Extraterritorial Application of Competition Law

The act of competing is the means promulgated by the supporters of a free market economy of how to achieve a more efficient allocation of resources. Competition is beneficial for consumer welfare since it boosts individual liberty and welfare economics. Competition laws aim at regulating abuses, fostering economic growth and development. Too many restrictions and regulations for market entry are considered as unhealthy; hence laws help in maintaining the equilibrium between freedoms and restrictions.

Competition policy considerations are transformed into municipal law by national lawmakers through the medium of law. Competition laws boost free market behavior and maintain competitive pressures amongst producers to achieve an efficient allocation of resources. For instance, many industries or businesses are competing on worldwide markets. But when companies engage in business activities away from them homeland, they often form strategic alliances to form new foreign partnerships. This leads to an increased degree of international economic inter-dependence and openness towards international production and cross-border trade. Due to this increased competition from abroad, opportunities for domestic competitors to access market also considerably increases.

Undoubtedly, competition from abroad has given rise to extraterritoriality. The extra-territorial application of domestic laws have helped overcome considerable risks for individual competition engaging in cross-broader business activity. Such laws have helped reduce serious deficiencies relating to both the efficiency and legitimacy of the application of domestic law abroad. Over the years the enforcement efforts and laws have expanded in prominence.

Undoubtedly country policies very often conflict with each other giving rise of practical problems and even diplomatic conflicts. However, extraterritorial application of laws has come to rescue several nations. Additionally, the vigorous enforcement of laws and policies against horizontal mergers, collusive behavior and strategic alliances has helped sustain the rate of upgrading in an economy. Nevertheless, at international level, the law policies are still not very effective to meet the demands of the fast-changing technology and globalization.

For continuous freedom of trade, freedom of choice and access to markets, effective competition policy is a necessity. Such a policy can create conditions for growth, development and employment opportunities. Hence controlling competition at national level through effective laws and policies becomes more decisive. In future, the cross-broader anticompetitive practices will possibly pose complex challenges. Considering the changed circumstances, laws and policies need to be updated in order to meet the future challenges. In this respect, international cooperation and or international coordination can help achieve positive results.

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