WORLD TRADE
ORGANIZATIONWT/WGTCP/W/66
26 March 1998
(98-1211)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE UNITED STATES
The following communication, dated 10 March 1998, was received from the Permanent
Mission of the United States with the request that it be circulated to Members.
_______________
Impact of Anti-competitive Practices of Enterprises and
Associations of International Trade
I. INTRODUCTION
In this submission, the United States discusses its views and experience with respect to
anti-competitive practices and their relationship to, or effect on, international trade.  Before
proceeding with that discussion, we would like to offer a few remarks to explain the approach that we
have taken to this topic.
First, this submission is by no means intended to be an exhaustive treatment of the role which
such practices can play, nor of our views on or approaches toward addressing this topic.  In some
respects, it could be argued that the members of the multilateral trading system are just beginning to
appreciate the full impact which anti-competitive practices can have on the flow and direction of
global trade as well as the certainty of the concessions made and obligations undertaken bygovernments over the course of one half-century of trade liberalization.
Second, our submission draws upon the experience of both antitrust and trade policies in
considering the issue.  We offer neither as a perfect analysis, but seek merely to further the educative
mandate of this Working Group by sharing both the common and the divergent perspectives which
each policy framework has to offer on this topic.
Third, whereas our submission and, no doubt, others will speak generally of "anti-competitive
practices" and their "impact on international trade", we wish to observe at the outset that a serious andbalanced discussion of this issue may actually warrant a more careful use of terms.  Actions and
practices such as some horizontal agreements, vertical restrictions and arrangements, practices by
dominant firms and mergers with international scope can, but do not necessarily or always, have
anti-competitive consequences.  By the same token, these same actions and practices may or may not
have international trade effects.  In some instances, they may affect both competition and trade, but inother instances, neither may be affected.  These convergences and divergences are elaborated in
greater detail later in this paper.  They should also be borne in mind as the Working Group discusses
the application and objectives of trade and competition policies, and the extent to which the tools and
techniques of one policy can profitably (or properly) be employed to achieve the goals of the other.
Competition policy and trade policy each have independent - and legitimate - objectives;  theWT/WGTCP/W/66
Page 2
outcomes of one policy may sometimes complement or help serve the purposes of the other, but it
remains important to be aware of their differences if we are to understand fully their interaction.  At a
minimum, what seems clear is that the trade policy objectives of trade liberalization,
non-discrimination and transparency can generally go a long way toward facilitating robust
competition in markets, whereas the establishment and vigorous enforcement of sound antitrust laws
and competition policies can generally go a long way toward assuring the conditions which areconducive to expanding and sustaining free and open trade among nations.
One final caveat has to do, again, with the scope of our paper.  This fourth meeting of the
Working Group is the first in which we begin the process of assessing the question of the "interaction"
between trade and competition policy in the context of particular issues or practices which arise in
both the trade policy and competition policy fields.  Because much of the focus of this paper is on
how anti-competitive practices affect trade and the role which competition policy can play in
enhancing trade liberalization, we have not always restricted our discussion to "private"anti-competitive practices, per se , but have included such topics as regulation and other means by
which government action (or inaction) may interrelate with private conduct to restrict competition
and/or market access.  In certain respects, therefor e, this paper anticipates the examination of issues
on the agenda of the next several meetings of the Working Group.  In future meetings, we may wish
to return to some of the thoughts introduced in this paper, as well as to explore certain issues ingreater detail.
In the following section, we discuss the experien ce of the US federal antitrust agencies with
private anti-competitive practices which have an international dimension.  Then, we present a
discussion of the growing role assumed by such practices in the formulation and implementation of
trade policy.  Each section will conclude by offering some questions and thoughts for considerationabout the use of remedies and possible ways to improve upon the manner in which such practices are
addressed.
II. EXPERIENCE OF U.S. ANTITRUST AUTHORITIES WITH PRIVATE ANTI-
COMPETITIVE PRACTICES AFFECTING INTERNATIONAL TRADE
Since the passage of the Sherman Act in 1890, the US federal antitrust enforcement agencies
have accumulated a great deal of experience in dealing with private anti-competitive practices,
including those affecting international trade.  During the 108 years of US federal antitrust
enforcement, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have
brought many thousands of cases of various sorts.  The economic globalization of recent years has
required the US agencies to focus more and more attention on private anti-competitive conduct thathas an international dimension.  This section of our submission describes the US antitrust agencies'
experience with such conduct.
1  It does not, however, focus as much on private anti-competitive
conduct without an international dimension, i.e., where the actors are domestic and the conduct occurs
domestically, although it should be noted that this type of conduct also can affect international trade.
