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CERCA ARTICOLI:

Breaking States' Monopolies in Addressing International Cartels - In Favour of a WTO Agreement on Competition

Di Eugenia Costanza Laurenza

21 ottobre 2002

 

Contents

 

1. INTRODUCTION

2. LINKAGES BETWEEN TRADE AND COMPETITION

2.1 Trade policy, competition policy and market access

2.1.1. General Considerations

2.1.2. The Trade Policy Perspective

2.2. Classifying the cartels that harm international trade law

2.2.1. Practices Affecting Market Access for Imports

2.2.2. Practises Affecting Domestic Markets of Different Countries

in the Same Way

2.2.3. Practices Having an Impact on a Market Different from that

in which they were Conceived

2.3. Conclusions

 

3. TO WHAT EXTENT CAN WTO RULES ADDRESS RESTRICTIVE BUSINESS PRACTICES?

3.1. The Havana Charter: good attempt but never in force

3.2 WTO substantive provisions on competition policy

3.3. Non violation Complaints: Lessons from the Kodak-Fuji Dispute

3.4. Conclusions

 

4. GLOBAL SOLUTIONS FOR WORLD PROBLEMS

4.1. The different approaches to competition policy

4.1.1. Unilateral Application, Bilateral Agreements and Co-operation

4.1.2. The WTO as the Appropriate Forum

4.2. Settling and Agreement in the WTO Framework: The Reasonable Alternatives

4.2.1. The Doha Mandate

4.2.2. The Possible Architecture of The Agreement under the WTO:

 Harmonisation versus Framework Agreement

4.3. The Relevance of Non-discrimination and Transparency Principles

4.3.1. The Application of the Non-discrimination Principle

4.3.2. The Transparency and ‘Due Process’ Commitments

4.4. The Role for The Dispute Settlement Mechanism

 

5. General Conclusions

6. BIBLIOGRAPHY

 

1. INTRODUCTION

 

Since their very existence the General Agreement on Tariffs and Trade and its successor, the World Trade Organisation, have progressively achieved their prime objective of removing or reducing governments’ barriers to trade. Markets have become global through comprehensive trade liberalisation, and the exchange of goods and services have been widely facilitated. As a consequence, the focus of policy makers, trade institutions and legal doctrine have shifted to analyse those practices that although not arising directly from governments’ behaviours threat to undermine the benefits occurring in international trade. The so called ‘restrictive business practices’ adopted by global enterprises under various forms, are traditionally regulated by the national competition policies, but they become a concern for international trade to the extent that they reach an international dimension and reduce the benefits of open trade by fixing prices, allocating markets , and impeding market access to foreign suppliers.

In 1996, as a result of the Singapore Ministerial Declaration, and due to the pressures of some delegations, the Working Group on the Interaction between Trade and Competition Policy was established “to study issues raised by Members, relating to the interaction between trade and competition policy, including anti-competitive practices, in order to identify areas that merit further examination in the WTO Framework.”[1] Two years later its mandate was extended to the study of the relevance of non-discrimination and transparency principles, and to analyse possible approaches for the promotion of co-operation among WTO Members in competition policies. The study of the Working Group focused on the anti-competitive practices capable of affecting international trade, and the range varies from international price-fixing and market sharing cartels, import and export cartels, vertical restrictions. Practices that also required particular attention are abuse of dominant position and cross-border mergers.

The debates taking place within the Working Group, as in other fora like the OECD and the UNCTAD, have promoted a general consensus on the importance of a consistent and vigorous application of competition law for international trade. Competition laws have, in fact, proved to be fundamental in order to avoid the impairment of benefits arising from trade liberalisation. What is not agreed upon is if the WTO should play a more decisive role in this respect, and include under its umbrella a multilateral agreement on competition policy, or if it should leave the matter to other fora or to the Members’ own competition policies and continue with its educational pattern.

The existing agreements under the World Trade Organisation have, so far, not proved to be able to address anti-competitive practices arising from private conducts. Given the lack of a global competition policy, countries have recourse to various solutions in order to address global anti-competitive practices adopted by firms operating in the large transactional setting, such as unilateral application of domestic competition laws, the negotiation of bilateral agreements and co-operation activities promoted by the OECD and the UNCTAD through recommendations and non-binding instruments. Yet, these instruments have not, so far, been able to address effectively the problem of anti-competitive practices.

Unilateral extraterritorial application of competition laws often causes jurisdictional conflicts or frictions between sovereign states. Bilateral arrangements tend to be established only among countries with well developed competition laws. Non-binding recommendations lack the necessary persuasive function by being devoid of mandatory character. The European Union has been the strongest advocate of the insertion of competition rules in the WTO and has been gathering consensus among a great number of countries. Moreover, the recent Doha Declaration seems to mark a significant milestone towards the possibility of negotiations on a multilateral agreement on competition policy in the WTO.

This paper speaks in favour of a WTO approach. This is in fact the natural forum for addressing, through substantive rules, the intersection between anti-competitive practices and international trade issues. The WTO promotes trade liberalisation and shares with competition policies the same objective of promoting global efficiency and economic welfare. Thus, an international competition law supported by the WTO is more likely to reach a common strategy with existing trade laws. Also the binding character of the obligations therein contracted, and the wide membership that the WTO enjoys are further reasons for promoting an extension of its scope towards competition rules.

Leaving aside the treatment of abuse of dominance and mergers, this paper will initially focus on the identification and study of the international cartels affecting trade; chapter 3 will then respond to the question whether existing WTO instruments could be able to address anti-competitive practices, and lastly chapter 4 discusses the possible structure of an agreement, the impact of the fundamental principles of non-discrimination and transparency on competition policies, and the scope of the Dispute Settlement.

 

 

2. LINKAGES BETWEEN TRADE AND COMPETITION

 

2.1 Trade policy, competition policy and market access

 

2.1.1. General Considerations

 

The common underlying rationale of trade and competition policies is the elimination of market distortions and barriers to market entry. Their shared goal is to promote economic efficiency and welfare through non-discriminatory, transparent, rules-based regimes.[2] Traditionally trade policies have concerned public restrictions to trade and have been primarily focused on seeking market access and promoting trade liberalisation through the progressive reduction and elimination of governmental measures capable of distorting trade flows. Competition policies aim to assure competitive conditions inside the domestic markets and to prevent private firms’ behaviour which may undermine the benefits of competition by exploiting their market power. As opposed to trade policies, whose mechanisms concern restrictions to trade placed by governments “at the boarder”, competition policies are focused on private restrictions that take place “behind the boarder”, because competition laws provide jurisdictions to proceed only against anti-competitive effects within the national market;[3] consequently, if trade law is more internationally oriented, competition law has national roots.[4] It is widely recognised that competition policies and trade liberalisation policies are complementary and mutually reinforcing. Not only they both aim at opening the market to competition, either by allowing external contestability or by enhancing the internal functioning of the market; perhaps their complementarity has showed more evident with the progressive reduction of tariff and barriers, result of successive rounds of trade negotiations.[5] Since its very existence the General Agreement on Tariffs and Trade has provided a framework within which it has proved possible for governments to lower trade barriers through bound reciprocal concessions applied on a most-favourite nation basis. The following multilateral trade negotiations rounds have succeeded in the progressive reduction of tariffs barriers to trade in goods and services. Because of this policy, trade liberalisation as embodied through the GATT and successively the WTO Agreements, creates new export opportunities and enhances international commercial competition which involves business investment, technological innovation and long-term economic growth. But even with this remarkable decline of tariffs barriers, trade distortions had not terminated. The abuse of anti-dumping actions, countervailing duty measures, voluntary export prohibitions and private restrictive practices are now affecting trade in a less transparent and more harmful way than the tariffs themselves.[6] Under a competition policy perspective the existence of high tariffs and barriers to trade is a relevant factor. In a domestic market a tariff acts like a shield against imports by raising their prices and rendering them less competitive. In a such protected market entry for foreign products is particularly difficult, and firms can easily exploit their market power, either unilaterally or collectively by raising their prices above the competitive level, behind the tariff shield from foreign competition.[7] Once the tariffs have been reduced or eliminated, the access to domestic markets is facilitated and firms are more exposed to competition from foreign, cheaper imports. Thus, firms are strongly tempted to replace former governmental barriers with private commercial measures which, in a global market context, creates the conditions for anti-competitive activities falling also outside the ambit of the single States. “The more open markets are to foreign products, the greater potential vulnerability to anti-competitive practices of foreign monopolists or cartels.”[8] Such practices, not only reduce consumers welfare and misallocate resources, but in a purely trade perspective may constitute an obstacle to the achievement of economic growth, development and trade expansion by restricting market access and distorting trade flows. This is why a vigorous application of competition policy is so relevant for the promotion of world trade.

 

 

2.1.2. The Trade Policy Perspective

 

In a trade policy perspective the interest to protect is not competition per se, but the protection of foreign competitors from structural market barriers or restrictive behaviour by domestic operators. This is properly where competition policy and trade policy intersect: an anti-competitive conduct that excludes a foreign company from a national market, cartels that allocate markets among the participant firms with a world wide spread market power capable of compartmentalising markets or fixing prices, export cartels which escape from national competition laws have basically all the effect of denying or restricting market access, distorting world trade and slowing economic growth Such effects have the potential to threaten the whole trading system, which so far has been built upon the practice of negotiations and exchange of market access opportunities between countries under reciprocal basis, the benefits of which ought to be enjoyed also by all the WTO Members through the most favourite nation clause. Countries accept to open their market to foreign competition, which may frustrate the profits of their own producers, in exchange for market access opportunities from other countries.[9] Unregulated private practises, which would escape an eventual challenge under the Dispute Settlement provisions when the government are not proved to be directly responsible for, by restricting market access or distorting trade flows are capable of undermining the reciprocity of the trade agreements and, therefore, of the all trading system. Countries would not have the incentive to negotiate knowing that the gains they might achieve could be undermined by the presence of cartels.[10]

It is true, as those who strongly oppose to any interference of the WTO in competition issues argue, that if national competition laws were correctly enforced, and adopted in those countries which still lack, some of these issues would find a solution. Nevertheless such solution would reveal to be partial and unsatisfactory in the majority of the cases. A domestic approach would not be able to address the case of transnational cartels with better results than the ones already achieved by recurring to extraterritoriality and “effects doctrine”. Those cartels will still escape for the lack of such jurisdictional strength of domestic competition laws. The same can be said for export cartels, which enjoy immunity from almost all of the domestic competition legislations. Maybe, a strict domestic policy against vertical agreements would, for instance, contain the harmful effect of such agreements on market access. Though this could not always be possible when the problem is not the enforcement but the substantive aspects of the competition laws.

As Mr. Trebilcock has observed “ […] while liberal international trade policies will remove public impediments to foreign competition, such policies will leave unaddressed private restriction on competition, including foreign competition, and indeed may increase reliance on such restrictions by uncompetitive domestic producers, as a substitute for directly imposed State restrictions”[11] One of the major obstacles that the advocates of an agreement on competition are facing is the objection that different countries might have different appraisals on what constitutes an anti-competitive agreement. Many countries may in fact have politicised differences of views about the economic and legal rationales of competition policy. Indeed this argument might find a very strong ground for those countries that have a longer history of competition laws. Though sometimes those “divergences” might also hide protectionist purposes. This is the case of nations that might adopt, or have adopted, more permissive competition laws , for example again on vertical restrictions or even on the most harmful horizontal agreements, when such weak laws both in substance and in application, are a result of political pressures by the domestic industries.[12] In this cases, competition policy not only fails to achieve its objectives by reducing domestic welfare, but by functioning as an useful tool for protectionism undermines the benefits arising from trade liberalisation. Consequently, also in the cases of cartels placed in one single country, where the domestic laws are deemed to be successively applicable, their correct enforcement may not always provide for satisfactory answers, because the lack of a minimal harmonisation in the standards of the appraisals may induce different evaluations depending on every country’s own competition policy, and could end up frustrating the benefits that the trading partners expected from penetrating the markets; nor such states can be held responsible for choosing to adopt weak competition polices.

All these reasons explain the international’s trade law interest in competition law. When governments are not involved in private anti-competitive practices, or there is lack of sufficient evidence, they cannot be challenged. States can neither be challenged for adopting weak competition laws or not possessing them at all. Advanced domestic competition laws and bilateral agreements among developed countries may successively reduce the impact on trade of cartels, but only in their limited context, and sometimes not completely. A multilateral agreement under the auspices of the WTO seems to be the solution that would be able to comprise all the community of nations and provide with a binding dispute settlement system; but to be effective it should entail a minimum degree of harmonisation of the most harmful practices, and regulate both market access restrictions caused by weak domestic competition laws, in substance and enforcement, and international cartels which from such laws may easily escape.

 

 

2.2. Classifying the cartels that harm international trade law

 

From the above considerations it can be stressed a first distinction among two sets of restrictive business practises: private anti-competitive behaviours and practices which arise as a mixture of private and public action, for which a State can be held responsible.[13] The latter ones for the very fact that presume a participation from the government can be handled under the present rules of the WTO,[14] given that in such cases the governments could be brought before a panel for not complying with their obligations. For this reason, they cannot deemed to constitute a “trade and competition” problem, and they fall outside the present inquiry.

The former ones, that is, anti-competitive behaviours arising from private action, can be mainly divided in three groups. According to the 1998 Report[15] of the WTO Working Group on the Interaction Between Trade and Competition Policy (hereafter, Working Group), a first group is constituted by practices affecting market access for imports; a second group includes practices affecting international markets, where different countries are affected in largely the same way; finally a third group comprises practices having a differential impact on the national markets of countries.[16]

 

2.2.1. Practices Affecting Market Access for Imports

 

The most common cartels falling under the first category are import cartels that allocate national markets among participating firms and vertical agreements with market foreclosures effects. As noted above, the main effects of these cartels are to reduce or eliminate the potential gains from trade liberalisation. By foreclosing the market of the country where they are placed, they create a de facto barrier which impedes the access in that country to foreign products, frustrating the exporting countries’ producers and reducing the benefits that the importing country was expecting from a far-reaching trade liberalisation policy. Substantially they have the effect of replacing a tariff, maintaining higher prices and reducing domestic welfare.

Import cartels consists in agreements among importers and buyers within a country, with the objective of co-ordinating the purchase and importation into the country of a good or service. Similar practices can include boycotts, collective refusals to deal with foreign competitors, or their exclusion from trade associations. Their effect is to restrict competition in the domestic market between domestic and foreign suppliers by restraining imports of goods and services.[17]

Vertical market restriction are usually defined as practices that confine, constrain or inhibit the action of two or more parties at different stages of their production or distribution chain.[18] Their adverse effect on market access derives from the very fact that they prevent foreign firms from having access to the distribution channels that are controlled by domestic suppliers.[19] Most of vertical restrictions can include: exclusive dealing requirements, which prevent distributors from marketing competitors’ products; tied selling, which makes the purchase of a product of a given brand conditional upon purchasing another product of the same brand; loyalty or sale rebates, which provide a financial incentive not to distribute the products of competitors; exclusive territories, which prevent distributors from selling outside a certain geographical area. They can also include price maintenance clauses, and in this case they are illegal in almost every country that has adopted competition laws.

