Important recent decisions by the EU and national courts – in Intel, iiyama and Power Cables – have set the stage for a potential increase in public enforcement and private litigation of business conduct which has effects on competition in the EU internal market despite not being implemented there. This paper, available here, addresses the potential changes to EU and national law wrought by these decisions, and considers the extent to which limiting principles may emerge to address potential conflicts of law, multiplicity of proceedings and double jeopardy. It is structured as follows:
Section 2 describes the evolution of EU law on the jurisdictional reach of its competition provisions.
The EU Courts have had to delimit the jurisdictional scope of EU law, typically in the context of judicial review of decisions of the European Commission (‘Commission’) in which the Commission had exercised enforcement jurisdiction over conduct whose territorial links to the EU were susceptible to challenge. Early on, the Court of Justice of the EU (‘CJEU’) held in the Béguelin case that Article 101 TFEU applied to an exclusivity agreement between a non-EU manufacturer and a distributor domiciled in the EU, insofar as that agreement is operative on the territory of the common market. This led to questions about what the court meant by saying that conduct had to be ‘operative’ in the market. In its judgment in Woodpulp I, the CJEU held that Article 101 TFEU captures cartels implemented in the EU (i.e. where cartel sales were made in the EU), irrespective of where the relevant agreement is entered into or where the relevant parties are based.
To this implementation test, an approach based on ‘qualified effects’ was adopted in Gencor, a judgment of the EU Court of First Instance (‘CFI’) (now the EU General Court) in the field of merger control. In examining the jurisdiction of the Commission to review a proposed concentration between undertakings with registered offices and operations outside of the EU, the CFI held that the application of the [EU Merger] Regulation was justified ‘when it is foreseeable that a proposed concentration will have an immediate and substantial effect in the [EU]’. Following Gencor, the Commission endorsed the qualified effects test not only for merger control but also for antitrust. However, it was not until the Intel decision that the qualified effects tests was endorsed by the CJEU or outside the scope of merger control – if only in general terms, and leaving open questions regarding the actual scope of the test. In a number of subsequent judgments regarding the power cables cartel (which are currently under appeal before the CJEU), the General Court affirmed that the qualified effects test can be applied to practices falling under Article 101 TFEU as an alternative to the implementation test.
Section 3 looks at the implications of these developments at the national level.
The main development at the national level has occurred in the context of follow on claims in England. In 2015, iiyama, a Japanese distributor of televisions and monitors, brought two follow-on actions for damages in the English High Court (‘HC’) against addressees (or affiliates of the addressees) of the Commission’s decisions in relation to the cathode ray tubes (‘CRT’) and liquid crystal displays (‘LCD’) cartels. CRTs and LCDs are components in televisions and computer monitors ultimately sold by iiyama group companies within the EU. The supply chain was essentially structured as follows: cartelised CRT and LCD products were first supplied to original equipment manufacturers, or OEMs, in Asia. These OEMs then incorporated these products into televisions and monitors and supplied them to an iiyama holding company in Asia. This company in turn supplied them to iiyama subsidiaries in the EU for onward sale and distribution within the EU. Iiyama claimed it had suffered losses as a result of the CRT and LCD cartels. The defendants challenged jurisdiction by arguing, inter alia, that any loss suffered by iiyama fell outside the territorial scope of Article 101 TFEU because there were no direct sales of cartelised CRT or LCD by the defendants into the EU.
The High Court came to different conclusions in the two cases, decided before Intel was decided. In the CRT proceedings, Mann J found that cartelised sales outside the EU did not constitute implementation within the EU under the Woodpulp I test, nor did they fulfil the immediacy criterion of the qualified effects test. In the LCD proceedings, Morgan J concluded that iiyama was able to claim losses suffered as a result of the implementation of the LCD cartel in the EU by buying outside the EU at a price greater than the price that would have been available if the cartel had not been implemented in the EU, but could not claim any alleged loss resulting from the implementation of the LCD cartel in Asia. On appeal – heard after the Intel judgment was issued –, the English Court of Appeal concluded that, particularly in light of Intel, the English Courts can, in principle, award damages for losses suffered as a result of indirect sales into the EU at prices inflated by reason of a worldwide cartel which was intended to produce substantial indirect effects on the EU internal market. Intel was said to provide support to two propositions: (i) the CJEU considered the qualified effects’ test correct in principle, and capable of application to different factual scenarios; (ii) in applying the qualified effects test, there is a need to look at the ‘offending conduct as a whole’ in respect of all three elements of the qualified effects test – immediacy, substantiality and foreseeability.
Section 4 considers the implications of these developments for the public and private enforcement of EU competition law.
