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Antitrust Law in the United States and European Union

Sanford M. Pastroff and Tilman Kuhn

Antitrust Law in the United States and European Union
taseffski via iStock

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More than 120 countries have their own antitrust laws (known as competition laws or antimonopoly laws outside of the United States), and therefore a detailed comparison of global antitrust laws would be far beyond the scope of this article (and would probably induce sleep, or at least severe boredom). So, we focus on key differences between the United States and European Union. To limit the number of caveats and exceptions, we make several generalizations, which hopefully will steer you in the right direction and equip you with some antitrust lingo.

Similar General Approach, but with Important Differences

US and EU antitrust laws cover most of the same subjects, rely on similar economic principles, and follow broadly similar conceptual approaches to topics such as cartels, mergers, joint ventures, and (a bit less so) monopolization (referred to as abuse of a dominant position or market power in the European Union). However, there are several important differences on the opposing sides of the Atlantic.

Exchanges of Information between Competitors

Both EU and US antitrust laws prohibit agreements among competitors that harm competition. Cartel agreements—such as price-fixing, bid rigging, and dividing up customers or territories—are uniformly viewed as very serious offenses that often lead to high fines, sometimes reaching the hundreds of millions or even billions of dollars (or Euros). In the United States, moreover, individuals found guilty of these violations can be sent to prison. In Europe, however, only a handful (albeit an increasing number) of countries currently have criminal penalties for antitrust violations.

Another key difference between US and EU antitrust laws involves the treatment of situations where competitors exchange competitively sensitive information but don’t agree on anything. In the European Union (and many other places), any exchange among competitors of commercially sensitive information that reduces uncertainty in the market is considered an unlawful concerted practice. In the United States, by contrast, only an actual agreement violates federal antitrust law. But allegations of information exchanges between competitors often lead to government investigations and class action lawsuits. So, from a counseling perspective, the basic advice to clients is the same everywhere in the world: never exchange, directly or indirectly, competitively sensitive information with a competitor.

Dealings between Suppliers and Retailers

Dealings between suppliers and retailers are called vertical relationships because they involve companies operating at different levels of the production and distribution chain. This is an area where US and EU law diverge significantly.

Minimum resale prices. Almost everywhere (if not everywhere) in the world, suppliers can recommend resale prices to their customers. But the treatment of resale price agreements varies significantly. In the European Union, agreements between manufacturers and retailers on resale prices are generally considered to be illegal, regardless of whether the agreed price is fair or the retailer would have charged the same price anyway.

In the United States, federal antitrust laws judge such agreements under the rule of reason, which involves balancing procompetitive benefits (such as creating incentives for retailers to provide better services) against any negative effects on competition. In addition, US court cases recognize an exception for unilateral policies (sometimes called Colgate or UMRP policies) that—if properly implemented—allow manufacturers to lawfully prevent retailers from discounting their products.

Advertised prices. US manufacturers generally can require customers to advertise at or above a certain minimum advertised price (MAP), particularly if the manufacturer is subsidizing the ad, as long as the retailer is free to sell at any price it wants. By contrast, EU enforcers tend to consider MAP policies to be illegal.

Cross-border sales restrictions. Lawfully limiting distribution by distributors and retailers (such as through exclusive territories) is much more difficult in the European Union than in the United States. Consistent with the goal of promoting a strong “single market,” the European Commission has aggressively challenged actions that limit sales between Member States, such as geoblocking tactics that make it difficult for consumers in EU countries where prices are higher to buy from sellers in EU countries where prices are lower.

Online sales restrictions. Except for limited circumstances (involving the sale of luxury goods or complex products on marketplaces such as Amazon or eBay), the European Union generally prevents manufacturers from prohibiting online sales by retailers. US manufacturers have broad rights to limit where and how their customers sell the manufacturer’s products.

Customer restrictions. In the European Union, manufacturers have to jump through a number of hoops to create a “selective distribution system” that limits the number of authorized dealers, and to which other dealers they may resell the products. In the United States, by contrast, a fundamental principle of antitrust law is that a manufacturer has a nearly unfettered right to choose its own customers. To be sure, the United States has laws designed to prevent manufacturers from unfairly terminating distributors, but US manufacturers still have much more flexibility in structuring their distribution systems.

Price discrimination. The Robinson-Patman Act prohibits US manufacturers from charging different prices to different customers absent an exception or defense (such as meeting competition). Although rarely enforced by federal antitrust agencies, this Depression-era law still leads to occasional private lawsuits. Conversely, price discrimination in the European Union is unlawful only if used by a manufacturer with a dominant position to take unfair advantage of its market power (e.g., by offering very low prices to block new competitors from entering a market).

A Few Tips for New Lawyers

  • Don’t assume that all EU countries will enforce EU law the same way. Particularly when it comes to efforts by manufacturers to limit discounting by retailers (or other types of vertical restraints), enforcers in some countries (most notably France and Germany) interpret EU law somewhat less permissively than in other countries.
  • In the United States, don’t focus only on federal antitrust laws. US state antitrust enforcers have been more aggressive than their federal colleagues in challenging vertical restraints—particularly where, as in California, state antitrust law is different from federal law.
  • If a European client asks you for legal advice, don’t assume your advice is privileged. If you are an in-house lawyer, your advice probably will not be privileged. And if you’re an external lawyer, the privilege only applies if you are licensed in the European Union (and only to the extent your advice relates to EU law), and it may then still not be privileged in all EU countries (e.g., in Germany, external counsel advice can only be privileged if provided after an investigation has officially been opened).