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Policy
Statement
Competition
policy in the WTO: Doha Declaration issues
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pdf version
Prepared
by the Commission on Competition
Table of contents
- Introduction
- Summary
- Non-discrimination
- Due
process and transparency
- Technical
assistance, capacity building and competition advocacy
- Hard
core cartels
- Modalities
of cooperation
Competition policy in the WTO: Doha Declaration issues
1. Introduction
1.1
In
preparation for the 2003 WTO Ministerial Meeting and subsequent negotiations,
paragraph 25 of the Doha Declaration mandated the Working Group on the
Interaction between Trade and Competition Policy (the "WTO Working
Group") to focus on the clarification of:
(i) core principles,
including transparency, non-discrimination and procedural fairness;
(ii) provisions on hard core cartels;
(iii) modalities for voluntary cooperation; and
(iv) support for progressive reinforcement of competition institutions
in developing countries through capacity building.
1.2 This paper
discusses each of these subjects from a private sector perspective, with
the objective of providing input to the WTO Working Group. Since business
plays a central role in the WTO goal to expand cross border trade in goods
and services, ICC assumes that it is helpful to provide input from a business
perspective to the WTO as it continues its important work on the interaction
between trade and competition policy. ICC represents companies and associations
from over 130 countries and is the only representative body that speaks
with authority on behalf of enterprises from all sectors in every part
of the world.
1.3 ICC continues
to support the work of the WTO Working Group and appreciates the opportunity
to contribute. ICC's intention is to focus discussion on areas that require
consideration from the perspective of international business.
1.4 World business,
as represented by ICC, firmly believes that an open multilateral system
that facilitates flows of goods, services and investment across national
borders is a major force for raising living standards and creating jobs
in all parts of the world. Growth in world trade and investment - which
far outpaces growth in world output - is an essential condition for the
spread of job and wealth creation throughout the world economy. ICC notes
that both government and private sector practices can impede these objectives.
1.5 Governments
and business must work more closely together to design the multilateral
rules for the worldwide marketplace that will be increasingly necessary
for the globalization of trade and investment. The special contribution
of business is to help governments to develop rules that maximize the
scope and ability of business to work productively to create wealth and
employment, while maintaining appropriate individual and business freedoms.
1.6 Competition policy is one of the areas in which an international
framework is germinating, and in which this necessary balance has to be
achieved. Private sector input is necessary to ensure that the work done
is realistic, potentially effective, and balanced, therefore more likely
to be accepted.
2. Summary
2.1 ICC has actively contributed business views to international
discussions on the interaction between trade and competition policy. In
its November 1998 "Statement on future WTO work on competition and
trade", ICC supported the mandate of the WTO Working Group as established
at the December 1996 Singapore Ministerial Conference, but suggested that
it should not go beyond educational and informative discussions among
its members on market access issues related to competition and trade policies.
In that note, ICC recommended that if the WTO Working Group's mandate
were to be prolonged, there should be opportunities for the WTO Working
Group to receive and consider business views. Dialogue with the business
community would be essential should the WTO consider expanding the Working
Group's mandate beyond its current analytical and educational focus.
2.2 In a joint
statement with the Business and Industry Advisory Committee to the OECD
(BIAC), "ICC/BIAC comments on report of the US International Competition
Policy Advisory Committee" (3 June 2000), (the "June 2000 Statement")
ICC and BIAC stated that "the WTO is not an appropriate forum for
the review of private restraints and that the WTO should not develop new
competition laws under its framework at this time…" In the June
2000 Statement, ICC also took the view that a dispute resolution mechanism
within the framework of a multilateral agreement on competition laws raises
many complex issues and was premature at the time.
2.3 There is
broadly shared recognition among ICC members that the issues in question
are complex and that, while efforts are being made to achieve a workable
level of soft harmonization and convergence in the application of the
world's already large number of competition regimes, there remain significant
differences on substantive competition law principles and their application.
Bridging those differences will require time and a great deal of cooperation
among governments, competition authorities, private sector interests and
other stakeholders. The issue of the inclusion of a competition framework
in the WTO system thus should be assessed very carefully as the WTO proceeds
at its meetings later this year.
2.4 ICC believes
that the "core principles" identified in the Doha declaration
that set out this Working Party's present charter - transparency, non-discrimination
and procedural fairness - are, as broadly understood, fundamental and
that they should be reflected in the competition regime of every jurisdiction
that chooses to adopt one.
2.5 ICC identifies in this paper key issues that require consideration
in any discussion or analysis of competition policy norms.
2.6 ICC notes
that the backdrop for any discussion of procedural or substantive competition
policy norms in a multilateral framework is constantly changing. In particular,
regard must be had not only to private sector positions such as those
put forward by ICC and BIAC, but the ongoing work of other international
organizations such as the OECD and the International Competition Network
(ICN). Work on many of the issues before the WTO Working Group is proceeding
rapidly in various fora shaped by competition policy and legal developments.
2.7 In particular,
ICC encourages the WTO Working Group to carefully consider in the broader
competition policy context, the application of the principles of transparency,
non-discrimination, procedural fairness and protection of confidential
information endorsed in the merger context, by the ICN at its inaugural
conference in Naples, Italy, September 2002 ("Guiding Principles
for Merger Notification and Review") if and when developing recommendations
for going forward.
