• International Enforcement in a Global Economy

    International economic activity involving multiple regulatory jurisdictions has increased significantly in recent decades. Between 1960 and 2009, imports of goods and services as a percentage of the global gross domestic product (GDP) have more than doubled.

    International Enforcement in a Global Economy

    Together, the United States and European Union economies account for more than half of the world’s GDP. In addition, cross-country corporate mergers as a percentage of total worldwide mergers have risen from 30% in 1998 to 45% in 2007.

    This cross-border economic activity has spurred the creation of more fully developed antitrust policies and an increase in enforcement. Will domestic policy makers be tempted to use antitrust enforcement as a back door to protectionism? Are policies across jurisdictions naturally converging, or does enforcement differ for domestic and foreign firms?

    Edward Snyder, dean of the Yale School of Management, and Analysis Group Managing Principal Pierre Cremieux explored these issues in a recent study, "Global Antitrust Enforcement: An Empirical Assessment of the Influence of Protectionism."

    Professor Snyder and Dr. Cremieux posit that antitrust authorities may exhibit three possible approaches to enforcement (see right). They analyzed how EU and U.S. antitrust authorities enforced anti-cartel laws from 1994 through 2012. They studied instances in which firms sold the same product lines in both jurisdictions, and examined the pattern of fines imposed to test whether the approach to enforcement was neutral, protectionist, or domestic. The authors found a surprisingly low level of overlap in enforcement across jurisdictions; most firms fined in one jurisdiction were not fined in the other.

    They also found that authorities in both the European Union and United States are somewhat more likely to fine domestic rather than foreign firms. Furthermore, they discovered that EU authorities impose higher fines on EU firms, while U.S. authorities impose higher fines on non-U.S. firms.

  • Interactive Timeline:
    Fines issued by U.S. and EU antitrust authorities to U.S. and EU firms with sales in both jurisdictions, 1994 to 2012
    Click on the timeline below to view the number of fines issued in each year

    The authors conclude that their results provide little support for the notion that antitrust enforcement of cartels has yielded to protectionism. The United States is less likely to fine foreign than domestic firms, but when it does, those fines are significantly larger. By contrast, the European Union is unambiguously domestically focused, with EU firms both more likely to be fined and to receive larger fines than their foreign counterparts.

  • “It is clear that domestic firms are more likely to be investigated by their own authority than by the foreign jurisdiction.”

    — Edward Snyder, Dean, Yale School of Management

  • As a possible explanation for the European Union’s more aggressive domestic focus, Professor Snyder and Dr. Cremieux note that EU antitrust policies are relatively new compared with those in the United States. U.S. firms have been regulated by antitrust policy for more than a century – since the passage of the Sherman Act in 1890 – while the foundations of EU antitrust enforcement date back only to 1957, and the emergence of cartel enforcement to 1986. ■

    Notes:

    Fines by the U.S. Department of Justice are levied under Section 1 of the Sherman Act (Anti-Competitive Agreements). Fines by the EU European Commission are levied under Article 101 (formerly Article 81, Anti-Competitive Agreements).

    Sources: 

    Notes and Sources

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