Edited by Ariel Ezrachi
Chapter 2: Competition law and extraterritoriality
It is obvious that the objectives of competition law would be insufficiently safeguarded if one applied competition law exclusively to conduct by nationals of the enforcing state, or to conduct that takes place on the territory of that state: a cartel is no less harmful just because the cartelists travelled to an exotic location for their meetings; and consumers are hardly interested in the nationality of those who exploit them. The same applies, mutatis mutandis, to abuses of dominant firms or anticompetitive mergers. One could theoretically conceive of a regime where all affected jurisdictions rely exclusively on antitrust enforcement by the jurisdiction in which the anticompetitive conduct takes place (‘home jurisdiction’). Such reliance on ‘altruistic enforcement’ by the home jurisdiction, however, may be misplaced for at least two reasons. First, where cartels, monopolists or merged firms exercise their market power to exploit exclusively or primarily customers abroad, the increase of the producer surplus is internalised with the producer in the home jurisdiction, whereas all or most of the deadweight loss and the reduction in consumer surplus is externalised. Accordingly, the home jurisdiction may profit from a ‘beggar-thy-neighbour’ strategy. From a public choice perspective, exporters often form closely knit groups that can easily coordinate their lobbying efforts, whereas the foreign consumers have no voice in the home jurisdiction, even if they as a dispersed group could coordinate their interests.2 Secondly, even where the home jurisdiction does not pursue a bad-faith strategy, it may lack antitrust legislation or the resources to enforce existing legislation effectively.
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