Consistent with the Chairman's suggestions at the last meeting, this section of the paper
contains numerous concrete examples and discusses how particular types of anti-competitive practices
have affected imports, exports, and/or investme nt, and which economic sectors and geographic areas
have been affected by such practices.  Finally, in response to the Chairman's request, we will discuss
the types of antitrust remedies that the United States has used to deal with international anti-
competitive practices, to what extent antitrust enforcement deters such conduct, and whether there are
ways in which the current enforcement regime could be improved.
                                                     
1 Recent US government antitrust enforcement, including international enforcement, is discussed in this
year's Economic Report of the President 195-214 (February 1998).WT/WGTCP/W/66
Page 3
A. Summary of International Antitrust Enforcement by DOJ and FTC
US antitrust laws are the ultimate protector of the competitive process that underlies our free
market economy.  As explained in graphic terms by  Thurman Arnold, Assistant Attorney General for
Antitrust under President Franklin Roosevelt, "t he competitive struggle without effective antitrust
enforcement is like a fight without a referee".  Antitrust enforcement is not a simple process.  In the
last ten years alone, DOJ has filed nearly 700 criminal cases (in matters involving price-fixing,
bid-rigging, and market allocation among competitors);  DOJ and FTC together have reviewed nearly
25,000 proposed mergers and challenged or otherwise remedied nearly 400 anti-competitive mergers
and acquisitions;  and the two agencies together have filed over 150 cases involving otheranti-competitive practices (in matters involving monopolization, attempted monopolization,
anti-competitive but non-criminal agreements among competitors, and anti-competitive use of vertical
restraints and intellectual property rights).  US consumers and businesses benefit from the kind of
open, free market economy which such antitrust enforcement engenders.  Protecting against anti-
competitive private conduct helps consumers obtain more innovative, high-quality goods and servicesat lower prices.  It also enhances the worldwide competitiveness of US businesses by promoting
healthy rivalry, encouraging efficiency, and ensuring a full measure of opportunity for all competitors,
domestic and foreign alike.
2
There are no systematic data on how many of these matters might be said to be "international"
in some way or to affect international trade.  Nor is there any generally accepted definition of an
"international" matter, though relevant factors might include whether one or more of the firms
involved (or affected by the practices at issue) is incorporated outside the United States, whether
relevant conduct occurred abroad, whether significant evidence is located abroad, or whether a foreigngovernment is involved in the anti-competitive conduct.   This lack of data in part reflects DOJ's and
FTC's longstanding policy that they "do not discriminate in the enforcement of the antitrust laws on
the basis of the nationality of the parties.  Nor do [they] employ their statutory authority to further
non-antitrust goals."
3  But we do know that US antitrust enforcement work of all sorts is becoming
more international in terms of the firms involv ed, the location of relevant evidence, and the
enforcement interests of other countries, among other factors.  For example, in 1997, nearly
30 per cent of DOJ's criminal antitrust investigations had substantial international aspects (up from
10 per cent in 1993) and involved firms based in over 20 countries.  Routinely, about 50 per cent of
the FTC's pending merger investigations involve ma tters in which the FTC has been in contact with
foreign enforcement authorities because one or both of the parties, relevant assets, or significant third-party information is located abroad.
The international aspect of US federal antitrust enforcement has varied greatly over the
years.
4  The first major case with an international dimension was the American Tobacco  case, filed in
1907. In that case, DOJ filed charges against 94 US firms and individuals and two British firms,challenging the creation by the defendants of a private tobacco monopoly in the United States.  One
part of the illegal conduct was an agreement between US and British tobacco firms that they would
stay out of one another's "home" markets and divide up the rest of the world.  Such elimination of
                                                     
2 As Dr. Michael Porter has explained, "[f]ew roles of government are more important to the upgrading
of an economy than ensuring vigorous domestic rivalry ... .  A strong antitrust policy, especially in the area ofhorizontal mergers, alliances, and collusive behavior, is essential to the rate of upgrading in an economy".
M. Porter, "The Competitive Advantage of Nations", 662-663 (1990)
3 DOJ and FTC, Antitrust Enforcement Guidelines for International Operations 2 (April 1995)
4 The history of US international antitrust enforcement is discussed in detail in numerous treatises.  See,
e.g., 1 W. Fugate, Foreign Commerce and the Antitrust Laws 5-13 (5th ed. 1996);  1 B. Hawk, United States,
Common Market and International Antitrust: a Comparative Guide 1-28 (2d ed. 1996);  1 S. Waller, J. Atwood,
K. Brewster and S. Waller’s Antitrust and American Business Abroad §§2.1-2.23 (1997)WT/WGTCP/W/66
Page 4
competition adversely affected US consumers (as well as those in the United Kingdom and the other
countries targeted by the agreement).  When the British firms argued that their conduct was not
covered by the Sherman Act, the US Supreme Court disagreed, holding the conduct of the defendants,
US and British alike, to be illegal.5  At approximately the same time, DOJ also challenged various
agreements among competing US, Canadian and European shipping firms to eliminate competition
involving travel to and from US destinations;  some of these prosecutions were successful, whileothers were mooted by the First World War.
