Harmonization of International Competition Laws: Pros and Cons : Pros and Cons [1 ed.] 9783954895434, 9783954890439

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Jitendra Jain

Harmonization of International Competition Laws

Copyright © 2012. Diplomica Verlag. All rights reserved.

Pros and Cons

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Jitendra Jain Harmonization of International Competition Laws: Pros and Cons ISBN: 978-3-95489-543-4 Fabrication: Anchor Academic Publishing, an Imprint of Diplomica® Verlag GmbH, Hamburg, 2013

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Index Executive Summary

1

1

4

Antitrust or Competition Policy: Magna Carta of free enterprise 1.1 Evolution of Antitrust Regime:Antitrust 1.0, Antitrust 2.0 & Antitrust 3.0 1.2 The Great Antitrust Paradigm Shift 1.3 Contemporary Antitrust World 1.4 Aims of Competition Policy 1.5 Pillars of Antitrust Mechanism: The Efficiency Factor & The Fairness Factor 1.6 An Important Task: Create perfect blend of efficiency and fairness 1.7 An Overview of Antitrust Regulation of various countries 1.8 In a Nutshell

4 10 12 13 16

18 19 23

2

Global Markets need Global Governance 23 2.1 Puzzle: Whether there is need for unifying international competition policy ? 23 2.2 Need for Global Competition Laws 24 2.3 Enforcement Dilemma: Domestic Policies and Global Market 27 2.4 Need for Unifying Global Competition Policy 28 29 2.5 Need for International Dispute Settlement Mechanism 2.6 In a Nutshell 30

3

Benefits of unifying Antitrust Regulations 3.1 Transaction Cost 3.2 Ready availability of Expertise 3.3 Maximization of Consumer Welfare 3.4 Maximization of Global Welfare 3.5 Efficient Allocation of World Resources 3.6 Harmonization leads to increment in Productivity 3.7 Collective Efficiency vs. Collective Inefficiency 3.8 In a Nutshell

31 31 31 32 33 34 34 35 36

4

Unifying Competition laws: Areas of Harmonization 4.1 Unifying Substantive Regulations 4.2 Unifying Procedural Aspects 4.3 Unifying Level of Enforcement 4.4 In a Nutshell

36 36 37 38 38

5

Limitations of Harmonization 5.1 Political Reasons

38 38

5.2 5.3 5.4

39 39 40

6

Conflict Areas 6.1 Conceptual Discord 6.2 National Welfare vs. Global Welfare 6.3 Economic Structure of Countries 6.4 Erosion of National Autonomy 6.5 Intergovernmental Disputes 6.6 Spillover Effects 6.7 Extending beyond Nation’s Jurisdiction 6.8 Enforcement Mechanism 6.9 Jurisdiction conflicts and Confusion 6.10 In a Nutshell

41 41 42 43 44 45 45 46 49 49 50

7

Other Modalities of Cooperation 7.1 Unilateral Approach 7.2 Bilateral form of Cooperation 7.3 Mutual Legal Assistance Treaty Agreements (MLATs) 7.4 Multilateral form of Cooperation 7.5 In a Nutshell

51 51 52 57 58 60

8

Various Initiatives 8.1 International Trade Organization (ITO) 8.2 General Agreement of Trade Tariff (GATT) 8.3 Organization for Economic Co-operation and Development (OECD) 8.4 At EU level 8.5 The UN Set 8.6 World Trade Organization (WTO) 8.7 International Competition Network (ICN) 8.8 In a Nutshell

61 61 61

Concluding Remarks 9.1 The Mystery of Antitrust 4.0 9.2 Their Remarks 9.3 My Observations

71 71 72 75

9

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Social Areas Other Reasons In a Nutshell

63 63 65 66 67 70

Appendix I to VIII

78

References

86

Executive Summary Since the failure of the Havana Charter in 1947 till the success of the combined efforts of leading antitrust authorities against mighty Microsoft, the antitrust regime has witnessed several ups and downs. Auf jeden Fall the journey was not an easy one. Moreover now antitrust regime is standing at international crossroads and is wondering about its future direction.1 Today, at this crucial juncture the antitrust world is confronted with several dilemmas simultaneously. Choices are to be made between national welfare or global welfare, national autonomy or global regulations, the efficiency factor or the fairness view, national champions or global champions, collective efficiency or collective inefficiency, WTO or ICN, the US model or the EU model and so on.

It is widely believed among experts that to overcome these dilemmas, the world needs some truly unified international antitrust framework, which would enable the international community to achieve optimal product mix incorporating the best from all options and through such optimal product mix the global community can enjoy to a large extent advantages that competition policy has to offer. In this direction I have examined the feasibility and viability of unifying international competition policy in this work. Additionally, as the title suggests I have listed out advantages and disadvantages of such moves.

In the beginning I have dealt with evolution of competition policy since its origin in a nutshell. My aim is to explain the dynamic character of competition policy. I have also described the gradual change that has occurred in the ideology of competition policy over last 100 years. Primarily, Competition policy addresses economic issues and hence depends on economic structure of a country. After giving a short history of competition policy, I have formally started with the introduction of competition policy. Economic develCopyright © 2012. Diplomica Verlag. All rights reserved.

opment in today’s world is unevenly distributed and accordingly the aims and objectives of antitrust regime of individual nations also differ. With the help of various case laws and other incidental literature I have made an attempt to illustrate how these differences are influenced by time, places and circumstances. A thorough understanding of these dif1

See Antonio F. Perez, P. 1

1

ferences is according to me, essential to understand reasons for differences in antitrust area worldwide. Only after diagnosis of the problem area, one can find better remedies. Toward the end of chapter 1, I have elaborated on two basic foundation concept of competition policy, namely the efficiency and the fairness. Thereafter, I list out concrete aims and objectives of some contemporary antitrust regime of some of the major economies.

Chapter 2 begins with analysis of the major question; whether there is need for unifying international competition policy? After describing global scenario in brief, I proceed with discussion on global remedies such as: global governance, global laws, global competition policy and so on. I have also discussed various dilemmas faced by antitrust regime and also a vacuum created by absence of a globally valid competition policy.

Assuming that the world succeeds in getting a unified antitrust regime, in chapter 3 I have listed out the advantages that can be enjoyed under such a scenario, such as reduction in transaction cost, increment in consumer welfare, efficient allocation of resources etc. Advantages of a unified antitrust policy are immense. Hence I admit the list is essentially not an exhaustive one.

Chapter 4 deals with areas of harmonization. Effective unification of international competition policy call for coordinated efforts and requires substantial changes in domestic rules and regulation. In addition to substantial changes in domestic legal provisions and procedural requirements, harmonization also calls for effective domestic enforcement.

Prima facie antitrust regime is part of economic policy. However very often governments around the world use antitrust regulation as an instrument to realize social goals, achieve political targets and other aims. These factors cause distortion in effectiveness of antiCopyright © 2012. Diplomica Verlag. All rights reserved.

trust provisions. As the social and political circumstances around the world substantially differ, national governments are forced to have country specific antitrust remedies. This adds to heterogeneity of antitrust regime worldwide and consequently renders the task of unification of international competition policy almost impossible. In chapter 5 I have dealt with these aspects very briefly.

2

Plurality of economic, political, social and other circumstances around the world have strong influence on national antitrust policies and also contribute to contradictions and conflicts. “(…) efforts to advance harmonization or “convergence” of national rules regulating competition can reach their full potential only if two sets of preconditions— economic/commercial and political—exist to support such harmonization or convergence.”2 In chapter 6 I have dealt with possible conflict areas. At times due to strong conflicts, harmonization seems impossible. Hence extra efforts on the part of authorities are needed to deal effectively with these conflict areas.

At present, feasibility of a unified international competition policy is under doubt. However a small beginning in form of cooperation among antitrust authorities could go a long way in harmonization process. Bilateral agreements between the EU and the US are good examples. In chapter 7 I have dealt with other possible modalities of cooperation between antitrust authorities, namely unilateral approach, bilateral agreements and multilateral forum.

Efforts for harmonization of competition laws began as early as in 1948. Till date there are several binding and non-binding arrangements made in the direction of harmonization. The WTO and the EU for effective coordination in antitrust area have launched recently new initiatives. International Competition Network, a forum for active interaction among antitrust officials, even though non-binding in nature is doing considerably good work. I believe such confidence building initiatives among nations would help in arriving at some amicable solutions, agreeable to all nations. Chapter 8 focuses on various such initiatives taken in the direction of harmonization.

In the concluding chapter, I elaborate further on need of having a unified antitrust regime Copyright © 2012. Diplomica Verlag. All rights reserved.

under a contemporary scenario. Recommendations and views of experts are also presented. At the end I discuss my views about feasibility of having a truly unified antitrust regime in foreseeable future and other possible alternative measures that might help in achieving harmonization in future. 2

See Timothy M. Reif and Gary E. Bacher, P. 1

3

1

Antitrust or Competition Policy: Magna Carta of free enterprise

The Apex Court of United States in a very rare occasion has honored antitrust framework or competition policy with near constitutional status. The Court described Competition Policy as “ Magna Carta of free enterprise” and “ as important to the preservation of economic freedom and our free enterprise system as the Bill of Rights is to the protection of our fundamental personal freedom”.3 Although, such comparison appears slightly rhetoric, the importance and effectiveness of antitrust framework in protecting consumers against anticompetitive actions and thereby ensuring social welfare cannot be undermined. Recent successes of antitrust authorities against software juggernaut Microsoft and against other international cartels such as vitamin cartel are some of the shining examples. “Competition is a public good and society cannot expect the victims of anticompetitive conduct to protect themselves.”4

In this section, I briefly deal with evolution of competition policy or antitrust regime as called in the US5, since enactment of first antitrust regulation in Canada in 1889. Thereafter, I explain some basic fundamental concepts of competition policy. In the last section of this chapter various aims and objectives of competition policy are dealt with.

1.1

Evolution of Antitrust Regime: Antitrust 1.0, Antitrust 2.0 & An-

titrust 3.0

The first antitrust regulation was enacted in Canada in 1889. A year later, celebrated antitrust regulation Sherman Act was enacted in US. In US, antitrust laws are usually described in general terms and hence they provide possibility for several different interpretations. To mention a few, Sherman Act prohibits agreement in restraint of trade (Article

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1) and monopolization (Article 2), FTC Act prohibits unfair practices and Clayton Act (Article 7) goes against acquisitions likely to lessen competition substantially or tend to 3

See United States vs. Topco Associates, Inc., 405 U.S. 596 (1972) See Jonathan Baker, 2003, P. 1 5 The terms “antitrust regime” and “competition policy” are by and large synonymous. However the term “competition policy” includes aspects of state aid, industrial subsidies etc.. In the US these aspects form part of “industrial policy”. See Robert Feinberg, P. 1 4

4

create a monopoly. In the absence of further explanations these statues give more liberty to courts in interpretations. On various occasions courts have taken liberty to interpret the laws according to prevailing political and social circumstances. These decisions are strongly influenced by ideologies and power of their proponents, at the prevailing time. As a consequence it appears that these statues can pursue a plethora of perspectives and goals.

Since enactment of Sherman Act in 1890, there have been paradigm shift in ideology and thinking of antitrust experts. In later part of this chapter I deal with these aspects. History of antitrust regime could be easily divided in three distinctive phases, namely;6 -

Antitrust 1.0

-

Antitrust 2.0

-

Antitrust 3.0 Antitrust 1.0

Antitrust 1.0 era began with the enactment of Sherman Act and this era can also be described as the Classical Era.7 Forefathers of the Sherman Act and presiding Judges, who decided early antitrust matters in the US under the provisions of this Act, did not differentiate between classical economic values and political values. For them these values were closely connected.8 Hence in those days the Sherman Act was more or less equated with social legislations, introduced only for betterment of society in general. By and large, the efficiency aspects were ignored.

Justice Peckham differentiated between ordinary contracts – ‘a lease or purchase by a farmer, manufacturer, or merchant of an additional farm, manufactory or shop.... the sale of goodwill of a business with an accompanying agreement not to engage in similar busiCopyright © 2012. Diplomica Verlag. All rights reserved.

ness…[or an] agreement entered into for the purpose of promoting the legitimate business of an individual or corporation’ and agreement in restraint of trade under the Sherman

6

See Jonathan B. Baker, 2001, P. 2 Id., P. 3 8 See Jonathan B. Baker, 2001, P. 3 7

5

Act.9 According to him “ The ‘corporate aggrandizement’ of trusts and combinations is ‘against the public interest’ even if generates cost reductions that lower price, because ‘it is power of the combination to raise [price]’ and the trust may ‘driv[e] out of business the small dealers and worthy men whose lives have been spent [in that line of commerce].’10 Originally the Sherman Act was more understood as an instrument to protect economic liberty, security of property and competitive process, free from artificial interference.11 Hence, maintaining individual business opportunity, economic efficiency, national prosperity, justice, and social harmony were some of the original aims of competition policy. Needless to mention, that these aims were primarily guided by the fairness principle.

Slowly and gradually experts of antitrust regime realized that the economy was changing. Innovations of new technologies have enabled industry to produce more through automation. Firms are taking advantage of economies of scale and economies of scope.12 Induction of railways and other forms of transport facilitated procurement of raw materials from remote areas at a cheaper cost. Geographical reach for finished products also expanded substantially.

Wide geographical reach, technological innovation and efficient use of modes of transport led to emergence of large corporations and rise in market concentration. Many observer felt need for more enforcement of antitrust regulations as market concentration was rising. They realized that the growth of large corporations was inevitable but sought to regulate them simultaneously. President Theodore Roosevelt promoted Trust busting and in 1914 Federal Trade Commission (FTC) was established.13 FTC an independent agency was entrusted with the task to regulate unfair trade practices with active cooperation with Department of Justice, a government agency responsible for enforcement of antitrust laws in US at the federal level.14 Another group had their reservations concerning Copyright © 2012. Diplomica Verlag. All rights reserved.

antitrust. They thought that antitrust regime was creating unnecessary obstacle in the way 9

See United States vs. Joint Traffic Association, 171 U.S. 505 (1898) See United States vs. Trans-Missouri Freight Association, 166 U.S. 290 (1987) 11 See Jonathan B. Baker, 2001, P. 4 12 Economies of scale- reduction in per unit cost of production due to large production; economies of scope-reduction in per unit cost of production due (spare) capacity utilization 13 See Jonathan B. Baker, 2001, P. 5 10

6

of progress by blocking growth of large and efficient producers. Antitrust experts took positive note of such reservations and willingly accommodated them also. Subsequently, in 1911 in Standard Oil decision a compromise was found, which incorporated both perspectives. The Standard Oil Case (1911)15

In this case the Apex Court upheld the use of Sherman Act to break the monopoly and found that conduct of the Standard Oil has witnessed a “ a purpose to maintain the dominancy over the oil industry, not as a result of normal methods of industrial combination, but by new means of combination which were resorted to in order that greater power might be added had normal methods been followed…” This speaking order actually benefited large-scale enterprises in the long run. This judgment established a new legal parameter: the rule of reason. This decision made clear that Sherman Act prohibited only unreasonable restraints of trade.