2.8 ICC joins
in the condemnation of "hard core cartels," which victimize
business consumers and competitors and ultimate consumers alike, while
noting the importance of addressing important definitional issues in this
connection, as well as the importance of appropriate safeguards for confidential
information in the context of investigations of cartel activity.
2.9 With respect
to modalities for cooperation, ICC encourages the expanded use of appropriate
voluntary "peer review" mechanisms that periodically subject
jurisdictions' competition regimes to in-depth scrutiny and comment such
as those conducted under the OECD's Regulatory Review program and the
WTO's TPRM.
3. Non-discrimination
Competition laws
should not discriminate on the basis of nationality
3.1 ICC strongly supports the view that competition laws should
not discriminate on the basis of nationality, and that non-discrimination
should be considered a core principle of all competition laws. Put another
way, the principle of national treatment should apply to competition laws,
i.e., the principle that a government should treat the goods, services
and persons of other nationalities no less favorably than it treats its
own.
3.2 It is generally
accepted that competition laws and their implementation should be "nationality-blind,"
and should be concerned exclusively with the impact on competition of
the conduct or transaction in question. The recently adopted ICN "Guiding
Principles for Merger Notification and Review" endorse non-discrimination
on the basis of nationality in the context of the merger review process.
Competition laws that are expressly drafted or implemented so as to favor
local as against foreign firms, distort trade and undermine the credibility
of competition policy generally. They risk becoming instruments of protectionism
rather than a guardian of open and efficient markets.
3.3 Any WTO competition agreement, if one does come about, should
include an appropriately tailored prohibition on de jure nationality-based
discrimination. ICC considers that including de facto discrimination in
such a prohibition would, although attractive at the level of principle,
require further consultation and thinking in order to see whether a workable
line can be drawn between inappropriate de facto discrimination and legitimate
enforcement discretion, both as an evidentiary matter and as a substantive
matter.
3.4 The application
of the non-discrimination principle to de facto nationality-based discrimination
in the context of competition law raises complex issues. These issues
are of two kinds. First, it may prove difficult or impossible to identify
instances of de facto discrimination with any assurance. A competition
authority that wants to bend its policies or its enforcement decisions
to favor its nationals can cloak its actions in ostensible competition-based
rationales. Second, competition authorities exercise a wide range of discretion
in their enforcement decisions, both in choosing their enforcement targets,
in reaching their substantive conclusions, and in choosing remedies. In
considering this issue, the WTO should take into account the risk that
a binding rule against de facto discrimination, accompanied by dispute
resolution, could too easily trigger supranational litigation of individual
enforcement decisions or enforcement policies, and deprive competition
authorities of a degree of necessary and legitimate discretion to enforce
or not to enforce in particular cases.
3.5 In adopting
any nondiscrimination principle, it is important not to sweep so broadly
as to prohibit legitimate distinctions that may coincide with nationality
but that nonetheless have appropriate nondiscriminatory bases. For example,
evidence-gathering powers will often differ for firms located abroad,
in view of sovereignty and other issues that may arise regarding foreign-located
evidence. Similarly, regulatory schemes in local markets result in differences
in the way competition law is applied in those markets and the way it
is applied to foreign-based firms that are not subject to the same regulations.
It is important to distinguish in these cases between discrimination based
on corporate nationality or ownership, which generally should be unacceptable,
and differences based on where the firm is operating and what markets
are affected by its activities.
Important questions
remain and need to be considered by the Working Group about the application
of a non-discrimination principle to competition laws
3.6 Even a prohibition on de jure discrimination raises difficult
questions. Set out below are examples that should be considered and resolved
before adopting any binding non-discrimination principle. These examples
do not, of course, exhaust those that arise in examining the nondiscrimination
issue; but they do suggest that the issue is more complex than it may
at first seem, and that it requires careful examination and analysis.
Preliminary comments have been offered on some of these examples.
3.6.1 Example
1: Under a bilateral or regional antitrust cooperation agreement,
a jurisdiction cooperates more closely with, or shares information more
extensively with, parties to the agreement than with nonparties.
Comment: This does not constitute impermissible discrimination.
Competition authorities must have discretion to tailor their cooperation
to considerations that are specific to the other jurisdiction involved.
3.6.2 Example 2: Under a positive comity or "who goes first"
agreement, a presumption is set up under which each party refers enforcement
action to the other party, in whose territory the companies are based,
the conduct is centered, or the effects of the conduct predominate.
The presumption does not apply to jurisdictions that are not party to
the agreement or to a similar agreement.
Comment: As in the last example, this does not constitute impermissible
discrimination. Given existing disparities among the world's competition
law regimes - disparities that are likely to persist for some time -
ICC believes that competition authorities should retain discretion regarding
the extent of their cooperation with, or deference to enforcement by,
authorities of other jurisdictions. That discretion should not be viewed
as inconsistent with the principle of nondiscriminatory enforcement.
3.6.3 Example
3: A competition enforcement authority gives explicit priority to
effective enforcement against foreign-based cartels whose members sell
into its markets.
Comment: While there would be reasons for legitimate concern
if this competition authority chose to target foreign cartel participants
while ignoring equally culpable domestic participants, or equally damaging
domestic cartels, instances of this nature should not be justiciable
under internationally binding rules or dispute resolution. Subjecting
prosecutorial decision-making of this nature to supranational review
would unduly interfere with legitimate discretion and resource allocation,
and in effect impose an unwarranted and artificial obligation to "balance"
enforcement efforts among a range of targets.
