Case laws

(Jurisdiction)

The Permanent Court of International Justice in its landmark judgement in Lotus, a State
can, apart from the principle of territoriality, establish principles to adopt and constitute
extraterritorial jurisdiction too.

The idea reflected in the effects doctrine, which has initially been applied in the context of
antitrust law by Judge Learned Hand in 1945 in its landmark judgement in United States v.
Aluminum Co. of America (Facts) The United States alleged violations of the Sherman
Act, 15 U.S.C.S. §§ 1, 2, through interstate and international monopolization of the virgin
ingot market and sought dissolution of defendant appellee aluminum company. The United
States alleged that appellee defendant aluminum companies and others had entered into a
conspiracy in restraint of trade and a monopoly in production of virgin ingot, perpetuated
through unlawful practices. The district court dismissed the complaint. Appellant United
States sought review. (Issue) May a state impose liabilities even upon persons not within its
allegiance, for the conduct outside its borders that has consequences within its borders?

Again in the case law of Alcoa, the effects doctrine was acknowledged.

In A Ahlstrom Oy v. Commission (1993), also known as the “wood pulp case”. Here, the
wood pulp industry had engaged in a price-fixing cartel. The notable aspect of the case was
that the price cartel was formed outside the jurisdiction of the EU. Despite their business
being outside the EU, the Commission imposed fines on their conduct. On this decision being
appealed, the Court applied the effects doctrine and held jurisdiction due to anti-competitive
effects in the EU market.

Facts: The court considered the territorial scope of Articles 81 and 82. in the context of
producers outside the Community selling to purchasers established in the Community. The
external producers had engaged in price fixing and therefore restricted competition. The
Commission had determined that there had been an infringement of Article 85. On appeal
they argued that such a finding was inconsistent with public international law.
Held: The contention was not accepted. Infringement of Article 81 involved two elements,
namely the agreement, decision or concerted practice on the one hand and its implementation
on the other: ‘If the applicability of prohibitions laid down under competition law were made
to depend on the place where the agreement, decision or concerted practice was formed, the
result would obviously be to give undertakings an easy means of evading those prohibitions.

The decisive factor is therefore the place where it is implemented.

The producers in this case implemented their pricing agreement within the common market.
It is immaterial in that respect whether or not they had recourse to subsidiaries, agents, sub-
agents, or branches within the Community in order to make their contacts with purchasers
within the Community.
Accordingly the Community’s jurisdiction to apply its competition rules to such conduct is
covered by the territoriality principle as universally recognized in public international law.

In the case of Intel Corp. v. European Commission (2017), (Facts) Intel designed computer
processors and sold them to original equipment manufacturers (“OEMs”) to use in central
processing units (“CPUs”). One of its competitors, Advanced Micro Devices Inc (“AMD”),
complained to the Commission that Intel was abusing its dominant position by offering
loyalty rebates to its OEMs if they purchased all or most of their processors from Intel.  The
Commission agreed and imposed a €1.05 billion fine. The General Court dismissed Intel’s
appeal.
On appeal, the Grand Chamber of the CJEU rejected Intel’s complaints about jurisdiction and
procedural irregularities but allowed its appeal on the assessment of the rebates as abusive. 
That rendered three other grounds unnecessary to consider.

There are two key points of interest arising from the judgment:

1. Arrangements that are intended to form part of a grander anti-competitive

scheme may fall within CJEU jurisdiction, even though they are relatively
removed from the EEA, under the “qualified effects” route to jurisdiction.
2. Loyalty rebates are not automatically anti-competitive; in particular, they can
be saved if the undertaking can show that they could not have the effect of
foreclosing an as efficient operator from the market.

It has not been until recently that the ECJ made clear that the effects doctrine provides a
suitable means to establish jurisdiction also in the context of EU competition law. In the case
of Intel, the ECJ, basically following the GC’s first instance decision, recognized both, the
implementation doctrine as well as the qualified effects test as standalone and independent
means to establish jurisdiction for the application of the competition provisions.
The GC held that the jurisdiction was justified under Public International Law as sufficient
qualified effects of the practice were present in the EU. “Qualified Effects”, here refer to the
“criteria of immediate, substantial and foreseeable effects”. This led to the application of the
qualified effects doctrine to extend territorial jurisdiction to the Commission.