Proponents of antitrust were disappointed and this led to the beginning of a new political debate. Eventually, this led to establishment of FTC and a new anti-merger law namely Clayton Act was enacted in 1914. The Clayton Act explicitly prohibits practices, such as price discrimination, which lessens competition and interlocking directorates among competing firms.16 Appalachian Coals vs. United States: The New Deal17

Again during the Great Depression of 30’s, classical antitrust ideology came under fire. Ability of unregulated marketplace to serve public welfare was questioned. This thought Copyright © 2012. Diplomica Verlag. All rights reserved.

became transparent in Supreme Court decision in the New Deal, which permitted 137 coal producers to appoint an exclusive selling agent so as to counter and effectively deal 14

See Massimo Motta, P. 6 See The Standard Oil Case, 221 US 1, 75 (1911) 16 See Massimo Motta, P. 5 17 See Appalachian Coals vs. United States, 288 U.S. 344 (1933) 15

7

with ‘destructive trade practices’ that drove down price. “ The Court found that this agreement was not unlawful since it was to be considered as a reasonable response to protect the market from destructive practices.”18 Several years later, as the circumstances changed; around the beginning of the structural era, the Supreme Court effectively overruled it. In 1938 Thurman Arnold was appointed as head of Antitrust Division of Justice Department. During his tenure as the head, he sought to increase the impact of the Sherman Act and conducted various new investigations and reached new enforcement levels through consent settlement. Under his leadership the antitrust division of DOJ “revealed numerous examples where monopoly and participation in international cartels had reduced the US military and economic capability for war.”19

Antitrust 2.0 Antitrust 2.0 era began around the middle of the 20th Century and is also known as the Structural Era.20 Journey of antitrust regime from World War II till mid seventies could be understood as a phase of Thurman Arnold’s approach.21 Without caring much about ongoing political debate, his approach simply suggested a forward way for antitrust jurisprudence. Antitrust experts during this phase had very often reservations about the conduct of large corporations. It was widely believed that large corporations were acting in public interest. Industrial Giants were not only seen as threats to consumers and other buyers, but also were considered as menace to small business, restricting their potential to

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compete.22

18

See Massimo Motta, P. 7 See Denys Gribbin, P. 143 20 See Jonathan B. Baker, 2001, P. 8 21 Id., P. 8 22 Id., P. 9 19

8

Now I narrate some important judicial landmarks of Antitrust 2.0: Unites States vs. Von’s Grocery Company23 Antitrust laws concluded that mergers among rivals are detrimental to competition. United States vs. Arnold Schwinn & Company24 Exclusive distribution in territories was declared illegal per se.

In 1968 merger guidelines were issued by the Department of Justice under leadership of lawyer-economist Donald Turner to counter harmful effects of high and rising market concentration.

Antirust authorities initiated monopolization proceeding against IBM, AT&T, Xerox, the breakfast cereal industry, the rubber industry and the oil industry.25 Such proceedings were by and large unsuccessful. Observers were surprised by such large failures of these antitrust actions. Many felt that prevailing circumstances played a decisive role. These cases commenced during structural era but many ended after courts had begun accepting Chicago School perspectives.26

Antitrust 3.0 Antitrust 3.0 also known as the Chicago School Perspective Era27 began around last quarter of the 20th Century. There was a revolution of ideas. These ideas were by and large developed and dominated by thinkers and writers, economists and lawyers affiliated to University of Chicago. A renowned Chicago school economist George Stigler, who later won the Nobel Prize in economics in an article published in 1964, wrote that it was not Copyright © 2012. Diplomica Verlag. All rights reserved.

appropriate to presume that the firms in any market, even when they are few in number, 23

384 U.S. 270 (1966) 388 U.S. 365 (1967) 25 See Jonathan B. Baker, 2001, P. 10. As mentioned such proceedings were by and large unsuccessful. However as an exception substantial relief was obtained against AT&T and Xerox. 26 See Jonathan B. Baker, 2001, P. 10 27 Id., P. 11 24

9

would find a way to raise the price above the competition level.28 In support of his views he also offered convincing evidences in that article. Proponents of the Chicago school also expressed their reservations about a single firm with high market share necessarily exercising market power. In defense of their opinion, they put forward another argument that threat of expansion by fringe sellers and potential competition from new entrants kept prices low.

New merger guidelines issued by Assistant Attorney General William Baxter was a clear departure from the 1968 guidelines. These guidelines incorporated new range of features including mergers’ likely competitive effects. During the Chicago School Era there was radical transformation of several other doctrines. Telex Corporation vs. IBM Corporation29 Held: Agreement among rivals is not anti-competitive per se. Continental TV Inc. vs. GTE Sylvania Inc.30 Per se prohibition of exclusive distribution territories was overruled.

Big was not necessarily seen as an evil.

However, some experts believe that with the induction of Reagan administration in 1988, the Chicago revolution was by and large complete. 31

1.2

The Great Antitrust Paradigm Shift

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During its journey of last 100 years, antitrust regime has witnessed frequent paradigm shift in its ideology. Ideologically, it has moved away from the fairness factor and got closer to the efficiency factor. In the beginning, antitrust authorities were worried about

28

Id., P. 11 510 F.2d 894(10th Cir.),cert.dism’d, 423 U.S. 802 (1975) 30 433 U.S. 36 (1977) 29

10

social issues such as protection of small participants form large entities, equitable distribution of wealth, protection to vulnerable sections of society and so on. Later on, with emergence of new technology, large-scale production facilities and efficient transport and communication systems, wide growth of marketplace and urge for more production at lesser cost, “efficiency” factor started playing crucial role in decisions of antitrust authorities. Through efficiency, production cost per unit can be reduced and that could lead to efficient allocation of resources and increase in consumer welfare. In a nutshell, at least now, in some leading economies efficiency is preferred over fairness.

Reasons for Paradigm Shift

A closer look at history of antitrust regime makes it clear that there have been a frequent and radical changes in aims, objectives, and purposes of competition policy. Policy framers were acting according to ever changing economic environment. It vindicates the stand that antitrust framework is dynamic and not static. Antitrust framework moulds itself according to the need of the time and demand of policy makers. Now I would like to narrate various reasons and circumstances as listed by Jonathan Baker that compelled such paradigm shift in antitrust framework over last 100 years.32

-Developments in the economy

Industrialization and thereafter-great depression of 30s had strong influence on economy and business environment. During industrialization phase general sentiment was to protect small players from large organizations. Hence, antitrust authorities were guided by the fairness factor. During The Great Depression several distinctive and rare questions Copyright © 2012. Diplomica Verlag. All rights reserved.

were raised. Creating an environment, which is conducive for survival of business entities was the priority. During this period several agreements, which would under normal circumstances be termed as anticompetitive were given the green signal. “ Something simi-

31 32

See Jonathan B. Baker, 2001, P. 15 See Jonathan B. Baker, 2001, P. 17

11

lar may be happening today, as the antitrust laws come to grip with the information revolution.”33

Proactive approach of political system

Throughout history of antitrust regime, the prevailing Political system had a proactive approach in competition policy matters. Political leaders moulded themselves, according to the need of society and were by and large receptive to changing circumstances. To mention one, during The Great Depression, political leaders acted swiftly and came out with the new deal to overcome prevailing economic crisis.

Influence of Think tank

Change in economic policy, thinking or parameters of experts or to be precise of group of experts affiliated to same institute, or otherwise also led to paradigm shift in aims and objectives of competition policy. For example, Edward Chamberlin’s research on monopolistic competition designed antitrust’s structural era.34 Thereafter gurus belonging to Chicago School successfully challenged the antitrust model designed in a structural era. It were the initiatives from scholars belonging to the Chicago school that led to an increase in importance of efficiency factor.

1.3

Contemporary Antitrust World

Antitrust framework followed by large economies, such as the US antitrust framework,

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The EU competition policy framework and the Japanese competition policy framework, rule contemporary international antitrust arena. By and large, the US antitrust framework is considered as Musterbeispiel. Recent trends indicate convergence of the EU competi-

33 34

Id., P. 17 See Jonathan B. Baker, 2001, P. 18

12

tion policy toward the US antitrust framework e.g. SSNIP test.35 Some scholars are of the opinion that “One size does not fit all”. Ajit Singh in his G-24 discussion paper lays emphasis on suitability of the Japanese antitrust framework for developing economies.36

1.4

Aims of Competition Policy

Massimo Motta gave the formal definition of competition policy as “ the set of policies and laws which ensure that competition in the marketplace is not restricted in such a way as to reduce economic welfare”37

After discussing evolution and describing definition of competition policy, now I proceed to elaborate on various objectives of antitrust regime. National competition authorities very often formulate antitrust provision in such a manner, so as to achieve desired aims and objectives. Aims and objectives are strongly influenced by socio-economic and political considerations. There may be some contradiction between welfare objectives and other objectives.38

Objectives of Antitrust Regulations:

Welfare Maximization

“ Welfare is given by total Surplus, that is the sum of consumer surplus and producer surplus.”39 Consumer surplus is the difference between the price of goods or services and his valuation (i.e. his willingness to pay). Consumer surplus is aggregate of surplus of all

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consumers. Producer surplus is aggregate of profits earned by all producers in a given industry. Maximization of total surplus is one of the main objectives of antitrust frame35

See Justus Haucap et al, P. 320 See Ajit Singh, P. vii 37 See Massimo Motta, P. xvii 38 See Massimo Motta, P.17 39 Id., P.18 36

13

work. Concept of total surplus overlooks the issue of distribution of income between consumers and producers.40 Hence it must be distinctly understood that antitrust regulation doest not per se strive for socio-political causes such as reduction in inequalities of income and wealth among different sections of society.

Consumer Welfare

Prima facie reduction in consumer welfare leads to reduction in total welfare. But very often there are exceptions. To mention perfect price discrimination by a monopolist (in circumstances where all consumers are forced to pay exactly equal to their willingness to pay) maximizes welfare but is detrimental to the interest of consumers.41 Primarily, aim of the authorities is to maximize total welfare and hence it is difficult to say that maximization of consumer welfare is always the ultimate objective of competition authorities. However, regulatory authorities generally accept efficiency defense “provided that it is to consumer advantage”. Such provisions vindicate the stand that consumer welfare is one of the important objectives of competition policy.42 Revised US merger guidelines state, “ the agency considers whether cognizable efficiencies likely would be sufficient to reverse the merger’s potential to harm consumers in the relevant market, e. g. by preventing price increases in that market”.43 Hence, as far as mergers are concerned, it seems that US antitrust framework favors consumer welfare. However competition authorities in several other countries, like Canada, Australia and New Zealand go for total welfare standard.44

Such discrepancies regarding purposes of competition policy create hindrance in devising

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a globally valid competition policy.

40

Id., P. 18 See Massimo Motta, P.19 42 Id., P. 19 43 Id., P. 20 44 Id., P. 20 41

14

Protection of Small Entities

Protection of small firms is one of the original objectives of antitrust regulations. In fact anti-trust laws were introduced in the US due to grievance of the small entities against the large entities.45 “Farmers and small businesses had enough political force and public sympathy to lead to creation of ant-trust laws in many US states.”

46

Giving benefits to

small firms so as to balance the level of playing field is in coherence with objective of economic welfare. However, such measures should be sparingly used. Such measures should in effect enhance competitive capabilities of smaller firm, so that they can face the challenges imposed by larger firms successfully. It must be distinctly understood that artificially helping small firms to survive not operating at efficient scale of production is in contradiction with economic welfare objective.47 Such attitude would encourage inefficient allocation of resources and therefore would go against fundamentals of competition policy, i.e. the efficiency factor and fairness factor.

Promoting Market Integration

As per treaty, the EU competition policy aims for promotion of market integration. This is enforced by the EC and also endorsed by judiciary. This objective may be politically correct but might not be in conformity with parameters of economic welfare.48 EC competition laws de jure prohibit price discrimination across national borders. Uniform pricing policy across borders may not necessarily lead to increase in economic welfare, because income standards in member countries differ substantially and hence purchasing power. A lot of other measures need to be taken to make market integration more benefi-

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cial.

45

Ambit of term small entities does not include only small businessmen who suffer from cost disadvantages due to small operations, but also includes wholesalers, manufacturer’s agent and other middlemen who face threat of being driven out of business as the large producers move forward and the large retailers move backward into wholesaling. For further details see Massimo Motta, P. 72 46 See Massimo Motta, P. 3 47 See Massimo Motta, P. 22 48 Id., P. 23

15

Economic Freedom

Ensuring economic freedom might be also objective of competition policy. This is probably the main rationale behind competition laws in Germany.49 Sometimes there may occur friction between this objective and objective of economic efficiency. To mention, sometimes efficiency defense in agreement such as retail price maintenance are allowed. But these arrangements are per se against economic freedom of retailers.50

After describing fundamentals, evolution and various objectives of competition policy, now I proceed to deal with basic elements of antirust regime, which are core to all competition policy frameworks irrespective of their national or international character namely, the efficiency and the fairness. These core concepts can offer us some help in unifying international competition policy.51 In this chapter I also describe some conflict areas among national policies simultaneously.

1.5

Pillars of Antitrust Mechanism: The Efficiency Factor & The Fairness Factor

“Surprisingly there appears to be no obvious relationship between competition and competition policy.”52 There are empirical evidences to prove that many countries successfully maintained competition in their market despite absence of a codified competition policy. Hence the question arises; why do we need competition policy and what is task of antitrust regime? Prime task of antitrust regime is to ensure efficiency and fairness. Based on these two pillars, efficiency and fairness, every country has developed conventions or rules of conduct for firms. I admit that all countries do not have formally codified competition laws but all countries have informal competition convention.53 And more and Copyright © 2012. Diplomica Verlag. All rights reserved.

more countries are formulating codified competition laws.54 (See Appendix I: Countries 49

Id., P. 24 Id., P. 24 51 See Edward M. Graham and J. David Richardson, P.8 52 See Ajit Singh, P. 7 53 See Edward M. Graham and J. David Richardson, P. 7 54 The number of countries with codified competition laws has increased. 50

16

adopting formal Antitrust Regime)) Almost all competition policies are designed to ensure that efficiency and fairness prevails. When there is a conflict between the efficiency and the fairness, the objective is to evaluate and trade-off between them. Experts seek a perfect mix of the efficiency and the fairness.

The Efficiency Factor

“ Die Wettbewerbspolitik zielt in erster Linie darauf ab, die Effizienz der Wirtschaft zu sichern.”55 The term efficiency could be understood as “getting most out of least resources”. Production of desired goods at least cost is characteristic of an efficient market. Efficiency is further classified into static efficiency and dynamic efficiency. Even though the term efficiency is very clear in its meaning and purpose for competition policy matter, different treatment is given to efficiency factor in different countries. Countries pursuing static efficiency may regulate cooperative high-technology activities more strictly. Countries pursuing dynamic efficiency may subsidize innovations.

One more critical area: What might be efficient for one country might not be efficient for another country. Export cartels and monopoly marketing brand are some such examples.56 Very often such activities are carried under protection from respective governments. “Most nations explicitly exempt export associations from the prohibitions of their competition policy laws, sometimes (as in the United States) insisting that competition reducing spillover effects be avoided in domestic markets, sometimes not.”57 Such attitude of national government provides protection to those establishments, who are globally inefficient. Needless to mention, this leads to inefficient allocation of scarce global resources. If all countries taken together collectively pursue such harmful goals, the World

Copyright © 2012. Diplomica Verlag. All rights reserved.

will be full of collective inefficiencies. (Discussed in detail in chapter 4)

55

See Manfred Neumann, P. 229 See Edward M. Graham and J. David Richardson, P. 11 57 See F. M. Scherer, P. 46 56

17

The Fairness Factor

The meaning of term fairness is culturally distinctive. To mention in United States equality of opportunities or free entry into business is often associated with fairness. In other countries reward for loyalty or favored activity is associated with fairness. In Japan, loyalty toward traditional supplier is considered “just and fair”. In several countries, creating opportunity for weaker section of society is considered fair.58 Several countries under pretext of fairness formulate their policies in a manner so as to protect vulnerable sectors of economy (these sectors are not opened for competition from outside). Sometimes extra incentives are provided to several sectors, when large chunks of population are dependent on these sectors. “ Cross-country conflicts in competition policy are increasing because concepts of fairness often differ.”59 And precisely these conflicts are obstacles in creation of a unified international competition policy.