3.6.4 Example
4: A jurisdiction's enforcement policy restricts aggressively competitive
activities by large powerful firms in order to protect small and medium
firms. In the context of this economy, the large powerful firms are
foreign and the small and medium-sized firms are local. Apart from policy
questions that are raised by a policy that may amount to protection
of less efficient firms, this does not necessarily constitute impermissible
discrimination. However, what if the jurisdiction passed a new law designed
to increase protection for small and medium firms and there was evidence
the law was intended to neutralize their foreign rivals' advantages
of efficiency and access to capital?
3.6.5 Example
5: A competition law that, by its express terms, deals more harshly
with, or denies exemptions or favorable treatment to, non-nationals
appears on its face to be discriminatory. Does that mean that any exemption
available to domestic, but not to foreign, firms is suspect?
3.6.6 Example
6: A competition law requires filing and review of international
contracts, but has no such requirement for similar contracts between
domestic firms: does this constitute impermissible discrimination?
4. Due Process and Transparency
Overview
4.1 ICC strongly believes that due process and transparency are
important core principles to be respected and applied in the design, implementation
and enforcement of competition laws at the national level and with respect
to any multi-jurisdictional enforcement cooperation. Both principles are
essential because they provide stakeholders - the public, consumers and
competitors - some assurance that the system will produce consistent and
rational results and generate confidence in the system of competition
law enforcement. Those jurisdictions with the longest traditions of competition
law enforcement have managed to create a consensus for such laws and policies
by trying to grapple with these issues and to continually balance the
interests of a rigorous competitive process with concerns for due process
and fair play. It is perhaps all the more important that laws and policies
enacted to safeguard the competitive process be seen to be administered
in a transparent and fair manner.
4.2 The following
are suggested key due process and transparency elements of competition
policy offering a preliminary view of elements that need to be considered
and resolved before adopting any binding principles of due process and
transparency in the WTO context, should this prove desirable. These questions
do not, of course, exhaust those that arise in examining these issues;
but they do suggest that the issues are complex ones that require careful
examination and analysis. Many of these values are endorsed in the "Guiding
Principles for Merger Notification and Review" recently adopted by
the ICN which should be an important basis for any discussions on issues
of transparency and due process in the WTO . The institutional framework
that best provides the checks and balances desirable from a business perspective
is one that combines both administrative proceedings and private suits
in national courts. However, these suggested elements would apply with
equal force to regimes that rely exclusively on formal participation in
administrative proceedings or those that rely exclusively on private suits
before national courts.
4.2.1 Mechanism
for bringing matters before competition agency. The process should
provide a mechanism whereby anyone can bring a matter to the attention
(by complaint or otherwise) of the competition agency; such complaint
should identify the interests and competitive problems they seek to
address. Agencies should develop appropriate systems to filter out spurious
complaints.
4.2.2 Right to
be advised of progress and reasons for decisions. Those who bring
matters to the attention of the competition authority should, to the
extent practicable and appropriate, be kept advised of the progress
of the authority's examination and its ultimate determination, including
reasons for not initiating an investigation or launching proceedings
if applicable, having regard to confidentiality obligations.
4.2.3 Right to
notice and disclosure of investigations. Persons subject to investigation
should be advised at the earliest possible time of the nature of the
matters under investigation and the basis for the investigation, unless
doing so would materially prejudice the authority's enforcement obligations.
Further, persons with a "legitimate interest" in the proceedings
should receive notice and disclosure of investigations at the earliest
time practicable. Persons with a "legitimate interest" should
include complainants and third parties who satisfy the appropriate authority
that they will be directly and significantly affected by the conduct
being investigated.
4.2.4 Right to
make submissions. Persons subject to investigation and persons with
a legitimate interest in matters being considered by the competition
authorities should be allowed to make written or oral submissions to
the authorities at any time as well as offer evidence and participate
in formal hearings or proceedings.
4.2.5 Independent
and objective decision. The first decision should be an independent
and objective assessment by the deciding body.
4.2.6 Transparency
of substantive and procedural rules. The substantive and procedural
rules, including evidentiary rules must be transparent. In order to
foster consistency, practicability and fairness, the process should
be transparent with respect to the policies, practices and procedures
involved in the review, the identity of the decision-maker(s), the substantive
standard of review, and the basis of any adverse enforcement decisions
on the merits.
4.2.7 Right of
appeal. A timely appeal of decisions to an independent judicial
authority should be provided.
4.2.8 Timely
decisions. Decision-making by agency and appellate bodies must be
timely. (Deadlines for responding to complaints and for completing investigations
and proceedings should be stated in advance, but the agency could have
the opportunity to extend these for good faith reasons or, in a merger
investigations, with the consent of the merging parties). Competition
authorities should be accountable for adherence to stipulated timelines.
4.2.9 Ability
to challenge investigatory measures. Throughout the investigation,
there should be an effective ability to challenge the investigatory
measures employed.
4.2.10 Clear
and transparent process standards; adequate protection of information.