Vertical agreements represent one of the major concerns among OECD countries when debating on adopting a common competition policy. In fact, given that in some cases their anti-competitive effects are even more complex than in the case of horizontal agreements, generally there is a widespread belief among economists and government officials that most of the times such agreements are actually beneficial for competition. Usually, in evaluating their legality most domestic antitrust agencies tend to balance their pro and anti-competitive effects on a case-by-case basis, exempting them if they do not fall under the per se illegal category. In an harmonisation context, this presents many inconveniences, as countries apply different standards in their evaluation process. In the United States, with the exception of vertical price arrangements which are condemned as per se illegal, vertical agreements are generally lawful, unless they violate the rule of reason. The European Union’s competition law, which has not adopted a rule of reason approach (even though recently is seems shifting towards it ) envisages broad block exemptions for vertical agreements, but always provided that the involved firms do not enjoy a market share above a determined threshold (30%), and that the agreements do not contain per se illegal clauses or their cumulative effect does not restrict market access.[20] Conversely, the too tolerant Japanese policy regarding Japan’s keiretsu has been for long time a reason of complaints from the U.S. companies, whose export performances in Japan were frustrated by instances of exclusionary and anti-competitive treatment by local Japanese firms,[21] as it was the case in the Kodak-Fuji dispute. As stated above, vertical agreements represent a very sensitive issue in the discussions for the adoption of a global agreement on competition rules, not only because of the lack of global consensus on their treatment, but also because national competition authorities involved in the debate are generally very reluctant to share the regulation of agreements with trade officials, especially when their legality is to be evaluated, as in the case of vertical agreements. Under a competition policy perspective, usually the degree to which these arrangements exclude (inter-brand) competition is outweighed by the gains that they may offer in terms of efficiency at the intra-brand competition.[22] Further more, such evaluation is made commonly on a case-by-case basis, according to a rule of reason approach. Under a trade policy point of view instead, the impact of such agreements on imports is so harmful that cannot be compensated by efficiency gains enjoyed at a national level,[23] as the rule of reason would probably pay little attention to the adverse effect on market access. As Depute Director General Hoda has expressed, “[…] if it was decided to employ a rule of reason in any multilateral competition rules, considerable work would be required to adapt this approach to that particular context.”[24] Though, a global rule of reason might not be necessary if the eventual agreement limits its substantive provisions to core, broad principles already agreed upon by most jurisdictions, and provides for controversial issues, as the treatment of vertical restrictions, co-operative provisions. In this respect, it seems that the most recent proposals are moving in the right direction.

 

 

2.2.2. Practises Affecting Domestic Markets of Different Countries in the Same Way

 

Such category comprises international cartels that fix prices and output, divide markets or rig bids across multiple country markets. In countries with advanced competition laws they are condemned as per se illegal, considered as ‘hard core’ cartels, and such qualification has been restated by the OECD Members in the Recommendation Concerning Effective Action against Hard Core Cartels.[25]

Recent examples of international cartels include the Citric Acid, the Lysine Cartels, the Graphite Electrodes Cartel and the Vitamins Cartel. The Citric Acid Cartel involved five firms, a U.S: firm, a German based firm, two Swiss firms and a French-based Dutch firm. Such cartel represented an international price-fixing arrangement prosecuted by the U.S. Antitrust division. According to the OECD Competition Law and Policy Committee’s Report[26], the Lysine Cartel doubled the world price of lysine for three years. Five firms, all the world’s significant lysine producers, and six individuals conspired from June 1992 to June 1995 to fix prices and allocate sales of lysine, a feed additive.[27] In the Graphite Electrodes six firms along with a German national and two U.S. individuals have pled guilty to participating in a five year cartel. In such cartel, the participants agreed to increase and maintain prices, eliminate discounts, allocate among themselves the volume of graphite electrodes to be sold and divide the world market among themselves;[28] the outcome was huge price increases in various markets. Lastly, the Global Vitamins Cartel is deemed to be one of the largest cartels ever; in total seven firms have pled guilty for having fixed prices and allocate market shares for almost a decade.

The impact of the damage caused on trade by international cartels is remarkable. As long as they artificially raise prices, reduce output in markets and often compartmentalise markets, therefore impeding cross-trading by one country’s suppliers into markets allocated to other countries’ suppliers, they prevent the realisation of trade gains.[29] These cartels provoke a distortion of world trade, which creates market power, waste and inefficiency in countries whose markets would otherwise be competitive, and also a slower economic growth.[30] But even in the lack of evidence of discriminatory deviation of trade flows caused by such cartels, the view expressed in the Working Group and in other fora such as the OECD[31] and UNCTAD,[32] is that such cartels need to be banned. So far they have been handled with the application and enforcement of one or, simultaneously, more countries’ domestic competition laws. This approach has given some results, though sometimes jurisdictions face insurmountable problems, such as difficulties in obtaining jurisdiction over foreign actors, and difficulties in achieving information, which many times is confidential and not subject to be shared.[33] Even if these problems have been addressed by new forms of mutual co-operation agreements among governments, which embody principles as mutual assistance and positive comity, to the extent that such agreements are usually bilateral, they do not provide for appreciable results in a larger scale. In fact, most of the times the existing patchwork of national, bilateral and regional agreements fails to control anti-competitive practices affecting different countries.[34]

 

2.2.3. Practices Having an Impact on a Market Different from that in which they were Conceived

 

Export cartels are the main practice encompassed under this category. Differently from import cartels, whose anti-competitive impacts are felt in the market where the conduct takes place, export cartels in the majority of cases restrict competition only in foreign markets,[35] thus they are not deemed to harm consumers’ welfare in the exporting country, conversely the exporting country benefits from them. For this reason they often enjoy immunity or protection from the application of competition laws of all major trading countries. In the EU export cartels fall outside the scope of antitrust rules; Canada an the U.S. also exempt them, under condition that such restrictions to trade are not felt within their territory. These laws basically authorise firms to co-operate in adopting anti-competitive behaviour, maximising domestic welfare that arises in the home country from such practices, at the expenses of foreign nations.[36] Such deficiencies in domestic antitrust regimes are often the result of a strategic policies, aimed to provide domestic firms with a competitive advantage, both in the domestic and foreign market; in fact, the economic effect of export cartels is to raise exports’ prices, therefore granting a terms-of-trade gain for the exporting country and a corresponding loss for the importing country.[37] As noted by in the ABA Report on International Antitrust, the victim countries of export cartels face enormous procedural and jurisdictional obstacles in enforcing their competition laws against such cartels, whereas mutual elimination of export cartel immunity among participants in the trading system should confer welfare benefits on the countries in the trading system.[38]

  

 

2.3. Conclusions

 

All the views expressed by the WTO Members seem to converge on the recognition of the existence of several links between trade and competition. The identification of the categories of restrictive practices raises, though, some interesting considerations. The range of practices that affect trade at the study of the Working Group includes cross-boarder cartels and domestic cartels denying market access to foreign products, both falling under the notion of “international cartels” affecting (international) trade.

In this context, the task of isolating specific trade-related aspects of competition policy, using the “cross-border criterion” to limit the scope of a future agreement may not be an easy one, nor the most efficient. If the interest to protect is a principle of global competition, in order to grant “equal competitive opportunities” in all the markets and for all the sources of supply, an agreement may also have to include the adoption of common views on the substance and application of domestic competition laws, thus implying an element of deregulation when such laws do not comply with the agreed standards. In practice, a minimum degree of harmonisation might be required, and not many countries might agree with it. In addition, those who strongly oppose to a multilateral agreement fear that a global competition instrument within the WTO framework will be strongly influenced by market access concerns,[39] and neglect specific competition policies’ objectives, such as consumers’ welfare, or will fail to draw a balance between pro and anti competitive effects of certain practices, as in the case of vertical agreements.

These issues will be considered more deeply below, but it is enough to say that the recent proposals of a multilateral agreement reflect a very careful balance of trade and competition considerations, emphasising the role of international co-operation and limiting the substantive provisions to the prohibition of hard core cartels. Moreover, the debate that took place in the Working Group highlighted two different possible approaches: “the completion of international trade” and the “global antitrust approach”, both of which are based on the commonality of objectives between trade and competition policy (“theory of complementarity”).[40] Between the two alternatives, though, enhancing a common position, on multilateral basis, in competition policies seems to be a more efficient solution than limiting the scope to the trade-related aspects of competition. In fact, if both policies aim to the promotion of global economic efficiency, and given that an international agreement based on basic principles would both protect and guarantee genuine competition between private parties a limitation of its’ scope to trade-related restrictions would not be reasonable and probably more market-access-oriented A world-wide consistent application of competition laws, on the basis of multilaterally agreed minimum standards, would grant greater security of market access commitments, and constitutes a necessary element in the process of trade liberalisation,[41] while at the same time, protect the interests of consumers and foster global efficiency.

 
 

3. TO WHAT EXTENT CAN WTO RULES ADDRESS RESTRICTIVE BUSINESS PRACTICES?

 

3.1. The Havana Charter: good attempt but never in force

 

The Havana Charter of 1948, which was supposed to give birth to the International Trade Organisation, contained several provisions on the regulation of restrictive business practices. Chapter V was in fact entirely devoted to set common obligations upon Member States and procedural rules in competition policy. Article 46, which was titled “General Policy Towards Restrictive business Practices” required Members to take “appropriate measures” and to co-operate to prevent business practices, on the part of private or public commercial enterprises, from affecting international trade which would restrict competition, limit access to markets or foster monopolistic control, whenever such practices had an harmful effect on the expansion of production or trade and would interfere with the achievement of the objectives set forth in the Charter.[42] Further, paragraph 3 of the same article provided a list of practices, engaged by private or public enterprises, or any combination of the two, which allowed for an ITO investigation in accordance with specific procedural rules. Such practises included price fixing and market sharing cartels (geographically or by field of business activity), boycotts and discriminatory conducts against enterprises, purchase and production quotas.[43] If the existence of the practice, as well as the restrictive effects on trade were proved, the ITO would have been entitled to request the Members concerned to take “every possible remedial action”;[44] though, a consultation procedure was also envisaged, through which Members were encouraged to find a mutually satisfactory solution.[45] Finally, as a general obligation, Members had to take all possible measures to insure, within their jurisdiction, that private and public enterprises would not engage in restrictive business practices.[46]

         The Havana Charter contained detailed provisions on competition policy, including an investigating procedure and a relatively weak enforcement mechanism. Evidently the “Drafting States” were aware that the necessity of providing core binding rules on competition policy was complementary to the objectives of the trade organisation. However, such Charter was never adopted, and some scholars argue that the provisions on competition had a major weight on U.S.’ rejection of the draft. The General Agreement on Tariffs and Trade 1947, that was to serve as an interim agreement until the entry into force of the Havana Charter, was instead pressed into service and governed the international trade relations of the Contracting Parties until it was successively embodied in the World Trade Organisation,[47] established by the Marrakech Agreement.[48] Although Chapter V was never force due to the failure of the Havana Charter,[49] concerns on the detrimental effects of restrictive business practices on trade were never put aside.[50] Successively, in the framework of the Uruguay Round negotiations, provisions dealing with restrictive business practices were introduced in certain agreements part of the WTO body of law, though in a fragmentary and unsystematic manner.

 

 

3.2 WTO substantive provisions on competition policy

 

The recognised objective of trade liberalisation implicit in the GATT preamble was to be carried through two ways: the substantial reduction of tariff and non tariff barriers to trade and the elimination of discrimination in international commerce. These principles, embodied in the most-favoured-nation (Art. I), non-discrimination (Art. III) and prohibition of quantitative restrictions (Art. XI) clauses, called for an obligation directed to the original Contracting Parties, to create conditions of equal opportunities of competition for the products originating in different countries. Though, differently from the Havana Charter, in the GATT 1947 no reference was made to adverse changes in competitive conditions caused by structural market barriers as a result of private action.[51]

         Some provisions of the Marrakech Agreements seem, instead more specifically devoted to competition matters. Article XVII of the GATT 1994 requires state trading enterprises established or maintained by governments to act consistently with the general principles of non-discrimination in all their purchases and sales; this provision also applies when governments grant exclusive rights or special privileges to private enterprises.

According to Art. IX of the General Agreement on Trade in Services, explicitly titled as “Business Practices”, Members should recognise that certain business practices of service suppliers may restrict competition, and thereby restrict trade in services; therefore they are under obligation to enter into consultations with the aim of eliminating such restrictive business practices. In addition, Art. VIII imposes an MFN clause on monopoly suppliers of services, and in paragraph 2 establishes an obligation for monopoly suppliers, to refrain from abusing their monopoly position in their territories when competing outside the scope of their monopoly rights.

The Safeguard Agreement also contains an interesting provision on competition. Article 11.b establishes on Members a prohibition on the adoption or maintenance of voluntary export restrictions, on the import and export side, whether unilateral or as a result of agreements between more Members; further, it also states that Members should not encourage or support the adoption or maintenance by public and private enterprises of equivalent measures. This entails that voluntary export restrictions engaged by private parties should be deemed inconsistent with the Agreement, but nevertheless to challenge such measure one should always prove the involvement of the government, either by encouragement or by support.

Finally, it is worth to mention few competition-related provisions included in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and in the Agreement on Trade-Related Investment Measures (TRIMS). Article 8 of the TRIPS Agreement recognises the need for “appropriate measures” to be taken in order to prevent the abuse of intellectual property rights by right holders, or the resort to practices which unreasonably restrict trade or have an adverse impact on the international transfer of technology. Analogously Art. 40, which alone constitutes the whole section 8 dedicated to the “Control of Anti-Competitive Practices in Contractual Licenses”, not only recognises the adverse effect on trade of some licensing practises which restraint competition, but also permits Members to take appropriate measures to control and prevent such practices, and reaffirms the right to consultation of each Member whenever it considers that restrictive practices in other Member Countries may adversely affect trade.[52]

On the other hand, the preamble of the TRIMS Agreement expressly includes in its objectives the promotion of the progressive liberalisation of world trade and the facilitation of investments across international frontiers while ensuring free competition, and Art. 9 requires the Council for Trade in Goods, when reviewing the operation of the Agreement, to consider its completion with provisions on competition policy.[53]

The inclusion of the above mentioned provisions in the Marrakech Agreements witnesses a whole new awareness among the Members, while drafting the new components of the future WTO, of the potential adverse effect on trade of anti-competitive practices. Though this general recognition embodied in specific, though fragmentary, rules of competition throughout these Agreements does not reach yet the core of the problem. Such rules, if they grant sufficient grounds for challenging a restrictive business practice under the WTO Dispute Settlement Mechanism, they do not provide for any coverage outside their specific context.

