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    The em Wood Pulp em Case

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    Balaji
    The Wood Pulp Case document summarizes a 1989 case in which the European Court of Justice ruled on the extraterritorial application of European competition law to foreign wood pulp producers. The Court rejected arguments that the EC lacked jurisdiction over foreign companies without a direct territorial connection to Europe. Instead, the Court held that EC competition law can apply when an anticompetitive agreement or practice is "implemented" within the EC, such as when non-European companies sell directly to EC customers and coordinate prices for those sales. The Court found jurisdiction over the foreign producers because their coordinated pricing agreements affected competition for sales to buyers in the EC.

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    The em Wood Pulp em Case

    Uploaded by

    Balaji
    22 views5 pages
    The Wood Pulp Case document summarizes a 1989 case in which the European Court of Justice ruled on the extraterritorial application of European competition law to foreign wood pulp producers. The Court rejected arguments that the EC lacked jurisdiction over foreign companies without a direct territorial connection to Europe. Instead, the Court held that EC competition law can apply when an anticompetitive agreement or practice is "implemented" within the EC, such as when non-European companies sell directly to EC customers and coordinate prices for those sales. The Court found jurisdiction over the foreign producers because their coordinated pricing agreements affected competition for sales to buyers in the EC.

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    The Wood Pulp Case document summarizes a 1989 case in which the European Court of Justice ruled on the extraterritorial application of European competition law to foreign wood pulp producers. The Court rejected arguments that the EC lacked jurisdiction over foreign companies without a direct territorial connection to Europe. Instead, the Court held that EC competition law can apply when an anticompetitive agreement or practice is "implemented" within the EC, such as when non-European companies sell directly to EC customers and coordinate prices for those sales. The Court found jurisdiction over the foreign producers because their coordinated pricing agreements affected competition for sales to buyers in the EC.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    22 views5 pages

    The em Wood Pulp em Case

    Uploaded by

    Balaji
    The Wood Pulp Case document summarizes a 1989 case in which the European Court of Justice ruled on the extraterritorial application of European competition law to foreign wood pulp producers. The Court rejected arguments that the EC lacked jurisdiction over foreign companies without a direct territorial connection to Europe. Instead, the Court held that EC competition law can apply when an anticompetitive agreement or practice is "implemented" within the EC, such as when non-European companies sell directly to EC customers and coordinate prices for those sales. The Court found jurisdiction over the foreign producers because their coordinated pricing agreements affected competition for sales to buyers in the EC.

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    of 5

    International Lawyer

    Volume 23 Number 3 Article 9

    1989

    The Wood Pulp Case


    Andrew N. Vollmer

    John Byron Sandage

    Recommended Citation
    Andrew N. Vollmer & John Byron Sandage, The Wood Pulp Case, 23 INT'L L. 721 (1989)
    https://scholar.smu.edu/til/vol23/iss3/9

    This Case Note is brought to you for free and open access by the Law Journals at SMU Scholar. It has been
    accepted for inclusion in International Lawyer by an authorized administrator of SMU Scholar. For more
    information, please visit http://digitalrepository.smu.edu.
    CASENOTE

    ANDREw N. VOLLMER*
    JOHN BYRON SANDAGE**

    The Wood Pulp Case


    Forty-one non-EC producers of bleached sulfate wood pulp, together with two
    non-EC trade associations, one U.S. and the other Finnish, brought actions in the
    European Court of Justice to annul a decision of the EC Commission. The
    commission had imposed substantial fines on the applicants for violating EC
    competition law. 1 Most of the applicants challenged the power of the Community
    to apply its competition law extraterritorially to reach them, and, considering the
    importance of the issue, the Court first heard and decided submissions limited to
    the jurisdictional question.
    The Commission had determined that the producers and the trade associations
    had engaged in concerted practices to fix the price of wood pulp in violation of
    article 85(1) of the EEC Treaty. Article 85(1) prohibits agreements and
    concerted practices "which may affect trade between Member States and which
    have as their object or effect the prevention, restriction or distortion of
    competition within the common market."
    In its decision, the Commission had addressed the jurisdictional question and
    had explicitly adopted an effects test as the basis for applying article 85 to the
    wood pulp producers and trade associations. It said that the EC had jurisdiction
    because the "effect of the agreements and practices on prices announced and/or
    charged to customers .. .within the EEC was . . .not only substantial but

    *Partner, Wilmer, Cutler & Pickering, London/Washington, D.C.


    **Associate, Wilmer, Cutler & Pickering, London/Washington, D.C.
    Both authors are currently resident in the London Office.
    1. See Wood Pulp, 27 0. J. Eua. Comm. (No. L 85/1) (1984), [1982-85 Transfer Binder]
    Common Mkt. Rep. (CCH) 10,654 (1985).
    722 THE INTERNATIONAL LAWYER

    intended, and was the primary and direct result of the agreements and
    practices."2
    In their submissions to the Court, the industry applicants argued principally
    that the Commission did not have extraterritorial authority over the conduct of
    foreign persons that engaged in no wood pulp production in the EC, did not
    maintain offices or subsidiaries within the EC, and entered into no concerted
    agreements with the EC. 3 By focusing on the lack of any direct territorial
    connection between themselves and the Community, the industry sought 4
    to
    invoke the stricter versions of the territoriality principle of jurisdiction .
    The Court rejected these arguments, concluding first that nothing in article 85
    itself precludes its application to persons situated outside the Community. The
    Court reasoned that the concerted practices of the applicants satisfied the
    wording of article 85(1): The practices had the object and effect of restricting
    competition in the Common Market because they coordinated the prices charged
    to customers in the Community. 5
    The Court next concluded that the Commission's decision was compatible
    with the territoriality principle as universally recognized in public international
    law. The Court reasoned that: "an infringement of article 85, such as the
    conclusion of an agreement which has had the effect of restricting competition
    within the Common Market, consists of conduct made up of two elements: the
    formation of an agreement, decision or concerted practice and the implementa-
    tion thereof." 6 The Court could not accept that the Community had jurisdiction
    only if the challenged conduct originated within the EC: "If the applicability of
    prohibitions laid down under competition law were made to depend on the place
    where the agreement . . . was formed, the result would obviously be to give
    7
    undertakings an easy means of evading those prohibitions." The Court

