Developing Countries Experience with Extraterritoriality in Competition Law – an empirical study
This study addresses the question of extraterritoriality (extraterritorial jurisdiction) in the area of competition law and the experience of developing countries and economies in transition in this regard. It examines to what extent domestic competition legislation applies to foreign entities that may not be present in the forum, but whose conduct harms or may harm local consumers or producers. It also analyzes existing enforcement track record and hurdles involved in such cases. This original empirical project relied on direct input from 40 developing countries and economies in transition. It has been designed and conducted by Dr Marek Martyniszyn within the framework of the United Nations Conference on Trade and Development Research Partnership Platform.
Transnational violations of competition law cause significant harm. Connor estimates that between 1990 and 2016, the private international cartels that were detected affected sales of over $51 trillion worldwide. The overcharges exceeded an estimated $1.5 trillion globally. While inflated margins are endemic to cartels, international cartels overcharge much more than similar domestic arrangements. Furthermore, unlike in a domestic setting, such competitive harm is not just a matter of redistribution of resources between producers and consumers. It also constitutes an extraction of wealth from the affected state to the state hosting violators. Given most transnational enterprises are located in the Global North, competitive harm can be seen as illegal transfers of wealth to shareholders in developed states. Hence, transnational anticompetitive conduct may be further deepening the divide between developing and developed countries, which the international community endeavours to address.
Hitherto, extraterritorial enforcement of competition law was analyzed mainly from the perspective of well-established competition law systems, hence predominantly developed states, which were the first to use extraterritoriality to protect their markets. Broader comparisons of legal systems were made from only limited perspectives, largely due to the lack of empirical data. This study contributes to narrowing the gaps in our knowledge of the nature and gravity of challenges involved in dealing with transnational anticompetitive practices in transition economies. It examines existing frameworks and practices of developed countries and transition economies and provides an overview of the key practical and systemic challenges faced by enforcers in such countries.
The empirical findings of this project enabled to formulate workable solutions that can be implemented to strengthen domestic competition systems. They also helped to identify areas requiring further collective efforts.
The principal material output of this project is the UNCTAD Report on the topic. Its online version can be freely downloaded here.
The recording of the official online launch of the Report, moderated by colleagues from the UNCTAD Competition and Consumer Policies Branch, is now freely available online on UNCTAD’s YouTube channel.
Beyond showcasing the Report, the event included presentations of the relevant experiences by Representatives of the Brazilian and Turkish Competition Authorities, as well as a roundtable of academic experts (including Prof. Alexey Ivanov, Director of BRICS Competition Law and Policy Center, National Research University, Higher School of Economics, Moscow; Prof. Imelda Maher, Sutherland Full Professor of European Law, Sutherland School of Law, University College Dublin; Prof. Qianlan Wu, Faculty of Social Sciences, University of Nottingham; Prof. Spencer Weber Waller, John Paul Stevens Chair in Competition Law, Director of the Institute for Consumer Antitrust Studies, Loyola University Chicago).
We are pleased to inform that during the Report’s Launch UNCTAD declared their intention to incorporate the Report’s findings in the commentaries of the Model Law on Competition—the leading international benchmark in this area of law.
This work has been further discussed and disseminated by means of a LawPod podcast. To access and listen in your favourite podcast player you can find the episode on Apple Podcasts and Spotify. Otherwise you can listen on this page below or on the Lawpod website.
For the output directly related to the UNCTAD Report—see the open access peer-reviewed article, published in the Journal of Antitrust Enforcement, entitled ‘Competitive Harm Crossing Borders: Regulatory Gaps And A Way Forward’. This piece critically analyses the broader regula
tory framework and offers further recommendations applicable more generally, that is also beyond the developing world.