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The Extraterritorial Application of the German Antitrust Laws

Published online by Cambridge University Press:  27 February 2017

David J. Gerber
David J. Gerber*
Affiliation:
IIT/Chicago-Kent College of Law
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Extract

The extraterritorial reach of national economic regulation, particularly of antitrust laws, is one of the most controversial topics in the international legal community, largely because that community has failed to develop jurisdictional principles that both accommodate the regulatory needs of regulating states and are discriminating enough to avoid impinging on the legitimate interests of other states. As a result, international conflicts related to the assertion of jurisdiction have greatly increased in both frequency and intensity.

Type
Research Article
Information
American Journal of International Law , Volume 77 , Issue 4 , October 1983 , pp. 756 - 783
Copyright
Copyright © American Society of International Law 1983

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References

1 See, e.g., Sarnie, , The Extraterritorial Enforcement of United States Antitrust Laws: The British Reaction, 16 Int’l Law. 313(1982)Google Scholar.

2 See, e.g., Timberlane v. Bank of America, 549 F.2d 597 (9th Cir. 1976); Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979); and Dominicus Americana Bohio v. Gulf & Western Indus. Inc., 473 F. Supp. 680 (S.D.N.Y. 1979).

3 See, e.g., Lowe, , Blocking Extraterritorial Jurisdiction: The British Protection of Trading Interests Act, 75 AJIL 257 (1981)CrossRefGoogle Scholar; Toms, , The French Response to the Extraterritorial Application of United States Antitrust Laws, 15 Int’l Law. 585 (1981)Google Scholar; Herzog, , The 1980 French Law on Documents and Information, 75 AJIL 382 (1981)CrossRefGoogle Scholar.

4 Not to be forgotten here are the needs of practitioners who are, or should be, aware of the practical importance of understanding the reach of German antitrust law. Any company that participates in an acquisition or joint venture involving either a German company or a company that is doing business in the German market may find itself affected by German antitrust rules.

5 The issue of the extraterritorial application of German antitrust law is both substantively and procedurally separate and distinct from the application of the antitrust law of the European Community. The provisions of the Treaty of Rome, however, have been interpreted to require that the actions of national cartel authorities may “not jeopardize the uniform application throughout the Common Market of the Community cartel rule.” Wilhelm v. Bundeskartellamt, 1969 ECR 1, [1969–1970 Transfer Binder] Common Mkt. Rep. (CCH) ¶8056, at 7867. See also Hawk, B., United States, Common Market and International Antitrust 476 (1979)Google Scholar.

6 For a detailed description of German antitrust law in English, see Stockmann, K. & Strauch, V., Federal Republic of Germany, 5 World Law of Competition (Kalinowski, J. ed. 1981)Google Scholar. For a leading German textbook, see Rittner, F., Wirtschaftsrecht (1979)Google Scholar.

7 Gesetz gegen Wettbewerbsbeschränkungen, 1957 Bundesgesetzblatt [BGB1] I 1081 (July 27) [hereinafter cited as GWB]. For a useful German-English presentation of the text of the statute as well as a short commentary, see Riesenkampff, A. & Gres, J. , Law Against Restraints of Competition (1977, Supp. 1980)Google Scholar.

8 Private suits are permitted in cases where there has been a violation of a provision that is intended to provide so-called individual protection (Individualschutz)—i.e., protection of individual competitors rather than protection of the institution of competition itself. See GWB §35.

9 Many of the recent American cases involving extraterritorial application of the antitrust laws have been private suits. See Panel Discussion on Antitrust and International Trade, 49 Antitrust LJ. 1217, 1221 (1980), and cases cited.

10 See generally Rittner, , Das Ermessen der Kartellbehörde, in Festschrift für Heinz Kaufmann 307 (1972)Google Scholar.

11 See generally Ongman, , Be No Longer a Chaos: Constructing a Normative Theory of the Sherman Act’s Extraterritorial Scope, 71 Nw. U.L. Rev. 733, 735 (1977)Google Scholar.

12 148 F.2d 416 (2d Cir. 1945).

13 Id. at 444.

14 See generally Yntema, , The Comity Doctrine, 65 Mich. L. Rev. 9 (1966)CrossRefGoogle Scholar.

15 See Maier, , Extraterritorial Jurisdiction at a Crossroads: An Intersection between Public and Private International Law, 76 AJIL 280 (1982)CrossRefGoogle Scholar.

