There's a New Sheriff in Town: European Commission Investigations Prompt U.S. Antitrust Class Action

Article excerpt

What was once as American as apple pie is now almost as ubiquitous around the world as McDonalds: antitrust enforcement.

In Germany, the United Kingdom, Japan, Australia, South Korea and elsewhere, there is no doubt that antitrust enforcement has been increasing.

Perhaps the most ambitious antitrust enforcement occurring outside of the U.S. are antitrust investigations brought by the European Commission ("EC"). Nowhere outside of the U.S. have companies been under greater attack than when subject to the investigational powers of the EC. An interesting corollary to the increased focus in Europe on efforts to curtail anticompetitive conduct has been a recent spate of new class action filings in the U.S.. The underpinnings of these filings are supported, at least in part, by allegations related to EC antitrust investigations.

I. Background of the European Commission

The European Union ("EU") is perhaps most easily understood by describing what it is not: It is neither a federation, like the United States, nor an organization for cooperation between governments, like the United Nations. The countries that comprise the EU ("member states") remain independent sovereign nations that pool together in order to gain strength and world influence.

The European Commission is the executive and administrative organ of the member states. The Commission exercises responsibility over the wide range of subject areas covered by the European Union treaty. Those areas include the treaty provisions and regulations thereunder that govern competition. (8) Article 17 of Regulation 1/2003 empowers the Commission to conduct investigations of a "particular sector of the economy" when it suspects that a particular market is not competing efficiently. The Commission, like its United States counterparts--the Department of Justice and Federal Trade Commission--holds a range of investigative powers, including the power to request information, take statements, conduct inspections, and to impose sanctions.

The antitrust arena of the EC covers two prohibition rules set out in the EC Treaty--Articles 81 and 82. Article 81 of the European Community Treaty prohibits cartels and other "concerted practices" that distort competition. Article 81 is comparable to Section 1 of the Sherman Act, which outlaws concerted action to restrain trade. (9) Price-fixing or bid-rigging are obvious examples of illegal conduct infringing Article 81. The EC also has a counterpart to Section 2 of the Sherman Act, which prohibits the willful acquisition or maintenance of monopoly power. (10) Article 82 of the EC Treaty states: "Any abuse by one or more undertakings of a dominant position within the common market ... shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States." (11) This is exemplified by predatory pricing aimed at eliminating competitors from the market. (12)

The EC has launched several inquiries into a wide range of industry sectors including the financial services, energy, telecommunication, pharmaceutical and media sectors. (13) In greater or lesser detail, these investigations have become the subject of pleadings in class actions filed in the United States.

II. EC Investigations and U.S. Class Actions: The First Wave

In recent years, EC investigations have proven to be fertile ground to class action plaintiffs' lawyers, who have filed a new wave of antitrust class actions in the United States asserting antitrust violations based substantially on the existence of the EC investigations themselves. For example, antitrust allegations have made their way into a multitude of U.S. class action complaints in industry sectors including fasteners and zippers, elevators, bath and kitchen fixtures, acrylic plastic manufacturers, bananas, wineries, carbon products, and bromine products. (14) A defendant can generally expect to be hauled into U. …