International Approaches to Competition Policy in 2003: An Eventful Year

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International Approaches to Competition Policy in
2003An Eventful Year

• Simon J. Evenett
• Oxford University and Brookings
• simon.evenett_at_sbs.ox.ac.uk

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Objectives of this presentation

• To summarise the major inter-governmental
  decisions on competition law and policy in 2003.
• In particular, to describe and assess the
  proposals made for a multilateral framework on
  competition policy (MFC) at the WTO.
• To draw lessons for researchers.

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Accompanying document

• Greater detail can be found in the following
  document, that has been circulated
• J. Clarke and S. Evenett, A Multilateral
  Framework for Competition Policy? This can be
  downloaded from www.wti.org.

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Terminology

• There is a distinction between competition law
  and policy the latter is broader than the
  former.
• Anti-trust law and competition law are used
  interchangeably.

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Relevant international fora

• UNCTADInter-govermental Group of Experts,
  capacity building.
• OECDCompetition Committee, Joint Trade-Comp
  Committee, capacity building.
• ICNestablished several working groups on
  competition advocacy, capacity building, mergers.
• WTOwhere the major action has been.

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WTO deliberations since 1996

• Singapore Ministerial Declaration.
• Doha Development Declaration.
• Paragraph 23.
• Paragraph 24.
• Paragraph 25.
• What was to be decided in Cancun?
• Cancun decision and December 15th deadline.

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The changing nature of the debate at the WTO
1996-2003

• Market Access ?Minimum Standards.
• Pre-1999 Competition policy matters were seen
  primarily in terms of their effects on market
  access.
• 1999 Main proponent of MFC (the EC) shifts
  position to advocate minimum standards of
  competition law and practice.

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Assessing proposals for an MFC approach taken
here

• Identify key actors in debate.
• Describe what is proposedand what is not being
  proposed.
• Discuss economic case for each element of
  proposed MFC.
• Discuss coherence of entire MFC.
• Describe and assess criticisms of proposed MFC.

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Proposals for a MFC

• Who are the proponents?
• What do they want?

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Proponents of a MFC

• EC
• Canada
• Australia
• Japan
• Korea
• Switzerland
• Note These countries did not agree on each and
  every component of a MFC.

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Opponents and skeptics of a MFC

• Malaysia (consistent opponent).
• India (skeptic and then outright opponent).
• Like Minded Group.
• Hong Kong, China (consistent opponent).
• United States (became more vocal in opposition
  over time).
• US DOJ, US FTC, and ABA.

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What did the proponents want?

• A ban on hard core cartels that is enforced.
• A commitment to adhere to core principles in
  national competition law and practice.
• Provisions to foster voluntary cooperation.
• Progressive reinforcement of competition law and
  institutions in developing countries.

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What did the proponents want?

• A ban on hard core cartels that is enforced.
• A commitment to adhere to core principles in
  national competition law and practice.
• Not all the proponents wanted was hard law.

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For better or for worse, what was not being
proposed in the MFC?

• The creation of a supra-national competition
  enforcement agency.
• The harmonisation of national competition law to
  a single model.
• A ban on state-run cartels, like OPEC.
• A requirement to create a new enforcement agency.

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For better or for worse, what was not being
proposed in the MFC?

• A requirement to enact any competition law other
  than a cartel law.
• A requirement to abandon pro-development
  objectives of competition law.
• A requirement to abandon existing exemptions etc
  from national law.
• Measures to prevent the creation of national
  champions.

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For better or for worse, what was not being
proposed in the MFC?

• A requirement to enact any competition law other
  than a cartel law.
• A requirement to abandon pro-development
  objectives of competition law.
• A requirement to abandon existing exemptions,
  exclusions, etc from national law.

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What was the economic case for the MFC?

• Case for minimum standards for national cartel
  law was based on two cross-border spillovers of
  enforcement actions taken to date
• Active enforcement announcements and breaking up
  of international cartels.
• No or under-enforcement creates safe havens for
  cartels.
• Evidence.