1.6

An Important Task: Create perfect blend of efficiency and fairness

Prima facie efficiency and fairness like oil and water do not mix easily.60 Under normal circumstances efficiency cannot be achieved without some sacrifice of fairness and vice versa. Inherent conflicts among these objectives surface inter as well as intra countries or economies. Hence, creation of regulatory instrument, which has perfect mix of efficiency and fairness, is a Herculean task.

Within countries, conflicts might surface when policies giving push to efficiency of some participants appear unfair to others. Merger between firms (say two large companies havCopyright © 2012. Diplomica Verlag. All rights reserved.

ing different place of origins) is normally efficient for insiders at the cost of unfair disadvantage for outsiders. Recent merger of steel giants Mittal and Arcelor might have creat-

58

The Competition Act, South Africa, 1998 See Edward M. Graham and J. David Richardson, P.10 60 See Edward M. Graham and J. David Richardson, P. 9 59

18

ed “European Champion”. But creation of such giants might be harmful to the other players from other parts of the World.

1.7

An Overview of Antitrust Regulation of various countries

During the past hundred years since enactment of first antitrust regulation in 1889 in Canada61, there has been significant paradigm shift in the aims and objectives of competition policy. Prime facie protection of competition at market place is given utmost importance by antitrust advocates. As the following statement issued by World Bank and OECD jointly, says:62

“ While many objectives have been ascribed to competition policy during the past hundred years, certain major themes stand out. The most common of these objectives cited is the maintenance of the competitive process or of free competition, or the protection or promotion of effective competition.”

This definition also vindicates the stand that efficiency and fairness has been seen traditionally as guiding parameters of competition policy in many countries. Preamble of the competition law of India enacted in 1998 mentions about aims of preventing practices that have negative impact on competition, promoting and sustaining competition in markets, protecting the interest of consumers and ensuring freedom of trade carried on by other participants in markets in India. 63 Here I would like to mention that objectives of national competition polices are influenced by socio-political and economic factors prevailing in respective countries and this makes the task of unifying international competition policy more difficult. As Frank Fishwick rightly says, ” Economic policies cannot be divorced from political and social philosophies – nor should they be.”64 Alexis JacqueCopyright © 2012. Diplomica Verlag. All rights reserved.

min also vindicates these views. He says, “ Competition policy varies from country to

61

See Joan-Ramon Borrell, P. 1 World Bank-OECD 1997, P.2; for further details see Julian L. Clarke and Simon J. Evenett, P. 7 63 History of antitrust legislation in India to promote fair market dates back to 1969, with enactment of Monopolistic and Restrictive Trade Practices Act. Recently a new legislation has been introduced in 2002 to promote competition at market place based on efficiency and fairness parameter. 64 See Frank Fishwick, P. 175 62

19

country, and in the same country, from decade to decade, reflecting changes in economic and social conditions as well as reversal in academic thought.”65 Fair enough. But there are some basic parameters, such as efficiency and fairness, which are incorporated in most of the competition policies. To mention, Posner says that fundamental objective of US antitrust law is the protection of competition and efficiency.66

Recently scholars are talking about importance of dynamic efficiency as an objective of competition policy. To mention, Singh recommends that competition policy in developing countries should contribute to overall development of an economy. He puts emphasis on dynamic efficiency, “ the need to emphasis dynamic rather than static efficiency as the main purpose of competition policy.”67

Dynamic nature of markets, striking speed of information and innovation now call for reassessment of importance given to static efficiency as an objective of competition policy68. Hence ensuring an environment that is conducive to innovation and dynamic efficiency is also an important purpose of competition policy.

Competition laws in Germany are strongly influenced by agenda of the neo-liberal school69 and its demand for a strict codified legal system for economy. Additionally there is also an influence of American antitrust policy, which is regarded as most progressive and rigorous. These influences make German competition policy, especially least with respect to mergers and monopolies, the most rigorous of all market economies.70

65

See Alexis Jacquemin, 1990, P. 2 See Julian L. Clarke and Simon J. Evenett, P. 8 67 See Ajit Singh, 2002, P.22 68 See Julian L. Clarke and Simon J. Evenett, P. 8 69 See Erhard Kantzenbach, P. 10 Neo-liberal School – Contrary to classical liberalists proponent of neoliberalism do not believe in a laissez-faire economy. They also advocate for strong state. According to them state should neither participate nor intervene in competitive process of economy. But state should formulate rules and effectively enforce them. Rules should be formulated in such a way that in addition to selfinterest of participants, they should serve public interest also. Neo-liberalists put strong emphasis on ordering function of the state. And hence they are also called Ordo -liberals. 70 See Erhard Kantzenbach, P.25

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66

20

As I have mentioned earlier, competition policies in several countries are strongly influenced by socio-economic and political considerations. Competition laws in South Africa are designed in such a manner, so as to achieve socio-economic equality and development in addition to economic efficiency. The Competition Act of 1998 in South Africa mentions: “ The purpose of this act is to promote and maintain competition in the Republic in order, (a) to promote the efficiency, adaptability and development of the economy; (b) to provide the consumer with competitive prices and choices; (c) to promote employment and advance the social and economic welfare of South Africans; (d) to expand opportunities for South African participation in world markets and recognize the role of foreign competition in the Republic (e) to ensure that small and medium sized enterprises have an equitable opportunity to participate in the economy; and (f) to promote a greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons”(Chapter 1, Article 2)71

These examples vindicate the stand that competition laws need not be uniform world over. National competition policies and national needs are different from global needs. Competition policies need not be directed toward single objective of promoting efficiency and fairness. Very often these regulations strive for a plethora of objectives and these objectives are determined according to need, tradition, socio-economic considerations and the other prevailing circumstances in the country. To mention, traditionally, Germans opted for system of social market economy. “ In Germany competition policy is acknowledged as a main part of the so called “Ordnungspolitik” means the formation of legal framework conditions for a workable economic system, especially for the system of Copyright © 2012. Diplomica Verlag. All rights reserved.

the social market economy.”72

71 72

See The Competition Act, South Africa, 1998 See Erhard Kantzenbach, P. 1

21

To conclude, one can say that like all other regulations competition policy regulations also reflect history, culture and need of countries. As a consequence it is dynamic and constantly changing and also differs among countries.73

1.8

In a Nutshell

Antitrust regime has witnessed various changes in its journey through the last hundred years. The Efficiency factor and the Fairness factor do have influence on national competition policies. However, sometimes due to various reasons countries do ignore these parameters. National competition authorities very often pursue different goals and aims, according to their needs. “ The goals of competition policy, as well as competition culture and traditions, differ among jurisdictions. This can be traced back to different citizen preferences about role of competition and competition policy.”74 Sometimes these goals are in contradiction with the basic tenets of the competition policy. Such heterogeneous

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environment makes task of unification of international competition policy more complex.

73 74

See Edward M. Graham and J. David Richardson, P. 7 See Oliver Budzinski, 2003, P. 47

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2.

Global Markets need Global Governance

A sudden spurt in trade liberalization, globalization coupled with increase in global takeovers and mergers has led to the emergence of a global marketplace. “ Ökonomisch betrachtet bedeutet Globalisierung vor allem das Zusammenwachsen bisher nationaler und damit voneinander getrennter Märkte zu übernationalen, häufig weltumspannenden Märkten.”75 Global marketplace calls for a truly global governance mechanism. Quantum of global commerce of mergers and takeovers have increased fivefold in the past decade reaching US $ 2.5 trillion in 1998.76 International mergers and takeovers demand coordination between legal authorities of different nations. Companies are obliged to obtain permission from respective authorities of each country individually. Under these circumstances demand for a truly global legal system is perfectly justified.

2.1

Puzzle: Whether there is need for unifying international competition policy?

In their essay “How to Reduce Conflicts over International Antitrust?” Justus Haucap et al raise an interesting puzzle. They doubt the need for unifying international competition laws in an integrated world economy. They write that globalization should prima facie reduce the need for antitrust regime. As more and more segmented markets come together, more players will join emerging as a single market and as a consequence intensity of competition at marketplace should increase. “More players makes markets almost always more competitive.”77 Empirical evidences suggest that increase in international competition lead to reduction in Price-Cost margin. Hence globalization per se should foster competition and reduce need for artificial intervention and supervision. Ajit Singh also Copyright © 2012. Diplomica Verlag. All rights reserved.

put forward instances where countries were able to ensure considerable competition at marketplace even without formal codified competition policy.78

75

See Oliver Budzinski and Wolfgang Kerber, 2003, P. 9 See Christian Conrad, P. 57 77 See Justus Haucap et al, P.309 78 See Ajit Singh, P. 7 76

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In an integrated world economy economic and commercial activities are no longer confined to national boundaries. Anticompetitive activities of players not only affect domestic consumers and domestic firms, but also might harm foreign customers and firms.79 Additionally the recent rise in number of international hardcore cartels, incidences of cross border mergers and other forms of cooperation, jurisdictional conflicts and disputes over extraterritorial application of one’s own laws call for existence of an international antitrust framework. Emergence of international merger wave has led to creation of big business giants. “The basis of our competition is threatened by an unprecedented growth of big business. Continuous strengthening of the competition policy is needed to minimize these defects and dangers.”80 Additionally, “ Increased international interdependence, often also discussed under headings such as globalization, has also increased potential for international conflict.”81 Hence there is an urgent need for an internationally valid antitrust regime. In the forthcoming paragraph and also later in other chapters I have discussed these issues in detail.

2.2

Need for Global Competition Laws

“National competition law can be defined as the set of rules and disciplines maintained by governments aiming to counteract attempts to monopolize the market (and thus ensure that competition is guaranteed), either through agreements between firms (including attempts to create dominant position through merger) that restrict competition or through

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unilateral behavior (abuse of a dominant position).”82

79

See Justus Haucap et al, P. 309 See Corwin D. Edwards, P. 318 81 See Stefan Voigt, 2006, P. 1 80

24

Illustration: Competition Policy Frameworks

Competition Policy

Instruments

Objectives

Frameworks National competition Policy

Global Competition Policy

National Competition - Domestic Welfare - National aims and Laws Objectives - Monitoring market dominance Nationwide - National Welfare - Foster Export Cartels, etc. - Domestic Welfare + Foreign Welfare - Global Welfare - Monitoring Market dominance Worldwide - Curbing International Cartels - Curbing Export Cartel, etc.

?

The prime objectives of national competition law are to ensure competition at marketplace and maximization of national welfare. National policy framers also very often use competition laws as an instrument to achieve social objectives, which ultimately maximizes national welfare. I have discussed them in detail in chapter 1.

National antitrust regulations are designed to achieve national goals and priorities. Prevailing technological environment and liberalization rules and regulations are attracting global business.

As the markets are becoming global, competition problem surpasses

national boundaries. National competition laws are based on framework of national

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competition policy and are designed to achieve national objectives. In the above diagram, I describe various aims and objectives of national as well as global competition policy. I admit that the list of aims and objectives is not exhaustive. Very often the terms competi-

82

See Bernard Hoekman and Petros C. Mavroidis, P. 4

25

tion laws and competition policy are used as synonyms. However, in above illustration these terms should be understood in their precise meaning.

It could be observed that existence of vacuum due to absence of global competition laws creates hurdles in achieving global welfare and other incidental objectives.

Antitrust authorities today worldwide are confronted with international cartels. Recent example is Trans-Atlantic Agreement among shipping companies from various countries such as the United States, Mexico, Japan, Korea and other Countries, which notably fixed prices for inland transport operations.83 Technological innovations are enabling emergence of global giants. A new kind of market dominance is surfacing at worldwide level. Recent Microsoft cases are good examples.

Nowadays antitrust authorities are encountering giant companies having worldwide reach. “ One after another, the long standing barriers that protected companies from takeover are dissolving. The result: an unprecedented wave of deal-making (…).”84

“ Un-

ternehmenfusionen sind in den letzten Jahren zu einem Dauerthema geworden: Es vergeht kaum eine Woche, in der nicht große Fusionsvorhaben angekündigt oder vollzogen werden.”85Under such scenario, antitrust authorities also need a comprehensive mechanism having global reach and global deterrence against the antitrust crime. The recent mega merger wave is having global dimensions (see Appendix II & III: Statistics of Mega Mergers Worldwide and details of cross border mergers). For example, the EC recently decided to oppose proposed merger of mining interests of South Africa’s Gencor and Lonrho because it would create duopolistic dominance worldwide. Such resistance from the EC was again observed in merger of Boeing and McDonnell Douglas. Apart from few exceptions number of acquisitions and merger from foreign firms in past few Copyright © 2012. Diplomica Verlag. All rights reserved.

decades have increased substantially worldwide. (see Appendix IV )

83

See Youri Devuyst, P.2 See Dennis K. Berman et al, P.1 85 See Stefan Voigt, P. 9 84

26

In the absence of a comprehensive internationally valid competition policy, regulatory authorities around the world are looking for other alternative solutions to overcome vacuum created by such absence.

These authorities are working together in some or other

form to deal effectively with antitrust matters extending beyond their national territories. They are pursuing simultaneously three different strategies:86 -

the extraterritorial application of their competition laws (Unilateral framework )

-

the conclusion of bilateral or regional cooperation agreements (Bilateral framework)

-

the creation of a worldwide competition regime within the framework of the WTO (Multilateral framework)

I have discussed these modalities of cooperation among various authorities later in chapter seven in detail.

2.3

Enforcement Dilemma: Domestic Policies and Global Market

“As markets integrate across national borders, the logic of purely national antitrust policy breaks down.”

87

“ Mit dem Übergang von einer außenhandelsfokussierten (Fokus auf

nationale Märkte) zu einer wettbewerbsfokussierten Perspektive (Fokus auf supranationale Märkte) bedarf auch die internationale Wettbewerbsordnung einer wettbewerbspolitischen Dimension.”88 Simultaneous existence of domestic policies with national jurisdiction and global markets with global reach calls for urgent creation of some mechanism to cover cross border competition problems. National competition can effectively deal with cross border disputes only when foreign entities have de facto presence and substantial stake within its jurisdiction and that too only when national law apply. Antitrust pundits call for some form of international mechanism because they believe national laws suffer Copyright © 2012. Diplomica Verlag. All rights reserved.

form inherent deficiency in dealing with cross border disputes, “when foreign supplier does not have a commercial presence.”89 86

See Youri Devuyst, P.2 See Simon J. Evenett et al, P.13 88 See Oliver Budzinski, 2004, P.1 89 See P. J. Lloyd and Kerrin A Vautier, P.13 87

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Existing framework of national laws with some collaborative international agreements very often fails to check inter country anti-competitive behavior and to be precise, cross border spillovers. Additionally, rules and procedures available under existing arrangements i.e. cooperation agreements are cumbersome and very often pose administrative problems. Compliance of such rules necessitates additional transaction costs.90

Global Marketplace has led to emergence of international cartels. Actions against such offenders may take place in more than one jurisdiction. Big firms may enjoy dominant position in markets of more than one country and circumstances may require thorough simultaneous investigation by antitrust authorities from various countries. Merger between domestic company and foreign entity might need approval from different authorities individually. Such situations pose additional administrative burden on authorities and needless to say additional financial burden for both authorities as well as firms. Creation of any globally valid antitrust mechanism will definitely lead to large financial savings. Taxpayers’ precious money could be used for other constructive purposes.

