Academic journal article Law and Policy in International Business

Mergers and Acquisitions in the European Community and the United States: A Movement toward a Uniform Enforcement Body?

Academic journal article Law and Policy in International Business

Mergers and Acquisitions in the European Community and the United States: A Movement toward a Uniform Enforcement Body?

Article excerpt


The extraterritorial application of competition laws is common in the world market. The European Community (EC) and the United States, which have the two largest international economies in the world,(1) often find themselves regulating the same mergers and other financial transactions. This creates a potential for conflict, and the resulting tension leads to efforts to harmonize EC and U.S. competition laws. While harmonization is itself important, it may not be enough to ensure efficient regulation of the market. In addition to considering the substance of the laws being applied to mergers, we must also account for factors other than competition policy that influence the decisions of regulatory bodies.

This Note will argue that the current system of extraterritorial application of competition laws, while beneficial from a purely competitive standpoint, is not optimally efficient for the world market. Because nations consider industrial policy(2) when investigating mergers, efficiency losses can result. The recent merger between Boeing and McDonnell Douglas(3) reveals the tensions placed on enforcement bodies in considering both industrial and competition policy. The Boeing merger highlights the possible efficiency losses caused by the current EC and U.S. systems of extraterritorial regulation of mergers. This Note suggests a new system that will avoid these efficiency losses.

Under the current system, national merger and acquisition authorities have an incentive to advance industrial policy in an attempt to increase national welfare relative to other countries.(4) With the Clinton administration's stance on government intervention, there are indications that industrial policy is a major consideration for the Department of justice (DOJ) and Federal Trade Commission (FTC).(5) The European Community similarly has an incentive to advance regional industrial policy because of the political sensitivity of the EC Commission.(6) These incentives could lead both U.S. and EC enforcement authorities to use merger control to protect and promote domestic industry. Changing competition policy into a type of industrial policy, the merger enforcement authorities no longer solely consider benefits to the market; instead they concentrate also on benefiting their relative economies.

This kind of misuse of national competition law has led to attempts to create a worldwide antitrust code.(7) While an international code is a worthy goal, it is less important than creating uniform enforcement. As the then-head of the Directorate TV for Competition Policy stated in 1993, "[w]hen we talk about convergence, it's probably more important to talk about procedures [than substantive law] to make sure the policies are the same . . . "(8)

Some commentators believe the most effective way to ensure uniform policy is to create an international agency to handle antitrust enforcement, perhaps through the World Trade Organization (WTO).(9) However, as was recognized by Ambassador to the EC Commission Greenwald, the creation of a world-wide antitrust body may be premature.(10) Foremost among the problems with such a WTO body is that substantial differences remain among the antitrust laws of WTO members. In addition, there is significant disagreement and misunderstanding about the goals of antitrust laws on a global scale. A global enforcement body at this time seems unlikely; however, that should not preclude smaller steps toward better international enforcement of antitrust laws. One such step could be an EC/U.S. merger board to regulate mergers that affect the interests of both jurisdictions.

This Note begins in Part II by comparing the standards under which the United States and European Community apply their competition laws extraterritorially to mergers and acquisitions. It will then briefly compare the substance of those laws, noting ultimately that they are very similar in their approach and could easily be applied by a joint enforcement board. …

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