Another question is then whether the traditional existing GATT instruments to prevent discrimination might be interpreted as including a direct responsibility of Member States for not correctly enforcing their competition laws when restrictive business practices prevent market access. As noted above, the three core principles of the GATT are aimed at the final objective of creating equality of opportunities for goods, irrespectively of their origin. As noted in the Oilseed Panel Report, GATT Art. III and Art. XI “are to protect expectations of the Contracting Parties as to the competitive relationship between their products and those of other Contracting Parties…”[54]. Article III establishes an obligation to accord national treatment to foreign products with respect to laws covering both “charge elements”, that is taxes or charges, and “non charge” elements, such as laws, regulations and requirements affecting sale, purchase, transportation, distribution or use.[55] Under such obligation Member States have to make sure that their internal measures will be applied in a non discriminatory manner, with respect to both domestic and foreign products. Theoretically antitrust rules can certainly be included in the scope of Art. III (para. 4), and this entails that whenever they are applied in a way so as to favour domestic imports over foreign like products they could be found in breach of the national treatment provision. Though it is difficult to argue that such rules could have an impact on the sale, purchase, transportation or use of a product (or service), even according to the broad definition of the scope of Art. III:4 given by the panel in the Italian Discrimination case.[56] And even if it was the case, what would have to be proved would then be the discriminatory feature of antitrust rules but no inquiry will be based on their efficiency, and considering that the harmful effect on trade is not always caused by direct discriminatory attitude of competition laws against foreign products, but by market foreclosures, then the consequence is that Art. III does not provide enough coverage for market foreclosures when caused by private parties.[57]

Analogously, GATT Art. XI establishes a prohibition on the adoption or maintenance of quantitative restrictions, in the form of quotas or other measures. Such prohibition is a very broad one, including both import and export measures, other than duties, taxes or charges. As the Panel noted in the ECC-Oilseed Report, an import restriction constitutes a violation of Art. XI by affecting the conditions of competition; thus export or import government-supported cartels which fix prices or quantities of the products would be GATT inconsistent and therefore could be legitimately challenged before a panel. What if the government is not involved in such practice? According to the Panel in Japan-Semiconductors[58] government responsibility for measures such as quotas, when they are not explicitly included in laws or regulations, can always be found when two criteria are met: there must be reasonable grounds to believe that sufficient incentives exist for non-mandatory measures to take effect, and that the effectiveness of the private conduct should be “essentially dependent” on the non-mandatory actions taken by the government. This is a broad definition of government intervention, but it does not reach pure private import and export cartels that might be only “tolerated” by the government, given that mere acquiescence does not constitute a “measure.”

The limits of the current WTO provisions in preventing market foreclosures when caused by private parties are evident. Such provisions are exclusively addressed to the Member States, and when their direct responsibility cannot be proved, those rules do not provide sufficient grounds for claims, except when Member Sates committed themselves, under the above mentioned specific provisions of certain Marrakech Agreements, to grant that private enterprises will not reiterate restrictive practices. Moreover, as current WTO rules lack in providing a direct, positive obligation upon Members to avoid certain restrictive practises taking place in their territory, Members cannot be held responsible for applying loosely their antitrust rules, nor for not adopting antitrust rules at all or omitting to apply them when they have one. The only obligation that Members have to comply with is to avoid applying their domestic legislation in a manner that would frustrate the “equal level playing field” that they should grant for goods and services irrespectively of their origin. This entails that only when Members adopt positive acts, that is when they are involved in a restrictive business practice, and not simply when they omit to act, such acts may be challenged under the present system.[59] Such conclusion is also supported by the recent Panel Report of the Kodak-Fuji[60] dispute.

 

 

3.3. Non violation Complaints: Lessons from the Kodak-Fuji Dispute

 

Private restraints against imports can be the basis for a WTO complaint if the complaining country is able to characterise their existence as a violation of GATT obligations, or a weaker kind of wrong, named “Non-Violation Nullification and Impairment”. In fact, the GATT/WTO dispute settlement system envisages two different situations under which a complaint can be brought: violation complaints, in the case of a failure of a WTO Member to carry out its’ obligations under one of the existing agreements, and non-violation complaints, where the claim concerns a measure that, even if not found in violation of any specific legal obligation, nevertheless has the effect of nullifying or impairing the market access benefits that a Member have expected arising from the commitments made in a trade agreement[61].

Since the GATT, as noted above, does not contain any relevant competition rule, and given the broad wording of the provision contained in GATT Art. XXIII:1 (b), some authors have argued that competition-related measures can be brought before the WTO dispute settlement procedure if they nullify or impair benefits or frustrate the effet utile of the Agreement. But also according to this type of complaints, which relies on legal principles as effectiveness of the concessions, reciprocity and good faith in the protection of legitimate expectations[62] strict requirements are needed for private anti-competitive behaviours to be challenged: the measure must entail a government involvement, correspondent to a positive action (application of a measure), and it must alter previously negotiated competitive conditions[63] (nullification or impairment of an existing benefit accruing under a relevant agreement). This is also shown in the Kodak-Fuji case where core of the U.S.’ strategy was all focused on proving the existence of a link between the government and the private practice consisting in a close distribution network. U.S. basically claimed the Japanese government’s responsibility for having promoted the creation of such closed distribution system that was impeding market access to U.S.’ products. The lack of sufficient evidence able to support the claim of continuing Japanese government’s involvement in restricting market access led to a ruling substantially in Japan’s favour.[64]

Perhaps a more interesting aspect to consider is whether the term “measure” in GATT Art. XXIII (b) can also comprise a mere government tolerance of an existing restrictive business practice; specifically, if it provides sufficient grounds to challenge a government for having failed to use its’ legal powers to stop or prevent the reiteration of the practice. The U.S. claims in the case were limited to positive measures and not directed to governmental tolerance. Three were the main reasons: U.S. thought that it would not have great chances to challenge the governmental tolerance in the exceptional framework of non-violation complaints,[65] and also it feared that the eventual success on such grounds could create a precedent for complaints against U.S. for the same reason; lastly given Kodak’s reluctance to refer the complaint to the Japanese Fair Trade Commission (hereafter JFTC) until pressured by the United States Trade Representative (USTR), it would have been difficult then to qualify the JFTC’s behaviour as “ government inaction”.[66]

This issue remains unclear. Some authors argue that if the rational of GATT Art. XXIII is to provide a remedy for nullification and impairment of the benefits arising (directly or indirectly) from the Agreements, then “measures “ should be interpreted in a rather flexible manner.[67] Usually, though, in legal terms the word “application of a measure” entails some sort of positive action by the government, as mere inactivity expressed by tolerance of a practice does not fulfil the requirement. As an author has said, doing nothing would not be considered as a “measure”, and given the exceptional character[68] of such kind of complaints, panels are more likely to interpret the requirements rather strictly.[69]

Another suggestive way to fit competition-related complaints within the framework of the non-violation complaint is to argue that the mere existence of a competition law is sufficient government behaviour to generate a “reasonable expectation”[70] of protection from a restrictive business practice. In this case the complaining government should show that it expected the defendant government to enforce competition laws in its’ territory as a guarantee of the effectiveness of the concessions agreed through previous negotiations. Though, in order to make such complaint effective, the claimant should be able to prove its’ ignorance of the practice at the moment of the negotiations and, simultaneously establish the defendant government’s foreknowledge of the existence of the practice.[71] This might turn difficult, and moreover, such complaint will always clash against the interpretation of “application of a measure” as a positive action by the government, being an omission of enforcement not sufficient.[72]

The other non-violation complaint provision envisaged in GATT Art. XXIII:1, usually named “situation complaint”, allows Members to bring a complaint under the dispute settlement procedures when benefits are nullified or impaired as a result of the existence of “any other situation.”[73] This type of non-violation complaint is even more exceptional,[74] but despite the fact that, according to an author such provision had fallen in desuetudo,[75] it has nevertheless been used by the U.S. in the Kodak-Fuji dispute. The term “situation” suggests an adverse circumstance for which governments could not be responsible for, and would be suitable for comprising anti-competitive practices arising from private parties. However, given the lack of a definition of the extent and scope of application of this provision by a Panel, and considering that it was initially meant to address situations affected by macroeconomics factors, there is no consensus among authors on whether its’ use would be appropriate for competition cases.

Some authors share the opinion that a more rigorous and specific interpretation of some aspects of the non-violation complaints would lead to an inclusion of private practices as subject-matter under the WTO dispute resolution.[76] Much depends on the interpretation of “measure” which could include an omission by the government in whose territory the practices take place; even more the concept of “reasonable expectation” could also comprise the legitimate expectations of the non existence of private barriers (which frustrate the result of the negotiations and the benefits arising from the exchange of market access) regardless of the efforts made by the defendant government, if any effort was made, to enforce its’ laws. In other words, this would mean posing an obligation of results on every Member to guarantee the effectiveness of the market access commitments reached through negotiations. But also according to this interpretation, the complaining state would still have to prove the existence of a restrictive business practice, which would raise a problem concerning the “applicable competition law” (the complainant’s or the defendant’s? what if the defendant does not have one or does not envisage the specific practice as illegal?).

These suggestion are not groundless, but as a matter of fact what is certain is that so far, also according to previous panel interpretations of non-violation complaints, the present system does not leave any space for a challenging anti-competitive private practices without establishing a serious finding of governmental responsibility.[77] This is the most direct consideration resulting from the Kodak-Fuji case. The other outcome is that if the country where market foreclosures take place lacks of a competition law, or when possessing it is enforced in a rather discriminatory or ineffective fashion, at the present there is no remedy available for foreign firms seeking market access.[78] Lastly, even if a private practice would successfully go through a Panel’s examination against the previous objections, as Art. 26 of the DSU does not require a Panel or the Appellate Body to make out of a GATT Art. XXIII (b) case a binding ruling, the strongest outcome that the complaining party could obtain would be a recommendation to negotiate, the result of which is not guaranteed anyway;[79] and in the case of “situation complaints,” for which the new rules of the dispute settlement procedures do not apply, only the adoption of the report by all the Members would qualify the decision as binding.

 

3.4. Conclusions

 

As stated in the 1999 Working Group Report, the principles of national treatment and most-favoured-nation, which are meant to promote the equality of competitive opportunities for Members and their respective goods, services and enterprises, “sought the avoidance of distortions in the competitive process, not the guarantee of specific results in terms of market access.” It is also clear, as further confirmed by the Members in the context of the debate taking place in the framework of the Working Group, that the scope of the relevant provisions of the existing WTO instruments is limited to governmental action, intended also as broadly defined in the Japan-Semi-Conductor case, but does not reach private anti-competitive practices, such as price-fixing cartels, import and export cartels and market sharing arrangements.[80] Moreover, where national treatment and transparency principles could play a role, even if marginal, in those countries with well constituted domestic competition laws, when such laws were being applied in a discriminatory fashion, the relevance of such principles could not be defined at all in those countries devoid of competition laws, nor with regards to exceptions, derogation or loose application of competition laws. Lastly, according to the use that has been made so far of the non-violation complaints, in the lack of an explicit interpretative declaration from the WTO Members in order to include in such remedy complaints arising from private behaviours’, it is unrealistic to pretend that WTO panels and Appellate Body would efficiently deal with anti-competitive practices which nullify or impair expected benefits from trade.[81] WTO instruments have proved to be insufficient to contain the increasingly harmful impact of anti-competitive practices. This is the first and foremost reason why remedies must be found somewhere else. Though, given the broad recognition of an existing relation between trade and competition policies, given also the important role that competition policy plays in the process of trade liberalisation, the WTO, also due to its wide spread membership and its central role for the negotiations of binding rules governing the economic conduct of nations, is certainly the best forum for the negotiation of an agreement promoting a world wide consistent application of competition rules.

 

 

4. GLOBAL SOLUTIONS FOR WORLD PROBLEMS

 

4.1. The different approaches to competition policy

 

4.1.1. Unilateral Application, Bilateral Agreements and Co-operation

 

In the present situation, lacking an international antitrust agreement, the international aspects of competition laws are dealt with the unilateral application of domestic competition laws, and with new forms of co-operations among states, mostly in the form of bilateral, regional agreements and non-binding instruments produced by international organisations.

         The unilateral application of domestic competition laws is based on the concepts of territorial jurisdiction and “effects doctrine”. Whereas, according to the territoriality principle, a state is entailed to exercise its’ competition laws (jurisdiction) over individuals and firms who violate the laws within its territory and irrespectively of the nationality, the “effects doctrine” provides jurisdiction over firms whose anti-competitive conducts take place abroad but affect the domestic market. More precisely, the effects doctrine poses the unilateral applicability of national competition laws to foreign firms whose anti-competitive behaviour affects national territory.[82] The aim of such measures is the protection of national consumers’ interests.[83]

A notable example of the application of competition laws pursuant to the effects doctrine has been the EC Commission’s decision in the Wood Pulp case,[84] where non-EC firms were charged for co-ordinating prices of wood-pulp sold to purchaser in the Community; the price-fixing agreement on imports was established outside the Community, nevertheless its implementation by taking place in the Common Market constituted a link for the application of EC Competition laws.

The application of competition laws under territoriality is commonly accepted, given that the territorial principle, under public international law, provides sufficient grounds for the enforcement of domestic laws over individuals acting in violation of those laws, and this of course would apply also in the case of antitrust rules. Though, because of the increasing globalisation of the business activities, which reflects in the increase of international antitrust matters,[85] jurisdiction based on territoriality does not reach most of the international antitrust cases.[86] Extraterritorial application of competition laws through the effects doctrine has given some results, but more often causes more problems than the ones it is intended to solve.

Firstly, as also mentioned in the WTO Report 1999, unilateral enforcement of competition laws often provokes jurisdictional disputes, given that it is perceived as an infringement of state sovereignty. Secondly, conflicts may also arise from the fact that some conducts are viewed differently depending on the various national laws, and mostly from the lack of consensus among nations that the effects doctrine enjoys.[87] Further more, domestic antitrust laws are in the majority of cases insufficient to handle international restrictions, given the various exceptions provided for export cartels, as well as other loopholes that consent anti-competitive conducts to escape from prosecution. [88] In addition, practical problems may arise for the investigation phase from competition authorities in foreign countries and in gathering the relevant information from foreign firms.[89] These considerations lead to the conclusion that although extraterritorial enforcement of competition laws is increasingly accepted, nevertheless it cannot be perceived as a remedy able to substitute an international antitrust agreement.[90]

To obviate the complications connected with extraterritorial enforcement of competition laws, countries with advanced competition systems have increasingly engaged in the negotiations of bilateral agreements. Usually five models of bilateral agreements can be identified, and the degree of co-operation varies from provisions on informal communication between antitrust agencies to agreements containing positive comity[91] clauses: (1)agreements providing for non-binding, voluntary exchange of non-confidential information and technical expertise; (2) agreements based on traditional comity; (3) agreements comprising provisions of positive comity; (4) bilateral agreements providing for the exchange of confidential information on a case-by-case basis and (5) bilateral agreements relating to mutual assistance envisaging co-operation in criminal antitrust cases.[92] A notable example of bilateral co-operation is the E.U.-U.S. 1998 Positive Comity Agreement, which was meant to broaden and deepen the scope of the 1991 Co-operation Agreement in the light of the recent 1998 OECD Recommendation Concerning Effective Action Against Hard Core Cartels.[93] The agreement formally adopts the principle of positive comity, which creates an expectation that the country will proceed promptly and diligently in the examination of the allegations.[94] In addition it provides for the exchange of non-confidential information between the parties, and the possibility of co-ordination of the enforcement activities among the agencies. It has been noted, though, that while this form of co-operation has worked efficiently in merger control cases, it has not developed with regard to international cartels,[95] and so far only one full-fledged positive comity request has been submitted.[96] Other notable bilateral agreements are the 1998 E.U.-Canada Co-operation Agreement, the1999 Brazil-U.S. Antitrust Co-operation Agreement, the 1999 Japan-U.S. Antitrust Co-operation Agreement and the 1999 Israel-U.S. Antitrust Co-operation Agreement.

