The scholarly literature on the movement of legal norms focuses almost exclusively on transfers from one jurisdiction to another. It largely ignores transfers into new regulatory regimes. Drawing on a case study of the transplantation of U.S. antitrust law into the nascent entity that was to become the European Community, and analyzing its evolution from a public choice perspective, this Article suggests that transfers into new regulatory regimes are more likely to be effective when the lack of established institutions creates opportunities for stakeholders. The endorsement of a new law will enable stakeholders to influence its application and to capture positions of the regulatory agency in charge of its administration. An enhanced understanding of this transplant and the impact of a German stakeholder on the development of EU competition law explains why, if today the European Union and the United States investigate the same transaction, the competition law standards set by the European Union will prevail.
TABLE OF CONTENTS I. INTRODUCTION II. CAPTURING LEGAL TRANSPLANTS A. Transplants into New Regulatory Regimes B. The Role of Stakeholders III. THE CASE STUDY: U.S. ANTITRUST IN EUROPE A. The Harvard School and Structuralism B. Europe and the Ordoliberal School C. Capturing the U.S. Antitrust Transplant IV. TODAY'S DIVERGENCE AND PROTECTIONISM IN THE EUROPEAN UNION V. CONCLUSION I. INTRODUCTION
The wave of regional and global economic integration that started in the 1950s with the formation of the European Community (EC) called for the definition of supranational rules and policies to regulate trade in newly integrated markets. (1) Key among these policies was the promotion of a competitive market, which promised to attract capital inflows and spur economic growth. Familiarity with competition law was, however, not widespread when the integration movement started, and the negotiators of the newly formed EC had to refer to the U.S. example, the only country that had a comprehensive system of competition law in place at the time. (2) The U.S. Sherman Act thus became a model for the competition laws of the European Coal and Steel Community (ECSC), the entity that laid the foundations for the EC. (3) The definition of new rules through transfers or imitation is by no means a new phenomenon in the scholarship on integration, convergence, and, more generally, the movement of legal norms, but this Article explores a different and underestimated angle of this literature: the transfer of rules into new regulatory systems. (4) Drawing on the transfer of U.S. antitrust law to the EC, this Article asks--how are transfers to new regulatory regimes different? How is this difference relevant to the globalization of competition? To what extent did U.S. antitrust law influence the formation of competition policies in the European Union?
These questions have become more and more relevant since European antitrust authorities began making it increasingly difficult for U.S. firms to operate in Europe. Over the past decade, the European Commission has fined Microsoft more than $3 billion and ordered the company to change the products it sold in Europe in response to its antitrust abuses, even though U.S. authorities had previously cleared such behavior. (5) Similarly, the European Commission accused Google of abusing its dominance in the online search market. (6) Whereas the U.S. Federal Trade Commission (FTC) dropped its charges against Google in 2013, the Commission's investigation is ongoing, and it is causing much agitation in Congress, since a recent resolution by the European Parliament called for the "unbundling [of] search engines from other commercial practices." (7) This would require Google to split its operations, which would fundamentally alter the way Google operates in Europe as well as worldwide. (8) The regulatory leverage that European competition law is exerting on the companies that come under its jurisdiction, including U.S. firms, is perplexing insofar as EU competition laws were originally modeled on U.S. antitrust provisions in an attempt to integrate international competition. (9)
This Article introduces a framework for the evaluation of legal transfers to new regulatory regimes that explains how the transfer of U.S. antitrust to Europe led to the current situation, as well as the general implications underlying the development of laws in forming legal systems. The framework shows that transfers into forming legal systems are more likely to be effective when the lack of established institutions creates opportunities for stakeholders to assert themselves within a new regulatory regime. No such opportunities emerge if the institutional setting of an importing body is tightly entrenched and has already determined the role the transplanted measure would have. The discussion makes specific reference to the transfer of U.S. antitrust to Japan, which occurred at the same time and under similar circumstances as the transfer to the EC, but where existing bureaucracies refused to integrate the law. (10) The focus of the existing literature on the role of institutions in integrating new laws fails to explain transfers into nascent entities, where the introduction of a law occurs just as the institutional and normative settings of the receiving system are forming. (11) As institutional constraints diminish, the bargaining power of stakeholders becomes predictive of the effectiveness of the transfer--the two parameters are inversely proportional.
By applying public choice theory to the context of the formation of laws, the analytical core of the framework explores the role of stakeholders when the transfers into new regulatory regimes occur. At present, public choice explanations in this context are limited to stating that transferred laws are likely to reflect the normative preferences of local advocates, but such an argument has never been fully explored. (12) This Article claims that interest group theory is fundamental to understanding and evaluating the development of laws in new legal orders, and that it carries significant implications for regional integration and regulatory globalization in general. (13) The metric that determines the effective development of a law in a newborn system is connected to the bargaining power of stakeholders that can benefit from the introduction of a new law--elements such as confidence in the law's attainments, familiarity with its theoretical basis, articulated strategies to implement it, and alignment with the exporter's interpretative preferences (especially if there is outside pressure to introduce the law) will increase the bargaining power of a given stakeholder vis-a-vis its opposition. (14) The payoffs are significant. The winning stakeholder will play a direct role in shaping the policies used to apply the new law and capture positions within the regulatory agency in charge of its administration. (15) This will help the group secure stable outcomes, durable benefits, and long-lasting power.
The argument is supported by a case study that shows that a self-interested stakeholder used the introduction of U.S. antitrust laws to its favor during the formation of the EC. The analysis directly engages with the intellectual disciplines governing competition policy in the United States and in Europe at the time of transfer and uncovers the importance of a German liberal movement that emerged as the winning stakeholder because it could define the transplanted provisions in a way that would benefit its own constituency as well as the United States. The United States had a keen interest that the laws in Europe be used to break up concentrations and prohibit anticompetitive behavior, and the approach to competition of the German Ordoliberal movement could accommodate these goals. (16) This is the first analysis that compares and connects the approach to antitrust of the Harvard School, also known as Structuralism, with the discipline of the Ordoliberal School. It shows that the vision of the Ordoliberals was not just the key to integrate the U.S. approach to antitrust in Europe, but also to explain how competition policies are applied by the European Commission today. (17)
Finally, the dominance of the U.S. approach to antitrust ties the present case study to the literature on state power and "Americanization" to the extent that the influence of hegemonic U.S. ideas provoked a shift in the European system. (18) This Article argues that the transplant of antitrust into the ECSC was accepted because it created an opportunity for certain constituencies that were sophisticated and organized enough to use it to their advantage. This interpretation differs from the conventional narrative that defends the transplant as an assertion of American power. (19) Once the Ordoliberal School had affirmed itself as a major influence on the development of European competition law, the importance of the American antitrust model diminished--and when the approach to antitrust in the United States changed from rigorous enforcement to the more laissez-faire attitude endorsed by the Chicago School, this change was not reflected in Europe, where rigorous enforcement remained the norm. (20) These diverging paths have led to a reversal of the conventional story: in recent case law, European antitrust regulations have come to define the standards under which large corporations operate, causing great concern for U.S. companies. The divergent opinions of the FTC and the European Commission on Google's case merely illustrate this trend.
This work has broader implications for the globalization of competition policy. The present discussion draws attention to the antagonism between current approaches to antitrust in the United States and the European Union, two major players in the global economy. The approach other key participants decide to adopt will have fundamental consequences for the...