In Dyestuffs the ECJ abstained from directly ruling on the (non-)existence of effects.
However, considering the wording of the Court and, in particular, the fact that ICI “was able
to ensure that its decision was implemented on [the internal] market” as well as the finding of
the ECJ that “[t]he increased prices at issue were put into effect within the internal market,
which means that “the actions constitute practices carried on directly within that market”,
theimplementation of a measure as well as its effects arguably indeed played a role in the
ruling by (indirectly) considering it via “the back door”. Hence, it seems that the way for the
adoption of new concepts to establish EU jurisdiction was paved.

In the same case it was held, he Court further held that “if the applicability of prohibitions
laid down under competition law were made to depend on the place where the agreement,
decision or concerted practice was formed, the result would obviously be to give
undertakings an easy means of evading those prohibitions”.

In Gencor ltd v commission, (Facts) Three years ago the planned joint purchase and
ownership of South African companies in which Gencor Ltd, the South African mining and
metals firm, and the English company, Lonrho Ltd. held separate shares was declared by the
Commission to be incompatible with the Merger Control Regulation (MCR). Gencor had
argued that the MCR only applied to mergers within the European Community. The
Commission found the operation would have created a dominant duopoly in the world
platinum and rhodium market. Effective competition would have been significantly impeded
in the common market as a result. The Court of First Instance upheld the Commission’s
decision even though the South African competition authorities had no objections and the
purchase agreement had in fact lapsed.

The Court of First Instance clarified that the MCR can be applied to prohibit concentrations
that create or strengthen a collective dominant position even where there are no formal
structural links between the parties in the market. The Court ruled that although structural
commitments such as divestment, are more likely to allay the Court’s concern about the
creation or strengthening a dominant position, behavioural commitments, such as making a
dominant facility available to competitors, can be adequate to prevent the emergence or
strengthening of a dominant position. Such undertakings are to be examined on a case-by-
case basis.

supplemented the latter by recognizing the applicability of the merge regulation when “a
proposed concentration will have an immediate, substantial and foreseeable effect in the
EU”.

Basic information
The EU competition law is not explicit about its jurisdictional application. Article 101 (1) of
TFEU provides certain necessary criteria for its application. This includes there being an anti-
competitive agreement between two parties and the agreement must have an impact on the
trade within the EU or in between the member states. Similarly, Article 102 of TFEU
required there to be a dominant position within the internal market of the EU.

Single Economic Entity Doctrine

As per this doctrine, a parent company and its subsidiary are considered as a single unit for
the application of the competition law. This means that if the subsidiary falls within the
provisions of the EU antitrust laws, all other subsidiaries and the parent company will be
considered as a single unit and will be within the jurisdiction of the EU.

This doctrine was applied in the case of A Ahlstrom Oy v. Commission (1993)

From the side of merging parties

The Article creates a three stage process which Member States follow in order to receive and
implement the Article – referral, ruling, and application.

The first stage is that of national referral. Domestic courts are able to ask for clarification on
two specific aspects of EU law, denoted in the Article under (a) and (b). The first is
clarification on the interpretation of EU Treaty law, that is, the law contained in the Treaty of
the European Union (TE), the TFEU, the amending Treatities and the Treaties of Accession.

The second is on the validity of acts taken by EU institutions or bodies, and the interpretation
of any law arising from those acts. The scope of these enquiries is relatively large, extending
not only to regulations, directives and decisions of EU bodies, but also to opinions and
recommendations issues by those bodies (as per Grimaldi v Fonds des Maladies
Professionnelles[4].) Indeed, in Deutsche Shell AG v Hauptzollamt Hamburg[5]the scope of the
ECJ’s jurisidation extended to subjects as subtle as the ‘arrangements’ made by EU
committees. It was also noted in the above case that there is no need for the subject of a
preliminary ruling to be an element of the law with compulsory effect (such as a regulation or
direction); the ECJ instead can rule on matters which national courts are merely obliged to
take account of.