2.4

Need for Unifying Global Competition Policy

Justus Haucap et al list out various reasons for harmonization of competition policy.91 In the absence of a globally valid antitrust regime, companies having presence in various countries have to deal with antitrust authorities of each country individually. Such additional administrative task reduces benefits that could be realized through international presence. One of the prime aims of competition policy is maximization of consumer welfare. Nowadays consumers in almost all countries are badly affected irrespective of their country of presence due to existence of hard-core cartels worldwide. Moreover consumers in developing countries are more prone to such exploitation due to absence of an efCopyright © 2012. Diplomica Verlag. All rights reserved.

fective mechanism to deal with such eventualities. (see Appendix V ) As mentioned in earlier discussion, national competition authorities are entrusted with the prime task of ensuring national welfare. Some policies may enhance domestic welfare to the detriment 90 91

See Justus Haucap et al, P. 312 See Justus Haucap et al, P. 328

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of global welfare. “Allowing national firms to form an export cartel may permit the domestic industry to raise prices on export markets and improve the country’s term of trade.”92 Such behavior of national antitrust authorities are harmful to international of global consumers, as they end up paying high prices for goods and services.

In addition to the above-discussed reasons there are numerous benefits of unifying international competition policy. I have discussed them in detail in forthcoming chapter.

2.5

Need for International Dispute Settlement Mechanism

“It can be said that competition law is national, while markets are increasingly becoming global. Yet there is no international antitrust code. The key question is how to deal with transnational competition issues in a global economy. How can competition authorities manage marketplace conduct that takes place in one nation, but has a harmful effect in another?” -Konrad von Finckenstein (2001)93

These words of Canada’s top competition law official, elaborate on tension between national competition laws and global anticompetitive actions. On the one hand authorities are entrusted with task to ensure enforcement of national competition laws within national territory. On the other hand, simultaneously there are incidences of cross border anticompetitive actions such as exploitation from international hard core cartels occurring within national territory but which are beyond purview of their national laws. As European Commission’s report describes,”(…) there are more and more competition problems which transcend national boundaries: international cartels, export cartels, restrictive pracCopyright © 2012. Diplomica Verlag. All rights reserved.

tices in fields which are international by nature (…) abuse of a dominant position on several major markets (e.g. the Microsoft case).”94

92

See Bernard Hoekman and Petros C. Mavroidis, P. 5 See Julian L. Clarke and Simon J. Evenett, P. 22 94 See European Commission, Report of the Group of experts, P. 9 93

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Such incidents call for urgent formation of an international dispute settlement mechanism. Only an effective dispute settlement mechanism can curb such incidents and also work as a deterrent factor. Justus Haucap et al examine need and also viability of setting up an institutional framework namely an International Competition Court to deal with inter country disputes. They further argue that before such an arrangement is made, it is imperative to have substantial harmonization of competition laws if not essentially a unified international competition policy.

Some experts are against dispute settlement mechanism per se. Massimiliano Montini says, “ (…) neither the DSU95 nor a similar dispute settlement regime, empowered to render binding judgments on the Parties, should be used to resolve trade and competition controversies. This is because most countries normally find the typical trade and competition issues as being closely linked to their national industrial policies, and are therefore normally not willing to relinquish their sovereign rights in this area.”96

Looking at differences in aims and objectives of competition policies around the world, it seems impossible to have a globally valid international competition policy in the near future. “ the scope for conflict over international antitrust measures can also be reduced without full harmonization and centralization of competition policy.”97There are other modalities of cooperation among antitrust authorities, which require less harmonization and can also reduce conflicts to some extent, such as unilateral, bilateral and multilateral solutions. In chapter seven I have dealt with these modalities in detail.

2.6

In a Nutshell

Globalization of international marketplace per se should reduce need for antitrust regime. Copyright © 2012. Diplomica Verlag. All rights reserved.

But surprisingly this is not true. In fact, such scenario calls for extra efforts on the part of competition authorities. National competition laws are designed for achieving national 95

DSU –The WTO Dispute Settlement Undertaking popularly called, as DSU is an envisaged dispute settlement system annexed to the WTO Charter. 96 See Massimiliano Montini, P.19 97 See Justus Haucap et al, P. 329

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objectives. Absence of global competition laws creates a vacuum. Existence of an international antitrust regime is a must before working on modalities of a dispute settlement mechanism in antitrust area.

3

Benefits of unifying Antitrust Regulations

There are inherent difficulties in using “a system based on territorial authority to address global economic behavior.”98 Antirust framework is not an exception. A unified global antitrust regulation can help the global community to overcome several such inherent hardships. Here I have listed out advantages of having a unified global competition policy.

3.1

Transaction Cost

A unified global competition policy could substantially reduce transaction cost involved in international business. In an integrated world market firms have to deal with larger number of competition laws, enforcement authorities and appropriate courts. These additional administrative burden and cost arising due to international trade reduces the potential benefits of international specialization and increased competition.99 Application of different competition laws and jurisdiction adds to compliance work and thereby add to total transaction cost of international business. Harmonization of competition laws on substantial matters may contribute to reduction in transaction cost and thereby enable firms to enjoy benefits of economies of scale.100

3.2

Ready availability of expertise

Once again I refer to Microsoft matter. Cooperation between the US and the EU regulatoCopyright © 2012. Diplomica Verlag. All rights reserved.

ry authorities contributed to the success. Eventually software Juggernaut Microsoft agreed to end ”unfair monopolistic agreement”. Entire efforts consumed 14000 attorneyhours, 5500 paralegal-hours, 3650 economist-hours and roughly one million pages of

98 99

See Hannah L. Buxbaum, P. 1106 See Justus Haucap et al, P. 312

31

documents in United States alone.101 United States was able to pursue the matter successfully, as it had sufficient resources and expertise. In 1999-2000 the US shelled out US$ 140.1 Millions for successful enforcement of antitrust provisions and had total workforce of 1157 officers. (see Appendix VI ). Annual Budget outlay of the European Commission for FY 2001 for antitrust purpose amounted to US$ 59.9 Millions. Now the question arises: How can a developing country without sufficient resources or a developed country without required expertise pursue antitrust regulations so as to combat anticompetitive practices? Additionally experts estimate that it takes about 10 years for countries to acquire the necessary expertise and experience to implement such laws effectively.102

Such scenario suggests need for unifying international competition policy, so that developing countries and also advanced countries without requisite expertise in antitrust area can have immediate access to the required expertise. “Competition law is technical and requires the use of skills that are in short supply in many developing countries-building capacity to apply competition legislation effectively take time.”103 Additionally, establishment of proper institutional framework, the independence of regulatory authorities, effective judicial review and appeal mechanism and the availability of know-how both legal as well as analytical are imperative for effective enforcement of competition laws.104 Effective enforcement of antitrust regulation based on efficiency and fairness parameters in each country is beneficial to the global economy as a whole. Developed countries can play a constructive role by offering assistance wherever needed.

3.3

Maximization of Consumer Welfare

With rapid expansion of trade and commerce across borders coupled with free flow of Copyright © 2012. Diplomica Verlag. All rights reserved.

information, nowadays, companies are in a better position to take advantages of information asymmetry and sometime to the detriment of consumers. Nowadays, consumers 100

Id., P. 313 See Richard H. Marschall, P. 1 102 See Ajit Singh, P. 6 103 See Bernard Hoekman and Petros C. Mavroidis, P. 7 104 Id., P. 8 101

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in one country are affected by anticompetitive behavior of the firm located in another country. Additionally, international cartels are now better equipped with more resources. For example, it is believed that recent cartel in vitamin market has affected over $5 billion worth commerce to the detriment of the consumer. Maximization of consumer welfare is the prime aim of antitrust regime.105 Exchange of information between antitrust authorities and mutual help in antitrust investigations and cases would be helpful in curbing international anticompetitive actions.106 Harmonization of competition laws is desirable to ensure consumer welfare worldwide.

3.4

Maximization of Global Welfare

Another important argument in favor of harmonization is maximization of global welfare. Global welfare is sum total of domestic welfare and foreign welfare.

Expansion of commerce beyond national territory coupled with globalization process of competition and market has led to internationalization of anticompetitive practices such as cartels, predatory, exclusionary strategies and so on. Incidences of cross border

mer-

gers of large giants from all parts of the world, which if approved would be harmful to global welfare have also increased (see Appendix VII: Statistics of Cross Border Mergers) Sometime domestic welfare might increase through a merger due to increase in productive efficiencies and increase in market power of merged entity to the detriment of foreign welfare and might lead to decrease in global welfare. “National competition authorities may simply not act in the world’s best interest, but only take local welfare into account.”107 Hence, an internationally coordinated competition policy might ensure max-

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imum global welfare.

105

See Hannah L. Buxbaum, P. 1095 See Justus Haucap et al, P. 316,317 107 See Justus Haucap et al, P. 314 106

33

3.5

Efficient Allocation of World Resources

As we saw in the introductory chapters, during the last 100 years antitrust regime has witnessed radical changes. Contemporary antitrust regime is more tilted toward efficiency rather than fairness. Even though one of the prime aims of competition policy is to benefit consumers by maximizing consumer welfare, competition policy is not per se against producers. Nowadays very often “efficiency defense” is successfully allowed. Antitrust regime just wants to preserve competition at marketplace to the healthy level. Competition drives producers to produce more and better products at lesser cost. Harmonization of antitrust laws worldwide would induce producers to locate their production base in those areas where they can enjoy comparative cost advantage. Hence a unified competition policy worldwide would lead to efficient use of resources worldwide.

3.6

Harmonization leads to increment in Productivity

Harmonization of competition laws would create a level playing field for players across the globe. Companies would opt for places where efficient production facilities could be established and where they can enjoy other comparative advantages. Hassle free business environment would be an additional incentive for producers to make full utilization of economies of scale and economies of scope.108 “ The multinationals of today are not searching for resource inputs as in the earlier portion of the twentieth century but are spreading the economies of scale and scope of increasingly technology-driven production across borders and among firms.”109 Reduction in production cost and devising better product are must for producers in competitive environment. They should be able to offer better products at a good price to consumers. As discussed in earlier paragraphs, efficient use of global resources coupled with investment in R&D for improvement of product

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leads to increment in production both quantitatively and qualitatively to the advantage of consumer worldwide.

108

Economies of scale are achieved, when production cost per unit falls with increase total production. Economies of scope are accrual of benefits due joint production of two or more products. See Massimo Motta, P.2

34

3.7

Collective Efficiency vs. Collective Inefficiency

Efficiency is broadly understood as “getting most out of least resources”. Prima facie in almost all countries, competition policy aims to reduce inefficiency. Efficient allocation of resources is one of the prime movers for economic development.

Dilemma: what is efficient for one country may not be necessarily efficient for another country. Export cartels and monopoly marketing brands are some of such examples. Unchecked dumping of subsidized goods in other countries also creates economic distortions. If such behavior goes unchecked, then the World will be full of collective inefficiency. This in turn would lead to waste of scarce global resources and that too due to human error.

The issue of different impacts on national efficiency was well discussed in proposed merger of Boeing and McDonnell Douglas. European authorities initially concluded that merger might be anticompetitive for Europe, whereas US authorities found that such merger would be efficient for United States. A compromise was reached by canceling some agreements between Boeing and other US airlines, which in turn reduced potential efficiency in United States.110 Readymade international guidelines might have avoided such conflicts.

Harmonization of competition laws will definitely create an environment, which is conducive to promote collective efficiency. In this way the world can move from collective

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inefficiency to collective efficiency.

109 110

See Leonard Waverman et al, P. 1 See Edward M. Graham and J. David Richardson, P. 11

35

3.8

In a Nutshell

Harmonization of antitrust laws is beneficial to both consumers and producers. Producers can save huge amount on account of reduction in transaction cost and they can really enjoy the benefits that international trade had to offer. International comparative cost advantages enable reduction of prices. Global consumers would be the ultimate beneficiaries. Additionally, harmonization also leads to efficient allocation of world resources and increase in productivity.

4

Unifying Competition laws: Areas of Harmonization

Unification of competition laws might occur in three different areas i.e. substantive laws, procedural aspects and enforcement areas. The issues that are tackled in each area are different and also their relative importance in the process of unification varies.

4.1

Unifying Substantive Regulations

After dramatic failure of various attempts to unify international competition laws, scholars are now skeptical about possibility of harmonization of substantive laws. Some experts do not agree with this and they do hope that some limited and gradual harmonization of substantive rules is possible.111 “ A large number of academics have called for harmonization of the substantive content of antitrust laws.”1121998 OECD Recommendation on Effective Action Against Hard-Core Cartels, also backed by United States proves that there are still some areas, where harmonization of substantive rules is possible and

Copyright © 2012. Diplomica Verlag. All rights reserved.

hence such initiative should be encouraged. OECD recommends that domestic laws should provide for effective framework to deter and remedy hardcore cartels. !996 EC Green Paper on Vertical Restraint113 is another example that in this area also some degree of harmonization of substantial rules is possible, possibly in form of a guideline incorpo111 112

36

See Massimiliano Montini, P. 16 See John O. McGinnis, P. 1

rating “rule of reason” approach rather than per se prohibition. Similarly, a small beginning may be made in market dominance and merger areas, initially just by means of recommendation, guidelines and other form of non-binding cooperation. Merger policy is very often connected with industrial policy and nowadays countries are unwilling to part with their sovereign right in this area. Therefore agreement on substantive rules to tackle merger issues, even in form of “rule of reason” guidelines does not seem foreseeable in the near future.114

4.2

Unifying Procedural Aspects

Any cooperation at international level in competition policy area calls for adoption of some fundamental procedural framework, which would ultimately enable fruitful cooperation. Some scholars suggest that harmonization in procedural areas should at least provide for inclusion of non-discrimination principle, transparency and assistance, positive comity principle and negative comity principle.115 Non- discrimination principle forbids discrimination among nations (e.g. Most Favored Nation Principle) and discrimination between domestic and foreign goods or services, whether directly or indirectly. Transparency and assistance in antitrust context refer to reciprocal exchange of information and coordination of efforts between different antitrust authorities situated in different countries in different forms, such as notification, consultation etc. Negative comity principle is a doctrine of politeness and good manners between nations. Under this doctrine, a country in case of an antitrust violation may in certain circumstances decide not to pursue an investigation, but instead, leave the same to authorities of another country, in matters where considerable stake of that foreign country might be involved. Positive comity principle provides for positive acts of cooperation and mutual assistance between antitrust

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authorities. (for further details see chapter 7)

113

See European Commission, EC Green Paper on Vertical Restraints in EC Competition Policy, 1996 See Massimiliano Montini, P.18 115 See Massimiliano Montini, P.14 114

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4.3

Unifying Level of Enforcement

Existence of antitrust framework at domestic level is a must for establishment of cooperation arrangement in enforcement area, with sufficient enforcement power. Not only the existence of mechanism itself, but also willingness and ability to enforce antitrust laws at domestic level is a must for introducing harmonization in enforcement area.

4.4

In a Nutshell

Effective unification of competition laws calls for reforms in all segments of regulations i.e. Substantive laws, Procedural Aspects and Level of Enforcement.

5

Limitations of Harmonization

Harmonization of international competition policy regulations is not an easy task. We saw earlier in chapter one that different countries pursue different goals. Very often antitrust regulations are designed to address different needs of society. Apart from economic aspects, such as maximization of total welfare, several other political and social aspects also have an impact on national competition policies. I think it would be irrational to imagine complete harmonization of antitrust provision, as some of the goals of national competition policy are contradictory, due to different economic, social and political needs of various countries. In this chapter I would like to deal with various circumstances other than economic policy that might influence harmonization.