Co-operation in international antitrust is certainly a recommendable and necessary step for the prevention and persecution of restrictive business practices arising in the present global context. In this respect, the work done by the OECD is also remarkable. The Competition Law and Policy Committee (hereafter CLP) has been very active in promoting debates and exchanges of views on competition policy matters, and in issuing recommendations on international co-operation among competition authorities. The 1998 Recommendation on Effective Action against Hard Core Cartels enhances Members to strengthen and extend their co-operation through positive comity agreements,[97] to engage in consultations over issues relating to co-operation,[98] to provide for effective sanctions and enforcement procedures to deter and detect cartel behaviour.[99] Further more, it encourages Members to engage into deeper co-operation practices such as sharing information and documents with foreign competition authorities on a voluntary basis and, when necessary, through a compulsory process.[100] Interestingly, the Recommendation is open also open to non-OECD Members, and several of those countries have manifested already the intention to associate themselves with the recommendation and to implement it. Though the Recommendation does not consist in a binding instrument[101], nor envisages a dispute settlement mechanism; it only provides for consultations on its application, and so far consultations within the CLP have not been used as a method of dispute settlement.[102]

Co-operation is viewed by many participants in the debate on trade and competition policies as the most realistic and appropriate avenue towards a world wide consistent approach of antitrust policies. Notably, the U.S. position in promoting an agreement under the auspices of the WTO has been very cautious. The former Assistant Attorney General Joel Klein in the 1999 OECD Conference on Trade and Competition[103] clearly rejected the idea of a negotiation of an antitrust agreement within the WTO framework, rather promoting the creation of a “competition culture” through further negotiations of bilateral agreements, an expansion of co-operative enforcement mechanisms and a gradual convergence of approaches within the model furnished by the OECD. Mr. Klein’s views are shared by the International Competition Policy Advisory Committee (hereafter ICPAC), which was also from him established. The ICPAC considers co-operation among antitrust authorities as desirable and necessary to address effectively transborder antitrust cases, and positive comity as “a first useful step in addressing anti-competitive restraints affecting trade where the territorial party has the authority and willingness to take effective action.”[104] With regard to extraterritorial enforcement, it argues that in absence of co-operation of the requested country U.S. should stand ready to apply its own antitrust rules. The Report also reflects Mr. Klein’s scepticism of the feasibility of multilaterally agreed rules on competition, and expresses doubts on the WTO’s role in such context considering that the trade perspectives could prevail on antitrust principles. Nevertheless it recognises the value of the Working Group’s research and endorses the possibility of the creation of a new, independent framework of debate, such as the “Global Competition Initiative”,[105] which should be opened to all governments, agencies and parties and promote a deeper co-operation and integration.[106]

 

 

4.1.2. The WTO as the Appropriate Forum

 

Without undermining the importance of co-operation in international antitrust and the effectiveness of bilateral agreements, several arguments can be opposed against those who consider such instruments sufficient to deal with international antitrust issues and who do not agree on a WTO approach to competition rules.

First of all, bilateral co-operation is likely to take place among countries with developed competition laws, but does not help countries which do not have such laws to adopt one.[107] Currently 90 countries posses competition rules, and this represents only two thirds of the WTO Members. Countries without competition laws would still not enjoy the important corrective function that competition policies carry out, not only with regards to private restrictions, but also in respect of restrictions of competition and market access caused by laws or regulations of various nature, that may arise in the context of particular markets. In a multilateral trading context such countries will always carry a comparative disadvantage. Furthermore when anti-competitive practices arise in countries devoid of such rules and restrict competition and market access in other countries that have competition rules, these may be not able to seek assistance to the countries where the practices have originated. In addition, countries without competition laws would not be able to face the damages arising from anti-competitive practices in the same way as the ones which enjoy bilateral protection.

Therefore, for smaller or less developed countries it might be more useful to achieve an agreement in a multilateral context, especially if such agreement is provided with some sort of enforcement mechanism to redress the damages suffered.[108] It is also strongly probable that an international agreement would easily accelerate the process of drafting and adopting competition laws in countries still devoid by providing a model, and especially by including provisions of technical assistance and capacity building in order to assist developing and transition economies countries in the implementation of competition laws.

In strict connection with the above consideration, another problem arises from the fact that, by being the negotiation of a bilateral agreement a voluntary undertaking, countries enjoy discretion in choosing the other countries to commit with. Such discretion may be questionable under the non-discrimination principle, given that in a context in which businesses may affect simultaneously more countries, some countries would enjoy more protection than others by being party to a co-operation agreement.[109] Multilaterally agreed rules would, instead, be binding upon all the parties and provide for co-operation which would operate in a non-discriminatory way.

Another inherent limit of a co-operative approach on bilateral basis, is that fails to take into consideration that countries engaged in such agreements may deliberately choose not to co-operate in instances of “asymmetric competition effects”, as it is the case when practices affect only one of the two parties involved. A clear example is provided by export cartels, which may be beneficial for one country, but affect the interests of the other.[110] Co-operation is in fact likely to happen when the parties perceive a common and mutual interest; this might be the reason why certain co-operation agreements leave to the parties discretion either to co-operate or not in individual cases.[111]

Voluntary instruments of co-operation, such as the OECD Recommendation and the UNCTAD Set of Restrictive Business Practices suffer inherent limitations arising from the non-binding character of their normative, and further more from their focus, which is said to reflect the interests of specific group of countries, as the UNCTAD’s work is more oriented towards the developing and least developed world, and the OECD is often perceived as the exclusive club for developed, industrialised economies. Especially with respect to the OECD, there is a certain degree of scepticism on what could be achieved at a plurilateral or multilateral level, given the recent failure of the Multilateral Investment Agreement. An agreement under the WTO would, instead benefit from a dispute settlement mechanism which would characterise it as a mandatory instrument, and would, moreover represent the result of negotiation into which the whole international trading system participates.[112]

The objection which is most commonly opposed by the U.S. representatives, and which is also shared by some authors,[113] to multilaterally agreed rules on competition under the WTO is based on the consideration that negotiations under the WTO umbrella would be focused on market access, ‘producer-driven’ concerns, at the expenses of ‘consumer-driven’ competition policies’ objectives. Further more, they will not be able to deeply analyse the impact and effects of certain restraints on competition under an ‘efficiency’ angle because based on the promotion of market access for domestic producers. Basically those who disagree with a WTO initiative rather prefer to maintain the application of trade and competition policy distinct in their respective fields, preferring co-operative approaches in antitrust matters of international dimension.

These objections are not unreasonable, though they fail to take into account some important considerations. First of all, they neglect the existence of the complementarity and mutual consistency characterising trade and competition policies. This has been already analysed in this present work, though it is sufficient to remind that the two policies share the same underlying rationale, which is the elimination or reduction of barriers to, and distortions of markets.[114] Trade liberalisation is necessary for competition policy’s task of promoting effectively the contestability of markets, and to the same extent competition policies are necessary to avoid the loss of gains caused by private restraints, to prevent distortions of world trade and, more generally, for the full achievement of the WTO objectives of non-discriminatory conditions of competition.[115]

Moreover, if one considers that the primary objective of the trading system under the WTO of establishing “equal competitive opportunities” is not legally or economically distinct from the “protection of a competitive environment”, which is the aim of antitrust policies, then there should be no concrete reason to fear that negotiations of competition rules under the WTO would be more closely related to the producers’ needs rather than the consumers’, or more ‘market access oriented’ than if they would take place in some other fora.[116] Specifically, it has been noted previously that market access (in a narrow sense) is one of the aspects mostly endangered by anti-competitive practices, but not the only one; trade is also concerned by cartels which create trade distortions and affect international transactions in different ways. Market access in the WTO is a relatively broad concept, that refers not only to the possibility of producers to export their products in foreign markets, but is closely related with the avoidance of trade distortions, the promotion of development and contestability of markets so that the benefits from trade liberalisation can be more broadly shared.[117] This is also why an agreement on competition strictly focused on a narrow market access perspective will not be able to efficiently consider all of the several existing connections between trade and competition policies, therefore would not provide a complete and satisfactory answer for all the trade aspects affected by the violation of competition rules, nor comprise the interests of all the countries in the context of international competition policy. [118]

In this respect the most recent proposals seem to reach a solid balance between pure trade concerns on one side and too competition-oriented reforms on the other side. In addition they achieve to suggest a framework agreement not exclusively focused on trade-related aspects of competition, but characterised by co-operative provisions extended to the several antitrust matters. By promoting substantive harmonisation only on provisions shared already by most jurisdictions, as the prohibition of hard core cartels, and by enhancing co-operation modalities on anti-competitive practices other than hard core cartels, the EU’s recent proposal, also endorsed by Australia, Canada, Japan and Korea, Central Europe and Latin American countries, seems to be the more complete and at the same time the most feasible one.

The proposal corresponds to a TRIPs- type module, or rather a more modest framework agreement, articulated in: core principles of competition law and policy, which entail a commitment on the adoption of a competition law and a competition authority equipped with enforcement powers, the application of the non-discrimination, transparency and right of due process principles, general prohibition of hard core cartels under domestic laws; co-operation modalities, which include co-operation on practices on a case-specific basis, exchange of information and evidence, consultations and exchanges of views and the creation of a Competition Committee which should provide a forum for the exchange of experience on competition policy. The scope of co-operation would also extend to provide developing countries with technical assistance in drafting and enforcing their competition laws, and, generally in fostering in developing countries, at different stages of development, the creation of a competition culture.[119] The feasibility of such proposal basically rests on the fact that an approach which is focused on principles of general application does not require the adoption of detailed and specific commitments, and grants enough flexibility in order to respect the existing differences present in the national legal systems; especially with regards to transparency and non-discrimination principles, they express values that are highly compatible with the substantive divergences of the various competition laws and of the enforcement policies. Responding to criticisms to the previous submissions, which were more oriented towards a substantive harmonisation,[120] the EU’s new proposal surprisingly met recently the U.S.’ consensus.[121]

 

4.2. Settling and Agreement in the WTO Framework: The Reasonable Alternatives

 

4.2.1. The Doha Mandate

 

The Doha Ministerial Declaration, which embodied the result of the 2001 WTO Ministerial Conference in Qatar, represents a further and significant step towards a possible development of a multilateral agreement on competition rules. Negotiations have been postponed until the successive Ministerial Conference, (which is to take place within two years from Doha), pursuant to a decision that must be taken by Members, by “explicit consensus”, on the modalities of the negotiations; nevertheless it expresses an explicit recognition of the opportunity of a multilateral framework on competition rules through which promote and foster the contribution of competition policy to international trade and development. It also envisages as a necessary element of the agreement, and for the effectiveness of the developing countries’ participation, the need to provide them with technical assistance and capacity building.[122] The relevant article states:

“Recognising 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.”[123]

Notwithstanding that such provision represents a compromise between delegations that desired an immediate launch of negotiations and those which preferred following the ‘educational’ pattern carried out so far by the Working Group pursuant to the Singapore mandate,[124] it also clearly witnesses a wide spread awareness among Members of the importance of the promotion of an effective competition policy as necessary for the achievement of the benefits arising from trade liberalisation, and crucial for the realisation of the common objective of economic efficiency and world welfare.

What remains unclear is what is really meant for “explicit consensus on modalities of negotiations”. According to an UNCTAD Draft Report on the Doha mandate[125] while some delegations shared the view that such consensus should be related to a specific list of the modalities of negotiations, other participants believed that the consensus is to be achieved explicitly and directly on the modalities of negotiations. The Chairman of the Conference made a statement concerning his interpretation of such provision, according to which the requirement of “explicit consensus” attributes “each Member the right to take a position on modalities that would prevent negotiations from proceeding after the Fifth Session until that Member was prepared to join in an explicit consensus”. Would this basically grant a veto right on the launch of negotiations to Members that do not agree with the “modalities” chosen by other Members? Maybe. The correct interpretation seems in fact to intend the explicit consensus on the modalities as a condicio sine qua non on negotiations for the agreement. The exact meaning of “modalities of negotiation” is also unclear. According to some experts such modalities of negotiations to be agreed upon by consensus, should refer either to procedural or/and substantive matters, intending for the former ones the plurilateral or multilateral qualification of the eventual agreement, the possibility of countries to drop in or out the negotiations, or the inclusion of a pre-negotiations phase; substantial matters would probably relate to the principles to be incorporated in the agreement, such as transparency, non-discrimination, procedural fairness, special and differential treatment, commitments to the adoption of a competition law, co-operative provisions and, perhaps, general prohibition of hard core cartels. It is quite likely that modalities refers to both elements, including also the possible architecture of the agreement itself, that is, if it is going to be based on a TRIPS-type or follow a GATS-structure. In this respect it is also interesting to note that with regards to an other pending issue, namely the relationship between trade and investment, the Doha Declaration follows a similar language, though referring explicitly to a GATS-type module. Such explicit reference misses in the Chapter devolved to trade and competition, though a careful reading of paragraph 25[126] seems to suggest that negotiations will probably be based on a module which closely resembles EU’s and Japan’s actual proposals.[127]

 

4.2.2. The Possible Architecture of The Agreement under the WTO: Harmonisation versus Framework Agreement

 

Since the debate on the interaction between trade and competition has been involving more and more scholars and policy makers, and successively institutionalised in the Working Group, several proposes have been advanced with regards to the advisable structure that the agreement should be based on. With the risk of oversimplify many of them, two basic common approaches can be identified: proposals suggesting a maximalist solution, which entailed harmonised substantive rules, their national enforcement and the establishment of an international antitrust authority; and, at the other end of the spectrum, suggestions for a framework agreement, which resembles a TRIPs model, or more modest framework agreement based on core principles such as non-discrimination, transparency and envisaging a commitment directed to the Members to adopt competition laws. Many proposals are collocated in between these alternatives, such as the PACT, the Plurilateral Agreement proposed by the EU Group of Experts in 1995, which suggested a higher degree of harmonisation (than the framework agreement would require), without the establishment of an international antitrust authority. Lastly, a suggestion from Prof. E. Fox aimed to the introduction of a general obligation directed to WTO Members to adopt and enforce competition laws and policies in order to prevent restrictive business practices from impairing market access.[128]

The following paragraphs will be focusing on the first two approaches mentioned.