The third and final stage of the process is the implementation of the clarified law. Whilst the
ECJ might clarify the law, they do not implement it. Instead, this is left to the courts of the
petitioning Member State – for example, in the Factortame cases legal discussion moved
from a domestic setting in the (then) House of Lords, up to the ECJ for clarification, and then
back to the House of Lords for the implementation of the ECJ’s decision.

In particular, Article 13(2) TEU provides that each institution shall act within the limits of the
powers conferred on it in the Treaties, and in conformity with the procedures, conditions and
objectives set out in them’. Accordingly, the Court’s jurisdiction is framed by the system of
judicial remedies established by the Treaties. These remedies are available only when the
conditions set out in the relevant provisions are fulfilled. As concerns the preliminary ruling
procedure, Article 267 TFEU makes the jurisdiction of the Court subject to a number of
cumulative conditions19. Under the first paragraph of that provision, the questions referred
must concern provisions of EU law the interpretation or validity of which is in doubt in the
main proceedings. Furthermore, under the second paragraph of that provision, the body
making the reference must be a court or tribunal of a Member State and a decision on the
question referred must be necessary in order to enable it to give judgment in the main
proceedings.

According to settled caselaw, the Court may refuse to rule on a question referred for a preliminary
ruling only where it is quite obvious that the interpretation of EU law sought is wholly unrelated to
the actual facts of the main proceedings or to its purpose, where the problem is hypothetical, or where
the Court does not have before it the factual or legal material necessary to enable it to give a useful
answer to the questions referred ( https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?
uri=CELEX:62008CJ0384_SUM&from=LT )

It implies, in particular, that there must be a genuine dispute pending before the referring
court, and that the answer to be provided by the Court has to be relevant for the resolution of
that dispute. Indeed, the Court has consistently stated that it is clear from both the wording
and the scheme of Article 267 TFEU that a national court or tribunal is not empowered to
bring a matter before the Court by way of a request for a preliminary ruling unless a case is
pending before it in which it is called upon to give a decision which is capable of taking
account of the preliminary ruling The reason lies in the very function conferred on the Court
by Article 267 TFEU: to assist in the administration of justice in the Member States,by
contributing to the effective resolution of disputes concerning EU law, and not to deliver
advisory opinions on general or hypothetical questions. The Court considers ‘unacceptable’
that its answers might be ‘purely advisory and without any binding effects’ since that would
change the nature of the function of the Court as conceived by the Treaties, ‘namely that of a
court whose judgments are binding’.

In the case of Foglia v Novello case (https://eur-lex.europa.eu/legal-content/EN/TXT/?

uri=CELEX%3A61980CJ0244 ), the Court has stated that it has no jurisdiction to hear
questions referred from cases which are artificially construed before national courts. That is
so when the dispute is but a procedural device arranged by the parties in order to induce the
Court to take a position on certain problems of EU law that do not serve any objective
requirement inherent in the resolution of the dispute. Those principles were, however,
severely criticised in legal scholarship, and the Court was urged to apply them ‘with great
care, since they not only question the validity of an order made by a national court but also
put at issue the bona fides of the parties to the main action’.

That approach was broadly endorsed by the Court — sitting in Grand Chamber — in Ullens
de Schooten. The Court distinguished four types of situations in which, despite the purely
domestic character of the dispute, it still has jurisdiction under Article 267 TFEU. The first
two concern cases in which, although the factual elements are confined within one Member
State, certain cross-border effects of the challenged domestic legislation cannot be ruled out,
whereas the latter two concern cases where the provisions of EU law are indirectly applicable
or relevant to the dispute. First, the Court is empowered to answer where the national
legislation at issue, that is indistinctly applicable, possibly dissuades (or may have dissuaded)
nationals of other Member States to exercise their freedoms of movement (the ‘Blanco-Perez
case-law’)

(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62007CA0570).

Second, the Court may answer where the reference is made in proceedings for the annulment
of provisions that are indistinctly applicable and, therefore, affect also nationals of other
Member States (the ‘Libert case-law’) . Third, the Court accepts the questions, despite the
internal character of the main proceedings, when national law forbids reverse discrimination
against its own nationals (the ‘Guimont case-law’)
(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=ecli%3AECLI%3AEU%3AC
%3A2000%3A663 ).

