Competition Laws in the U.S. and EU Research

Introduction

The European Union and the United States have established legal regimes that regulate competition. The two major jurisdictions have enacted legislation and regulations on merger control to protect their markets from practices that would restrict competition. The legal regime for antitrust laws in the U.S. comprises of provisions of the Clayton Act, The Sherman ActAnd the Federal Trade Commission Act. The primary legal basis for competition law for the EU is Council Regulation (EC) No 139 of 2004. Competition laws in the U.S. and EU bear similarities and significant discrepancies in their respective provisions.

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As a matter of comparative jurisprudence, this paper compares and contrasts the antitrust and competition laws in the U.S. and the EU. The comparative analysis appears in various dimensions including the rationale behind competition laws, investigations and prosecutorial procedures, pre-merger filings and notifications, and decisions approving mergers. The paper also distinguishes the two regimes regarding provisions for confidentiality agreements, enforcement of mergers, arbitration procedures, the disclosure of information and the welfare standards.

Similarities between the U.S. Antitrust Law and E.U Competition Law on Merger ControlRationalizationThe Substantive TestThe clearance or disqualification of mergers in both the U.S. and EU are informed by similar principles. Both jurisdictions apply the substantive test to assess the feasibility of a merger. The Clayton Act prohibits mergers that tend to "lessen competition" or whose result would be the creation of a monopoly. Similarly, Council Regulation 139 of 2004 renders any concentration that significantly hinders effective competition, incompatible with the common market; hence forbidden.

The overall objective of the two legal regimes is to eliminate anticompetitive tendencies. The Council Regulation weighs the need to maintain effective competition within the common market, the financial power of the undertakings involved, and the alternatives available to other suppliers and users to access the supplies or the market. Hence, the objective of the EU is to eliminate any barriers that shall limit the supply of goods and services to the common market or limit their demand trends. Similarly, both the Horizontal and Vertical Merger Guidelines of the U.S. weighs mergers by ensuring their efficiencies are merger-specific and verifiable in addition to being devoid of anticompetitive reductions.

Pre-requisites and Preconditions

Mergers are subject to various thresholds before they can attract the notification obligations. The scope of the EU dimension takes to account multiple factors including market share thresholds and the turnover thresholds set by the EU. The merit for the turnover thresholds is two-fold. The first alternative considers whether the merging firms bear a combined worldwide turnover of over EUR 5000 million. Alternatively, the first alternative may require the merging firms to have an EU turnover of over EUR 250 million for each of at least two firms in the merger. The Second alternative considers whether all the merging firms have a worldwide turnover of at least EUR 2 500 million or an EU-wide turnover of at least EUR 100 million for each of at least two firms in the merger. The second alternative sets other two thresholds whose turnovers are limited within at least three the Member States.

The EU also sets out market thresholds for merging firms that may not be operating within related markets. The specified market share limit is at least 15% of the firms' combined market shares on the markets they compete. Otherwise, lower market shares would not warrant notification to the EU. Instead, the merger would only be subjected to simplified procedures that involve routine checks.

Similarly, the U.S. jurisdiction, the legal regimes also set out thresholds that must be met for premerger notification obligations to accrue. The limits are divided into three tests; the commerce, size-of-transaction test, the size-of-persons tests. Under the commerce test, one party in the merger must be engaged in "interstate United States commerce." The size-of-transaction test sets out an aggregate amount of voting securities and bears specific non-corporate interests. Some of the measures for the size of transactions vary with the nature of the merger. The threshold depends on whether voting securities were acquired among other non-corporate interests or assets. According to the size-of-persons test, the size of the merger transaction must be worth at least $80.8 million, not exceeding $323 million. The criteria also require that at least one of the firms or persons involved in the transaction must record at least $16.2 million in annual net sales. This threshold is also subject to adjustment from time to time.

Similar to the position in the EU, merger transactions in the U.S. that do not meet the three jurisdictional tests may be exempted from premerger filing obligations. The operations that shall be subjected to such commitments include the acquisition of cash, goods, bonds, mortgages, and purchases with solely intended for investment. However, the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) may invoke their general investigative powers and proceed with investigations.