The investigatory and judicial process, both within individual jurisdictions
and in the multijurisdictional investigation context, should have established
standards that are clear and transparent and provide adequate protection
of competitively sensitive, proprietary information and information
subject to legal or other privilege. Legal privilege should apply without
discrimination to both lawyers called to the local bar and to those
called to foreign bars, and should also extend to in-house lawyers who
are governed by the same code of ethics as lawyers in private practice.
4.2.11 Adherence
to due process standards binding. The agency should be bound by
legal rules to adhere to its due process standards and at least be subject
to a rule excluding evidence obtained contrary to due process standards.
4.2.12 Jurisdictional
nexus. Jurisdiction should be asserted only over transactions and
conduct that have an appropriate nexus with the jurisdiction concerned.
Determination of the nexus to the jurisdiction of a transaction or conduct
should be based on whether the transaction or conduct is likely to have
a significant, direct and immediate economic effect within the jurisdiction
concerned.
4.2.13 Reasonable
and proportionate remedies. Remedies for anti-competitive conduct
must be reasonable, proportionate and linked by an appropriate causal
nexus to the specific anti-competitive harm or conduct alleged, having
regard to legitimate enforcement concerns relating to deterrence and
compensation.
5. Technical Assistance, Capacity Building and Competition Advocacy
5.1 The Doha Declaration set out two tasks for the WTO in the area
of capacity building. In Paragraph 24, WTO commits to cooperating with
other intergovernmental organizations in providing technical assistance
to developing countries to "better evaluate the implications of closer
multilateral cooperation for their development policies and objectives".
Paragraph 25 of the Doha Declaration sets out the more analytical mandate
of the WTO Working Group to reflect upon and to clarify the issues relating
to the reinforcement of competition institutions in developing countries
through capacity building.
5.2 Pursuant
to paragraph 24 and in the run-up to the Cancun Ministerial meeting, the
WTO secretariat has been cooperating with organizations such as UNCTAD
in organizing meetings to help developing countries better understand
the possible consequences of negotiations on a multilateral framework
on competition so that they are prepared for discussions at the Cancun
Ministerial.
5.3 ICC supports
educational efforts made by WTO to ensure that all WTO members enter into
discussions on this important topic with sufficient understanding of the
complex issues involved. ICC refers to its views set out elsewhere in
this paper on the principles of non-discrimination, due process and transparency,
and on hard core cartels, which might be useful to the WTO in raising
its members' awareness on different aspects of these issues.
5.4 ICC believes,
however, that it would not be appropriate for WTO to advocate any particular
substantive principles or approach to competition policy - other than
the core principles examined above - unless and until further thinking
and consultation allow reaching a common understanding as to the proper
premise and substantive underpinnings of competition policy.
5.5 The world's competition policy regimes vary widely in content,
with many mandating conflicting rules on business, and many allowing different
nation-states and regional groupings to issue conflicting commands to
businesses engaged in trade in more than one nation.
5.6 While many
governments subscribe to the beneficial effects of competition policy
regimes in mature economies as an act of faith, some question their efficacy
for other types of economies, while still others strongly advocate their
adoption as beneficial for all. There is conflict even among the most
mature economies, such as the US and the EU, about the appropriate premise
and substantive underpinnings of competition policy, which historically
has progressed from populist notions of "fairness" and "anti-large
business" to a more refined appreciation of a consumer welfare focus,
based on modern economic thinking. Even this is tempered with the realization
that innovation is changing the global landscape of business, adding new
dimensions to the competitive process that have yet to be assimilated
in competition policy rules.
Any WTO-mandated capacity building efforts should therefore be directed
in priority toward implementation of "core principles" and,
where appropriate, to developing agencies' capacity for sound economic
analysis. Capacity building should not be designed to promote enforcement
of substantive competition law rules on which there is not a sufficient
level of consensus.
5.7 In this
respect, ICC welcomes the Working Group's recognition in its 2002 Report
that, in the context of capacity building, a "one size fits all approach"
is not appropriate as each country should be free to choose how to apply
a competition regime in a way that reflects its economic situation and
development objectives. It also supports the Working Group's view that
developing countries should be allowed to take a phased approach to the
discussion, introduction and implementation of competition legislation.
ICC would add that while countries should also have the scope to determine
whether to choose to adopt a competition regime, every country that does
so should adhere to the "core principles" of non-discrimination,
due process and transparency .
Role of WTO
5.8 In considering how the WTO could most helpfully fulfill its
mandate to provide technical assistance to developing countries, ICC suggests
that the following factors should be considered.
5.9 Numerous
international organizations are already actively involved in efforts to
bring some intellectual harmonization or convergence to the disparate
competition policy rules now in force, and also to promote the adoption
of modern competition policy rules. Most recently, some 60 governments
(all members of the United Nations and the World Trade Organization) have
joined the ICN, a virtual organization of governmental competition agencies,
devoted to meetings and working groups exploring the content of competition
policy rules, enforcement mechanisms, and technical assistance and capacity
building issues. The OECD has for years
undertaken efforts of convergence and advocacy, with programs such as
its Global Competition Forum. UNCTAD's efforts now span more than four
decades. UNESCO, the World Bank, and the International Monetary Fund have
all been involved in promoting the adoption of competition policy rules-with
varying content over the years, it might be noted. Many of these organizations
are devoting substantial efforts at reducing the conflicts between nations
growing out of the varying competition policy statutes. Many individual
governments, such as the US agencies and the EC, have devoted, and continue
to devote, considerable resources on both promotion and convergence of
competition policies.