Finally, the Court has jurisdiction to give preliminary rulings on questions concerning EU
law in situations where the facts of the cases before the referring courts are outside the direct
scope of EU provisions, but where those provisions are made applicable by national law,
which has adopted, for internal situations, the same approach as that provided for under EU
law (the ‘Dzodzi case-law’)

(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61988CJ0297 ).

It can be said that, in the past, the Court was rather ‘generous’ in assessing its jurisdiction
under (what is now) Article 267 TFEU, and in checking whether the orders for reference
contained all the necessary information. Until fairly recently, cases such as Foglia v Novello,
Telemarsicabruzzo, Corbiau or TWD Textilwerke Deggendorf in which the Court declined
jurisdiction or declared the reference inadmissible were rather rare. When in doubt, the Court
was normally willing to assist national courts and provide an answer to the questions referred.
The Court has consistently referred to a ‘presumption of relevance attaching to questions
referred by the national courts for a preliminary ruling’.

In particular, Article 13(2) TEU provides that each institution shall act within the limits of the
powers conferred on it in the Treaties, and in conformity with the procedures, conditions and
objectives set out in them’. Accordingly, the Court’s jurisdiction is framed by the system of
judicial remedies established by the Treaties. These remedies are available only when the
conditions set out in the relevant provisions are fulfilled.

As concerns the preliminary ruling procedure, Article 267 TFEU makes the jurisdiction of the
Court subject to a number of cumulative conditions. Under the first paragraph of that
provision, the questions referred must concern provisions of EU law the interpretation or
validity of which is in doubt in the main proceedings. Furthermore, under the second
paragraph of that provision, the body making the reference must be a court or tribunal of a
Member State and a decision on the question referred must be necessary in order to enable it
to give judgment in the main proceedings.
The two situations of lack of jurisdiction and of inadmissibility are, in fact, referred to
separately in Article 53(2) of the Rules of Procedure which reads: where it is clear that the
Court has no jurisdiction to hear and determine a case or where a request or an application is
manifestly inadmissible, the Court may … at any time decide to give a decision by reasoned
order without taking further steps in the proceedings’. From a theoretical point of view,
therefore, those two situations should be distinguished: whereas the former essentially
reflects a limit to the competence of the Court, the latter typically arises because of a
procedural error made by the referring court

The jurisdiction of the Commission on mergers is provided for under its Consolidated
Jurisdiction Notice, in addition to the EU Merger Regulation. The Commission invokes
jurisdiction where the operation meets the definition of concentration within the meaning of
Article 3 of the EU Merger Regulation. The term ‘concentration’ is used to cover mergers,
acquisition of control and the creation of full-function ventures. This research paper focuses
on mergers.

It seems consistent to apply the concept of conduct forming part of an overall strategy in the
jurisdictional context and cases of extraterritorial scope. Put differently, to view behaviour of
an undertaking as a whole, that is, putting together different sets of conduct pursuing the
same aim for the establishment of jurisdiction of the EU competition provisions seems
reasonable. Arguably, not to follow such an approach would lead to an artificial separation of
an undertaking’s business conduct which, by its nature, might consist of various practices or
different elements all forming part of the very same overall strategy. Furthermore, such
reading of the ECJ’s reasoning seems also appropriate from a consistency perspective: It
serves the aim of a coherent standard as regards the relevant conduct of an undertaking to be
assessed in order for the competition provisions to be applicable, that is, jurisdiction to be
established.

Furthermore, also within the system of the competition provisions and in particular, when
considering the concept of conduct forming part of an overall strategy in the context of
Article 102 TFEU and the effect on trade criterion, the recognition of an effects doctrine
approach in order to establish EU jurisdiction seems valid (as both criteria pursue the same
aim). Moreover, the qualified effects test seems to provide a “jurisdictional response” to
challenges imposed by our globalized world and economies. In other words, such an effect-
based approach seems to be capable of facing the challenges imposed by globalization.
Arguably, the judgement in Intel can therefore be read accompanied by the underlying tenor
that new challenges might call for new ways of thinking and conceptualizing.