16 For a comparison, see Schwartz, I., Deutsches Internationales Kartellrecht 154–57 (1962 Google Scholar).

17 For text, see text accompanying note 22 infra.

18 See Grundgesetz art. 25 (W. Ger.).

19 See generally Kegel, G., Internationales Privatrecht, ch. 22 (4th ed. 1977)Google Scholar; and Schröder, J., Internationale Zuständigkeit (1971)Google Scholar.

20 See generally Heldrich, A., Internationale Zustandigkeit und Anwendbares Recht (1969)CrossRefGoogle Scholar.

21 The court must also have “jurisdiction” (Gerichtsbarkeit). In the German view, however, jurisdiction is an accessory of sovereignty and exists generally, except as limited by public international law. Thus, it should not be confused with American concepts of jurisdiction. See generally I. Schwartz, supra note 16, at 138.

22 The legislative history is reviewed in id. at 17–21.

23 Bundestagsdrucksache No. 3644, at 40 (June 28, 1957) [this quotation and all others of German sources were translated by the author].

24 Ibid.

25 Bunte, Völkerrechtliche Fragen bet Auslandszusammenscklüssen, 1981 Wirtschaft und Wettbewerb [WuW] 605, 606.

26 Huber, Auswirkungstheorie und extraterritoriale Rechtsanwendung im internationalen Kartellrecht, 10 Zeitschriet für Unternehmens und Gesellschaftsrecht509, 511 (1981).

27 To be sure, significant international conflicts related to the extraterritorial application of antitrust laws had begun to occur earlier in the postwar period. See Atwood, J. & Brewster, K., Antitrust and American Business Abroad §4.13 (1981)Google Scholar.

28 See generally Markert, , Die Anwendung des GWB auf internationale Wettbewerbsbeschränkungen, in Zehn Jahre Bundeskartellamt 205 (1968)Google Scholar.

29 FCO, Sept. 10, 1971, WuW/E BKartA 1361 (Fernost-Schiffahrtskonferenzen).

30 See Immenga, U. & Mestmäcker, E., Kommentar zum GWB 1904–09 (1982)Google Scholar.

31 Rehbinder, E., aExtraterritoriale Wirkungen des Deutschen Kartellrechts (1965)Google Scholar; and I. Schwartz, supra note 16.

32 See, e.g., I. Schwartz, supra note 16, at 32.

33 BGH, July 12, 1973, WuW/E BGH 1276 (Ölfeldrohre) [hereinafter cited as Ölfeldrohre].

34 The decision was overturned in the 1980 revisions of the GWB, by which the GWB was expressly made applicable to export cartels. See Viertes Gesetz zur Änderung des Gesetzes gegen Wettbewerbsbeschränkungen, 1980 BGB1.I 458 (April 26). See also Grauel, , Zur Novellierung des §98Abs.2 GWB betr. Exportkartelle, 1981 WuW 763 Google Scholar.

35 Ölfeldrohre, supra note 33, at 1277.

36 Id. at 1278–79.

37 Zweites Gesetz zur Änderung des Gesetzes gegen Wettbewerbsbeschrankungen, 1973 BGB1. I 917 (Aug. 3).

38 See supra note 34.

39 See, e.g., Extraterritorial Rechtsanwendung unter Berücksichtigung der Entwicklung im U.S. Antitrustrecht, 1982 WuW 22.

40 For text, see infra note 54.

41 In order to alleviate unnecessary hardship in premerger notification cases where it is obvious that the requirements of §24 will not be met, the Minister of Economics on May 30, 1980, ordered the FCO to respond to notification in such cases “without delay.” Bundesanzeiger No. 103 (June 7, 1980), reprinted in 1980 WuW 591.

42 The concept of market domination is defined in detail in §22 of the GWB.

43 A losing party may also request “special permission” from the Minister of Economics, who may allow a merger where “the restraint of competition is outweighed by macroeconomic advantages of the merger or the merger is justified by a transcending public interest.” GWB §24(3).

44 Since the statute specifically refers to the effects principle as the relevant conflict-of-laws concept, the nationality principle is not considered a sufficient basis of jurisdiction. U. Immenga & E. Mestmäcker, supra note 30, at 1878.