5.10 To preserve
its scant resources and to allow it to focus on its primary role as an
organization for negotiating and administering international trade rules,
ICC suggests that the WTO should carefully consider whether to devote
further resources to capacity building initiatives. If the WTO does pursue
such initiatives, it should continue to work in the area of technical
assistance in cooperation with, and through, organizations already active
in this field.
5.11 ICC also
suggests that the WTO deploy its expertise and utilize survey and coordination
functions to assist the other international organizations and member governments
in the activities they are already conducting in the competition policy
area. Because more nations are members of the WTO than are members or
participants in the efforts of these other organizations, it might also
be useful for the WTO to comment to the other international organizations
and member governments on needs, issues, and focus of activity.
5.12 Specifically,
because of its broader membership base, a WTO survey of its members (and
the other, non-member nations who are members of the United Nations) with
respect to various aspects of competition policy, administration and enforcement
might be useful. The survey could be designed to elicit their competition
policy laws, the budgets and personnel of their enforcement agencies,
the exemptions and immunities from the competition regime, the priorities
of those agencies, and the perceived needs of the member governments for
technical assistance and capacity building.
5.13 Such a
survey might form the initial database of information on competition policy
regimes, which member governments might make use of in evaluating their
own activities, and which the other active organizations in the field
might make use of. If this proved useful, the survey, periodically conducted,
might be broadened to include questions on the current and planned activities
of others in the areas of technical assistance, capacity building, and
competition advocacy. The objective of broadening the survey would be
to include in the general database information on other agencies' and
governments' efforts, which might help coordinate the myriad of activities
being undertaken. Periodic monitoring of the situation, i.e. of the elements
disclosed in the survey, and reports on the situation might be useful
to the world community, as it evaluates whether progress is being made
in producing a global trading system where the constituent national elements
have competitive free markets.
5.14 Finally, while the instances of competition policy producing
impediments to international trade probably constitute a very small subset
of such impediments, it might be useful for the WTO to issue reports on
the impact of competition rules on international trade, with particular
reference to the application of the principle of non-discrimination. This
might become a part of the regular Trade Policy Review Mechanism of the
WTO, which in essence is a peer review mechanism.
6. Hard Core Cartels
Overview
6.1 ICC fully supports increased international co-operation focussed
on the detection and punishment of hard core cartels. Nevertheless, the
pursuit of this worthwhile objective does not negate the need for legal
safeguards and protections for parties involved in investigations (who
may or may not be proved guilty), especially as penalties for antitrust
offences are becoming increasingly serious and the risk arises of multiple
penalties for the same transgression. The fact that more and more jurisdictions
have introduced, or are considering introducing, criminal sanctions for
these offences, makes the need for legal safeguards and proportionality
in penalties imposed even more imperative bearing in mind human rights
statutes, both national and international.
6.2 In addition,
as a result of some recent US case developments, businesses and legal
advisors, both within and outside the US, are increasingly concerned about
the implications of information sharing among competition authorities.
These developments may give rise to pressure on competition authorities
and governments to reject bilateral or multilateral cooperation arrangements
that override domestic protections for confidential and privileged information.
6.3 Recognizing
the ever-changing contextual landscape, there are four key issues to consider
in any discussion of a possible multilateral framework for addressing
"hard core cartel" behavior:
(i) What is a "hard
core cartel"? In defining the term, consideration should be given
to such matters as whether the proscribed conduct includes only horizontal
agreements (not vertical agreement), whether there should be a distinction
between covert and overt activities, and what recognition, if any, should
be given to efficiency-enhancing activities.
(ii) What are the appropriate procedural safeguards in the context of
investigating and prosecuting parties who have participated in hard
core cartels?
(iii) What are the appropriate safeguards for protecting confidential
business information in the context of inter-agency co-operation in
pursuing and prosecuting hard core cartel activity?
(iv) Is the WTO framework suited to address the foregoing and related
issues given the great disparity in substantive principles and treatment
of hard core cartels among WTO members?
Definition of "Hard
Core Cartel"
6.4 Before engaging in any substantive discussion, the various
parties and stakeholders must have a common understanding or reference
point with regard to the type of activities to which enforcement co-operation
is directed. The definition will in part depend on the enforcement measures
applicable to the conduct. For example, if the behavior is punishable
per se and the penalties for engaging in the activity are serious criminal
sanctions, it may be appropriate to define the term narrowly.
6.5 In Draft
BIAC Talking Points dated 07/02/01 to the OECD CLP WP3 Roundtable on Information
Sharing in Cartel Cases, BIAC noted that the business community has differing
views on the definition of a hard core cartel based on the fact that different
jurisdictions have different laws which govern activities that may be
considered hard core cartel behaviour in one jurisdiction and not another.
6.6 The OECD
Recommendation of the Council Concerning Effective Action Against Hard
Core Cartels adopted on March 25, 1998 defines "a hard core cartel"
as follows:
"A 'hard core cartel' is an anti-competitive agreement, anti-competitive
concerted practice, or anti-competitive arrangement by competitors to
fix prices, make rigged bids (collusive tenders), establish output restrictions
or quotas, or share or divide markets by allocating customers, suppliers,
territories or lines of commerce."