Cooperation and Joint Investigations

Since the 1991 EU/US Competition Cooperation Agreement, the competition authorities from the two jurisdictions convene regular bilateral meetings to deliberate on contemporary issues surrounding their policies. The agreement requires the competition authorities of one of the parties to give notification of cases to the other. A notification will suffice if a case handled by one of the authorities bears essential interests of the other party. Authorities from both jurisdictions shall exchange information regarding matters on implementation of their respective rules. Both parties in the agreement agree to be sensitive to interests of the other party when enforcing their competition policies as a matter of traditional comity as well. The U.S. and EU authorities have historically been involved in joint intergovernmental consultations over foreign-to-foreign mergers. For instance, the Boeing/McDonnell Merger that warranted for cooperation between the EU Commission and the Federal Trade Commission to safeguard the interest of the European Union in the civil aircraft market.

Despite semblance of competition policies and facts, joint investigations may result in different outcomes. Owing to the variation in the competitive conditions and different product markets, the findings and decisions from investigations may vary. Such flexibility from these policy regimes may resolve various disputes involved in mergers with foreign elements such as transatlantic mergers. The competition agencies in the two jurisdictions have also initiate intergovernmental contacts to eliminate similar policy disagreements. Both jurisdictions engage in bilateral consultations on specific policy matters to avoid similar policy disagreements. Such intergovernmental contacts demonstrate the level of interdependency between the two legal regimes that have previously been perceived to be independent. The respective Authorities from both jurisdictions have also sponsored legal education programs to find a consensus between competition policies of the two major jurisdictions.

Due Diligence and Disclosure of InformationParties to a merger are required to share information among them during both the initial and closing stages of the transaction. However, various competition concerns arise regarding the nature and impact of such information exchange. While prohibiting anti-competitive concentrations, the EU and U.S. have policies controlling information exchange during mergers. For instance, the EU competition law forbids sharing of competitively sensitive information (CSI) between parties. The regulations against CSI under the EU regime applies whether the exchange is one-way non-reciprocal or disclosure of information on a single occasion. The Commission shall impose fines in the event parties breach this regulation. The man competition concerns that the EU intends to protect in its jurisdiction include detrimental collusive outcomes and anticompetitive foreclosures. Regarding collusive outcomes, the EU competition law protects against the effects of information sharing that would lead to coordination of the parties with restrictive effects to competition. The Commission also protects third parties against anticompetitive foreclosures resulting from likely to alter prices of components in a market downstream.Thus, parties in the EU jurisdiction are restricted from disclosing to each other such information as may compromise strategic uncertainty.

Similarly, the U.S. Antitrust regime also regulates disclosure of information between parties to the extent that such discovery may raise competition concerns. The U.S. regime is keen to protect the interests of consumers about collusion that may harm competition. Disclosure of CSIs in the U.S. is regulated by the Federal Trade Commission. The FTC Guidelines weigh the nature of the information being shared and the likelihood of such disclosure raising competition concerns. For instance, information that pertains price, cost, output, and strategic planning may result in anticompetitive collaboration between the parties. The U. S. regime exceptionally provides for instances that information exchange between parties may be absolved from scrutiny. Whenever the parties enjoin a third party to preside over the exchange, such a transaction may not be challenged on the grounds of antitrust concerns. The commission will also exempt disclosure in which each party does not disclose more than 25% of the "weight" of data shared. Thus, the U.S., just as the EU regime, guards against anticompetitive harm occasioned against consumers as a result of anticompetitive data exchange.

Appeals and Judicial ReviewWithin the EU jurisdiction, decisions regarding approval of mergers and any procedural conduct may be challenged through judicial review. These proceedings may be filed before the General Court and appealed to the Court of Justice. This procedure is replicated in the American jurisdiction where the decisions of the agencies are open to challenge in the federal courts.

Discrepancies between the U.S. Antitrust Law and E.U Competition LawInvestigation and Prosecution of legal issues Prosecution of Legal IssuesInvestigationUnder EU merger control provisions, investigations are carried out in two phases. The first phase of the investigation is the one that precedes lodging of notification of merger. The Commission takes 25 worki...