5.1

Political Reasons

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Very often there are several political constraints that compel authorities to devise a competition policy, which is detrimental to total welfare ab initio. Some examples; In 1978 U.S. government perceived that production of uranium was of paramount importance to the nation’s security. Hence it was decided to take suitable measures to protect domestic uranium industry. Accordingly, price of electricity was raised for American consumers,

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which was detrimental to total welfare. This hike almost bankrupted the industrial giant Westinghouse.116 Very recently, American aluminum companies succeeded in persuading the Clinton administration to create an international aluminum cartel to counter the effects of increase in Russian production. Moreover when affected consumers moved the court, they lost because of act of state doctrine and the non-judiciability of political questions.117

Under such inevitable circumstances, sometime, antitrust regulations are de-

signed under political constraints. These decisions are neither based on fairness and efficiency parameters nor do they pursue any of the normal aims and objectives of competition policy. These constraints are nation specific and hence limit the scope of devising a unified global antitrust regime.

5.2

Social Areas

Sometimes competition laws are customized to tackle social issues. “ US laws were implemented in more lenient way in times of The Great Depression, with the view that some price agreement would help firms to avoid bankruptcy, thus easing social tensions caused by unemployment.”118 Experts are against such measures, as they believe that such steps might create further distortions. These needs could be addressed with other instruments e.g. capital market regulations.

Another example is antitrust regulation of South Africa. Development of weaker section of society is one of the prime aims of competition policy.119

5.3

Other Reasons

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Apart from above discussed factors there are several other factors that influence competition policy matters. Recently European Commission approved an agreement among washing machines producers and distributors accounting for more than 95 percent of the 116

See Martin Holterman, P. 42 See Hammons vs. Alcan Aluminum Corporation (19960 Case no. SACV 96-0319-LHM (EEx) 118 See Massimo Motta, P. 26 119 The Competition Act, South Africa, 1998 117

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market due to environment reasons. The agreement aims for discontinuation of production and import of least energy efficient machines. The Commission formed an opinion that the agreement would benefit society at large on environment terms.120 However, use of competition policy for purposes other than efficiency is not advisable. Such need could be addressed through other public policy instruments.

Supporting national champions so that they withstand competition against foreign champions, also influence competition policy matters occasionally. Sometimes controls are relaxed at national level so as to allow national champions to grow bigger, with the hope that they would be able to face foreign players successfully. Such actions, if not carefully evaluated might cause distortion to the detriment of total welfare.

5.4

In a Nutshell

Competition Policy regime is prima facie part of economic policy of a national government. But very often national governments do make deviation and make use of competi-

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tion policy for achieving social and political targets.

120

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See Massimiliano Montini, P.28

6

Conflict Areas

In this section I intend to list out important conflict areas. The purpose is not to discourage efforts in the direction of harmonization, but just to make authorities cautious in dealing with such conflict areas, where situation specific remedies may be required. Conflict area covers a large spectrum. There are disputes about some concepts of competition policy itself. Additionally, other dispute areas are general in nature, that is to say they might be influenced by other economic, political and general factors.

6.1

Conceptual Discord

Differences and existence of confusion about basic concepts of competition policy could cause some hurdles in the unifying process. In some areas there is widespread consensus such as parameters for market definition, horizontal mergers etc. Contrary to this there are substantial differences in some other areas such as vertical restraints, cartel exemption, state aid policies, etc.121

Market Definition: Parameters of market definition no longer remain as a major area of dispute. The EU has modified its principles of market definition bringing it in uniformity with the US Standard i.e. the hypothetical monopoly or SSNIP test as parameter in defining markets. Additionally, as markets become international, the definition becomes irrelevant.

Horizontal Agreements: There is widespread consensus about action against price fix-

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ing agreement. But certain exemptions allowed by certain countries in areas such as R & D, supporting export cartel and other related incidental areas might cause frictions.

121

See Justus Haucap et al, P. 320

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Mergers: There appears consensus about disadvantages of horizontal mergers, however regarding vertical mergers the opinions do vary. New EU merger guidelines are quite similar to their US counterpart. But still there exist differences, which may be primarily due to the differences in aims and objectives pursued by countries individually.

Vertical Restraints: Authorities in the US are nowadays indifferent about vertical restraints. However, European Commission is by and large skeptical about impact of vertical restraints and such incidences are treated with suspicion.

Exempted Industries: Exempting certain industries of national or strategic importance from the purview of antitrust laws is also another area of differences. For example, both in the EU and in the US, aviation industry is provided substantial relief.

State Aid: Protection of local industries is another area of difference. Countries are looking for new ways to protect local industries. “State aid and trade policy can offset competition policy effects and vice versa.”122 State aid is part of the EU competition policy regime, which is guided by “ more economic approach”. In US, state aid and competition policy are distinctly separate policy areas and are divided into two separate watertight compartments.

6.2

National Welfare vs. Global Welfare

Competition laws are national laws. They are nationally defined. The only exception is the EU where national legislations are superseded by common EU-wide rules. National laws are designed and structured in such a way, so as to achieve national priorities and ensure national welfare. However, the enforcement of national antitrust rules and policies Copyright © 2012. Diplomica Verlag. All rights reserved.

may occasionally give rise to international pecuniary externalities detriment to global welfare. National laws may allow agreement among competitors that are designed to gain market dominance on foreign soil. Such agreement may additionally benefit firms from economies of scale or scope through cooperation popularly known as export cartels. “Ex-

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port cartels may be legal, that is, firms engaging in such practices may be exempted from national antitrust in their home market, if they have no detriment effect on home consumers.”123

Such scenario is detrimental to global welfare because it affects global consum-

ers, who are forced to shell out more money. Developing countries due to absence of effective mechanism to deal with such actions are more prone to exploitation.124 (see Appendix V)

Similar circumstances might arise in merger approval requirement. Competition authorities influenced by nationalistic focus might disallow a merger, which might have led to global welfare or efficiency, if they conclude that impact of proposed merger on their territory is negative. Recent wave of economic patriotism prevailing in several countries might also influence antitrust officers. “ In Europe, government take a more interventionist approach in corporate affairs, but that too seems to be fuelling merger activity as officials seek to turn deals to their countries’ advantage. Spain and Italy joined forces in defending electricity company Endesa SA from Germany’s E.On AG (…).” 125 These are just some of the several instances where conflicts might arise due to inherent differences / conflicts between national priorities and global priorities.

6.3

Economic Structure of Countries

There are sharp differences among industrial and economic structure of countries around the world. Here, I would like to draw attention toward important aspects put forward by Ajit Singh in his G-24 discussion paper. He writes that by and large, industrial structure of developing economies is dualistic in nature. In his discussion paper he puts forward statistics collected from original sources as evidence.126 Generally, in developing countries, there exists a large modern sector accounting for sizable chunk of industrial producCopyright © 2012. Diplomica Verlag. All rights reserved.

tion simultaneously with a very large traditional sector of small establishments, which contribute almost equally to the industrial output of the country. In developed countries, 122

See Justus Haucap et al, P. 322 See Bernard Hoekman and Petros C. Mavroidis, P. 12 124 Id., P. 11 125 See Dennis K. Berman et al, P. 24 123

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quantitative contribution of small establishments to total output is smaller as compared to developing countries. Existence of such large number of small establishment has impact on political will of governments of these countries to implement competition policy, unless some tailor-made solutions specific to national circumstances are incorporated. Therefore various antitrust parameters (e.g. Concentration Ratio) to assess market scenarios cannot be applied to developed and developing countries in the same manner. Needless to mention such factors create hurdles in unifying international competition policy.

There are evidences regarding substantial differences in competition laws of various developing countries.

127

The World Bank conducted survey of circa 50 countries. Report

published in 2002 states emphatically existence of inter-country differences in antitrust areas:128 - the definition of dominance; - the treatment of cartels; - enforcement; Majority of countries define market dominance in qualitative terms. However 22 nations identify market dominance quantitatively (see Appendix IV: Market Dominance Parameters in different Economies). Provisions dealing with treatment of cartels also differ from country to country. Estimates based on survey of top and middle management of firms in various countries reveal that antitrust authorities in advanced countries are 40 percent more effective than their counterparts in developing countries.129

6.4

Erosion of National Autonomy

Devising an internationally valid competition policy invites more problem than just enCopyright © 2012. Diplomica Verlag. All rights reserved.

forcement of rules across borders. National governments are opposed to attempt of unifying international competition policy or other similar arrangement. Countries consider 126

See Ajit Singh, P. 4 Id., P. 6 128 See Ajit Singh, P.6 129 These statistics are reported in World Bank (2002), for further details see Ajit Singh, P.7 127

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such extraterritorial enforcement of laws across borders as an “infringement of national sovereignty”.130 “ There is clear trade-off between gained advantage and acceptance on the one hand and loss of sovereignty and organizational expense at the other.”131 At this crucial juncture the international community must arrive at some decisions i.e. to opt for preservation of national autonomy or to go for global welfare, global efficiency, welfare for consumers worldwide and overall growth.

6.5

Intergovernmental Disputes

Merger between Boeing and McDonnell Douglas, both American entities led to dispute between two governments. US authorities okayed merger at the first instance but the EC had some reservations. In F. Hoffman-LaRoche vs. Empagran, S.A.132 allowing non-US plaintiff to bring action in United States also led to intergovernmental disputes. In amicus curiae briefs filed in Supreme Court, several governments lodged their protest.133 They argued that allowing non-US plaintiff to move U.S. courts would not enhance global antitrust enforcement, but would create obstacles. They also protested “the encroachment of U.S. laws on their own enforcement efforts.”134 They were worried about potential availability of treble damages in U. S. laws exceeding the limit provided in local laws and also because these damages might be awarded against local companies.135

6.6

Spillover Effects

Impact of damages caused by anticompetitive actions of International hard-core cartels

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surpasses national boundaries. They cause direct as well as indirect damages and also

130

See P. J. Lloyd et al, P. 16 See Christian Conrad, 2006, P. 114 132 U.S. Supreme Court 2004 133 See Hannah L. Buxbaum, P. 1096 134 The governments of Belgium, Canada, Germany, Ireland, Japan, the Netherlands, and the United Kingdom filed such briefs. For further details, see Hannah L. Buxbaum, P. 1096 131

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have international “Spill-Over”. Here again I refer to F. Hoffman-LaRoche Ltd. vs. Empagran, S.A.136 matter. The price-fixing cartel in the vitamin market, very often described as “ probably the most economically damaging cartel ever prosecuted under U.S. antitrust law”, is believed to have affected more than $ 5 billion worth of commerce worldwide.137 Due to “Spillover” effects it had adversely affected the U.S. market138. Non-US plaintiff, who had bought cartelized products in Australia, Ecuador, Panama and Ukraine and suffered overcharges in transactions occurring outside the United States, initiated matter.139 Consumer from developing countries shelled out millions of dollars extra due to the vitamin cartel (see Appendix V: Impact of International Cartel on Developing and least Developed Nations). Even least developed countries were not spared.

6.7

Extending beyond Nation’s Jurisdiction

Increase in amount of private business activities outside national territory of national firms has forced several countries and authorities such as the US and the EU to extend application of their antitrust framework against anticompetitive practices by national companies outside national territory. Such enforcement of national competition laws extending beyond national territory is highly controversial. Continental Ore vs. Union Carbide (1962)140: U.S. Supreme Court held, “a conspiracy to monopolize or restrain the domestic or foreign commerce of the United States is not out-

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135

See e.g. Brief for the Government of Canada as Amicus Curiae Supporting Reversal, for further details, see Hannah L. Buxbaum, P. 1096 136 U. S. Supreme Court, 2004 137 See Hannah L. Buxbaum, P. 1095 138 The D. C. Circuit Court of Appeals held that as long as anti-competitive conduct has requisite effect on U.S. commerce, then plaintiffs injured (…) law. For further details see Hannah L. Buxbaum, P. 1098 139 The defendants included major international Pharmaceutical companies, including F. HoffmanLaRoche, Rhone-Poulenc, Daiichi Pharmaceutical, and BASF. They fixed prices for bulk vitamins and vitamin pre-mixes in the global markets. For further clarifications see Hannah L. Buxbaum , P.1095 140 See Youri Devuyst, P.2.

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side the reach of the Sherman Act just because part of the conduct occurs in foreign countries.”141 United States vs. Nippon Paper Ind. (1 Cir. 1997)142 Criminal provisions of Sherman Act were applied to prosecute non-U.S. citizen for anticompetitive behavior outside the US that directly and substantially affected United States commerce.

With enactment of Foreign Trade Antitrust Improvements Act by Congress in 1982 anticompetitive acts that have “ direct, substantial, and reasonably foreseeable effect” on U.S. export trade or commerce were brought within ambit of U. S. antitrust laws. However in 1988 Reagon administration restricted extraterritorial application of U.S. antitrust laws solely to anticompetitive actions that are detrimental to interest of U. S. consumers. But again in 1992 Bush administration restored application of U.S. antitrust laws to anticompetitive practices detrimental to U. S. exports. Additionally, the Omnibus Trade and Competitiveness Act of 1988 empowers U. S. trade representatives to take action against “ the toleration by a foreign government of systematic anticompetitive activities by private firms or among private firms in the foreign country that have effect of restricting access of United States goods to purchasing by such firms.”

143

It is widely believed that

these provisions forced Japanese government to participate in the Structural Impediments Initiative (SII).144

The EU also extended application of their competition laws in certain circumstances to non-EU entities. Applications of competition laws were extended to foreign companies for their anticompetitive behavior, if such actions were affecting European consumers. In the Wood Pulp case, it was decided that European Commission has jurisdiction to apply Copyright © 2012. Diplomica Verlag. All rights reserved.

European antitrust provisions to non-EU establishments situated outside EU, if they ‘implement’ anticompetitive agreements reached outside the EU by selling their products to

141

Id., P. 2 Id., P. 2 143 See Youri Devuyst, P.2 142

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purchasers inside the EU. Here, parameters for application of antitrust laws beyond boundaries are similar to that in the US. Both antitrust authorities extend application of their laws to incidences, which are detrimental to the interest of their consumers. Mergers that meet the threshold limit described in Merger Regulation of the EU must always be approved by the European Commission irrespective of place of origin of the merging entities. European Court of First Instance justified application of Merger Regulation under Public International Laws to non-EU entities. Court in its Gencor judgment in 1999 said. “When it is foreseeable that a proposed concentration will have an immediate and substantial effect in the Community.”145 Recent merger between the US aircraft manufacturers Boeing and McDonnell-Douglas is also another example.

There are also some incidences, where courts in the US have given relief to non-US plaintiff for anticompetitive behavior outside U.S. territory. For example much publicized decision of Supreme Court in Hartford fire Insurance Company vs. California146,” opened a Pandora’s box of debate about how hospitable America should be to international antitrust cases.”.147 Controversy was about granting access of U.S. antitrust regulations to non-U.S. plaintiff.

Extraterritorial unilateral applications of present national laws do create a hurdle in reaching a common consensus and hence there is need for identifying some core common guidelines to proceed in the direction of harmonization.

However, surprisingly occasionally extraterritorial application of U.S. antitrust laws won some praise from some quarters. Recently in one similar matter in U.S. Supreme Court F. Hoffman-LaRoche vs. Empagran, S.A.,148, arising out of price fixing cartel in vitamin

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market, both legal pundits and economists suggested “that global cartels are currently

144

Structural Impediments Initiative (SII): An Initiative taken by the Bush administration to tackle competition-related trade barriers in Japan. 145 Judgment of the Court of the first Instance (Fifth Chamber, Extended Composition) in Case T- 102/96, 25th March 1999, par. 90. For further comment see Youri Devuyst, P.3 146 509 U.S. 764 (1993) 147 See Salil K Mehra, P.1 148 The U.S. Supreme Court, 2004

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under-deterred due to regulatory gap worldwide.”149 “(…) smaller countries, and especially developing countries , often do not posses sufficient power to enforce their antitrust policies against multinational enterprises.”150 “(…) some countries choose not to have antitrust laws because enforcement is too expensive.”151 It was argued that allowing private legal actions against culprits in U.S. courts would boost deterrence and thereby not only protect the U.S. markets but also enhance global welfare.152

6.8

Enforcement Mechanism

Absence of an enforcement mechanism having worldwide reach and authority is one of the main obstacles in devising a globally valid competition policy. Precisely due to this reason several countries went for unilateral approach (discussed in next chapter) and also some questionable ‘tit for tat’ actions, which occasionally led to misunderstanding among nations.

