Photo Credit: iDesign[1]

By: Aaron L. Schwartz

As the consumption of goods and services becomes increasingly globalized, multinational firms are finding it difficult to lawfully navigate the murky waters of international competition law. The current international regime lacks any cohesive policy; each state’s national competition authority applies its own unique tests and standards to determine whether a firm’s conduct is unlawful or super-competitive. Consequently, multinational firms are forced to speculate, with no degree of certainty, how their actions will be assessed in individual jurisdictions. The result of this unpredictability negatively impacts the natural operation of global markets to the detriment of consumers.

I.                   The Negative Effects on Consumers

There is no dispute that a firm engaging in anticompetitive conduct should be punished for its illegal behavior. Predatory monopolistic conduct or cartelization agreements almost always disrupt markets and reduce consumer welfare. But anticompetitive actions are not always so clear cut, and these laws have the potential to harm consumers if applied in a manner that subverts competition.[2]

When operating in single nation markets, firms are able to assess local antitrust laws and plan competitive strategies accordingly. However, when a multinational firm interacts with the global market, lawful competitive strategies used in one nation may be unlawful and anticompetitive in another. In such scenarios, firms cannot always anticipate the legal consequences of their actions. This opens the door for antitrust litigation, which can become duplicative as each individual competition authority assess the firms’ conduct and applies their own legal tests and standards.

Further, when facing multiple identical lawsuits in varying jurisdictions, a firm must divert funds, resources, and attention away from its research and development activities. The firm must also plan for potentially hefty fines and sanctions that may arise down the road. The number of years over which an investigation takes place multiplied by the varying jurisdictions may severely handicap an otherwise innovative firm. In the end, the consumer suffers; directly from the firm’s inability to compete at its fullest capacity in the marketplace, and indirectly from the slowdown of product innovation and technological advancements.

II.                The Google Case Study

Google presents a great example of the unpredictability firms face in international competition enforcement. Over the last few years Google’s conduct has been investigated by seven different national competition authorities. Each investigation is grounded on allegations that Google abused its dominant position in the search engine and online advertising market. The varying results of the investigation are outlined below.

In May 2012, after two years of investigation, the Vice-President of the European Commission (EC), Mr. Joaquim Almunia, issued a policy statement that Google was unlawfully “divert[ing] traffic” from rival search engines.[3] Because the statement was not a legal opinion carrying a penalty, Google subsequently entered into negotiation with the EC. [4] On October 1, 2013, the two sides reached a tentative deal in which the EC agreed to end its investigation and Google agreed to modify the operation of its search engine to allow competitor listings to have higher visibility on Web search queries.[5] The EC expects to finalize this agreement by the spring of 2014, after competitor companies submit comments on the proposed resolution.[6]

On January 7, 2013, the United States Federal Trade Commission (FTC) determined that, despite a somewhat harmful effect on rivals’ ability to compete in the market, Google’s behavior did not rise to the level of a “searching bias” because the company’s innovative techniques had a sufficient pro-competitive justification.[7] According to Guy Lougher[8] the U.S.’s and E.U.’s divergent legal conclusions stem from conflicting legal standards—noting that the U.S. imposes a higher standard for determining “whether an activity amounts to monopolization.”[9]

On July 18, 2013, the South Korean Fair Trade Commission (KFTC) dismissed its investigation into whether Google abused its search engine market position. The KFTC’s investigation concluded that there was sufficient competition in the cellular search engine market such that consumers could easily use alternative search engine platforms.[10]

On September 22, 2011, the Federal Court of Australia found against the Australian Competition and Consumer Commission, and in favor of Google, when holding that Google did not engage in misleading or deceptive conduct by publishing certain sponsored links on its website.[11]

While Google has thus far escaped significant fines imposed by national competition authorities, the firm continues to face several burdensome open investigations. On December 19, 2013, pursuant to an ongoing investigation, the Canadian Competition Bureau filed a legal motion against Google with the Federal Court of Canada.[12] Moreover, on May 24, 2013, the FTC decided to reopen its investigation into Google’s conduct after receiving another round of complaints by Google’s rivals. Other open and ongoing investigations include: the Brazil’s competition authority, Conselho Administrativo de Defesa Economica (CADE);[13] the Competition Commission of India (CCI);[14] and the Argentinian Competition Commission.[15]

III.             Conclusion

Unfortunately, there is no easy solution to this problem. Each state has a different national market and different interests with respect to the protection of consumer welfare. However, the endless global litigation that Google and other similar multinational firms face demonstrates the need for reform. Unless and until national competition authorities derive a method that allows firms to act rationally and with a degree of certainty in all markets, stability and innovative productivity may suffer.

Aaron L. Schwartz is a third year law student at The Pennsylvania State University – The Dickinson School of Law. He is an active member of the Student Bar Association, the Journal of Law and International Affairs, and the Moot Court Board (Jessup Team). Mr. Schwartz graduated from the University of Wisconsin—Madison.

[1] http://www.referenceforbusiness.com/management/Mar-No/Multinational-Corporations.html