Arbitration in Competition Cases

On August 2020, the Antitrust Division of the United States Department of Justice (USDOJ) released its final decision on the merger between two major aluminum producers in North America (Novelis & Arelis). This decision was historical since, for the first time in the antitrust history of the United States, arbitration was used to solve, at least partially, a competition matter.

As in most mergers and acquisitions, the anticompetitive effects identified by antitrust authorities critically depend on how the relevant market is defined.

On the one hand, the USDOJ used a market definition that implied anticompetitive effects so that the imposition of remedies was necessary. On the other hand, Novelis/Aleris claimed that the relevant market was much broader so that, as a result of the appropriate competitive assessment, remedies were not necessary.

The relevant aspect of this case is that, under the terms of the Administrative Dispute Resolution Act of 1996, the USDOJ agreed to make use of arbitration to resolve the critical point under dispute: the scope of the market definition.

In particular, the use of arbitration in this case implied that the US competition authority agreed: (a) to appoint an independent expert in competition to define the relevant market under dispute; (b) to fully accept the market definition provided by the expert during the legal proceedings associated with the review of the transaction (binding arbitration) and, (c) to make its decision regarding remedies on the basis of the findings of the expert analyzing the market definition controversy.

The use of arbitration by the USDOJ in the Novelis/Aleris case is important because it shows a world-class competition authority explicitly recognizing the value of arbitration in competition matters. As arbitration becomes more relevant in US antitrust enforcement, it should not be a surprise that other authorities around the world, particularly in Latin America and Asia, will follow suit.

A complete discussion of this case and its implications for a broader adoption of arbitration in competition in other jurisdictions can be found in the Oxford Competition Economics Business Review Letter 01/2021:

Arbitration in Competition Cases (PDF)

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