45 FCO, Tätigkeitsbericht (Annual Report) 45 (1975). For text, see also Kleinmann, W. & Bechtold, R., Kommentar zur Fusionskontrolle 467 (1977)Google Scholar. For a discussion of merger control in Germany and an English translation of the guidelines, see Markert, , Merger Control in Western Europe, in Competition in International Business 293 and 332 ( Schachter, O. & Hellawell, R. eds. 1981)Google Scholar.

46 Critics of the guidelines have attacked this assumption, arguing that the merger should not itself be considered a restraint of competition. See generally Huber, supra note 26.

47 If, for purposes of applying §98(2) to the reporting requirement of §23, a “restraint of competition” required proof of actual anticompetitive effects, far fewer mergers would be required to be reported, and the task of the FCO would be far more difficult.

48 For a statement of the present position of the FCO, see Niederleithinger, , Zur Problematik einer Praeventwkontrolle von Auslandszusammenschlüssen, 1981 WuW 469 Google Scholar.

49 See, e.g., Harms, , Zusammenschlusskontrolle, in Gemeinschaftskommentar 60 (4th ed. 1981)Google Scholar.

50 BGH, May 29, 1979, WuW/E BGH 1613 (Organische Pigmente) [hereinafter cited as Organische Pigmente].

51 Id. at 1614.

52 Id. at 1615.

53 See generally U. Immenga & E. Mestmäcker, supra note 30, at 1887–94 and 1911–15.

54 The text reads, in relevant part, as follows:

[§23] (1) The merger of enterprises shall immediately be reported to the Federal Cartel Office, if 1. the merger results in or increases a market share of at least 20% within the entire territory in which this Law applies or within a major portion thereof, or if one of the participating enterprises has a market share of at least 20% in another market, or

2. the participating enterprises combined had at any point during the fiscal year preceding the merger at least 10,000 employees during such period or combined sales of at least 500 million DM.

[§24] Notification of a proposed merger shall be given to the Federal Cartel Office if at least two of the participating enterprises had sales of DM 1 billion or more during the preceding fiscal year. . . .

55 U. Immenga & E. Mestmäcker, supra note 30, at 1912.

56 Allowing only domestic size data to be used in applying these tests would significantly restrict the scope of those provisions, but critics of the FCO argue that this would more fully reflect the GWB’s “protective purpose” guidelines. See, e.g., Harms, supra note 49, at 59–61.

57 U. Immenga & E. Mestmäcker, supra note 30, at 1912.

58 Id. at 1914.

59 But see Meessen, K., Völkerrechtliche Grundsätze des Internationale N Kartellrechts (1975)Google Scholar, discussed infra note 65.

60 See Kersten, , Zur Anwendbarkeit des GWB auf ausländische Unternehmenszusammenschlüsse mit Inlandswirkungen, 1979 WuW 721 Google Scholar.

61 Organische Pigmente, supra note 50, at 1615.

62 The fact that there was a domestic enterprise involved in the merger put the court in the position of having little incentive to look toward international ramifications. Its basic position was that “there is no legal basis to remove the reporting obligation of the domestic enterprise merely because the interests of the [acquiring foreign enterprise], which it indirectly controls, are affected.” Ibid.

65 See, e.g., Autenrieth, , Die Anzeigepflicht beim Zusammenschluss ausländischer Unternehmen, 1980 Recht der Internationalen Wirtschaft 820 Google Scholar.

64 See supra note 3.

65 The intellectual background for this change in position was the excellent study by Professor Karl Matthias Meessen published in 1975. Meessen confirmed that the effects principle remained a valid basis for jurisdiction under international law, and he made several important suggestions with regard to its application. He also discussed the external restraints issue and laid the foundation for subsequent case law developments with regard to it. See K. Meessen, supra note 59, and text accompanying note 72 infra.

66 KG, Nov. 26, 1980, WuW/E OLG 2411 (Synthetischer Kautschuk I, 1980).

67 Id. at 2417.

68 KG, Nov. 26, 1980, WuW/E OLG 2419 (Synthetischer Kautschuk II, 1980).

69 Id. at 2420.

70 Id. at 2420–21.

71 The case has been widely discussed in the legal literature. See, e.g., Ebenroth, & Autenrieth, , Die Fusionkontrolle beim Zusammenshcluss ausländischer Unternehmen unter indirekter Beteiligung ernes inländischen Unternehmens, Der Betriebs-Berater, Jan. 10, 1981, at 16 Google Scholar.

