Modern business operates in a world that is highly economically integrated, but that remains politically, culturally and legally diverse. Notwithstanding globalisation, law and politics is still organised primarily on the basis of nation-states. National laws reflect significant social and political differences between nations. A fragmented international regulatory environment has evolved in which each government has developed its own unique approach to the regulation of conduct that affects its territory, often without regard to the effect of that regulation on other nations.

Competition law (or ‘antitrust law’ as it is known in the United States) is one form of such regulation. Competition law involves laws that promote or maintain market competition by regulating anti-competitive conduct. However, modern competition laws have traditionally evolved to promote and maintain competition in markets principally within the territorial boundaries of each nation-state. Domestic competition laws are not usually concerned with activity beyond territorial borders unless it has significant domestic effects.

This limited territorial approach has created difficulties in an increasingly globalised world in which transactions subsume multiple territorial spaces. Anti-competitive conduct may have adverse economic effects in multiple jurisdictions, unconfined by territorial boundaries. In this manner, while competition law remains essentially national, competition issues have become increasingly international, creating a regulatory disjunction. To the extent the effect of anti-competitive conduct crosses territorial boundaries, it may escape effective regulation.

On the one hand, under-regulation may occur.