International Business: COMMENTARY
COMMENTARY: GUESS WHAT? EUROPE COULD USE MORE LAWSUITS
The latest salvo in Europe's ice cream wars is enough to melt an American lawyer's litigious heart. Mars Inc., the U.S. candymaker, won a decision on Mar. 11 from the European Commission that Unilever PLC was unfairly hogging the Irish ice-cream market. Mars may now sue the Anglo-Dutch giant for damages in Ireland's national court. And it could ask for as much as $1 billion.
Mars ought to go for it. The prospect of a billion-dollar award, paid by a powerful company to a struggling rival, is just what Europe needs to push business toward free competition. Given that monopolistic practices are more the exception than the rule, a few knock-down, drag-out legal confrontations could work wonders. "More companies should be doing it," says an antitrust lawyer with a white-shoe firm in New York.
FREE FREEZERS. Complaining to Brussels is the usual course when big companies force consumers to buy goods at a certain place and price. In the ice-cream case, Unilever must stop giving free freezers to Irish retailers on condition they stock only Unilever ice cream--a decision the company is appealing. But while the EC has become more aggressive, litigation would radically raise the stakes for offenders.
By tradition, Europeans prefer arbitration to court battles, and the clubby business community eschews open hostility. With antitrust gripes, it's simply cheaper to go to Brussels. For $25,000 or so, the EC's competition office will gather evidence, make a decision, and sanction or fine the offender. Lawsuits, by contrast, usually start in the six figures--prohibitive for an upstart challenging a bigfoot. In the U.S., damage awards are determined by a jury, and a company can collect triple damages for lost business. In Europe, a judge rules on the value of the missed opportunity. Plaintiffs collect only that amount.
But the anti-lawsuit culture is gradually changing. "It's more in the consciousness of companies and their lawyers that they have private remedies before national courts," says Alasdair Bell, an antitrust lawyer with White & Case in Brussels. As Germany deregulates its telecom industry, phone companies are using lawsuits to scrap for market share. Britain's First Telecom, an upstart challenger to giant Deutsche Telekom, sued the former monopoly after DT ran a one-time ad questioning First Telecom's quality--a no-no under German law.
DT never repeated the ad, and the lawsuit generated good publicity for First Telecom. "The downside is that once you punch the big elephant," says First Telecom Managing Director Bernhard Pussel, "he gets extremely nasty." Pussel says DT's legal department now dashes off notices weekly, mainly for breaking advertising law by claiming to be cheaper.
Despite such hassles, the EC urges more cooperation between Brussels, the courts, and national regulators. The commission also has hinted that it will hike fines on companies that break competition laws. Although the EC technically can dock a violator 10% of annual global turnover, it never has done so. And it never has awarded damages to a victim. That's why a thumping private lawsuit could set a healthy precedent.By Joan Warner