"The hard core cartel category does not include agreements, concerted
practices, or arrangements that (i) are reasonably related to the lawful
realization of cost-reducing or output-enhancing efficiencies, (ii) are
excluded directly or indirectly from the coverage of a Member country's
own laws, or (iii) are authorized in accordance with those laws. However,
all exclusions and authorizations of what would otherwise be hard core
cartels should be transparent and should be reviewed periodically to assess
whether they are both necessary and no broader than necessary to achieve
their overriding policy objectives."
6.7 While the
OECD definition of "hard core cartel" provides a strong foundation
upon which to build, and represents a consensus among the members of the
OECD, it does not address the distinction between covert and non-covert
activities, which is currently a subject of discussion among stakeholders.
For example, many believe that agreements between competitors regarding
prices, quantities, markets or customers that are arrived at and carried
out in a covert manner are the most egregious activities and should be
per se unlawful. A related issue is whether there should be a mechanism
for exemption from per se categorization as a result of notification of
an agreement to the relevant competition authorities or the public. Another
issue is the appropriate treatment to be given to efficiency enhancing
agreements. The OECD definition of "hard core cartel" is in
terms that the definition judges behaviour in advance.
6.8 ICC recommends at a minimum the following guiding principles:
6.8.1 Horizontal
agreements only. Hard core cartels ought to be confined to horizontal
agreements, properly defined, between competitors, and should not extend,
for example, to an agreement between two or more undertakings each of
which operates, for the purposes of the agreement, at a different level
of the production or distribution chain. In section 8 of "Discussion
Points on Information Sharing in International Cartel Investigations"
submitted by BIAC to the OECD Global Forum on Competition on February
15, 2002, BIAC suggested that hard core cartel behaviour means (i) horizontal
price fixing agreements, (ii) horizontal bid rigging, and (iii) horizontal
market allocation.
6.8.2 Recognition
of efficiency enhancing activity. Even where a jurisdiction adopts
a "per se" category of hard core cartels, there should always
be some opportunity to demonstrate in an appropriately unbiased forum
the efficiency enhancing aspects of an agreement, even in a case that
involves elements of price fixing, e.g., Broadcast Music, Inc., et al.
v. Columbia Broadcasting System, Inc., et al., 441 U.S. 1 (1979).
6.8.3 Affiliates
excluded. Hard core cartels should not include agreements between
affiliates or entities within the same economic unit.
Procedural Safeguards
6.9 The following are appropriate key procedural safeguards to
consider in any multilateral framework for addressing hard core cartel
activity.
6.9.1 Non-discrimination.
Competition laws and regulations applicable to hard core cartels should
be applied without discrimination on the basis of the nationality or
location of the parties.
6.9.2 Transparency.
The hard core cartel investigation process should be transparent
with respect to the policies, practices, and procedures involved in
the review, the identity of the decision-makers, and the standard of
review. Transparency should foster consistency and predictability of
the outcomes of hard core cartel investigations.
6.9.3 Due process.
Appropriate procedural safeguards should be available to ensure that
the hard core cartel investigation process incorporates core principles
of due process and procedural fairness. Specific safeguards are discussed
in Part 4 - Due Process and Transparency.
Safeguards for
Confidential Information
6.10 The exchange of confidential information between competition
authorities continues to be of concern to the international business community.
Such exchanges should include appropriate safeguards to prevent leaks,
and greater transparency to improve business confidence, avoid adverse
commercial consequences and protect the rights of companies targeted for
investigation. (See ICC Statement on International Cooperation between
Antitrust Authorities no. 225/450 rev. 3 of 28 March 1996; ICC Recommendations
to ICPAC on Exchange of Confidential Information between Competition Authorities
in the Merger Context no. 225/52 of 21 May 1999, and ICC/BIAC Comments
on report of the US International Competition Policy Advisory Committee
no. 225/554 Rev. of 5 June 2000).
6.11 The hard
core cartel investigation process, both within individual jurisdictions
and in the multi-jurisdictional investigation context, should have established
standards that are clear and transparent, and provide adequate protection
of confidential information, consistent with the need for such disclosures
as may be necessary for effective enforcement by competition authorities
in the jurisdictions concerned. A number of issues relevant to information
sharing between antitrust authorities in the context of hard core cartel
investigations are discussed in the February 15, 2002 BIAC Discussion
Points referred to above.
6.12 The following
is a list of safeguards specific to information exchanges among competition
authorities
6.12.1 Prior
notification. The owner or provider of the information should receive
prior notice of any proposed exchange of information and an opportunity
to be heard on: (a) the necessity of such exchange; and (b) whether
information is confidential or not, unless doing so would be prejudicial
to the investigation. When, for the latter reason, prior notice is not
given, information should be exchanged only with the approval of an
independent judicial arbiter.
6.12.2 Solicitor-client
privilege protection. A receiving jurisdiction should not receive
or use information that would be considered privileged under the recipient's
own law and a loss of privilege should not occur as a result of the
sharing of confidential information between antitrust authorities in
different jurisdictions. The privilege should be respected regardless
of the lawyer's bar origin and including communications with in-house
lawyers who are subject to rules of ethics comparable to those applied
to independent lawyers.
6.12.3 Substantial
convergence and similarity in laws. The highest standard of protection
in either jurisdiction should be provided in order to avoid conflicts.
