Wednesday, February 4, 2009
Posted by D. Daniel Sokol
Michal Gal of the University of Haifa Law School writes on Extra-territorial Application of Antitrust – The Case of a Small Economy (Israel).
ABSTRACT: International trade has changed some of the challenges faced by antitrust authorities: it has added an international dimension. Under the current system of international antitrust, the backbone of enforcement is unilateral: each country applies its own tools to deal with international antitrust issues within the constraints imposed upon it by public international law. This enforcement pattern is sometimes coupled with cooperation agreements which are based on the realization that while cooperation among firms might be anti-competitive, this is generally not true for cooperation among countries. Yet such cooperation is often limited.
This paper, which is part of a book on Cooperation, Comity And Competition Policy (Oxford University Press, 2009), analyzes the effects that a unilateral enforcement system has on a small economy, by focusing on a specific case study: Israel. The case of Israel is interesting not only as a stand-alone case study, but mostly because it provides useful insights into the reality of enforcing antitrust in a globalized world by a small economy. As the paper indicates, even when it possesses the legal tools to tackle international antitrust issues, Israel often suffer from serious practical deficiencies. Most importantly, it frequently cannot create a credible threat to large, multinational firms that engage in anti-competitive conduct which harms its economy. It also has limited resources and incentives to deal with international anti-competitive conduct, especially when such conduct is addressed by other jurisdictions. As a result, despite the sometimes severe effects of anti-competitive conduct on its markets, Israel, like other small economies, is a marginal player in the globalized antitrust regime and is generally a passive bearer of the effects of international anti-competitive conduct and of the enforcement actions of larger jurisdictions rather than proactive confronters of such issues and actions. This observation has important implications for a globalized antitrust regime.
The paper also analyzes some intriguing issues which arise from public international law doctrines of extraterritoriality. For example, it analyzes the issue of whether the effects doctrine acts as a pre-condition for a finding of an anti-competitive conduct if some of the parties are foreign or does it apply only if there is a finding of an anti-competitive conduct that has direct legal implications for a foreign firm. It also analyzes the issue of whether presumptions of illegality can apply in cases which involve foreign firms and in which jurisdiction is based on proof of "a significant and direct" anti-competitive effect.