The confirmation of the qualified effects test as a separate route to establishing jurisdiction lifted long-standing uncertainty over the application of the qualified effects test in non-merger contexts. At the same time, with expanded jurisdiction comes expanded risk of inconsistent enforcement. Extraterritoriality gives rise to multiple overlapping jurisdictions by public enforcers and courts in respect of the same conduct. With this come risks related to parallel proceedings, conflicts of law, divergent outcomes on the same facts, and potentially multiple fines and/or awards for damages in respect of the same conduct. In parallel, it is also possible that states will react to this by promulgating blocking statutes to nullify the effects in their jurisdictions of foreign judgments premised on extraterritoriality.
For these reasons, it is possible – and perhaps necessary – that public enforcers, as well as the EU and/or national courts, will take a more conservative approach on the extraterritorial reach of EU competition rules, in particular as regards cartels entirely implemented outside the EU. Another reason for restraint is the maintenance of close institutional and working relationships among public antitrust enforcers. Given the proliferation of enforcers around the world, the lack of harmonisation of legal standards and the absence of international dispute resolution mechanisms, any limitation of sovereignty by a public enforcer in favour of international comity is likely to be piecemeal and on a case-by-case basis, and subject to political constraints.
The adoption of the qualified effects test as a separate route to establishing EU jurisdiction over foreign anticompetitive conduct makes it all the more important for the EU Courts to set out some limiting principles to guide the Commission and other competition authorities in the EU in respect of their extraterritorial competition enforcement powers. Pending appeals against the General Court’s judgments in the Power Cables’ cartel present an opportunity for the CJEU to consider, for the first time, whether the qualified effects test goes beyond what is necessary to ensure that the Commission has adequate enforcement powers in respect of foreign cartel conduct. The Airfreight cases should also provide the courts with additional chances to develop the principles that govern the extraterritorial application of competition law by public enforcers. A particular topic in this regard is whether the Commission and national competition authorities should take into account circumstances that occur or have occurred outside their territorial jurisdiction. Another area for development is likely to be the extent to which the effect of a cartel on markets outside the EU is independent of its effects on markets within the EU – i.e. whether the Commission or a victim of cartel conduct must demonstrate that harm results from the international cartel’s effect on the EU’s internal market commerce (i.e. higher EU domestic prices), or if establishing an independent foreign effect (i.e. higher prices outside the EU) will suffice.
These developments will also influence private enforcement. The UK’s Court of Appeal’s ruling in iiyama is the first time that the English courts – and likely any forum of an EU Member State – has ruled that a national court may, in principle, award damages in respect of cartel conduct that has taken placed entirely outside the EU. The consequences are numerous. First, the use by cartelists of interlocutory actions seeking strike out or summary judgment in follow-on damages actions on the basis of absence of jurisdiction is likely to decrease, and the negotiating leverage of claimants in settlement negotiations will correspondingly increase. Second, iiyama reaffirms the attractiveness of the bringing antitrust damages claims, particularly in English courts, for competition claims relating to cartels with a weak EU nexus, e.g. those implemented entirely outside of the EU. Third, courts in other EU jurisdictions will now be under pressure to eventually follow the same approach as the UK Court of Appeal. Fourth, these developments may increase the already significant number of cases in which a number of actions are brought in various EU Member States at different levels of the supply chain in respect of the same cartel conduct.
An important concern in this regard is that a flexible jurisdictional threshold increases the risk of double recovery, or improper overcharge or loss calculations, in respect of foreign transactions. To address these risks, and the potentially material political risk associated with asserting jurisdiction over foreign conduct, courts are likely to develop or reinforce limiting principles to preclude claimants from abusing flexible approaches on jurisdiction over foreign cartel conduct. These can include setting high evidentiary thresholds regarding the effects of an anticompetitive conduct in the EU; requiring a robust analysis as to the presence of loss and causation; or narrowly interpreting the rulings on the Commission’s jurisdiction in Intel and Power Cables to exclude certain types of foreign conduct from the application of EU competition law, such as foreign price-fixing, with a view to discouraging frivolous claims based on remote territorial nexus. One can also expect national courts to make preliminary references to the ECJ on the largely unexplored issue of the interplay and overlap between the jurisdictional test – which requires proof of the effects an infringement has in the EU in respect of a given claimant – and the Damages Directive or national tort laws – which require a clear causal link between the infringement and the losses suffered by that claimant.
This paper takes a more practical approach than that of the papers reviewed above. A disadvantage of this is a lack of engagement with the theoretical and conceptual challenges raised by jurisdictional questions – e.g. there is virtually no mention of comity. The great advantage is that it provides a good overview of the likely practical consequences of the adoption, in general terms and without much detail, of a qualified effects tests by the European courts as regards public and private competition enforcement– and of the type of issues that are likely to have to be addressed by policy-makers, enforcers and courts in the near future.