6.12.4 Consistency
with immunity/amnesty programs. Rules governing information exchange
should encourage, rather than interfere with, immunity/amnesty programs.
6.12.5 Reciprocity: The receiving party must agree to reciprocate
as a condition of exchange.
6.12.6 Facilitation,
not delay. Any exchange of information should speed up the investigation
process rather than lead to extra delays.
6.12.7 Substantive
case and jurisdiction. Information exchange should only take place
where there is a substantive case as well as jurisdiction over the parties
in matters at issue, rather than only suspicion.
6.12.8 Use of
information/no further disclosure. The information should be used
by the receiving authority only for the purpose for which it was disclosed,
be subject to conditions of confidentiality at least as stringent as
those of the jurisdiction supplying the information, and not be disclosed
to any parties outside the receiving authority, in particular, potential
third party plaintiffs, other agencies or foreign governments. There
should also be an assurance that the authority has exhausted its own
administrative procedures and possibilities before making a request.
The Role of the
WTO
6.13 Any discussion about the appropriate definition and treatment
of hard core cartel activity at the WTO level should recognize that there
are significant issues that need to be addressed on which there is little
consensus among the various stakeholders. In addition to the foregoing,
there are issues regarding the extent to which any framework will address
government procurement, exemptions from cartel laws such as state action
immunity, and how to recognize differences between common law and civil
code jurisdictions.
6.14 Given
the complexity of the issues, as reflected in paragraph 2.3 of the summary,
the issue of the inclusion of substantive rules on hard core cartels in
the WTO system should be weighed carefully as the WTO proceeds with its
meetings later this year.
7. Modalities of Cooperation
Introduction and
summary
7.1 This part sets out ICC's perspective on the appropriate scope
for voluntary cooperation among competition authorities. The Working Group
has already reviewed the history of prior and existing bilateral and multilateral
cooperation efforts, and we will not reiterate that background except
as it bears directly on our suggestions.
7.2 In summary, ICC:
7.2.1 Supports efforts
by competition authorities to cooperate with one another with the objectives
of :
- formulating and
adopting coherent, consumer-welfare oriented competition policies;
- fostering the
use of "best practices" in the implementation of their competition
laws; and
- ensuring that
related investigations and proceedings ongoing in multiple jurisdictions
are handled in a way that is efficient for the agencies and for the
businesses involved and that promotes economically and legally sound
and consistent outcomes.
7.2.2 Stresses the
importance of assuring effective and adequate protection for confidential
information. (In that regard, see Part 6 - Hard Core Cartels)
7.2.3 Urges that
individual competition authorities retain flexibility and discretion
in the nature and extent of their cooperation with competition authorities
of other jurisdictions, taking into account, among other things, the
sufficiency of protections for confidential information, the impact
on the cooperating authority's own investigation or proceeding, the
degree of policy convergence or divergence, and demands on the authority's
resources.
7.2.4 Supports the
use of appropriate voluntary "peer review" mechanisms that
periodically subject jurisdictions' competition regimes to in-depth
scrutiny and comment, but that do not include dispute resolution mechanisms
or other compulsory measures that would result in "second guessing"
individual jurisdictions' enforcement decisions.
Discussion
7.3 The importance of cooperation among competition authorities
has increased in recent years. The reasons include the proliferation of
revised or newly adopted competition laws around the world; the frequency
with which transactions are subject to review in multiple jurisdictions;
a perceived need to combat hard core cartel activity at both local and
international levels and a growing appreciation of the importance of an
appropriate balance between the need for sound and effective competition
law enforcement on the one hand, and on the other hand, the importance
to economic growth and efficiency of an environment in which legitimate
mergers and other transactions are not impeded or deterred by unnecessary
delay, cost and uncertainty.
7.4 Antitrust authorities have responded to the need for expanding
cooperation in a number of ways. First, the network of bilateral cooperation
agreements has expanded rapidly, while jurisdictions that have had agreements
in place are revising or replacing old agreements with new arrangements
based on their more recent experience. The US was the earliest jurisdiction
to build a bilateral cooperation network, in its early period to deal
with jurisdictional conflicts and more recently to manage the growing
demand for more extensive enforcement cooperation. Agreements have been
entered into between other pairs of jurisdictions in all parts of the
world, sometimes similar to the US bilateral model, and in other cases
custom-designed to address the particular needs and interests of the jurisdictions
involved.
7.5 Most bilateral
agreements leave the parties substantial discretion to apply them in a
way that does not prejudice their important policy or enforcement interests.
Few bilateral agreements allow jurisdictions to share confidential company
information with one another.
7.6 Experience
with bilateral competition agreements has influenced the development of
multilateral arrangements, and vice-versa. Probably the best known multilateral
instrument dealing with competition law cooperation is the OECD Council
Recommendation Concerning Co-operation Between Member Countries on Anticompetitive
Practices Affecting International Trade. The Recommendation is non-binding,
although most OECD members purport to adhere to it in - albeit to differing
degrees and with a range of interpretations.
7.7 The OECD
Recommendation's provisions are basically similar to - and have influenced
and been influenced by - what has become the US's de facto bilateral model
agreement, which also has been followed by several other jurisdictions.
The OECD recommendation does not call for multilateral cooperation as
such. Instead, it is a recommendation about the way in which member countries
should cooperate with one another in their bilateral dealings.