 

A)     Harmonisation

 

An Agreement requiring full harmonisation and the establishment of an international competition authority under the WTO has never really been a realistic approach, due to the reluctance of countries with well established competition authorities to give up their discretion to implement such laws to an international authority and to the limitation of sovereignty that such proposal would entail, due to the several existing differences in the national competition laws and to the difficulty that such negotiations would face. It is remarkable that earlier suggestions of the European Union called for an agreement on competition embodying certain substantive standards of competition laws, but successively it acknowledged that such an approach was not only politically unfeasible but also unnecessary, and recently it shifted to more flexible solutions. Nevertheless the attempt was made, in the early 90s, to draft a model agreement comprising detailed antitrust provisions and the establishment of an international authority monitoring the enforcement of domestic competition laws, and empowered to request to the domestic competition authorities the initiation of antitrust investigations when necessary.

In 1993 a private group of academic experts and practitioners shared resources and efforts to draft an international competition agreement under the WTO, named Draft International Antitrust Code (hereafter DIAC), which was meant to constitute a Plurilateral Trade Agreement, and was motivated by the concern that the agreement should consider the interrelationship between the competition rules and the WTO rules on trade in goods, services, intellectual property rights, surveillance, dispute settlement and enforcement.

Basically the DIAC envisaged: international minimum standards for transborder cases according to the three basic criteria common to the existing developed competition laws: per se prohibitions with rebuttable presumptions for horizontal and vertical restrictions of competition, control of mergers and abuses of market power, subsequent incorporation of the minimum standards into national laws and their enforcement through domestic agencies and courts; immediate and unconditional application of domestic competition laws to all transborder antitrust cases falling within the scope of the DIAC, with no exemptions for export cartels and no discrimination of foreign competitors (national treatment provision); establishment of an “International Antitrust Authority” with the task of supervising the effectiveness of the enforcement by national competition authorities and empowered to request the initiation of the proceedings; dispute settlement proceedings before an “International Antitrust Panel” between injured and injuring countries or between the International Antitrust Authority and the eventual Member not complying with its obligations under the DIAC.[129]

Such proposal, elaborated when the trade and competition interface was still not fully discussed and debated, was very ambitious, too far-reaching, certainly not feasible, and apparently more destined to stimulate reflection and debate on the need for international competition rules.[130]

As noted above, seeking full harmonisation is not the advisable approach towards a world wide consistency of competition laws and policies. Negotiation of global standards is not possible for the lack of political and intellectual agreement on which standards should be prevalent, both on the substantive and procedural aspects of competition policies. Also, countries with well functioning and advanced competition laws such as the EU and US are unlikely to change their laws in order to meet other standards and reach a consensus,[131] especially if the final objective can be achieved in a more flexible and less dramatic way.

 

B) Framework Agreement

 

A TRIPs approach, or rather an even softer and more flexible “framework agreement,” has been suggested by the large community of scholars favourable to the introduction of competition rules under the WTO. The Agreement would then have the basic task of linking the core WTO principles of non-discrimination and transparency to competition policy, so as to promote globally non-discriminatory conditions of competition and open markets, devoid of private restraints. Such approach, as noted above, is also the one followed by the EU in its recent submissions to the Working Group and favoured also by a large portion of the international community. As the TRIPs Agreement, which also deals with the regulation of private practices, an international framework agreement on competition would impose affirmative obligations to the governments, settling broad effectiveness standards and procedural guarantees.[132]

The agreement would commit Members to adopt a competition law, to establish a competition authority endowed with enforcement powers, and to ensure the effectiveness and availability of their enforcement procedures (standards of enforcement), so as to permit effective action against private restraints The substantive provisions to be incorporated in (or applied to) domestic competition laws, would include the application of the principles of most favoured nation and national treatment, transparency and procedural fairness, plus a general obligation referring to the treatment of hard core cartels as a serious breach of domestic competition laws, whereas the treatment of vertical restrictions and merger control rules would be left to the discretion of the countries, or, even better (according to the EU’s proposal), would be dealt with co-operative provisions (as exports and import cartels).

Especially with regards to the transparency and non-discrimination principles, their general consistency with the basic aspects of competition policy and the crucial role they could recover in such context has already been explored and emphasised in several submissions and reports of the Working Group, given that its educational task has recently been focused on the study of the relation between such principles and competition policies. Core principles might also include the need of defining certain sectoral exclusions from competition laws, as in the case of R&D horizontal agreements. Standards of enforcement would include the obligation to grant the availability of remedies to all private parties affected by anti-competitive restraints, to guarantee standing before domestic courts to non-nationals, and general commitments to fair and equitable procedures.[133] As this framework agreement for competition policy would preferably be less detailed and more flexible than the TRIPs itself, there is a broad consensus that it should not specify in great detail the content and coverage of domestic competition laws, nor require a de facto harmonisation of such laws. It has been already noted, in fact, that with respect to proper antitrust substantive matters, there might be not enough political support if the WTO negotiations on competition would aim to include substantive provisions other than the ones already agreed upon in the context of the OECD (prohibition of hard core cartels), or would seek a broader consensus than the one necessary for minimum standards.[134]

Finally, the agreement would include a link with the WTO Dispute Settlement Procedures, as a multilateral agreement under the WTO would benefit from the binding character of the WTO system, and from the effectiveness of the enforcement. Though, there is a wide spread consensus that the scope of the WTO Panel in competition matters should be limited to the effectiveness of the implementation of the agreement into the national legal orders, and that it would not have the powers to review the decisions of national agencies, nor to patterns of enforcement or non enforcement. The only obligation eventually subject to a panel would then be the obligation contracted by the governments to render their domestic laws compatible with the principles multilaterally agreed. The EU’s proposal is quite clear in this respect: panels will not be granted the right to second guess the decisions taken by domestic antitrust agencies, and this provision might play a fundamental role for the achievement of a broader consensus.

The advantages of this approach has already been stressed: it grants enough flexibility for the countries to apply their own domestic competition policies, and meanwhile provides a framework according to which the most pernicious practices, such as hard core cartels should be, at least formally, definitively addressed, and the other international cartels (cartels affecting international markets and domestic cartels with an impact on international trade) should be contained through co-operative provisions.

It is quite clear that a fundamental cornerstone of such structure is constitute by the commitment of Members still devoid to adopt a competition law or policy; in the absence of it, in fact, developing and least developed countries are unlikely to find the incentive on investing the necessary resources in order to bring their competition regimes in accordance with more developed standards, and unlikely they would benefit from the technical assistance that would otherwise be provided to them. In addition the scope of the dispute settlement will be even more residual, and most importantly the impact of the general provisions of most-favoured-nation and national treatment would not be completely clear.

In the recent debate that took place in the Working Group, the view was expressed that the commitment to adopt a competition regime was to be interpreted in a flexible manner, and that Members would not necessarily be required in every case to provide themselves with a comprehensive competition law, and this was especially the case of certain Members that already chose not to establish one;[135] what was then stated was that in such cases, non-discrimination and transparency would apply to those Members which decided to adopt a competition law. But it is also clear that this would have a discouraging effect, given that such suggestion would basically entail posing additional obligations of non-discrimination and transparency only on those Members which wished to establish competition laws.[136] The impact that such provisions would have in a competition context, especially with regards to national treatment, is in fact quite broad and relevant, and is to this that now I turn.

 

 

4.3. The Relevance of Non-discrimination and Transparency Principles

 

Probably the most important aspect, and also the most unclear, of a framework agreement of the kind described is to understand the extent and impact of a commitment to introduce core principles of non-discrimination, transparency and procedural fairness in the application of competition laws and/or policies. Transparency and non-discrimination not only are principles already generally embodied in the sets of domestic competition laws and policies, but represent values that are fully compatible with the divergences in substantive competition laws and enforcement policies, and are necessary to provide, in an international competition context, the right to compete by ensuring equal treatment of foreign and domestic firms in all jurisdictions. They constitute ‘check and balances’ principles, and it is widely recognised that adherence to such principles in the application of competition policies is crucial for the promotion of international trade and investment. Their application in a competition policy context, though, may be also troublesome, and several aspects need a deeper consideration.

If, as said, legal discrimination if unlikely to be found in domestic competition policies and laws, and transparency is already a principle generally applied in most jurisdictions, in some instances the application and enforcement of competition laws can give raise to a de facto  discrimination. Aspects to be considered would then specifically be the discretionary nature of the enforcement of antitrust laws, exemptions and sectoral exclusions that are embodied in domestic competition laws, policies directed to the development of domestic industries and to the protection of small and medium enterprises versus big companies and multinationals; the compatibility of the most-favoured-nation clause with bilateral and regional agreements; the extent of the transparency obligation and the protection of confidential information.

 

4.3.1. The Application of the Non-discrimination Principle

 

In international trade the non-discrimination principle has two components: most favoured nation and national treatment. Applying the most-favoured nation principle in a competition policy context means, in principle, that Members’ domestic competition laws and policies, their enforcement and their administration should be required not to discriminate in the treatment of competing foreign firms, de jure or de facto. This doesn’t seem to create particular problems, also given that it is unlikely to find any example of competition laws or enforcement which are actually discriminating among firms depending on their origin. Problems may arise, though, with respect to special ‘preferences’ granted under bilateral antitrust co-operation arrangements, regional agreements, mutual assistance agreements and similar. It would be the case, in fact, that, according to the most-favoured-nation principle, the commitments contained in such agreements, as traditional comity and positive comity clauses, exchange of (confidential) information and co-operation and co-ordination enforcement provisions, should also be extended automatically and unconditionally to all Members parties of the agreement. Theoretically the alternatives would then be, in the case of bilateral co-operation agreements either to ‘grandfather’ them or to make the most-favoured-nation clause conditional; in the case of regional agreements either to exempt them from the most-favoured-nation obligation extending GATT Art. XXIV in order to comprise competition policy agreements, or, as above, to make the most-favoured-nation commitment conditional.[137]

Though, given that the recognised value of co-operation on competition policies on bilateral and regional basis has been reaffirmed in various fora and by various Members, including the ones favourable to a multilateral agreement, and given also that the final aim of such agreement would be strengthen co-operation rather than weaken it, bilateral and regional agreements will probably coexist with a multilateral framework, without the necessity of extending the provisions therein contained to the other Members of the agreement. Bilateral and multilateral approaches are in fact perceived as complementary rather than substitutes, as increased co-operation and convergence on bilateral basis is capable of facilitating the achievement of a multilateral agreement.[138]

The national treatment principle is more problematic. In international trade, the scope of the principle, as it has been elaborated by the panels and Appellate Body, covers both de jure and de facto discrimination. Therefore internal taxes, laws, regulations, requirements that discriminate in the face of the law or substantially between domestic and foreign products and services are deemed to be inconsistent with the obligation.[139] Perhaps this is even more explicit with respect to the national treatment provision embodied in the GATS.[140]

In the application of national treatment to competition laws and policies, the first point to consider relates to the discretion that antitrust agencies enjoy in the enforcement of the competition laws. If, in fact, the existing competition laws do not seem to include provisions regarding different treatment on the grounds of nationality, nevertheless their application could sometimes entail a de facto discriminatory feature. In order to detect it panels should then be entitled to proceed to a complicated review of the decisions taken by the agencies, and this goes far too beyond the scope that the Dispute Settlement Body would ever be given under the hypothesis of a framework agreement. It would imply too much cession of sovereignty that not even the Members proposing the agreement would be ready to give up. It is in fact already agreed upon that in no case WTO panels would be called upon to make rulings on the decisions already taken by national competition authorities or domestic courts. Strictly connected to the above consideration, lies the question of sectoral exclusions and exemptions that are often embodied in domestic competition laws. The beneficiaries of such exemptions vary depending on the policy that supports the competition laws in every single case.

A clear example is provided by provisions granting special regimes favourable to small and medium-sized businesses. There is no doubt that, even if not legally discriminatory, such provisions, usually based on thresholds of sales, would basically benefit domestic firms rather than foreign, if one presumes that foreign firms already competing in another market are supposedly more competitive and bigger in dimension.[141] In this respect the “equal opportunities of competition” would be better ensured with the introduction of provisions envisaging different treatment for different-sized firms and applying to domestic as to foreign firms. The same argument can be made for other sectoral exclusions from competition laws, such as regimes that tend to promote certain industrial policies or sectors of productivity, that often are implemented in developed as in developing countries. An example is provided by pro-development policies adopted by developing countries which often include financial incentives for firms engaging in research and development agreements. In response to these considerations, delegations proposing a multilateral framework agreement, notably the EU, have clearly stated that the non-discrimination principle embodied in the agreement would only concern the guarantee that competition laws would not include any provision openly discriminatory on the grounds of the nationality of firms. Moreover, recognising that this was already the case in most if not all the existing competition laws, the meaning of the inclusion of such provision would then be to “frame” this trend into a legally binding provision.

Basically the scope that a national treatment provision would have according to the proposals advanced, would then be to cover all the de jure discriminatory provisions, and therefore confine the application of national treatment to competition laws as such and not to the manner in which they would be applied. With regard to sectoral exemptions and exclusions suggestions focus on the need to narrowly define them and perhaps progressively exclude them, and, mostly, emphasis has been put on the role that the transparency commitment would play in this respect. In any case formal discrimination, has been said, was hardly taking place once transparency was ensured.

It is difficult to make a prevision on the efficacy of such a limitation of the national treatment provision. Surely, the eventual national treatment commitment would have to be very carefully constructed and narrowly focused on de jure discrimination in order to avoid legal uncertainty.

Still, the use of a national treatment provision limited to de jure discrimination, as applied specifically to competition policy, would be to prevent governments subject to political pressures by national industries and lobbies from providing them more favourable conditions when enforcing or drafting their competition policies and laws. Also, a binding non-discrimination principle on the grounds of nationality, would be able to grant a greater security for foreign investors and attract more investment capital.[142] Moreover what could still be caught by it are the immunities from export cartels. Even if, according to the recent proposals, the treatment of export cartels would be dealt within co-operative provisions, nevertheless it could be argued that if the de jure national treatment is to be applied to the whole body of competition laws, exemptions for export cartels, which basically allow unlawful practices taking place in the domestic markets when their effects are felt exclusively in foreign markets, would actually be found in breach of the law for discriminating between domestic and foreign markets.

With regards to sectoral exclusion and exemptions an important aspect to consider would be to verify if the agreement would, or not, include provisions as to limit these exclusions gradually, for example providing for a “phasing out” period, so as to progressively extend the scope of national treatment. Views have been expressed that the effectiveness of the agreement would very much depend on the existence of actual competition in all sectors, as often lack of competition in one sector is able to have spill-over effects in other sectors.[143] Many participants, including developing countries have expressed perplexities in this respect. As the EU has stated in its recent proposal, the question of sectoral exclusions needs a very flexible approach, which should be focused on the question of transparency.[144] What is clear anyway, is that the extent of national treatment to competition laws, needs further examination, and that it will be the core of the debates until the next Ministerial Conference.