72 See K. Meessen, supra note 59, ch. 5.

73 FCO, Feb. 24,1982, WuW/E BKartA 1943 (Morris/Rothmans) [hereinafter cited as Morris/ Rothmans].

74 See, e.g., N.Y. Times, March 5, 1982, at D4.

75 The FCO officially informed the Governments of the United States, the United Kingdom, and South Africa that it was considering taking action against the merger and gave them an opportunity to be heard. The United States did not respond to this opportunity. The Government of the United Kingdom held consultations with the FCO, and, on the basis of certain assurances from the FCO, it declared that it had no objection to the issuance of a prohibition order. The South African Government objected to the proceedings. It argued that the actions of the FCO would violate the international law principle of nonintervention because they would violate the rights of South African nationals to dispose of their foreign assets.

76 Morris/Rothmans, supra note 73, at 1953.

77 The external restraints concepts in the FCO’s test were similar to those used by the KG in Bayer I Firestone. Both the FCO and the KG utilized the nonintervention principle, but the FCO utilized the international law abuse of jurisdiction principle in place of the reasonable forum contacts principle mentioned in Bayer I Firestone. This change represented a clear improvement because the abuse of jurisdiction principle is directly related to the external restraints issue, whereas the reasonable forum contacts concept is not.

In addition, the FCO significantly developed the content of the respective principles. The KG had only mentioned them in Bayer / Firestone.

78 Morris/Rothmans, supra note 73, at 1953.

79 Id. at 1954.

80 Id. at 1953–54.

81 Id. at 1954.

82 See K. Meessen, supra note 59, at 203.

83 Morris/Rothmans, supra note 73, at 1955.

84 Id. at 1954.

85 See, e.g., Meessen, , Zusammenschlusskontrolle in auslandsbezogenen Sachverhalten, 143 Zeitschrift für das Gesamte Handelsrecht 273, 282 (1979)Google Scholar.

86 Defendants have appealed, but officials of the European Community are reported to be considering taking action in the case, in which event the German courts would presumably not have the opportunity to review the FCO’s decision. See supra note 5.

87 See cases cited supra note 2.

88 But see National Bank of Canada v. Interbank Card Ass’n, 666 F.2d 6 (2d Cir. 1981), which represents an effort to sharpen the analytical structure of American law by requiring that the relevant effects also be anticompetitive.

89 E.g., Timberlane v. Bank of America, 549 F.2d 597 (9th Cir. 1976).

90 Tentative Draft No. 2 of the Restatement of Foreign Relations Law (Revised), infra note 97, seeks to place balancing issues in a legal rather than a political and discretionary context. The draft is summarized in 75 AJIL 987 (1981).

91 See Maier, supra note 15, at 281.

92 The opinions in Timberlane and in other cases following it have been obscure on the issue of how the balancing test relates to the issue of subject matter jurisdiction. The analysis appears to be, however, that the effects test controls the right to exercise jurisdiction and the balancing test relates to whether we should exercise that jurisdiction.

93 A recent list of factors is contained in Mannington Mills v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979).

94 See generally Meng, , Neuere Entwiddungen im Streit urn die Jurisdiktionshoheit der Staaten im Bereich der Wettbewerbsbeschränkungen, 41 Zeitschrift für Ausländisches öffentliches Recht und Völkerrecht 469 (1981)Google Scholar.

95 K. Meessen, supra note 59, at 203.

96 Id. at 205.

97 The draft Restatement of Foreign Relations Law (1981) seeks to meet this need by concluding that “reasonableness” is a principle of international law and by specifying the various considerations and the relevant circumstances that need to be weighed in determining whether an exercise of jurisdiction is unreasonable as a matter of law. See Restatement of the Foreign Relations Law of The United States (Revised) §403, Comment and Reporters’ Notes (Tent. Draft No. 2, 1981).

98 This is to suggest neither that the German approach here outlined has been fully accepted in Germany nor that it is without weaknesses. See, e.g., Harms, supra note 49.

Indeed, in regard to the specific issue of premerger notification, American law has achieved a more effective solution to the problems raised. Not coincidentally, however, this is an area in which American law relies not on case law principles, but on recent statutory developments. See 15U.S.C. §18A(1981).