6.9

Jurisdiction Conflicts and Confusions

“Nicht-koordinierte nationale Wettbewerbspolitiken in internationalen Märkten verursachen auch Ineffizienzen aufgrund der parallelen Zuständigkeit mehrerer Juisdiktionen für ein und denselben Wettbewerbsfall.”153 Due to absence of coordination among national antitrust authorities, very often the same matter is subject to multiple jurisdictions. “(…) firms doing business internationally face a de facto regime generated by the overlap of domestic regimes.”154 Additionally, recently there has been some rise in incidences of conflicts between jurisdictions. National courts suo motto extending their jurisdiction area beyond nations territory adds to the problem of building an environment among na-

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tions conducive for cooperation (Example: Vitamin Cartel, discussed in chapter 6.7).

149

See Hannah L. Buxbaum, P.1096 See Oliver Budzinski, 2003, P.5 151 Id., P. 5 152 See Hannah L. Buxbaum, P. 1097 153 See Oliver Budzinski and Wolfgang Kerber, 2006, P.6 150

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Multiple jurisdictions and suo motto extension of jurisdiction area are major hurdles in unifying antitrust framework

6.10

In a Nutshell

There are numerous conflict areas, which create obstacles in devising a truly internationally valid antitrust mechanism. Some conflicts are inevitable because of presence of inherent friction between national priorities and international priorities. Other conflict areas such as conceptual discord can be resolved through persistent efforts among nations. Authorities must take note of these conflicts, before devising international antitrust mecha-

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nism.

154

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See Andrew Guzman, P. 3

7

Other Modalities of Cooperation

Various attempts to harmonize competition policy principles and thereby unifying international competition policy have dramatically failed.155 Countries around the world are .

now making efforts in development of other modalities of cooperation in trade and competition policy matters. Recently in an interview the US trade representative Susan Schwab, while pressing on need for taking a practical approach in trade related matters said, “ (…) a lot of different approaches – the trade investment framework agreement, FTAs, bilateral investment agreement – that we use.”156 In absence of a unified international regime such practical approaches (as in trade related area) in antitrust area could be beneficial. In this section, I deal with such other modalities of cooperation among antitrust authorities and benefits as well as pitfalls of such cooperation.

7.1

Unilateral Approach

Absence of antitrust framework in developing countries or for this purpose advanced countries without a proper legal antitrust framework prima facie instigate the other country to adopt unilateral approach through extraterritorial extension of their antitrust rules and regulation. “ (…) the industrialized countries particularly the USA and the EU, are in a position simply to use their own competition policy to investigate any case which they feel is having an ‘effect’ in their economy. Other countries involved which may be at very different stages of development have to accept the outcome, even when they strongly oppose it.”157 Very often developing countries due to absence of antitrust mechanism provide little protection from anticompetitive practices and also cannot readily turn to international organization for help.158

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Also due to absence of international antitrust framework, international companies may be subject to different antitrust regime and under such circumstances national governments

155

See Massimiliano Montini, P.4 See Monica Gupta, Interview with Susan Schwab, P.24 157 See Michael Utton, P. 132 158 See Richard H. Marshall, P.1 156

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and legal machinery may attempt to fill the vacuum by extending the geographical reach of their laws. Such attitude is obviously not appreciated and does not offer long lasting solutions. There are uncertainties and confusions. Such scenario might also cause political tensions.159 (for further details, please refer to chapters 6.5, 6.7 and 6.9)

In one of the high-profile dispute settlement case, popularly known as the “Kodak-Fuji case”, concerned complainants argued, that Fuji’s close association with its distributor was detriment to Kodak’s ability to sell film and other products in Japan. United States argued that Japan had breached its obligation under GATT. However the WTO’s Dispute Settlement Body ruled in favor of Japan. As a consequence experts felt that new multilateral practices are required to deal with private anticompetitive practices.160 Linking of trade policies with competition law enforcement was questioned. After this decision U.S. has more inclination toward bilateral approach compared to unilateral approach. 161 Also judiciary in the US occasionally validated unilateral action or behavior (see chapter 6.7).

7.2

Bilateral Form of Cooperation

As early as in 1960 the GATT recommended bilateral form of cooperation.162 There are various intensities of bilateral cooperation, which could be described as follows:163

Notification: Basic version of bilateral cooperation consists of notification procedures. It consists of mutual notification of potential anticompetitive acts among competition agencies, which may be affected by such acts. OECD also vouched for such cooperation in 1967.

Consultation: In addition to mutual notification this form of cooperation emphasizes on Copyright © 2012. Diplomica Verlag. All rights reserved.

mutual consultation and helping each other regarding the substance of an investigation.

159

See Massimiliano Montini, P. 4 See Julian L. Clarke and Simon J. Evenett, P.22 161 Id., P. 22 162 Id., P. 315 160

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Negative Comity: Negative Comity principle is essentially a doctrine of good manners plus politeness.164 Competition agencies are reciprocally considerate about interests of each other in their antitrust framework.165 In case of an antitrust violation, national antitrust authorities though having right to apply their laws, may in certain circumstances decide not to pursue investigation and leave the same to the authorities of another country, when substantial interest of that foreign country is likely to be affected.

166

Negative

comity principle or doctrine of good manners and politeness is essentially a voluntary self-restraint doctrine. Justus Haucap et al doubt about effectiveness of this doctrine, in a scenario when political power in not symmetrically distributed between nations. They further add, “it appears unlikely that a powerful government in one country would abstain from pushing its national interest for the benefit of another country’s consumers or firms.”167

Positive Comity: It consists of positive acts of cooperation and reciprocal assistance between antitrust authorities situated in different countries. Essentially positive comity principle enables antitrust authorities to devise modalities of cooperation between national antitrust authorities located in different countries.

It does not create any binding mechanism and such cooperation is voluntary in nature. “ Positive comity has inherent limitations given that cooperation could be constrained by the ban on sharing of investigatory information.”168

Landmark Bilateral Agreements: The 1991 EC-US Agreement & The 1998 EC-US Agreement

Twin bilateral agreements between governments of the United States and the European Copyright © 2012. Diplomica Verlag. All rights reserved.

Commission are hailed as landmark development in international cooperation in antitrust 163

See Justus Haucap et al, P. 315 See Massimiliano Montini, P.6 165 See Justus Haucap et al, P. 316 166 See Massimiliano Montini, P.7 167 See Justus Haucap et al, P. 316 168 See Merit E. Janow and Andrew J. Shapiro, P. 35 164

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area. These agreements could serve as Musterbeispiel for further cooperation in other parts of the World.

The 1991 EC-US agreement On 23rd September 1991 a bilateral agreement was sealed between government of the United States and the European Commission in antitrust area. Agreement consists of eleven different articles whose aim is to foster cooperation and coordination and reduce conflicts in antitrust matters.169 Article II and III deal with notifications and periodical meeting between officials of antitrust authorities. Articles V and VI deal with positive and negative comity principles respectively. Article VI of the 1991 EC-US Agreement runs as follows:170 “within the framework of its own laws and to the extent compatible with its important interests, each party will seek at all stages in its enforcement, to take onto account the important interests of the other Party. Each Party shall consider important interests of the other Party in decisions as to whether or not to initiate an investigation or proceeding, the scope of investigation or proceeding, the nature of the remedies or penalties sought, and in other ways, as appropriate.”

This article merely poses a general obligation on contracting parties to be considerate about important interests of the other party.171 This provision is non-binding in nature and implication differs according to circumstances. Article V which deals with positive comity principle and differs from negative comity principle as it calls for positive acts of cooperation and mutual help between antitrust authorities, provides: 172 “if a Party believes that anticompetitive activities carried out in the territory of the other

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Party are adversely affecting its important interests, the first Party may notify the other Party and may request that the other Party’s competition authorities initiate appropriate enforcement” 169

See Massimiliano Montini, P.6 See article VI of the EC-US Agreement (1991) 171 See Massimiliano Montini, P.7 170

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However these mechanisms do not create any binding obligation on the Parties. They simply create voluntary mechanism to try and foster an effective cooperation between antitrust authorities.173

The 1998 EC-US Agreement

In June 1998 both the European Commission and the Government of United States after acknowledging the positive role-played by the 1991 Agreement and “believing that further elaboration of the principles of positive comity and the implementation of those principles would enhance the 1991 Agreement’s effectiveness” sealed a supplementary Agreement often described as the 1998 Agreement.174 The 1998 Agreement is supplementary in nature and both the Agreements run parallel. The core subject of 1998 version is inclusion of advance version of positive comity principle. Article III of the 1998 ECUS Agreement prescribes:175

“the competition authorities of a Requesting Party may request the competition authorities of a Requested Party to investigate and, if warranted, to remedy anticompetitive activities in accordance with the Requested party’s competition laws, and regardless of whether the activities also violate the Requesting party’s competition laws, and regardless of whether the competition authorities of the requesting Party have commenced or contemplate taking enforcement activities under their own competition laws.” Performance of EC-US Agreements

Significant numbers of notifications exchanged by antitrust authorities of the United States and the European Community since sealing of first agreement way back in 1991 Copyright © 2012. Diplomica Verlag. All rights reserved.

vindicate success of the EC-US Agreements. (see Appendix VI: Details of Notifications exchanged between antitrust authorities of the EC and the US). These agreements serve 172

See Article V of the EC-US Agreement See Massimiliano Montini, P.8 174 Id., P.8 175 See Article III of the EC-US Agreement (1998) 173

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as a link between two sides of the Atlantic and provide a forum for exchange of views, which ultimately foster cooperation in broader sense.176 The United States enacted in 1994 the International Antitrust Enforcement Assistance Act (IAEAA), which enables US to cooperate with other countries for curbing criminal and civil competition law violations.

However, some antirust cases with global dimension such as Boeing-McDonnell Douglas merger revealed fragile character of bilateral Agreements and need to overcome certain inherent drawbacks of bilateral Agreements.177 (Discussed in forthcoming section)

Pitfalls of Bilateral Agreements: EC-US Agreements

The EC-US Agreements should be regarded as a milestone in history of antitrust cooperation among antirust authorities worldwide. However there are certain inherent pitfalls, which need to be dealt with. Such pitfalls are:

“Confidentiality Rule” – Article VIII deal with confidentiality Rule. It prescribes that neither party is obliged to submit information if it is prohibited under laws or would be incompatible with the important interests of the party processing information. 178

Existence of Inherent Limits – Voluntary nature of cooperation and coordination mechanism and non-binding provisos render Agreements less effective.

Even the advance version of positive comity principle incorporated in the 1998 Agreement does not lose its voluntary nature. Additionally the 1998 Agreement does not describe anything that may curtail the negative impact of the “confidentiality rule” conCopyright © 2012. Diplomica Verlag. All rights reserved.

tained in 1991 Agreement.

176

See Massimiliano Montini, P.10 Id., P.10 178 Id., P. 8 177

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Unfortunately majority of bilateral agreement in antitrust field are concluded among developed countries. “Neither the EU nor the United States has developed structural competition links with sub-Saharan Africa, for instance.”179

Therefore other countries especially developing countries are more willing to opt for multilateral platform that might protect their markets from abuses of dominance by both domestic and transnational corporations. (Further discussion in chapter 7.4)

7.3

Mutual Legal Assistance Treaty Agreements (MLATs)

Most bilateral Agreements, even those incorporating positive comity are non-binding in nature. Due to provision of confidentiality they do not permit any derogation from internal rules and regulations. I admit this might not essentially cause any obstacle in cooperation. But such provisions have occasionally prevented antitrust authorities from sharing some specific information.180

Improved Mutual Legal Assistance Treaty Agreements (MLATs) are seen as other suitable options that enable authorities to exchange otherwise protected confidential information. MLATs between OECD member countries cover a plethora of areas such as fraud, securities law and taxations. The scope of the US-Canada MLAT181 extends to antitrust matters where it is a criminal offence in both the countries. This agreement has been used successfully in various antitrust matters. Certain anticompetitive behavior such as hardcore cartel constitutes offence in both countries and hence MLAT permits cooperation in such kind of competition policy matters.182 MLAT agreements enable antitrust authorities of one country to obtain asCopyright © 2012. Diplomica Verlag. All rights reserved.

sistance from other evidence regarding possible criminal offences. As stated earlier the 179

See Youri Devuyst, P. 6 See P. J. Lloyd and Kerrin A. Vautier, P. 39 181 Treaty between the Government of Canada and the Government of United States of America on Mutual Legal Assistance in Criminal Matters came into force on 14th January 1990. 182 MLAT between the US and the Canada was played lead role in antitrust enforcement against criminal price fixing conspiracies in the Fax Paper and Plastic Dinnerware cases. 180

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US seeks to expand such kind of cooperation with other nations and to facilitate the same enacted IAEAA.183

This Act allows the US to negotiate and conclude cooperation

agreement with other nations and also allows sharing of confidential information. First incidence of cooperation under this regulatory framework was cooperation between the US and Australia184. It is expected that the IAEAA would foster similar agreements with other nations.

7.4

Multilateral Form of Cooperation

Recent emergence of merger deals with global implications such as Boeing-McDonnell Douglas led to inter governmental disputes. During investigation of this merger the fragile character of bilateral agreement such as between the EU- the US surfaced.185 This led to increase in perception that in an integrated world economy there are some situations, which cannot be effectively dealt with bilateral agreements. “(…) the growing number of different laws has increased the need for multilateral cooperation even though most competition laws are based on their European or American counterparts.”186 “(…) broader international efforts are needed, and the institutional framework for holding global talks on competition policy is not yet fully in place.”187

The need to unify competition policy at international level with multilateral participation is also based on several other arguments. Other forms of cooperation such as unilateral or bilateral have failed to remove communication gap between developed and developing countries. In the age of rapid globalization and integration of world economy, the developing countries are more vulnerable to exploitation through anticompetitive actions of global giants. (See Appendix V) Developing economies need to enforce competition policy in their market for their own benefit. “Apart from (…) international dimensions, Copyright © 2012. Diplomica Verlag. All rights reserved.

competition and competition policy are also important for developing countries in their 183

The International Antitrust Enforcement Assistance Act, 1994 Statutory framework enabling sharing of confidential information with other nations already existed in Australia, The Mutual Assistance in Business Regulation Act, 1992. 185 See Massimiliano Montini, P. 12 186 See Justus Haucap et al, P. 314 187 See Merit E. Janow and Andrew J. Shapiro, P. 1 184

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own right.”188 “ (…) it is suggested by many policy makers that not only do developing countries require a competition policy, but a multilateral one would be greatly to their advantage.”189

Majority of bilateral agreement in antitrust field are concluded among developed countries. “Neither the EU nor the United States has developed structural competition links with sub-Saharan Africa, for instance.”190 Hence developing courtiers are more willing to opt for multilateral platform that would ultimately help them to protect themselves against abuses of dominance by both domestic and transnational corporations.

The WTO can provide a good platform for establishment of multilateral mechanism. Initially, a model multilateral agreement could be a similar version of existing the EC-US bilateral agreements. Later on as per need and according to circumstances multilateral agreements may be customized.

