NEW FRONTIERS OF ANTITRUST 2016

Interview with Douglas Ginsburg

Concurrences Review will organise the seventh edition of the New Frontiers of Antitrust Conference in Paris on 13 June 2016. Douglas Ginsburg (Judge, US Court of Appeals for the District of Columbia) was interviewed by Jorge Padilla (Compass Lexecon Europe). They will participate in the panel "Is Territoriality Still Meaningful?".

To see the full programm, please visit the event website.

Jorge Padilla: When and why is effective competition enforcement at a national level likely to require extra territorial intervention?

Douglas Ginsburg: Any time a product’s supply chain spans multiple jurisdictions, most commonly in manufacturing and commodities markets, there is a risk that the effect of anticompetitive conduct will be felt outside the jurisdiction in which the conduct occurred. Consider a market in which Product X (LCD screen) is manufactured in Country A (Korea) and sold in Country B (United States) at the cartel price. In that case, Country A’s antitrust enforcers have inadequate incentives to punish the anticompetitive conduct because the harm is felt principally in Country B. Meanwhile, an external conspiracy imposes an even greater social cost upon Country B than would a purely domestic conspiracy; Country B’s consumer surplus falls due to the higher price, as it would from any conspiracy, but instead of providing a partial offset, the additional producer surplus is realized in Country A. Strictly territorial enforcement therefore fails adequately to protect consumers in the globalized economy. Each country’s enforcers should protect that country’s consumers from significant effects of anticompetitive conduct, wherever it occurs.

The “effects” test is also an important limitation on enforcement authority, however. In the above example, a Country C, whose consumers do not buy Product X and therefore are not harmed by the conspiracy, has no legitimate justification for enforcing against the conspiracy in Country A, even if Country C has some territorial nexus to Product X (e.g., Product X is assembled in Country C and shipped from there to Country B).

Jorge Padilla: What are the costs, if any, of extra territorial competition enforcement?

Douglas Ginsburg: With so many national competition agencies around the world, the system is highly fragmented. Country B must be empowered to protect its consumers from the conspiracy in Country A, but so must Countries D, E, and F. When multiple jurisdictions take action against the same conduct, they may impose redundant fines and compliance costs upon the violator and they multiply enforcement costs. Those wasted resources could be saved if a supranational organization were empowered to enforce on behalf of participating countries and remit fines and damages proportionately. With today’s divergent legal standards and formulae for calculating damages, however, comprehensive international coordination remains a long way off.

Jorge Padilla: Is policy coordination even more important when the actions of national competition agencies can condition the way companies compete outside their jurisdictions?

Douglas Ginsburg: Coordination is particularly important with respect to mergers. Navigating a complex web of merger control regimes is a heavy burden that may deter otherwise socially beneficial mergers. At the very least, notification procedures should be streamlined and standardized.

Coordination of substantive rules, particularly with respect to anticompetitive conduct, is another matter. A sovereign country is entitled to set the rules of play for companies that want to do business within its borders. If a country has an essential facilities doctrine or a per se prohibition of vertical agreements on price, though I think it is improvident, that is its right. In response, a company may choose to play by those rules or, if the cost of complying would render that market unprofitable, to stay out of it. Companies vote with their investment dollars, which serves as a competitive constraint of sorts against the imposition of oppressive competition as well as other laws.