 

 

4.3.2. The Transparency and ‘Due Process’ Commitments

 

Transparency is also a cornerstone of the multilateral trading system, and is embodied in every WTO agreement. It refers to the extent to which Member States render publicly available their rules and regulations affecting trade, their promulgation and the way in which they are enforced.[145] GATT Art. X establishes an obligation directed to Members to promptly publish laws, regulations, administrative rulings, judicial decisions of general application that are capable of affecting trade. In a competition policy perspective transparency gains a particular relevance, as it offers an important guarantee for firms operating in international commerce.[146] Provisions of transparency in a competition agreement should then include publications of laws, regulations, requirements (and their modification), other governmental measures and perhaps, as suggested, also guidelines[147] referring to the treatment of anti-competitive practices, including horizontal and vertical agreements, abuse of dominance, mergers and acquisitions. Exemptions from the application of domestic competition laws , as the requirements needed to meet such exemptions, should also be published. Finally, the decisions taken by domestic antitrust agencies, as relevant judicial opinions, should also be rendered publicly available. Importantly, the transparency provision should also contain some sort of safeguard against disclosure of confidential information. In fact, consistently with GATT Art. X:1, the requirements of transparency should not oblige Members to disclose confidential information contrary to the public interest, or that would prejudice the legitimate interests of particular enterprises, public or private.

Transparency provisions should also comprise guarantees of due process. They include provisions directed to the protection of the interests of the different parties and the availability of effective domestic remedies.[148] So, according to the TRIPs-type module, a specific section of the competition framework agreement should oblige Members to provide fair and transparent enforcement procedures, including access by foreign firms to effective judicial procedures for competition law enforcement. Foreign firms should be granted access to domestic agencies and courts on a non-discriminatory basis and standing before domestic courts in order to seek remedies for prejudice suffered by the existence of anti-competitive practices.[149] Such remedies should include the full range of civil remedies usually available, including orders, injunctions and compensatory damages. Also, parties should be granted the right to appeal to a higher court against a decision and minimum due process guarantees, such as the protection of confidential information from unauthorised disclosure, compulsory production of evidence possessed by the opposing party, empowering the authorities to provide a decision based exclusively on the evidence presented by the complaining party in the event of non-production by the responding party and the right to a reasoned administrative decision or judicial opinion.[150] In analogy to TRIPs Art. 41:5, Members should not be required to establish a judicial system for competition law enforcement distinct from general law enforcement. Due process commitments should, therefore, represent minimum standards, and that such provisions should take into consideration the existing divergences in the Members’ legal systems, and never attempt to harmonise legal proceedings.[151]

 

 

4.4. The Role for The Dispute Settlement Mechanism

 

Another crucial question that arises in the debate of adopting a multilateral agreement on competition is to what extent the Dispute Settlement mechanism should then be available to address Members’ potential violations. The DIAC proposed the establishment of an International Antitrust Authority, entitled to keep under surveillance the fulfilment of the obligations arising under the agreement, and empowered to bring individual cases to the national courts or to the Antitrust Panel. Thus, this model was proposing to submit individual antitrust cases to an international adjudicative body, which would base its decisions on legal grounds.[152] As seen above, it was unrealistic to foresee that states would give up their sovereignty and discretion to an international body in such a sensitive issue.

The question is particularly controversial, given the general consideration that the WTO dispute settlement mechanism is not appropriate for the review of decisions taken individual cases. This is due to the fact intensive nature of antitrust cases, that usually require a complex assessment of factual elements; to the discretion that panels would enjoy, given that the provisions embodied in national competition laws, and eventually in the agreement, usually are expressed in quite general terms; and lastly due to the evolutionary patterns of the antitrust jurisprudence which develop innovative approaches on a case-by-case basis, and which could be prevented by the WTO panel rulings.[153] On the other hand, though, the appropriateness of an agreement on competition rules under the WTO resides specifically in the binding character of the obligations contracted under the organisation, enforceable under the dispute settlement mechanism. Nevertheless there is a widespread consensus that a WTO panel should not be empowered to review on individual cases. As the OECD’s Joint Group on Trade and Competition has emphasised, “there is now consensus that dispute settlement should not be available to review individual cases…no competition agency has supported having individual competition case decisions being reviewed under the WTO’s dispute settlement mechanism”[154]

Proponents of a framework agreement, have clearly stated that, according to their proposals, the WTO Panels will not be granted the powers to review decisions, both of enforcement as non-enforcement patterns, taken by domestic antitrust agencies or courts. The role of the WTO dispute settlement will then be circumscribed to ensure that Members correctly adapt (or adopt) their competition laws and policies to the agreed core principles established in the agreement. Thus, the scope of a panel review could be to verify whether Members’ laws are consistent with the non-discrimination principles, whether they have implemented the agreed upon guarantees of due process and transparency, whether their laws consistently ban hard core cartels, and so forth. Therefore, according to this model a panel would be entitled to proceed on a comparison between domestic competition laws and the relevant provisions of the WTO agreement, and the only issue subject to review would be the violation of the terms of the agreement itself, caused by a failure to implement the agreed substantive and procedural law.

Though, given that three are the main types of disputes that may arise in an antitrust context – that is, no or insufficient implementation of the core multilaterally agreed principles into domestic legislation, unreasonable discretion by domestic antitrust agencies dealing with individual cases and omission or non enforcement of anti-competitive behaviour- among the three, according to the proposals, only the first one could be legitimately addressed by a panel, whereas for the last two the panel would be exceeding its jurisdiction.[155] Thus the efficacy of such reduced jurisdiction to solve the whole range of market-foreclosure behaviours is legitimately questionable; mostly, it is questionable if then such agreement would provide the degree of corrective action that part of the international community expects from it.[156]

An alternative approach, that has also been debated, is the establishment of non-binding peer reviews of Members’ competition laws under the Trade Policy Review Mechanism. In essence, the aim of the Trade Policy Review Mechanism (hereafter TPRM), stated in Annex 3 of the Marrakech Agreement is to “contribute to improved adherence by all Members to rules, disciplines and commitments made under the Multilateral Trade Agreements…and hence to the smoother functioning of the multilateral trading system, by achieving greater transparency in, and understanding of the trade policies and practices of Members.” In this context, the General Council, vesting the capacity of the Trade Policy Review Body (hereafter TPRB), would carry out trade and competition policy reviews, on the basis of a policy statement by the Member under review and a report drawn up by economists in the Secretariat’s Trade Policy Review Division.[157]

While this mechanism does not aim to replace or substitute the dispute settlement procedures, it carries out the important function of promoting the fulfilment of the WTO obligations through an educational process. Non-binding reviews by the TPRB would not constitute an enforcement mechanism, but by highlighting inadequate competition law enforcement in a non-adversarial context could persuade domestic enforcement agencies to persecute the alleged anti-competitive practices.[158] Suggestions have been made to expand the scope of the TPRM to competition laws and policies, including the exemptions; other delegations would preferably opt for the establishment of an ad hoc Competition Policy Review Mechanism administrated by a Competition Policy Review Body. The EU proposed voluntary peer reviews of Members’ competition policies to be carried out by a Competition Policy Committee, to be established within the WTO following the conclusion of the multilateral framework agreement.

         While neither of the two alternatives, taken by themselves, seem to provide an adequate answer, probably a combination of the two could be deemed appropriate to deal with enforcement matters. The WTO dispute settlement procedures would be available for alleged infringements of non-discrimination (in its limited fashion), transparency, due process guarantees and treatment of hard core cartels, on a State-to-State basis. Its scope would, as seen, be limited to the legislative framework adopted by the Members and aimed to grant the security of Members’ commitments to transparency and non-discrimination as principles, upon which their competition policies should be based. At the same time, the establishment of peer reviews mechanisms would grant the possibility of discussing substantive and procedural aspects of Members’ competition policies, outside a dispute settlement context. This would give Members the opportunity of exchanging practices and experiences in relation to all aspects of competition policy, including practices other than hard core cartels, such as vertical agreements, abuse of dominance, mergers and acquisitions, import and export cartels and sectoral exclusions. Most importantly, they would provide a forum for the discussion of the enforcement policies as such and enhance exchanges of views which could gradually promote convergence on the policies adopted by the competition authorities.


 

5. General Conclusions

 

Anti-competitive practices can no longer be left undetected. Recent reports from the OECD and the UNCTAD contain enough evidence of the harm caused to international trade. The international trade community seems to have increasingly become aware of the dimension of the problem, that so far affects developing countries even more than developed. In this respect the Doha Declaration seems to demarcate definitively the time of the debates from the moment from which effective action should be taken, and proves the existence of enough consensus in order to proceed in the negotiations for an agreement.

Though, the success of the negotiations strongly depends on the resolution of certain key issues. These consist in the achievement of a consensus on the structure of the agreement, on the role that the Dispute Settlement may play, on the relevance of the non-discrimination principle and, mostly, of the guarantees that developing countries will receive in terms of technical assistance, capacity building, financial aid and the inclusion of a special and differential treatment for the implementation. Developing countries may, in fact, be among those countries which would mostly benefit from a multilateral agreement on competition, but without the inclusion of a strong development dimension within the agreement, and specific guarantees of assistance, it is unrealistic to expect their consensus.

Further elements of debate from now to the next Ministerial Conference should then focus on the link between the core principles of the multilateral trading system and competition policies, the plurilateral or multilateral shape of the agreement, provisions for developing countries, and the architecture of the agreement. So far a framework agreement seems to provide the best balance between the need for minimum binding international competition rules and the relatively correct concerns of competition practitioners to rather keep a dividing line between trade and competition policies. The consensus achieved so far does not permit to work on an agreement with a higher degree of substantive harmonisation, but it is enough to successfully permit the conclusion of a more modest framework agreement. While this model may not be able to face the challenges arising from the internationalisation of competition policies, it might nevertheless provide a basis from which further convergence might develop.[159] International convergence and harmonisation of competition policies may require more time, and it is a final objective to be achieved gradually.


 

6. BIBLIOGRAPHY

 

Books

 

1.      S. Bilal & M. Olarreaga, “Competition Policy and The WTO: Is There a Need for a Multirateral Agreement?”

2.      J. Bhagwati & R. Hudec (edited by), “Fair Trade and Harmonisation: Prerequisites for Free Trade?” London, 1996

3.      E.M. Graham & J.D. Richardson (edited by), “Global Competition Policy”, Washington D.C., 1997

4.      E. Hope & P. Maeleng (edited by), “Competition and Trade Policies, Coherence or Conflict?”, 1998

5.      K. Kennedy, “Competition Law and the World Trade Organisation: the Limits of Multilateralism”, London, 2001

6.      OECD eds. “Trade and Competition Policies: Options for a Greater Coherence”, Paris, 2001

7.       R. Zach (edited by), “Towards WTO Competition Rules”, Berne, 1999

 

Articles

 

1.      F. Amato, “International Antitrust: What Future?”, in World Competition, 2001

2.      R.D. Anderson and F. Jenny, “Current Developments in the Competition Policy in the World Trade Organisation”, in Antitrust, 2002

3.      R.D. Anderson and P. Holmes, “Competition Policy and the Future of the Multilateral Trading System”, in Journal of International Economic Law, 2002

4.      I. Garcia Bercero and S.D. Amarasinha, “Moving the Trade and Competition Debate Forward”, in Journal of International Economic Law, 2001

5.      C.O. Garcia-Castrillon, “Private Parties under the Present WTO Competition Regime”, in Journal of World Trade, 2001

6.      A.T.L. Chua, “Reasonable Expectation and Non-Violation Complaints in GATT/WTO Jurisprudence”, in Journal of World Trade, 1998

7.      I. De Leon, “Should We Promote Antitrust in International Trade?”, in World Competition, 1997

8.      E.M. Fox, “The Harmonisation of Competition and Trade Law: the Case for Modern Linkages of Law and Limits to Parochial State Action”, in World Competition, 1995; “Towards World Antitrust and Market Access”, in American Journal of International Law, 1997; “The Elusive Promise of Modernisation: Europe and the World”, in Legal Issues of Economic Integration, 2001

9.      L. Fullerton and C. Mazard, “International Antitrust Co-operation Agreements”, in World Competition, 2001

10.  A.S. Grewlich, “Globalisation and Conflict in Competition Law: Elements of possible Solution”, in, World Competition, 2001

11.  B. Hoekman, “Competition Policy and the Global Trading System”, in The World Economy, 1997

12.  B.M. Hoekman and P.C. Mavroidis, “Dumping, Antidumping and Antitrust”, in Journal of World Trade, 1996

13.  R.E. Hudec, “A WTO Perspective on Private Anti-Competitive Behaviour in World Markets”, in New England Law Review, 2000

14.  E. Iacobucci, “The Interdependence of Trade and Competition Policies”, in World Competition, 1997

15.  C.A. Jones, “Towards Global Competition Policy? – The Expanding Dialogue on Multilateralism”, in Journal of World Competition, 2000

16.  Y.Jung, “Modelling a WTO Dispute Settlement Mechanism in an International Antitrust Agreement: An Impossible Dream?”, in Journal of World Trade, 2000

17.  N. Komuro, “Kodak-Fuji Film Dispute and the WTO Panel Ruling”, in Journal of World Trade, 1998

18.  P. Lloyd, “Multilateral Rules for International Competition Law?”, in  The World Economy, 1998

19.  L. Lanucara, “Interaction between antitrust and International Trade”, in Diritto del Commercio Internazionale, 2001

20.  M.C. Malaguti, “Restrictive Business Practices in International Trade and the Role of the World Trade Organization”, in Journal of World Trade, 1998

21.  P.B. Marsden, “Dealing With International Exclusion: the Right Focus for the Working Group on Trade and Competition Policy”, in World Competition, 1997

22.  A. Mattoo and A. Subramanian, “Multilateral Rules on Competition Policy – A Possible Way Forward, in Journal of World Trade, 1997

23.  P.C. Mavroidis and S.J. Van Siclen, “The Application of the GATT/WTO Dispute Resolution System to Competition Issues”, in Journal of World Trade , 1997

24.  A.D. Melamed, “International Cooperation in Competition Law and Policy: What can be Achieved at the Bilateral, Regional and Multilateral Levels”, in Journal of International Economic Law, 1999

25.  A.D. Mitchell, “Broadening the Vision of Trade Liberalisation: International Competition Law and the WTO”, in World Competition 2001

26.  E.U. Petersmann, “Legal Economic and Political Objectives of National and International Competition Policies: Constitutional Functions of WTO “linking principles” for Trade and Competition”, in New England Law Review, 2000

27.  R. Pitofsky, “Competition Policy in a Global Economy – Today and Tomorrow”, in Journal of International Economic Law, 1999

28.  F. Roessler, “Should Principles of Competition Policy Be Incorporated Into WTO Law Through Non-Violation Complaints?”, in Journal of International Economic Law, 1999

29.  D.K. Tarullo, “Competition Policy for Global Markets”, in Journal of International Economic Law, 1999, and “Norms and Institutions in Global Competition Policy”, in American Journal of International Law, 2000

30.  M.J. Trebilcock, “Competition Policy and Trade Policy – Mediating the Interface” , in Journal of World Trade, 1996

31.  S.W. Waller, “An International Common Law of Antitrust”, in New England Law Review, 2000

 

Documents

 

WTO – Working group on Trade and Competition

1.      Report of The Working Group on the Interaction Between Trade and Competition Policy to the General Council 1998, WT/WGTCP/2

2.      Report of the Working Group on the Interaction Between Trade and Competition Policy to the General Council 1999, WT/WGTCP/3