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What was the economic case for the MFC
(continued)?

• Case for voluntary cooperation modalities best
  practices, expertise with enforcement, and (down
  the road) maybe information exchange.
• All increase likelihood of effective enforcement
  and deterrent value of national laws.

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What was the economic case for the MFC
(continued)?

• Case for core principles balance new rules on
  firm behaviour with assurances of
  non-discriminatory treatment by authorities.
• Reduces downside for investment. Evidence?
• Case for strengthening institutions in developing
  countries to meet new obligations on them and to
  reduce implementation costs.

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Coherence of proposals for a multilateral
framework
Hard core cartels
Core principles Transparency Procedural
fairness Non-discrimination
Voluntary cooperation
Technical assistance and capacity building
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Coherence of proposals for a multilateral
framework
Hard core cartels
Core principles Transparency Procedural
fairness Non-discrimination
Voluntary cooperation
Technical assistance and capacity building
22
Coherence of proposals for a multilateral
framework
Hard core cartels
Core principles Transparency Procedural
fairness Non-discrimination
Voluntary cooperation
Technical assistance and capacity building
23
Coherence of proposals for a multilateral
framework
Hard core cartels
Core principles Transparency Procedural
fairness Non-discrimination
Voluntary cooperation
Technical assistance and capacity building
24
Coherence of proposals for a multilateral
framework
Hard core cartels
Core principles Transparency Procedural
fairness Non-discrimination
Voluntary cooperation
Technical assistance and capacity building
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What case was made against the MFC?

• Concerns about scope of proposed measures
• Not rigorous enough measures against
  international cartels (Thailand).
• Should include other anti-competitive practices
  (Kuwait, UNCTAD).
• Should be focused on hard core cartels only
  (India?).

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What case was made against the MFC?

• Concerns about effects of proposed measures.
• Constrain policy space and industrial policy
  (Many developing countries.)
• Implementation costs (DC plus World Bank).
• Concerns about forum (the WTO).
• Issue linkage and who sits at the table (USA).
• Dispute settlement (USA and DCs).
• Scope of negotiations (DCs).

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Concerns about scope

• Key issue what is the motive for international
  collective action?
• Cross-border spillovers
• Identification.
• Solution.
• Binding disciplines?
• Political economyis there an active supporter in
  each major jurisdiction?

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Concerns about effects

• On industrial policy
• To what extent has constraining competition and
  discrimination been central to industrial policy
  in DCs?
• Optimality of interventions.
• On implementation costs
• Identification and estimates of costs and
  benefits.

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Concerns about forum (WTO)

• Issue linkage
• Complementarities between trade and competition
  policy.
• Purity of competition law enforcement.
• Dispute settlement expertise and commitment
  problem.
• Negotiations commitment problem.
• Generic nature of most of these concerns.

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Fallout since Cancun retrenchment across many
fora

• WTO future of Working Group
• Soft-law approaches?
• Plurilateral negotiations?
• OECD future of Joint Committee.
• UNCTAD UNCTAD XI and future of capacity
  building.
• FTAA prospects for competition law chapter.

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Summary

• There was an economic case for the limited MFC
  that was proposed.
• The coherent criticisms focused more on the WTO
  as a forum.
• Failure to launch negotiations at Cancun is
  having considerable effects on international
  discussions on competition law and policy.

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Implications for researchers

• Was the focus on cartels appropriate?
• What about abuses of dominant position,
  consolidation, and vertical restraints?
• Identification of cross-border effects not taken
  into account by current policy measures.
• Demand and supply of policy-relevant research.
• Diffusion of findings across sub-fields.

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Implications for researchers

• There was an economic case for the limited MFC
  that was proposed.
• The coherent criticisms focused more on the WTO
  as a forum.
• Failure to launch negotiations at Cancun is
  having considerable effects on international
  discussions on competition law and policy.