Youri Devuyst points out that EU had identified a four points program, which could serve as a guideline for multilateral cooperation agreement at the WTO.191 Firstly, the WTO member would identify a core of common principles to be adopted at international forum, initially only those areas where consensus could be easily reached, such as international hardcore cartels, export cartels and so on. The WTO’s principles of transparency and nondiscrimination help in framing such core. Secondly, after framing the core, the members would then adopt domestic antitrust framework incorporating rules on restrictive business practices, abuse of dominant position and mergers with good enforcement mechanism and access to third to private party on nondiscriminatory terms. Thirdly, mechanism for fostering cooperation between competition authorities including provisions about notification, consultation and exchange of confidential information would be Copyright © 2012. Diplomica Verlag. All rights reserved.

created. Finally, a need to set up a surveillance mechanism to ensure that members meet their commitment was emphasized. 188

See Ajit Singh. P. 2 Id., P. 1 190 See Youri Devuyst, P. 6 191 Id., P. 6 189

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7.5

In a Nutshell

A unified international antitrust framework would be an ideal situation for international trade. But the possibility of having such a framework under present circumstances in the immediate future appears remote. In the absence of such framework, unilateral, bilateral and multilateral approaches would be of immense help to international trade. Bilateral agreements such as the EC-US Agreements are good examples of international cooperation between antitrust authorities. However, increase in number of laws dealing with antitrust areas coupled with more and more economies adopting antitrust framework necessi-

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tate establishment of multilateral framework.

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8 Various Initiatives In this section I propose to discuss various institutional initiatives undertaken at international levels since the beginning of antitrust regime. 8.1 International Trade Organization (ITO) International Trade Organization’s Charter popularly called 1948 Havana Charter described in detail description of restrictive business practices. Member would have been advised to take all possible precautions and measure to ensure that within their jurisdiction neither public nor private commercial entities pursue activities affecting international market, which leads to restrained competition, limited access to markets or otherwise fosters monopolistic control. The Charter also explicitly included a list of prohibited practices such as fixing prices, allocating or dividing territorial markets, allocating customers and discriminating against particular enterprises. Organization would have had authority to request each member concerned to initiate possible remedial measures against restrictive business practice. However, by and large initiatives taken at International Trade Organization’s Havana Charter did not make any further progress. “(…), six decades after the vision of a comprehensive International Trade Organization (ITO; the so-called Havana Charta), the complementary protection of international competition against restrictions by private enterprises ( cartels, market domination, abusive behavior ) is still missing.”192

8.2

GATT

The General Agreement on Trade and Tariff (GATT) has an interesting origin. It came into existence due to failure of ITO’s Havana Charter.

193

Havana Charter failed due to

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deficiency of ratifications from participants, specially the US. However despite failure provisions of ITO have strong influence on the approach of GATT and other international organization on international trade and competition matters. Chapter V consisted of nine

192 193

See Oliver Budzinski, February 2007, P. 2 See P. J. Lloyd and Kerrin A. Vautier, P. 125

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articles and set out obligations for member countries to address the problem of restrictive trade practices. The objective of these provisions was elaborated as; “ (…) to prevent, on the part of private or commercial public enterprises business practices affecting international trade which restrain competition, limit access to markets, or foster monopolistic control, whenever such practices have harmful effects on the expansion of production or trade and interfere with the achievement of any of the objectives.” The chapter precisely specified following practices, which were considered to be detrimental to production and trade; a.

Fixing prices, terms or conditions to be observed in dealing with others in the purchase or lease of any product;

b.

Excluding enterprises from, or allocating or dividing, any territorial market or field of business activity, or allocating customers, or fixing quotas or purchase quotas;

c.

Discriminating against particular enterprises;

d.

Limiting production or fixing production quotas;

e.

Preventing by agreement the development or application of technology or invention whether patented or unpatented;

f.

Extending the use of rights under patents, trade marks or copyrights granted by a member to matter which, according to its laws and regulations, are not within the scope of such grants, or to products or conditions of production, use or sale of which are likewise not the subject of such grants

A Group of experts was constituted in 1958 to decide about scope of GATT in dealing with restrictive trade practices. In their report, the experts were unable to attain consensus.194 Majority was of the opinion that it would be impractical to recommend multilateral framework to curb international restrictive business practices. However, they agreed that restrictive business practices might be detrimental to international trade and hence Copyright © 2012. Diplomica Verlag. All rights reserved.

best possible solution was to foster bilateral consultations.195

194 195

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See GATT, 1961, pp 170-79 See P. J. Lloyd and Kerrin A. Vautier, P. 126

8.3

Organization for Economic Co-operation and Development (OECD) The OECD adopted an accord (called Recommendation of OECD) in antitrust cooperation area through a Council Recommendation in 1967. The OECD has recently launched an exhaustive agenda of research, policy dialogue in the matter of hardcore cartels. The 1998 Recommendation of Council is regarding effective action against hard-core cartels. Describing these violations as the “most egregious violations of competition law”, OECD recommends that OECD member countries ensure effective compliance of their competition laws and deter hard-core cartels.196 This Recommendation runs as:197 “Member countries should ensure that their competition laws effectively halt and deter hardcore cartels. In particular, their laws should provide for: (a) effective sanctions, of a kind and at a level adequate to deter firms and individuals from participating in such cartels; and (b) enforcement procedures and institutions with powers adequate to detect and remedy hardcore cartels, including powers to obtain documents and information and to impose penalties for non-compliance.”

Similar to the UN Set, the OECD recommendations are also non-binding in nature.

8.4

At EU level

The European Union has entered in bilateral agreements on antitrust matters with other countries. Within the EU exists regional antitrust framework. On several occasions the

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EU together with the US authorities successfully combated anticompetitive behavior of international giants.

The EU appreciates bilateral agreements and simultaneously also

calls for some mechanism at multilateral level.

196

See Julian L. Clarke and Simon J. Evenett, P. 26

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European Commission’s report of the Group of the Experts regarding competition policy published in 1995 elaborates about modalities for further cooperation antitrust area. At the very outset, they call for further cooperation among authorities worldwide. Nowadays, business entities with huge resources and expertise are having worldwide reach. They have international presence. Huge expertise and resources enable them to find loopholes in various legal systems around the world in various field such as, taxation, stock exchange regulations, antitrust matters etc. Hence, the situation calls for “ greater cooperation between the competent authorities in these various fields.”198 Experts admit that world is confronted today with twin fold challenge;199 -

to ensure commitment to trade liberalization within international frame work;

-

companies operating on international level are subject to same form of competition discipline as operating within national framework or regional framework.

Experts recommend that progress should be made simultaneously in two areas:200 -

Bilateral cooperation: it is recommended to increase these kinds of agreement and strengthen existing agreement

-

Multilateral Initiative: Development of a multilateral mechanism taking help from existing present and bilateral agreements. Initially, such cooperation could be made between/among few interested countries. Gradually number of participants may be increased and so also its geographic reach.

In their report group of experts also list out various reasons for cooperation; 201 -

As world economy is getting integrated, competition problems are also surpassing national boundaries; international cartels, export cartels are having worldwide presence, restrictive practices or even abuse of dominant position in marketplace

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are occurring at several major markets simultaneously. Hence it is imperative for

197

OECD 1998, article I.A.1 See European Commission, P. 3 199 Id., P. 4 200 Id., P. 4 201 Id., P. 9 198

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competition authorities to enhance their skill through mutual learning and cooperation. -

International corporations are having worldwide presence. Very often they are subject to several different national competition laws. There are fair chances that certain commercial activity, which is legitimate in one country, might be illegal in another country. Additionally, such multiple jurisdiction problem pose additional financial and administrative burden on compliance part.

-

Heterogeneous penal provisions prescribed under different national antitrust rules adds to distortion. Some countries might be lenient in enforcement of antitrust laws. To mention, such lenient attitude might create barrier for new firms in entering market, which would otherwise be beneficial to consumers.

-

Very often competition authorities extend territorial scope of their competition laws to overcome competition problems. Such suo motto actions create conflicts between competition authorities.

-

Developing economies due to absence of formal competition policy and lack of expertise are more prone to exploitation by anticompetitive behavior of international giants. These countries are more interested in ensuring effective control mechanism. In the absence of other effective controls, these markets may also be prone to extra territorial application of antitrust regulation of other countries.

Report also puts faith in initiatives taken by WTO in this regard. Report states,” (…) under the aegis of WTO, recommendation have been made to deepen the competition aspect of trade related provisions (e.g. those concerning commercial monopolies, trade in services, intellectual property rights and “trade related investment measures”).”202 It further

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adds that more systematic and complete approach is required.

8.5

The UN Set

United Nations General Assembly took initiative in 1980 and adopted The Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business

65

Practices (UNCTAD, 1980). Initiative is popularly referred as the “UN Set”. It was hoped that such an initiative would lead to elimination of restrictive business practices.203 Through this Set an explicit instruction is given to firms to refrain from private international cartel activities. Statement runs as follows:204 “Enterprises (…) should refrain from practices such as the following when, through formal, informal, written or unwritten agreements of arrangements, they limit access to markets or otherwise unduly restrict competition, having or being likely to have adverse effects on international trade, particularly that of developing countries, and on the economic development of these countries: a

Agreements fixing prices, including as to exports and imports;

b

Collusive tendering;

c

Market or consumer allocation arrangements;

d

Allocation by quota as to sales and production;

e

Collective action to enforce arrangements, e.g. by concerted refusal to deal;

f

Concerted refusal to suppliers and to potential importers;

g

Collective denial of access to an arrangement, or association, which is crucial to competition.”

Additionally, the Set advises all Signatories to jointly and severally tackle restrictive business practices. However the UNCTAD statements like the OECD are non-binding in nature.

8.6

World Trade Organization (WTO)

Massimiliano Montini argues that given its very large membership coupled with its growing clout at international level, in today’s scenario the WTO appears “better suited foCopyright © 2012. Diplomica Verlag. All rights reserved.

rum” for some kind of multilateral cooperation in antitrust area.205 An Attempt to create an international antitrust framework under the auspices of the WTO was made at the 202

See European Commission, P. 10 See UNCTAD, 1980, P.7, for further details see 204 See UNCTAD, 2000. Section IV.D.3. P.13 205 See Massimiliano Montini, P.12 203

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1996 First Ministerial Conference of the parties to the WTO. At the initiative of the EC the matter was timely prompted before Singapore Meeting by various participants.

After much deliberations the WTO Working Group on Trade and Competition Policy was constituted in spring 1997. It took two years of intense work for completion of report. A comprehensive report was submitted in December 1998.The WTO members, barring few exceptions actively participated in devising a competition agenda in the working group. Till submission of report circa 125 written deliberations were submitted. Recent Doha Declaration of the WTO suggests that concrete discussions about antitrust issues have begun.206

By and large, the WTO may be perceived as the most suitable organization to tackle international disputes in antitrust matters, nevertheless there are few reservations from certain quarters. Justus Haucap et al summarizes them as follows:207 -

large membership base of WTO creates difficulty in reaching at consensus;

-

Probability of achieving inefficient compromises, which combine trade matters and competition policy aspects;

-

the WTO lacks required expertise in antitrust area;

-

Inherent complexity in dealing with confidential business information

8.7

International Competition Network (ICN)

After lukewarm response to bilateral agreement among nations in late 90s, the United States and other regulatory authorities worldwide started looking for other modalities for convergence of enforcement practices. It must be distinctly understood that convergence

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of antirust enforcement practices is not the same as unifying international competition

206

Paragraph 23 of the Doha Declaration of the WTO run as follows: “Recognizing the case for a multilateral framework to enhance the contribution of competition policy to international trade and development, and the need for enhanced technical assistance and capacity-building in this area as referred to in paragraph 24, we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on modalities of negotiations.” 207 See Justus Haucap et al, P. 319

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policy. However, substantial convergence of enforcement practices might eventually lead to harmonization of competition laws to some extent.

An Advisory committee to the US government recommended in 2000 that bilateral initiatives be supplemented with “a Global Competition Initiative to foster best practices and encourage dialogue between enforcement officials.”

208

“ The systematic and permanent

exchange of opinions, data, facts, and interpretation between the leading officials of the member agencies shall lead to cognitive convergence.”209

The Advisory Committee submitted following recommendations, thinking that such initiative could ultimately lead to policy convergence:210 “ Indeed, the Advisory Committee recommends that the United States explore the scope for collaborations among interested governments and international organizations to create a new venue where government officials, as well as private firms, nongovernmental organizations (NGOs), and others can exchange ideas and work, toward common solutions of competition law and policy problems. The Advisory Committee calls this the “Global Competition Initiative”.” (ICPAC, 2000)

“ A Global Competition Initiative should be inclusive and foster dialogue directed toward greater convergence of competition law and analysis, common understandings, and common culture. Such a gathering also could serve as an information center, offer technical expertise to transition economies, and perhaps offer mediation and other dispute resolution capabilities.”

After thorough discussions on these recommendations among leading antitrust authorities worldwide (on/about these recommendations), the International Competition Network Copyright © 2012. Diplomica Verlag. All rights reserved.

(ICN) was set up. The establishment of the ICN led to opening of a new avenue towards

208

See Julian L. Clarke and Simon J. Evenett, P.24 See Oliver Budzinski, 2004, Marburg, P.228 210 International Competition Policy Advisory Committee, 2000; for further details refer to Julian L. Clarke and Simon J. Evenett, P.24 209

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an international competition policy regime.211 At present the ICN has circa sixty antitrust authorities as its members. The Task of the ICN is to foster mutual dialogue, cooperation and discussion among members and it does not strive for binding commitments from members.

Even though the ICN recommendations are only advisory in nature, its im-

portance cannot be undermined. The International Completion Network despite being informal currently represents the second avenue for international competition policy coordination in the light of Cancun failure.212 Surprisingly, trade and other commerce related issues are not discussed at ICN forum. “ ICN can be seen as an attempt to separate trade and competition policy matters.”213

On occasion of inaugural conference of the ICN in 2002, suggestions were received from senior antitrust officers from several countries. Subsequently several resolutions were adopted. To mention, “ There was consensus on the proposed Guiding Principles for Merger Notification and Review, and members officially adopted them. The eight principles are sovereignty, transparency, non-discrimination on the basis of nationality, procedural fairness; efficient., timely and effective review; coordination; convergence; and confidentiality.” Presently the ICN forum has membership strength of more than 80 antitrust agencies representing more than 70 countries.214 Its steering committee consists of 15 members and is currently chaired by Ms. Sheridan Scott, antitrust commissioner of Canada. ICN ensures that membership of its steering committee represents geographical diversity. Some scholars have expressed their reservation about usefulness of membership of countries not having codified antitrust regulations. “Moreover, it is unclear what role, if any, nations without competition laws - many of whom hail from the developing world - can play in an organization that requires such laws a pre-requisite for membership.”215 In spite of some

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pitfalls, establishment of a forum like ICN should be appreciated.

211

See Oliver Budzinski, 2004, P. 223 See Mariana Bode and Oliver Budzinski, P. 85 213 See Julian L. Clarke and Simon J. Evenett, P. 24 214 See the International Competition Network, 2004d 215 See Julian L. Clarke and Simon J. Evenett, P. 25 212

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Justus Haucap et al list out three main objectives of the ICN, which are as follows:216 -

Simplifying the cooperation between antirust authorities worldwide in such cases/matters, where more than one jurisdictions are involved;

-

Fostering voluntary convergence, specially in procedural matters/areas;

-

Developing best practice guidelines.

Organizations and forums like ICN, UNCTAD and OECD have truly taken the lead in developing non-binding initiatives on antitrust matters. Interestingly issue of international hardcore cartels is not discussed at the ICN forum. Other forums focus less on mergers and more on others anticompetitive practices such as hardcore cartels etc. In 2003, acting Assistant Attorney General, R. Hewitt Pate, while emphasizing need for the ICN said, “…if we are to achieve true global convergence and cooperation, multilateral efforts must supplement existing bilateral ties.” Additionally, he said, “By focusing here on ICN. I do not mean to dismiss the extremely important work going on in the OECD, WTO and UNCTAD.”