3.      Report of the Working Group on the Interaction Between Trade and Competition Policy to the General Council 2000, WT/WGTCP/4

4.      Report of the Working Group on the Interaction Between Trade and Competition Policy to the General Council 2001, WT/WGTCP/5

5.      Communication from the European Communities and its’ Member States to the World Trade Organisation, Working Group on the Interaction Between Trade and Competition Policy, “Impact of the Anti-competitive Practices on Trade”, Feb. 1998, WT/WGTCP/W/62

6.      Working Group on the Interaction Between Trade and Competition Policy, “The Fundamental WTO Principles of National Treatment, Most-Favoured-Nation Treatment and Transparency”, Background Note by the Secretariat April1999, WT/WGTCP/114

7.      Communication from the European Communities and its’ Member States to the World Trade Organisation, Working Group on the Interaction Between Trade and Competition Policy, “The Relevance of Fundamental Principles of National Treatment, Transparency an Most-Favoured-Nation Treatment to Competition Policy and Vice Versa” May 1999,WT/WGTCP/115

8.      Communication from the European Communities and its’ Member States, to the World Trade Organisation, Working Group on the Interaction Between Trade and Competition Policy, “A Multilateral Framework Agreement on Competition Policy”, Sept. 2000, WT/WGTCP/152

9.      Communication from the European Communities and its’ Member States to the World Trade Organisation, Working Group on the Interaction Between Trade and Competition Policy, March 2001, WT/WGTCP/160

Singapore Ministerial Declaration, 13th of December 1996 (WT/MIN(96)/DEC)

Doha Ministerial Declaration, 14th of November 2001 (WT/MIN(01)/DEC/1)

 

OECD Documents and Reports

1.                   “Complementarities between Trade and Competition Policies”, 1999, (COM/TD/DAFFE/CLP(98)98/FINAL)

2.                   “Trade and Competition: Frictions After the Uruguay Round”, 1996, OECD/GD(96)105

3.                   “Consistencies and Inconsistencies between Trade and Competition Policies” 1999, (COM/TD/DAFFE/CLP(98)25/FINAL)

4.                   “Outline of (A) Core Principles, Common Approaches and Common Standards and (B) Bilateral and Multilateral Approaches” 1999 (COM/TD/DAFFE/CLP(98)97/FINAL)

5.                   “International Options to Improve the Coherence Between Trade and Competition Policies” 2000 (COM/TD/DAFFE/CLP(99)102/FINAL)

6.                   Recommendation of the Council Concerning Effective Action against Hard Core Cartels, April 1998

7.                   “New Initiatives, Old Problems: a Report on Implementing the Hard Core Cartel Recommendation and Improving Co-operation”, Report by the Competition Law and Policy Committee, 2000, www.oecd.daf/clp

8.                   Report on the Nature and Impact of Hard Core Cartels and Sanctions Against Cartels under National Competition Laws (DAFFE/COMP(2002)7)

UNCTDAD REPORTS

1.      “Closer Multilateral Cooperation on Competition Policy: The Doha Mandate”, Draft Consolidated Report of the Regional Meetings held in Panama, Tunisi and Hong Kong from 21 March to 18 April 2002, 2002

2.      “Recent Important Competition Cases in Developing Countries”, Report by the UNCTAD Secretariat, 2002 (TD/B/COM.2/CLP/26)

3.      “Experiences Gained so far on International Cooperation on Competition Policy Issues and the Mechanisms Used”, Revised Report by the UNCTAD Secretariat, 2002 (TD/B/COM.2/CLP/21/REV.1)

 

ICPAC – International Competition Policy Advisory Committee

1.      Final Report 2000, Washington 2000

 

Other Reports

“Competition Policy in the New Trade Order: Strengthening International Cooperation and Rules”, Report of the Group of Experts, Brussels 1995


 

[1] Singapore Ministerial Declaration, WT/MIN (96)/DEC, 1996, para. 20.

[2] K. Kennedy, “Competition Law and the World Trade Organisation: The Limits of Multilateralism”, London 2001, pg. 4.

[3] OECD, “Consistencies and Inconsistencies Between Trade and Competition Policies”, 1999, COM/TD/DAFFE/CLP(98)25/FINAL, PARAS. 3-4.

[4] E. Fox, “Towards World Antitrust and Market Access”, in The American Journal of International Law, 1997, pg.3.

[5] OECD, “Complementarities Between Trade and Competition Policies”, 1999 COM/TD/DAFFE/CLP(98)98/FINAL, pg. 4-5.

[6] OECD, supra, at note 5.

[7] Id.

[8] B.M. Hoekman and P.C. Mavroidis as cited by I. De Leon in “Should we Promote Antitrust in International Trade?”, in World Competition 1997, pg. 38, note n. 11.

[9] R. Hudec, “A WTO Perspective on Private Anti-competitive Behaviour in World Markets”, in New England Law Review, 2000, Vol. 34, n. 1.

[10] The European Union’s view in this respect is clearly stated in the Report of the Group of Experts “Competition Policy in the New Trade Order: Strengthening International Cooperation and Rules”, 1995: “A strict competition policy also guarantees companies from third countries that access to the Community market will not be compromised as a result of restrictive business practices by European companies seeking to protect their traditional markets. But this guarantee calls for recipricity! If other countries are less vigilant than we are with regard to the anticompetitive behaviour of their companies, access to their markets for Community products will be blocked.” The E.U. has been one of the major advocates of multilaterally agreed competition rules, and it also had the merits to call, in the Singapore Ministerial Declaration 1996, for the establishment of the Working Group on the Interaction on Trade and Competition Policy.

[11] M.J. Trebilcock, “Competition Policy and Trade Policy, Mediating the Interface”, in Journal of World Trade 1997.

[12] E. Iacobucci, “The Interdependence of Trade and Competition Policies”, in World Competition 1997, pg. 18.

[13] M.C. Malaguti, “Restrictive Business Practices in International Trade and the Role of the World Trade Organisation”, in Journal of World Trade, 1998, pg. 119.

[14] D. Tarullo, “Competition Policy for Global Markets”, in Journal of International Economic Law, 1999, pg. 448.

[15] WTO, Report of the Working Group on the Interaction Between Trade and Competition Policy to the General Council, 1998 WT/WGTCP/2.

[16] Id, para. 83.

[17] WTO, Report of the Working Group on the Interaction Between Trade and Competition Policy to the General Council, 1999, WT/WGTCP/3.

[18] G. A.Hay, “Vertical Restraints”, in International Harmonisation of Competition Laws, as cited by K. Kennedy, supra, n. 2, pg. 215.

[19] D. Papakrivopoulos, “The Role of Competition Law as an International Trade Remedy in the Context of the World Trade Organisation”, in World Competition, Vol. 22, n. 3, 1999, pg. 47.

[20] See Communication from the European Communities and its Member States to the World Trade Organisation Working Group on the Interaction between Trade and Competition Policy, Impact of Anticompetitive Practices on Trade, 23 February 1998, WT/WGTCP/W/62.

[21] International Competition Policy Advisory Committee to the Attorney General for Antitrust, Final Report 2000. The Report cites the U.S. Auto Industry complaint, the Flat Glass Market and the Paper Industry complaint as the common complaints from U.S. firms towards Japanese market vertical foreclosures, besides the notorious complaint on Japanese Film Market.

[22] P. Marsden, “The Improperty of WTO Market Access Rules on Vertical Restraints”, in World Competition, Vol. 21, n. 6, 1998, pg. 7.

[23] See OECD, “New Dimension of Market Access in a Globalising World Economy”, Paris, 1995, as cited by P. Marsden, supra, n. 22, at note 1, pg. 6.

[24] Comments by A. Hoda, “Trade, competition policy and the World Trade Organisation” Global Forum on Competition and Trade Policy Conference, New Delhi, 17-19 March 1997, as cited by P. Marsden, supra., n. 22, pg.11

[25] OECD, “Recommendation of the Council Concerning Effective Action Against Hard Core Cartels, April 1998.

[26] OECD, “New Initiatives, Old Problems: a Report on Implementing the Hard Core Cartel Recommendation and Improving Co-operation”, Report by the Competition Law and Policy Committee, www.oecd.org.daf/clp, 2000.

[27] See ICPAC, Final Report supra, n. 21, Chap. 4, pg.5.

[28] Id., pg.7

[29] R. D. Anderson and P. Holmes, “Competition Policy and the Future of the Multilateral Trading System”, in Journal of International Economic Law, 2002, pg. 542.

[30] See, OECD, supra, n. 26, pg. 21.

[31] The OECD has recently produced a “Report on the Nature and Impact of Hard Core Cartels and Sanctions Against Cartels Under National Competition Laws” (DAFFE/COMP(2002)7) that contains details on the impact of such practices and the damage they provoke.

[32] The recent UNCTAD Report on “Recent Important Competition Cases in Developing Countries”, 18th of April, TD/B/COM.2/CLP/26, contains an interesting exposition of recent cartels and their harmful for developing countries. In an introductory note it is stated: “In any event, any national efforts by developing countries to control RBPs or mergers originating from overseas would need to be complemented by international cooperation.” It is important to recall that UNCTAD has been very active in promoting international cooperation in addressing restrictive business practices; in 1980 the UNCTAD held a conference on restrictive business practices, the outcome of which was a document titled The Set of Multilaterally Agreed Principles and Rules for the Control of Restrictive Business Practices (22th of April 1980, UN Doc. TD/RBP/CONF/10). The aim of the Document was to prevent and control the RBPs that have a negative impact on international trade, espiacially focusing on developing countries.

[33] E. Fox and J.A.Ordover, “The Harmonisation of Competition and Trade Law – The Case for Modest Linkages and Limits to Parochial State Action”, in World Competition, 1995, pg.18.

[34] P.J. Lloyd, “Multilateral Rules for International Competition Law?”, in The World Economy, 1998, pg.1132.

[35] Export cartels can be “pure” when they restrict competition only in foreign markets;, “mixed” when their effects are also felt in the exporting country’s domestic market; “national” and “international” depending if they involve exporters only from one or several countries. See D. Papakrivopoulos, supra, n. 19, pg. 50.

[36] The so called “beggar-thy-neighbour” competition policy.

[37] A. Mattoo and A. Subramanian, “Multilateral Rules on Competition Policy - A possible Way Forward”, in Journal of World Trade, 1997, pg. 103.

[38] ABA Section of Antitrust Law, “Report of the Special Committee on International Antitrust 8”, 1991.

[39] I.G. Bercero and  S.D. Amarasinha, “Moving the Trade and Competition Debate Forward”, in Journal of International Economic Law, 2001, pg.500.

[40] A.S. Grewlich, “Globalisation and Conflict in Competition Law, Elements of Possible Solution”, in World Competition, 2001, pg. 371.

[41] OECD, as supra, note 5, pg.11.

[42] The Havana Charter, Art. 46, paragraph 1.

[43] The Havana Charter, Art. 46, paragraph 3.

[44] The Havana Charter, Art. 48, paragraph 7.

[45] The Havana Charter, Art. 47.

[46] The Havana Charter, Art. 50, paragraph 1. This article contains a list of obligations for the Member States such as providing the Organisation with relevant information, make arrangements for presenting complaints, abide the decisions and recommendation of the Organisation taken pursuant to the provisions of the Chapter.

[47] As a result of the Uruguay Round, negotiation and the Marrakech Agreement, the WTO was created. The GATT 1947 was embodied in the GATT 1994 which is one of the Multilateral Agreements on Trade in Goods included in Annex 1A of the WTO. Annex 1B is constituted by the GATS, whereas Annex 1C by the TRIPS Agreement. The Annexes 2, 3 and 4 concern the Understanding on Rules and Procedures Governing the Settlement of Disputes, the Trade Policy Review Mechanism and the Plurilateral Agreements.

[48] Marrakech Agreement establishing the World Trade Organisation.

[49] GATT Art. XXIX:1 described the relationship between the GATT and the Havana Charter, by stating that “the Contracting Parties undertake to observe to the fullest extent of their executive authority the general principles of Chapter I to V…of the Havana Charter…”; in 1955 the deletion of Art. XXIX was unanimously approved and voted, but since one Contracting Party failed to ratify this modification, this article was never excluded. Some authors argue that it is uncertain if Members are still bound by the provisions included in Chapter V. An author argues that the failure of the Havana Charter does not affect, in principle, the enforcement of GATT Art. XXIX, therefore anti-competitive practices could still be prosecuted (Garcia-Castrillon). Notwithstanding the degree of uncertainty in respect of this issue, in my opinion it is could be argued that, , the Article has been deleted by subsequent practice of the States and manifest intention (opinio juris) of exclusion. A case of treaty law modify by subsequent customary law according to public international law.

[50] In 1958 a group of experts was encharged to study and make recommendations “with regard to whether , to what extent if at all, and how the Contracting Parties should undertake to deal with restrictive business practices in international trade” (Res. 5 Nov. 1958 BISD 7S/29). The work terminated in a Decision, (18 Nov. 1960, BISD 9S/28) with which it was decided that the present circumstances did not permit to the Contracting Parties to undertake any form of action, other than consultations whenever a Contracting Party so requested. Though, despite the fact that it was decided not to take any concrete action, the Contracting Parties recognised the harm and the threat of those practices for the expansion of international trade.

[51] M.C. Malaguti, supra, n. 13, pg. 122.

[52] See TRIPS Agreement, art. 40, para.3. This paragraph is also important because it provides an obligation for the Member addressed to co-operate through supply of available non-confidential relevant information, according to its domestic law and to the conclusion of mutually satisfactory agreements concerning the safeguarding of its confidentiality by the requesting Member. As M.C. Malaguti observes, (see supra, pg. 124, note n. 26) such provision embodies a principle of positive comity similar to the one included in the EC/U.S. 1998 Co-operation Agreement.

[53] See TRIMs Agreement, preamble, para.2 and Art. 9.

[54] European Economic Community, Payments and Subsidies paid to Processors and Producers of Oilseeds and Related animal Feed Proteins, Panel Report adopted on the 25th of January, 1990, B.I.S.D. 37S/86.

[55] P.C. Mavroidis and S.J. Van Siclen, “The Application of the GATT/WTO Dispute Resolution System to Competition Issues”, in Journal of World Trade, 1997.

[56] Italian Discrimination against Imported Agricultural Machinery, BISD 7S/60, adopted in October 1958. In para. 12 the Panel stated that the Article was meant to cover “any laws or regulations which might adversely modify the conditions of competition between domestic and imported products on the internal market”

[57] M.C. Malaguti, supra,n. 13, pg. 130.

[58] Report of the GATT Panel, Japan-Trade in Semi-Conductors, B.I.S.D., 35th  Supp. 116, paras. 104-109, adopted on May the 8th , 1988).

[59] M.C. Malaguti, see supra, n. 13, pg. 136-137.

[60] Japan – Measures Affecting Consumer Photographic Film and Paper, complaint by the U.S., WT/DS44./R, 1998.

[61] R. Hudec, supra, n. 9.

[62] C.O. Garcia-Castrillon, “Private Parties under the Present WTO (Bilateralist) Competition Regime, in Journal of World Trade, 2001, Vol. 35, n.1.

