The Legality of Extraterritorial Application of Competition Law and the Need to Adopt a Unified Approach

Author:Thanh Phan
Position:Transnational merger investigator at the Vietnam Competition Authority, Ph.D. candidate at the University of Victoria, Law Faculty, Research Fellow at Centre for Global Studies, University of Victoria, Canada, Sessional Instructor in Politics of International Law at the University of Victoria.
Pages:425-477
 
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The Legality of Extraterritorial Application of
Competition Law and the Need to Adopt a Unified
Approach
Thanh Phan
INTRODUCTION
In 2014, three of the world’s largest shipping companies, Maersk Line,
Mediterranean Shipping Company, and CMA CGM, planned to create a
joint venture to operate a network named “P3 Network.”1 The proposed
network would operate on three trade lanes: Asia-Europe, Trans-Pacific,
and Trans-Atlantic.2 Although the headquarters of each company and the
proposed joint venture were located outside Vietnamese territory, the three
companies submitted a merger notification to the Vietnam Competition
Authority (“VCA”), pursuant to article 20 of the Competition Law of
Vietnam.3 The discussion surrounding this joint venture contributed to a
long-standing debate in the VCA regarding the extraterritorial application
of the Competition Law of Vietnam.4 The debate honed in on one primary
issue: although the P3 Network was run by foreign-based companies
located outside Vietnam, the companies still sought approval from the
VCA.
The extraterritorial application of competition law is a controversial
issue not only in Vietnam, but also in other jurisdictions5—especially now,
Copyright 2016, by THANH PHAN.
Transnational merger investigator at the Vietnam Competition Authority,
Ph.D. candidate at the University of Victoria, Law Faculty, Research Fellow at
Centre for Global Studies, University of Victoria, Canada, Sessional Instructor in
Politics of International Law at the University of Victoria. The au thor would like
to send his sincere thanks to Professor Mark Gillen and Professor Victor V.
Ramraj (Law Faculty, University of Victoria), Professor Fujio Kawashima
(Graduate School of Law, Kobe University), Timothy T. Hughes (U.S. Federal
Trade Commission), and Tran Phuong Lan (Vietnam C ompetition Authority) for
their helpful comments on this Article. The author would also like to thank the
Centre for Global Studies at the University of Victoria for the great support.
1. CMA CGM, Maersk Line and MSC to Establish an Operational Alliance,
CMA CGM (June 18, 2013), https://www.cma-cgm.com/news/1/cma-cgm-maersk-
line-and-msc-to-establish-an-operational-alliance [https://perma.cc/9GES-LS6P].
2. Id.
3. Lut Cnh Tranh [Competition Law], No. 27/2004/QH11 of Dec. 3, 2004
(Viet.).
4. See discussion infra Part II.D.
5. See discussion infra Part II.
426 LOUISIANA LAW REVIEW [Vol. 77
as multinational corporations (“MNCs”) have increasingly expanded their
power across countries under the shadow of globalization.6 As MNCs
transcend countries’ geographical borders, they face a problem in
determining which country’s law will apply to their cross-border
transactions. Generally, the national law of a country is applicable only
within that country’s territory.7 The application of a country’s law, however,
becomes more problematic when considering MNCs and cross-border
transactions, which potentially affect multiple countries. When international
cooperation surrounding these transactions is not available or too costly,
some countries respond by simply applying their own competition law.8
This extraterritorial application, however, can potentially harm cross-border
business transactions.9
The extraterritorial application of a country’s law is the unilateral effort
of a country to extend its jurisdiction to acts conducted in other countries.10
Although the exercise of extraterritorial jurisdiction of competition law11 is
criticized12 for seemingly undermining the territorial principle of
international law, the exercise of this jurisdiction is necessary when
countries are unable to reach an agreement regarding cross-border
transactions.
6. For example, Google bought Nokia in 2012. Microsoft to Acquire Nokia’s
Devices & Services Business, Licen se Nokia’s Patents and Mapping Services,
MICROSOFT NEWS CTR. (Sept . 3, 2013), https://news.microsoft.com/2013/09/03
/microsoft-to-acquire-nokias-devices-services-business-license-nokias-patents-and-
mapping-services/#sm.000wamleu1dzpd51pdc1m3ai3r4ao [https://perma.cc/WBG5
-QBXB]. Walmart acquired Jet.com in 2016. Walmart Agrees to Acquire Jet.com,
One of the Fastest Growing e-Commerce Companies in the U.S., WALMART (Aug. 8,
2016), http://news.walmart.com/2016/08/08/walmart-agrees-to-acquire-jetcom-one-
of-the-fastest-growing-e-commerce-companies-in-the-us [https://perma.cc/7DFX-
V7NR].
7. See discussion infra Part I.B.1.
8. See discussion infra Part II.
9. See discussion infra Part II.B, C.
10. See discussion infra Part I.A.
11. Rita Yi Man Li & Yi Lut Li, The Role of Competition Law: An Asian
Perspective, 9 ASIAN SOC. SCI. 47, 47 (2013).
12. See, e.g., discussion infra Part II.A.1 (discussing the arguments posed by
the Canadian government in the amicus brief submitted) and Part II.C (discussing
the arguments posed by the Japanese government in the amicus briefs submitted).
2016] EXTRATERRITORIAL APPLICATION OF COMPETITION LAW 427
Although many countries oppose the EACL, asserting that it violates
international law,13 others utilize the EACL but often in different ways.14
The international approach to the EACL is not unified and fails to recognize
that some countries still adopt a “double standard” for the EACL, which
occurs when one country opposes the application of another country’s law
within its territory but seeks to apply its own law to other countries
extraterritorially.15 This Article explains that the extraterritorial application
of competition law by a country16 to acts that occur outside its territory is
not contrary to international law if that application is properly limited. The
EACL should be the unilateral action of one country only when the affected
countries fail to find a common solution for a cross-border competition
issue. Ultimately, this Article further proposes a model that should be
applied to limit the extraterritorial jurisdiction of competition law. This
model would require a country to scrutinize the link between the alleged act
and its country and consider the interstate interests involved before deciding
to exercise its jurisdiction.
Part I of this Article discusses international law and the foundation of
the extraterritorial application of law. Part II surveys the EACL
approaches of four countries—Canada, the U.S., Japan, and Vietnam—
and illustrates that because the limit of international law on EACL is
unclear, countries impose their own limits. Finally, Part III proposes a
unified approach for all countries to use when considering the
extraterritorial application of competition law.
I. THE INTERNATIONAL LAW FOUNDATION OF THE
EXTRATERRITORIAL APPLICATION OF LAW
Before surveying the EACL approaches of multiple countries, it is
important to understand the foundation of the EACL. This Part first discusses
the definition of “exterritorial” and the characteristics of completion law.
Then, this Part discusses the relationship between jurisdiction and territory, as
established by international law. Finally, this Part explains the landmark Lotus
13. For example, Canada and Japan made this assertion in amicus briefs
submitted to U.S. courts. See discussion infra Part II.A.1, II.C.; Brief for
Government of Japan as Amicus Curiae Supporting Respondents at 1–2, United
States v. Nippon Paper Indus. Co., 109 F.3d 1 (1st Cir. 1997) (No. 96-2001), 1996
U.S. 1st Cir. Briefs LEXIS 11.
14. See discussion infra Part II.
15. For an example of a country that employs a “double standard” see
discussion infra Part II.C.
16. This country is normally referred to as the “country of forum.”

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