The Extraterritorial Application of the European Merger Control Regulation

5 Colum. J. Eur. L. 79 (1998)

Andre Fiebig. Adjunct Professor of Law, Northwestern University School of Law, Chicago; Attorney, Gardner, Carton & Douglas, Chicago.

Montesquieu, in describing the effects of international trade, said: “The natural effect of commerce is to lead to peace.” However, he made his assessment in 1748, long before the first merger control law was adopted or before Boeing announced its acquisition of McDonnell Douglas. Despite the fact that this transaction represented the merger of the largest and third largest commercial aircraft manufacturers in the world, the United States Federal Trade Commission concluded that there were no substantive antitrust problems. Nevertheless, in its decision of May 21, 1997, the European Commission raised-serious doubts” about the compatibility of the proposed merger between  Boeing and McDonnell Douglas with the European Merger Control Regulation  even though neither Boeing nor McDonnell had any facilities or assets in the European Community. Although it ultimately approved the merger, the Commission’s position not only caused a debate about the extraterritorial reach of the Merger Control Regulation, but it also had a negative impact on relations between the United States and the European Community on a broader level. Many in the United States viewed the European Commission’s stance as the protection of national interests.” The Commission, on the other hand, took the position that its concerns were legitimate under the applicable competition laws.

Although the BoeinglMcDonnell Douglas case is not the subject of this essay, it does serve to illustrate the importance of finding a solution to the extraterritorial application of merger control laws. For many years, the United States and Germany had the only preventative merger control regimes. In 1989, however, the European Community introduced its own merger control law applicable to many of the same transactions which are subject to US merger control law. This generally did not present a problem until the European Commission got serious about enforcing its law. Consequently, companies soon realized that they needed to pay more attention to the applicability of the European Merger Control Regulation.

It soon became apparent that the Regulation was essentially unlimited in its territorial scope. The Commission scrutinized transactions even though they had no effect on the European market. This essay examines the legal limits of the extraterritorial scope of the European Merger Control Regulation in such cases. After discussing the limits imposed by European law, the essay examines whether international law may be applied to limit the Regulation’s extraterritorial application. The final portion of the essay presents several proposals for reform, aimed at alleviating the type of conflict that occurred in the Boeing case.