[63] B.M. Hoekman and P.C. Mavriodis, “Dumping, Antidumping and Antitrust”, in Journal of World Trade, 1996, pg. 42-43.

[64] D. Tarullo, supra, n. 14, pg. 449.

[65] For a complete description of the Kodak-Fuji dispute see N. Komuro, “Kodak-Fuji Film Dispute and the WTO Panel Ruling” in Journal of World Trade, 1998, Vol. 35, n. 5. According to the Author, in the majority of cases of non-violation complaints the Panels have dealt with positive measures. The only exception was the Panel in the German Import Duties on Starch and Potato Flour case, which clarified that an omission might trigger non-violation complaints under certain conditions, which specifically referred to a failure to fulfil the promise of lowering a tariff made during some negotiations.

[66] Norio Komuro, supra, n. 65, pg. 183.

[67] C.O. Garcia-Castrillon, supra, n.62, pg. 118.

[68] See ECC-Oilseed case, supra, n. 54, para. 114.

[69] R. Hudec, supra, n. 9.

[70] The concept of “reasonable expectations” is not envisaged in any provision, but is the result of the GATT jurisprudence. It first appeared in Australian Subsidy on Ammonium Sulphate (3 April 1950, B.I.S.D. II/188 para. 12). According to the literature (see A.T.L. Chua, “Reasonable Expectation and Non-Violation Complaints in GATT/WTO Jurisprudence, in Journal of World Trade, 1998, Vol. 32, n. 5, pg. 31), the principle is meant to protect three interests: firstly, the validity of assumptions on which governments act; secondly the value of the concessions made during the negotiations, and lastly the protection of the mutuality of the obligations, according to a more general principle of reciprocity in international law.

[71] As Chua, also points out (see supra, pg. 41), two more requirements are necessary in non-violation complaints based on reasonable expectation principle: the measure must not have been reasonably foreseeable by the complainant at the time the expectation arose, and the measure must, as such, frustrate the complainant’s reasonable expectation of better market access arising as a result of the negotiations. The first requirement is said to ensure the good faith of the complainant, while the second is directed at the good faith of the respondent.

[72] R. Hudec, supra, n. 9.

[73] GATT Art. XXIII:1 (c).

[74] The European Communities requested consultations against Japan in 1983, but ultimately did not pursue the complaint. See GATT Doc.L/5479.

[75] Petersmann, as cited by P.C.Mavroidis and S.J.Van Siclen, supra, n. 55, pg. 12.

[76] See B. Hindley, “Competition Law and the WTO: Alternative Structures for Agreement”, in Fair Trade and Harmonisation: Prerequisites for Free Trade, edited by Bhagwati and Hudec, 1996, Vol. 2, pg. 339: “Private anticompetitive practices can nullify and impair concessions. The failure of a Member to apply its national competition law to a private anticompetitive practice that has the effect of nullifying or impairing a concession is a valid basis for a complaint under Article XXIII:1 (b). Such a failure will be construed as an ‘application’ of a measure, as called for by Article XXIII:1 (b).” (Citation from J.F. Bellis, “Anti-competitive Practices and the WTO: The Elusive Search for New World Trade Rules”).

[77] See also F. Roessler, “Should Principles of Competition Policy be Incorporated into WTO Law through Non-Violation Complaints?”, in Journal of International Economic Law, 1999.

[78] F. Amato, “International Antitrust: What Future?”, in World Competition, 2001, pg. 454.

[79] Article 26 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, states: “Where the provisions of paragraph 1(b) of Art. XXIII of GATT 1994 are applicable to a covered agreement, a panel or the Appellate Body may only make rulings and recommendations where a party to the dispute considers that any benefit accurring to it directly or indirectly under the relevant covered agreement is being nullified or impaired or the attainment of any objective of that Agreement is being impeded as a result of the application by a Member of any measure, whether or not it conflicts with the provisions of that Agreement.”

[80] WTO Report, 1999, supra, n. 17.

[81] F. Roessler, supra, n. 77, pg. 416-417.

[82] U. Immega, “Basic Principles for an International Antitrust Code”, in Competition and Trade Policies, Coherence or Conflict?, London, 1998, pg.47.

[83] Interestingly, F. Amato, as supra, n. 78, notes that in the application of the ‘effects doctrine’ there is no extraterritoriality, because antitrust laws are meant to protect competition within a certain domestic market, regardless of where the practice takes place. This observation is true and precise, however usually the term “extraterritorial application of domestic laws” is commonly used to indicate all the circumstances in which domestic laws are applied beyond the border.

[84] Wood Pulp I, ECJ Sept. 27, 1988, 1988 ECR 5193.

[85] L. Fullerton and C.C. Mazard, “International Antitrust Co-operation Agreements”, in World Competition, 2001 Vol. 24, n. 3, pg. 406.

[86] K. Kennedy, supra, n.2, pg. 23.

[87] U. Immega, supra, n. 82, pg. 47.

[88] I. De Leon, supra, n. 8, pg.41.

[89] U. Immega, supra, n. 82, pg. 47. As the author noted, “public international law does not authorise investigations by competition authorities in foreign countries”. For a deeper analysis of the problems arising from extraterritorial enforcement of competition laws see L. Fullerton and C.C. Mazard, supra, n. 85, pg. 410-411.

[90] A.D. Mitchell, “Broadening the Vision of Trade Liberalisation – International Competition Law and the WTO”, in World Competition, 2001, Vol. 24, n. 3, pg. 350.

[91] The concept of comity has been described as “the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience and to the rights of its own citizens or of other persons who are under the prosecution of its laws.” (A.S. Grewlich, supra, n. 90, pg. 385.). In antitrust cases, agreements including positive comity provisions usually provide that “when the requesting country is concerned that anti-competitive conducts in the requested country is harming its important national interests, and believes that the conduct may be illegal under the requested county’ s laws, the requesting country may request that the requested country take action against the anti-competitive conduct” (L.Fullerton and C.C. Mazard, supra, n. 85, pg. 413), whereas mere requests for investigatory assistance fall within the negative comity.

[92] This classification follows the one provided by the OECD in “Trade and Competition Policies – Options for a Greater Coherence”, OECD, Paris 2001, pg. 41-42.

[93] See supra, n. 25.

[94] R. Pitofsky, “Competition Policy In A Global Economy – Today and Tomorrow”, in Journal of International Economic Law, 1999, pg. 407.

[95] See F. Amato, supra, n. 78, pg. 463, and L. Fullerton and C.C. Mazard, supra, n. 85, pg.417.

[96] In 1997 the US Justice Department asked the EC to investigate the alleged anticompetitive practice identified by SABRE (computer airline reservation system), which was complaining against the failure of the European airlines to provide SABRE with data comparable to the ones offered to their own reservation systems, with the aim of favouring them.

[97] Part B, Art. 1.

[98] Part B, Art. 2 (d).

[99] Part A, Art. 1.

[100] Part B. Art. 2 (b).

[101] D. Tarullo, “Norms and Institutions in Global Competition Policy”, in The American Journal of International Law, 2000, pg. 495, defines the OECD approach as a “regulatory convergence approach, which involves a system of structured international activities through which national laws and regulations are made more congruent […]. Such approach does not include a formal agreement, but relies on contact and co-operation between national officials.”

[102] OECD, supra, n. 92, pg. 54.

[103] OECD Conference on Trade and Competition, Paris 29-30 June 1999.

[104] ICPAC Final Report, see supra, n. 21, Ch. 5, pg. 26.

[105] Such Global Competition Initiative should provide a framework of dialogue including international cartels, multinational merger control and market blocking of private restraints, and also an effort to deepen and multlateralise positive comity. It should provide information, technical experience and mediation mechanisms. The proposal also received the approval of the DG IV Commissioner Mario Monti, who at the same time carries out the approach towards multilateral rules belonging to the previous administration, and endorsed the necessity of developing multilateral competition rules in the following Round of negotiations. See M. Monti, “Co-operation between competition authorities – a vision for the future”, as cited by L. Fullerton and C.C. Mazard, supra, n 85, pg. 408.

[106] E. Fox, “The Elusive Promise of Modernisation: Europe and the World”, in Legal Issues of Economic Integration, 2001, pg.147.

[107] F. Jenny, “Globalisation, Competition and Trade Policy: Issues and Challenges”, in Towards WTO Competition Rules, edited by R. Zach, Berne,1999, pg. 26.

[108] UNCTAD, “Closer Multilateral Cooperation on Competition Policy: The Doha Mandate”, Draft Consolidated Report of the Regional Meetings held in Panama, Tunis and Hong Kong, 22 of April 2002, para. III, pg. 8.

[109] F. Jenny, Id.

[110] F. Jenny, Id.

[111] UNCTAD, “Experiences Gained so far on International Cooperation on Competition Policy Issues and the Mechanisms Used”, Revised Report by the UNCTAD Secretariat, 2002,TD/B/COM.2/CCLP/21/Rev. 1, para. 30.

[112] L. Lanucara, “Interaction Between Antitrust and International Trade: In Favour of a WTO Approach”, in Diritto del Commercio Internazionale, 2001, pg. 408.

[113] D. Tarullo, see supra, n. 101.

[114] See OECD, as supra, n. 5.

[115] E. U. Petersmann, “Competition-oriented Reforms of the WTO World Trade System – Proposals and Policy Options”, in Towards WTO Competition Rules, edited by R. Zach, Berne 1999, pg. 61.

[116] I. Garcia-Bercero and S.D. Amarasinha, supra, n. 39, pg. 502.

[117] Id.

[118] Id.

[119] See, “Communication from the European Communities and its Member States – A Multilateral Framework Agreement on Competition Policy”, 21 Sept. 2000, WT/WGTCP/W/152.

[120] See for example the “Plurilateral Agreement on Competition and Trade” proposed in the 1995 EU Group of Experts Report.

[121] See “USTR Zoellick Outlines U.S. Efforts to Promote Growth and Development by Launching New Trade Round: U.S.- E.U. Effort Directed at Expanding and Strengthening Global Trading System”, www.ustr.gov/releases/2001/07/01-54.pdf.: “In competition policy, U.S. trade and antitrust authorities recognize the significance of the issue. Therefore, we are working to understand more clearly what the EU seeks, and are discussing with the EU how it can accommodate the concerns of the United States and other countries. The United States can see merit in adherence to core competition principles of transparency, non-discrimination and procedural fairness. We also can support consultative capacity building efforts to help countries develop modern competition policy that promotes efficient, effective and dynamic markets”.

[122] UNCTAD, supra, n. 111.

[123] WTO, Ministerial Declaration, Fourth Session Doha, adopted the 14 Nov. 2001, WT/MIN(01)DEC/1, art. 23.

[124] R.D. Anderson and P. Holmes, “Competition Policy and the Future of the Multilateral Trading System”, in Journal of International Economic Law, 2002, pg. 531.

[125] UNCTAD, see supra, n 108, pg. 6.

[126] Paragraph 25 states: “In the period until the Fifth Session, further work in the Working Group on the Interaction between Trade and Competition Policy will focus on the clarification of: core principles, including transparency, non-discrimination and procedural fairness, and provisions on hard core cartels; modalities for voluntary co-operation; and support for progressive reinforcement of competition institutions in developing countries through capacity building. Full account shall be taken of the needs of developing and least developed country participants and appropriate flexibility provided to address them”.

[127] R. D. Andreson and F. Jenny, “Current Developments in Competition Policy in the World Trade Organisation”, in Antitrust, 2002, pg. 42.

[128] See E. Fox, “Competition Law and the Millennium Round”, in Journal of International Economic Law, 1999, p. 665.

[129] E.U. Petersmann, supra, n. 115, pg. 48.

[130] Id.

[131] E.M. Graham and J.D. Richardson, (edited by), Global Competition Policy, Washington DC 1997, pg. 560.

[132] F. Jenny, supra, n. 107, pg. 29.

[133] A. Mattoo and A. Subramanian, supra, n 37, pg. 112.

[134] E.U. Petersmann, “Legal, Economic and Political Objectives of National and International Competition Policies: Constitutional Functions of WTO ‘Linking Principles’ for Trade and Competition”, in New England Law Review, 2000, pg. 159.

[135] For example, Hong Kong and Singapore are not equipped with national competition authorities, and they argue that their open trade policies supplement competition regulation.

[136] WTO Report of the Working Group on the Interaction between Trade and Competition Policy to the General Council, 2001, WT/WGTCP/5, paras. 37-38.

[137]  K. Kennedy, supra, n 2, pg. 275.

[138] See OECD, supra, n. 92, pg.41.

[139] See GATT, Art. III. With regard to competition policy and laws, the provisions of Art. III:4 are the most relevant.

[140] According to GATS Art. XVII: 2, “A Member may meet the requirement of paragraph 1 by according to services and services suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and services suppliers.” Paragraph 3 continues: “Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of services and services suppliers of the Member compared to the like services or services suppliers of any other Member”.

[141] This point was made by the U.S. delegation. See Working Group on the Interaction between Trade and Competition Policy, Report on the Meeting of 5-6 July 2001, WT/WGTCP/M/15, para. 43.

[142] WTO, supra, n. 136, para. 19.

[143] WTO Working Group on the Interaction between Trade and Competition Policy, Report to the General Council, 2000, WT/WGTCP/4, para. 75.

[144] See supra, n. 119.

[145] K. Kennedy, supra, n 2, pg. 274.

[146] I.G. Bercero and S.D. Amarasinha, supra, n. 39, pg. 494.

[147] Guidelines can also fall within the obligation. The Panel in Kodak-Fuji stated that Art. X:1 should be extended to “general administrative rulings in individual cases where such rulings establish or revise principles or criteria applicable in future cases.”

[148] I.G. Bercero and S.D. Amarasinha, supra, n. 39, pg. 494.

[149] K. Kennedy, supra, n. 2, pg. 278.

[150] See TRIPs, Part III, Art. 41-49.

[151] I.G. Bercero and S. Amarasinha, supra, n. 39, pg. 494.

[152] Y. Jung, “Modelling a WTO Dispute Settlement Mechanism in an International Antitrust Agreement – An Impossible Dream?”, in Journal of World Trade, 2000, pg. 99.

[153] I.G. Bercero and S.D. Amarasinha, supra, n. 39, pg. 504.

[154] OECD, “Outline of (A) Core Principles, Common Approaches and Common Standards and (B) Bilateral and Multilateral Approaches”, Oct. 1999, COM/TD/DAFFE/CLP(98)97/Final, paras. 4-6. In the same Report the OECD stresses in detail further reasons for the inapplicability of WTO panel review of individual cases, such as problems of sovereignty of domestic competition authorities and courts, the complex fact intensive nature of competition analysis, sensitivity of information involved, lack of enforcement powers against firms of WTO panels. See para. 36.

[155] Y. Jung, supra, n. 152, pg. 105.

[156] R. Hudec, supra, n. 9.

[157] See OECD, supra, n. 92, pg. 25.

[158] K. Kennedy, supra, n.2, pg. 283.

[159] I.G. Bercero and S. Amarasinha, supra, n. 39, pg. 506.

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