8.8

In a Nutshell

Since the failure of the Havana Charter there have been several institutional initiatives to create a harmonious environment for international trade. Unfortunately the world community failed to achieve desired results. Recently, the WTO at the initiative of the EU is making new beginning in this direction. Concurrently, the International Competition Network is also doing extremely important work by facilitating close interactions among

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antitrust experts worldwide.

216

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See Justus Haucap et al, P. 319

9 Concluding Remarks Efforts in the direction of harmonization of antitrust laws across the globe were set in motion as early as in 1948 with the adoption of International Trade Organization’ Havana Charter. The Prevailing behavior of German cartels and Japanese zaibatsu necessitated such a move, as it was widely believed that international cartel and restrictive business practices could block market access.217 Needless to mention, that nowadays international hard core cartels are very much active on a much larger scale and are certainly having a wider reach. Movement of information at striking speed and efficient structure of transport system is an added advantage to them. In such a scenario, magnitude of damage that could be caused to global economy is immense. To counter such threats naturally the world needs a unified international competition policy. Almost all antitrust gurus strive for a unified antitrust framework.

Existence of a unified antitrust regime would be an ideal situation. But is such a competition policy framework possible or viable? Certainly not! Reasons: in earlier sections we saw that there are fundamental differences in aims and objectives of competition policy of various countries. Economic structures of countries are different irrespective of their development status. One size does not fit all. Within national territory too, there are very often changes in ideological aspects of antitrust. Competition policies are dynamic. That makes the task of unifying antitrust regulations even more difficult

9.1

The Mystery of Antitrust 4.0

It is widely believed that with the induction of the Reagan administration, Antitrust 3.0

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era also called as the Chicago School Perspective era came to an end.218Contemporary antitrust or Antitrust 4.0, as I prefer to call, is full of mystery. Present antitrust regime, as experts rightly say is standing at international crossroads. On one side, we see emergence of convergence in antitrust area. The EC competition policy is slowly and gradually con217 218

See Bernard Hoekman and Petros C. Mavroidis, P.1 See Jonathan B. Baker, 2001, P.15

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verging towards the US antitrust regime and hence pattern of harmonization in the direction of the US framework is surfacing.219 “(…) the introduction of the new EU Merger guidelines (…) resemble the US guidelines.”220 “(…) most competition laws are based on their European or American counterparts.”221 On can observe that to some extent in antitrust area the US hegemony in surfacing. Moreover, increase in number of bilateral agreements and MLATs also vindicate the same. On the other side, simultaneously on the global arena we can see an emergence of several different successful designs of antitrust framework such as the US framework, the EU framework, the Japanese framework and so on. Some recommend application of the Japanese model for developing economies. “A good model for many emerging countries with effective governance structures is that of the Japanese competition policy during 1950-1973.”222 In Antitrust 4.0 phase I see there is parallel presence of both “convergence” and “some divergence”. And this simultaneous presence of convergence, some divergence coupled with confusion about future trend makes Antitrust 4.0 a mystery.

9.2

Their Remarks

Christian Conrad in his work “Improving International Competition Order” advises that any international system of competition regulation must include at least two central elements. Prime element is the establishment of a politically independent international competition authority, which would function as an executive organ. Thereafter, to check arbitrariness and mistakes on the part of authority, formation of a control and review authority in form of an international court is also imperative.223

Many antitrust experts are not optimistic regarding international cooperation. They believe that given the disagreements over prime objectives of competition policies among Copyright © 2012. Diplomica Verlag. All rights reserved.

nations, it is not possible to devise a unified international competition policy in near future. Justus Haucap et al in their work express doubt over establishment of an interna219

See Justus Haucap et al, P. 320 Id., P. 321 221 Id., P. 314 222 See Ajit Singh, P. vii 220

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tional competition court. They share opinion that ‘substantial degree of harmonization’ is a must, before such international competition court could be formed.224 In later part of their essay they recommend building consensus at least on the demand side of globalization and working toward a common consumer standard. In their opinion such move would reduce scope of conflict without full harmonization and centralization of competition policies.225 They also lay emphasis on need for further research and exhaustive costs and benefits analysis in this direction.

Youri Devuyst suggests that international cooperation should include provisions about notification, consultation and exchange of confidential information. He also called for integration of developing countries in future framework of cooperation specifically through enhanced technical assistance.226

John McGinnis calls for limited and modest antidiscrimination international antitrust regime under the auspices of the WTO.227 According to him harmonization of substantive laws, even if limited to core areas, would be a major blunder. He submits that existences of multiple regimes do impose some cost, but he further adds that substantive harmonization - “also has potential cost”.

228

Substantive harmonization will invite large agency

cost and would also impose cost by discouraging beneficial changes. Naturally, regime once in existence will be complicated to amend. Additionally, such scenario would also discourage innovation in antitrust.229

Oliver Budzinski agrees that an internationally coordinated competition policy is must for maximization of global welfare. He further admits that existing efforts for creation of such framework have failed. According to him “(…), neither a purely decentralized solu-

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tion (national competition regimes), nor a strongly centralized solution (domination of

223

See Christian Conrad, P.73 Justus Haucap et al, P.308 225 Id., P. 329 226 See Youri Devuyst, P. 7 227 See John McGinnis, P. 1 228 Id., P. 1 229 Id., P. 13 224

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global rules and authorities) seems feasible.”230 Introduction of international competition policy parameters simultaneously with prevailing national and regional-supranational antitrust regimes231 would lead to emergence of a multilevel system of competition policy232 competences.

In later part of his essay Oliver Budzinski recommends creation of an agency at global level namely; International Competition Panel (ICP) and thereafter integration of the ICP into the WTO framework.233 He is optimistic and further adds that such integration would “complete the WTO as the primary organization responsible for the governance of global markets.”234

Ajit Singh in his G-24 Discussion Paper put emphasis on tailor-made competition policies for individual nations. He offers evidences regarding wide variations in competition laws in countries, where they have been introduced. According to him “ a good model for many emerging countries with effective governance structures is that of the Japanese competition policy during 1950-1973.”235 “Countries at different levels of development and governance capacities require different types of competition policies.”236 By and large, he is not for homogeneous antitrust regime worldwide.

However, most of the antitrust pundits worldwide vouch for minimum international cooperation in antitrust area at least for curbing international hardcore cartels, export cartels etc.. 230

See Oliver Budzinski, 2007, P. 2 “ Wettbewerbspolitik wird innerhalb der Europäischen Union in erster Linie auf zwei vertical miteinander verbundenen Ebenen betrieben, naemlich der supranationalen Ebene der EU-Institutionen und Organisationen und der nationalen Ebene der mitgliedstaatlichen Institutionen und Organisationen und der nationalen Ebene der mitgliedstaatlichen Institutionen und Organisationen.” –See Oliver Budzinski, 2006, P.3 .The EU competition policy framework is good example of regional-supranational antitrust regime. “Other than among the member states of the European Communities (EC) there is no international law of antitrust.” See Joseph Griffin, P. 1 European competition policy is also unique: Autonomy is granted to commission and its officers are allowed to use discretion in decision making process.- See Michelle Cini and Lee McGowan, P. 215 232 For further details, please see Oliver Budzinski, 2007, P. 3 233 See Oliver Budzinski, 2007, P.13 234 See Oliver Budzinski, 2007, P.13 235 See Ajit Singh, P. vii 236 Id., P. vii

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231

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9.3

My Observations

We saw in the first chapter, different countries pursue different competition policy aims and objectives. “ (…) there are differences in attitudes toward economic power, freedom of contract and trade, efficiency and equity, that are grounded in dissimilarities in political, cultural and moral history, what C. Edwards calls the “cultural inheritance”.”237 Hence, national competition policy aims are very often influenced by circumstances other than economic goals such as social and political factors. This interference creates hindrance in creation of an efficient international antitrust framework. National governments should understand that efficient economy is good for any nation in the long run and in fact efficient economy can help nation in achieving social goals. “(…) competition is a highly efficient tool for private markets and for most of the public activities, and that there is no contradiction between social goals and economic goals. On the contrary: social policy can only be successful, if it relies on an efficient economy, and social measures themselves should be economically efficient.”238 Countries around the world should reach consensus on the need for a truly independent antitrust mechanism for their own all round benefits. Initiatives should be undertaken to create awareness about benefits of competition policy among national policy makers.

I admit that today’s world is full of inequality and to be precise of heterogeneity. There are rich nations and poor nations, developed countries and underdeveloped countries, forward nations and backward nations, first world countries and third world countries and so on. Economic structures of countries are different. Moreover, social and political circumstances are different. Their needs are different. Hence, one size does not fit all. Even the advanced countries and regions such as the US and the EU, which successfully cooperated through bilateral agreements for decades, do “have major differences in their theoCopyright © 2012. Diplomica Verlag. All rights reserved.

retical approaches to enforcement.”239 Small Economies require different competition policy rules than those applied to large economies. Michal Gal rightly says, “ An im-

237

See Alexis Jacquemin, 1994, P. 27 See Johann Eekhoff, P. vii 239 See Robert W. Hahn and Anne Layne-Farrar, P. 11 238

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portant effect of the economic conditions of small economies is that they cannot afford to transplant simplistic competition policies applied in large economies.”240

Under such circumstances, naturally it would be impossible to reach consensus on all aspects. But also under such difficult circumstances there are some areas where consensus could be reached, such as action against international hard core cartels, maximization of consumer welfare and so on. Hence nations should try to formulate a common minimum antitrust agenda, based on principle of efficiency and fairness. Common minimum agenda and should list out aims and objectives explicitly to avoid future frictions.

After formulating common minimum antitrust agenda nations can move forward for creation of a common minimum program and a common minimum cooperation needed to achieve common minimum agenda. Common minimum cooperation might be based on pattern of some existing bilateral frameworks and might include similar cooperation principles such as positive comity principle and negative comity principle. Richard O. Cunningham and Anthony J. LaRocca in their research paper rightly say that know-how of regional regime might provide “ a helpful guide to the issues that arise when nations attempt to harmonize competition laws and practices and to the different approaches available.”241

Unfortunately, I am compelled to end this work with a dissenting note on the possibility of unifying international competition policy in the immediate future. But I am not a pessimist. Scarcity of financial, human, technological and other resources may create hurdle for developing nations in joining international antitrust framework. Hence, any future framework of international antitrust must pay heed to the constraints faced by developing nations. Developed nations should help developing countries in building requisite frameCopyright © 2012. Diplomica Verlag. All rights reserved.

work.

Developing nations should understand that presence of an effective antitrust

framework is in their interest. Special efforts should be undertaken to create awareness among citizens about benefits of competition policy, especially in developing countries.

240 241

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See Michal Gal, P. 55 See Richard O. Cunningham and Anthony J. LaRocca, P. 1

Initiative from citizens is a must for successful implementation of competition policy in developing nations.

As mentioned earlier, to start with, a model framework for cooperation based on existing bilateral agreements incorporating transparency, non-discrimination and other fundamentals could be beneficial. I admit that harmonization of antitrust framework worldwide is a cumbersome process. However, a small step in the direction of confidence building between nations might slowly and gradually evolve into a full fledge international antitrust

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framework at later stage.

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APPENDIX Appendix I: Countries with formal Antitrust Regime242

Economies adopting competition laws 100

No. of economies

90 80 70 60 50 40 30 20 10 0 1990

1991

1992

1993

1994

1995

Year

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Source: Singh, 2004, Table 1

242

78

See Justus Haucap et al, P.315

1996

1997

1998

1999

Appendix II: Statistics of Mega Mergers Worldwide243

International M&As Value in billions ( $ )

1400 1200 1000 800 600 400 200

02

01

20

00

20

20

99

98

19

19

97

96

19

19

95

94

19

19

92

93 19

19

91

90

19

19

89

19

19

88

0

Year

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Source: UNCTAD, 2003, P.293

243

See Justus Haucap et al, P.309

79

Appendix III: Statistics of Cross Border Mergers244

Cross-border M&As as % of total M&As worldwide ( estimate ) 40 35

Percent

30 25 20 15 10 5 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

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Source: UNCTAD, 2003, P.17

244

80

See Justus Haucap et al, P.310

Appendix IV: Mergers and Acquisitions by Foreign Controlled Firms (Selected Countries)245

Year 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

USA

344 291 231 192 245 367 420 547

France

100 119 178

FRG

192 181 205 165 199 249 213 276

Italy

26 33 56 81 56 89

Netherlands

Sweden

UK

Canada

187 151 105 30 35 44 32 35 40 29 37 30

52 47 33 33 58 50 51 56 81 107 125 110 122 103

9 9 10 12 13 6 23 75 29 24 28 21 22 36

78 109 124 192 271 307 234 200 371 395 410 466 641 622

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Source: United Nations (1989) Statistics is based on number of private and public sources with different methodologies; hence the coverage is quite uneven.

245

See Erhard Kantzenbach et al, P. 15

81

Appendix V: Impact of International Cartel on Developing and least Developed Nations246

Over Spending Countries Actual Outgo during Vitamin Estimated Saving had there been vigorous Cartel EnCartel (1990-1999) forcement Developing Nations Argentina Colombia Venezuela Honduras Ecuador Guatemala Paraguay Costa Rica Bolivia Dominican Republic El Salvador Jamaica Nicaragua

73.83 54.95 45.32 25.87 14.82 10.41 4.57 3.82 3.45 3.07 2.7 2.11 1.2

15.09 11.23 9.26 5.29 3.03 2.13 0.93 0.78 0.71 0.63 0.55 0.43 0.25

Trinidad Tobago Panama

0.81 0.68

0.16 0.14

Least Developed Country Haiti

0.11

0.02

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Source: Estimates from Clarke and Evenett (2003)

246

Julian L. Clarke and Simon J. Evenett, P.54

82

Appendix VI: National and Regional Antitrust Budget247

Country / Region

Annual Outlay

Workforce

US$ millions

United States Korea European Commission Japan Turkey United Kingdom Australia Canada Germany Netherlands Mexico Denmark Norway Sweden New Zealand Russia Finland Switzerland Hungary Argentina Czech Republic Slovak Republic Belgium

140.1 77.3 59.9 53.6 49 46.6 32.9 25.8 18 10.1 9.7 8.7 7.7 7.3 7.1 4.7 3.4 2.9 2.1 1.4 1 0.7 0.2

1157 431 537 558 297 153 401 382 262 124 201 187 145 116 71 1843 54 57 103 23 106 71 51

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Source: OECD website All data are reported for 1999-2000. The European Commission budget is reported for FY 2001.

247

Robert W. Hahn and Anne Layne-Farrar, P. 14

83

Appendix VII:

Benchmark of Market Dominance in different Economies248

Country Group

Market Share of the firm

Developing Countries East Asia Eastern Europe and Central Asia Africa Industrial Countries The United States The European Union

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Source: World Bank (2002) P.140

248

84

See Ajit Singh, P.7

50-75 30-40 20-45

Two-thirds or more 40-50

Appendix VIII:

Details of Notifications exchanged between competition authorities of the EC and the US249

YEAR

EC Notifications

US Notifications

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

5 26 44 29 42 48 42 52 70 104 84 63

12 40 40 35 35 38 36 46 49 58 37 44

EC Merger US Merger EU Antitrust US Antirust Notifications Notifications Notifications Notifications

3 11 20 18 31 35 30 43 59 85 71 56

9 31 20 20 18 27 20 39 39 49 25 27

2 15 24 11 11 13 12 9 11 19 13 7

3 9 20 15 17 11 16 7 10 9 12 17

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Source: European Commission, 2004

249

See Justus Haucap et al, P.316

85

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92

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