7.8 The Recommendation
calls for the parties to notify one another when they launch an investigation
under competition law that significantly affects the other party's interests.
Triggering circumstances include investigations of conduct in the other's
territory, or of conduct the other government may have required or endorsed;
mergers involving one or more firms incorporated in the other party or
one of its political subdivisions; cases in which the remedy will require
or prohibit conduct in the other party's territory; and, in some agreements,
seeking information located in the other party's territory.
7.9 The Recommendation
also includes a "positive comity" provision - i.e., an acknowledgment
that one party may ask the other to act against anticompetitive conduct
in the latter's territory that adversely affects the interests of both
parties.
7.10 In recent
years the OECD has expanded its "peer review" examinations of
member countries', and in some cases non-member countries', competition
law regimes. These reviews are similar to those carried out in the WTO
as part of its Trade Policy Review Mechanism, but with a deeper examination
of competition policy than has been possible so far in the WTO context.
Although these peer review exercises normally include discussion of individual
cases as illustrative of the examined jurisdictions approach, their focus
is on the overall competition regime. They are not designed to be critiques
of individual agency decisions. By most accounts, these examinations have
been a valuable impetus to convergence around best practices and policies.
7.11 In addition,
several WTO agreements provide that members will inform the committees
established under these agreements of their legislation, regulations and
administrative practices. They may be discussed in the committees and
other members may and do raise questions. The committees are not mandated
to make findings on the member country's legislation, etc. Under some
agreements Members are required to report on a yearly or a six-month basis
on measures taken. Here again other members may express views on the consistency
of these measures with the relevant agreement but the committees are not
mandated to make findings.
7.12 The regular
meetings of the various WTO committees are often used to raise bilaterally
certain issues in the margin of these meetings. It is sometimes surprising
to see that potential disputes result from misunderstandings that are
cleared up in such bilateral informal discussions.
7.13 In addition
to multilateral efforts at the OECD and WTO, the EU is in the process
of putting in place an elaborate network for cooperation among the Commission
and Member State competition authorities. This network, however, will
operate in the context of the extensive legal and political integration
of the EU, a level of integration which is not mirrored at the WTO or
global level or, in most instances, at regional levels elsewhere in the
world.
ICC's recommendations
7.14 ICC endorses constructive efforts among competition authorities
to cooperate with one another and supports ongoing voluntary efforts to
put into place a basic framework for cooperation . Cooperation can help
to achieve important objectives that provide a public benefit both to
consumers and to businesses, both as consumers and competitors.
7.15 First,
the sharing of experience among authorities at different levels of development,
and among authorities applying differing procedures and substantive rules,
benefits all participants. It helps identify the policies and procedures
best designed to promote coherent, consumer-welfare oriented competition
policies. In addition, it facilitates the identification and use of "best
practices" in the design and implementation of competition laws.
Further, it helps to ensure that related investigations and proceedings
ongoing in multiple jurisdictions are handled in a way that is efficient
for the authorities and for the businesses involved and that promotes
economically and legally sound and consistent outcomes.
7.16 ICC stresses the importance of ensuring that cooperation among
competition authorities is based on effective and adequate protection
for confidential information. Competition authorities that receive confidential
information from businesses normally are obliged under their national
laws to protect that information against further disclosure. These protections
serve a range of important and legitimate interests, including due process,
damage to competition that could result from the release of competitively
sensitive information, property rights in trade secrets and business confidential
information, privacy, and respect for the balances struck in individual
jurisdictions between these interests and the specific law enforcement
objectives and processes in place. In crafting mechanisms to enhance inter-jurisdictional
cooperation, it is essential to avoid creating a presumption in favor
of the sharing of confidential information that risks damaging these important
interests. Appropriate safeguards for confidential information in the
context of information sharing are discussed in Part 6 - Hard Core Cartels.
7.17 It is
important that individual competition authorities retain flexibility and
discretion in the nature and extent of their cooperation with competition
authorities of other jurisdictions. If for no other reason, in a world
of 100 or more separate competition authorities, the tasks of cooperation
and coordination can impose substantial cost and resource drains on individual
agencies which could overtax the resources of requested agencies and potentially
interfere with their own enforcement responsibilities. Agencies must have
discretion to decide when and how to cooperate with other authorities,
taking into account, among other things, the impact on the cooperating
authority's own investigation or proceeding, the degree of policy convergence
or divergence, and demands on the authority's resources. The sufficiency
of protections for any confidential information proposed to be exchanged
must also be take into account in any such cooperation.
7.18 ICC encourages
the expanded use of appropriate voluntary "peer review" mechanisms
that periodically subject jurisdictions' competition regimes to in-depth
scrutiny and comment. Peer review mechanisms such as those conducted under
the OECD's Regulatory Review program and the WTO's TPRM subject competition
regimes to the discipline of the "marketplace of ideas," while
leaving individual jurisdictions discretion to alter or maintain their
laws and policies. Peer review mechanisms should not be used as dispute
resolution for "second guessing" of individual enforcement decisions.
7.19 Effective
peer review is likely to be a more effective mechanism for convergence
toward sound policies and best practices than vaguely-worded multilaterally-agreed
rules that leave broad discretion in their interpretation and application.
Document n° 225/580 Rev.3
9 April 2003
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