. consumers from foreign and domestic conduct alike; since Judge Hand’s landmark opinion in Alcoa, the U.S. antitrust laws have applied extraterritorially when foreign conduct has a domestic effect. ’ However, effects-based jurisdictional tests are quite broad, and can catch in their net many foreign conducts with limited impact on the US. As a result: ‘In the 1970s, the exercise of jurisdiction by U.S. courts over foreign defendants in antitrust cases caused a good deal of international tension; some of the nation’s major trading partners, including Canada, France, and the United Kingdom, passed “blocking” and “clawback” statutes to…