    2. Id. at 11,547-54. The Wood Pulp case dealt solely with jurisdiction under article 85, but the
    Commission is also likely to apply the Court's reasoning when it proceeds under article 86 against
    an abuse of a dominant position.
    3. The applicants also advanced additional arguments, not central to the Court's decision. The
    Canadian undertakings argued that the Commission's actions interfered with Canadian sovereignty
    and thereby breached the principle of international comity. See A. Ahlstrom Osakeyhti6 v.
    Commission, [1987-1988 Transfer Binder] Common Mkt. Rep. (CCH) 14,491, at 18,606-07
    [hereinafter Wood Pulp]. The Court rejected this contention on the tautological ground that it called
    into question the Community's jurisdiction to apply its competition rules to the conduct at issue in
    the case. Id. at 18,612.
    The Finnish undertakings argued that the EC-Finland Free Trade Agreement superseded article 85
    and provided the only basis for challenging the actions of the Finnish industry. Id. at 18,608. The
    Court rejected the Finnish claims on the grounds that the Free Trade Agreements did not prevent the
    application of article 85. Id. at 18,613.
    4. See, e.g., Higgins, The Legal Bases of Jurisdiction, in ExTA-TERMuRIAL APPLCAO N OF
    LAWS ANDRESPONSES THERTro 3, 5-7 (C. Olmstead ed. 1984).
    5. See Wood Pulp, 14,491, at 18,611-12.
    6. Id. at 18,612
    7. Id.

    VOL. 23, NO. 3


    WOOD PULP CASE 723

    concluded that the "decisive factor" relating to the Community's 8


    jurisdiction
    over restrictive conduct is "the place where it is implemented."
    The Court did not define or analyze at length the critical term "implemented,"
    but three passages in the full report of the proceeding help illuminate the Court's
    thinking. The first passage explains the Court's conception of competition within
    the Common Market. Competition occurs when suppliers sell directly to
    purchasers established in the Community and engage in price competition to win
    orders from those customers. Competition in the Common Market is restricted
    when suppliers enter into an agreement or concerted practice concerning the
    price to be charged to their customers in the Community. 9
    The second passage is in the section in which the Court voided the
    Commission's decision against the U.S. trade association. The Court said that
    the trade association itself neither engaged "in manufacture, selling, or distri-
    bution," nor "played a separate role in the implementation" of the pricing
    agreements concluded by its members. 10 Evidently, to be held liable, a person
    must have some direct involvement in a transaction with an EC consumer.
    The third passage describes an argument of the Commission. The Commission
    claimed that the essential issue in the case was "the jurisdiction of the
    Community over undertakings that implement a practice directly, intentionally,
    and appreciably affecting competition within the Community and trade between
    Member States, either by trading directly into the Community or by using agents
    or sales offices within the Community."II
    These passages suggest that a restrictive agreement is "implemented" in the
    Community when it concerns the price, quantity, or quality of a product or
    service sold to a buyer in the EC by a seller having a connection with the
    agreement. As a result, the EC's jurisdiction does not reach as far as it would
    under the Alcoa standard 12 or even as far as a standard requiring a "direct,
    substantial, and reasonably foreseeable effect." 1 3 Extraterritorial jurisdiction
    does not arise simply when a restrictive agreement affects the price, quantity, or
    quality of goods or services sold to an EC buyer; the non-EC person that is
    making, or attempting to make, a sale to a buyer within the EC must have some
    direct involvement with the restrictive agreement.
    The Court also dealt briefly with the assertion that public international law
    contains a principle of noninterference. The U.S. trade association had con-
    tended that the Commission could not challenge its conduct because to do so
    would violate that principle. This was because the Webb-Pomerene Act of the

    8. Id.
    9. Id.
    10. Id. at 18,613.
    11. Id. at 18,605.
    12. See United States v. Aluminum Co. of America, 148 F.2d 416, 444 (2d Cir. 1945).
    13. See 15 U.S.C. § 6a (1982).

    FALL 1989
    724 THE INTERNATIONAL LAWYER

    United States encourages the formation of export associations.1 4 The Court


    declined to decide whether international law contains a principle of noninterfer-
    ence, saying that, even if it existed, it would not apply in this case. United States
    law did not compel the formation of the trade association, and the U.S.
    authorities had not raised any objections to the Wood Pulp case when consulted
    by the Commission. 15
    Wood Pulp is a statement of first importance on the scope of EC competition
    law. The Court adopted neither the expansive effects test of Alcoa nor the effects
    test used by the Commission, but it did make clear that effects are relevant to the
    jurisdictional analysis. The standard adopted by Wood Pulp, requiring an intent
    or direct effect of restricting EC competition following from conduct imple-
    mented within the EC, attempts to strike a balance between the extremes of
    jurisdiction based purely on territoriality and that based purely on effects.

    14. Wood Pulp, 14,491, at 18,607.


    15. Id. at 18,613.

    VOL. 23, NO. 3

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