6  Again, the agreements harmed not only US consumers,
but consumers and firms in other countries that relied on these shipping routes.
It was not until the 1940s and early 1950s, however, that the US agencies began to bring
significant numbers of "international" antitrust cases that involved foreign firms or were directly
concerned with international trade.  During that period, DOJ filed charges (some criminal, some civil)
against a wide range of international cartels involving US and European firms;  the many products
involved included aluminum - the famous Alcoa  case7 - dyes, incandescent lamps, nylon, titanium,
tungsten carbide, roller bearings, military optical equipment, and aircraft instruments, among others.8
The terms of the challenged cartel agreements varied from case to case.  Many agreements were along
the lines of the one reached in American Tobacco  :  US firms agreed not to sell in Europe, European
firms agreed not to sell in the United States, and other arrangements were made to limit competition
in third-country markets.  Other cartel agreements were effectuated through various anti-competitive
intellectual property licensing restrictions.9  The relief obtained by DOJ against these cartels also
varied; further implementation of the cartels in US markets was forbidden, and criminal fines
(significant ones by contemporary standards) sometimes were imposed on both firms and individuals.
During the 1960s through 1980s, the US agencies brought important, though relatively
infrequent, international cases.  Examples include the Singer   case, which involved a conspiracy -
 effectuated through patent pooling - between US  and Swiss sewing machine producers to eliminate
competing Japanese imports into the United States10;  the Canadian Radio Patents  case, in which US
and Dutch firms were charged with restraining US exports of radios and televisions to Canada,
through the anti-competitive use of patent pools11;  the Addison-Wesley Publishing  case, in which US
and British book publishers had allocated world markets among themselves12;  and DOJ prosecutions
of US and Central American airlines for price-fixing on international routes.13  D O J  a l s o  o b t a i n e d
                                                     
5 United States v. American Tobacco Co. , 221 US 106, 142-143, 181-184 (1911)
6 United States v. Pacific & Arctic Ry., 228 US 87 (1913);  United States v. Hamburg-Amerikanische
Packetfahrt-AG, 239 US 466 (1916)
7 United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945)
8 See authorities cited at n.4, supra
9 For example, in United States v. National Lead Co. , 332 US 513 (1947) - the titanium cartel case -
there was a complex set of agreements among the cartel members concerning the use of their patent rights,including patent exchanges, that had the effect of enforcing the cartel agreement.
10 United States v. Singer Mfg. Co., 374 US 174 (1963)
11 United States v. General Electric Co. , 1962 Trade Cas. (CCH)  ¶¶70,342, 70,428, 70,546 (S.D.N.Y.
1962)
12 United States v. Addison-Wesley Publ. Co. , 1976-2 Trade Cas. (CCH) ¶61,225 (S.D.N.Y. 1976)
13 United States v. Air Florida, Inc. , Crim. No. 84-260 (D.D.C. filed 11 July 1984).  The defendants
paid criminal fines.WT/WGTCP/W/66
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injunctive relief against US trade associations that, by means of discriminatory codes of conduct,
"stamps of approval", membership restrictions, and the like, had excluded foreign competitors in the
boiler and material handling equipment markets.14  In addition, during the latter part of this period, the
US agencies began to review increasing numbers  of mergers and acquisitions involving US and
foreign firms.
During the 1990s, US antitrust enforcement has frequently had international aspects.  Much of
DOJ's criminal enforcement work these days involves  international cartels, much of the merger work
of DOJ and FTC involves mergers and acquisitions with some foreign involvement or likely effect,
and much of the two agencies' enforcement work involving other anti-competitive practices occurs in
an international environment.  Many examples of international antitrust matters involving cooperation
between US and foreign antitrust agencies are contained in the United States' recent submission on
antitrust cooperation15, and will not be repeated here;  additional examples follow.
In the last several years, DOJ has brought a series of criminal prosecutions of international
price-fixing and market allocation cartels16 involving products and services as diverse as thermal fax
paper, plastic dinnerware, industrial diamonds, pe sticides, powdered metals, tampico fiber, lysine,
sodium gluconate, marine construction and transportation services17, and - just last month - graphite
electrodes.18  One-half of the suspected international cartels now under investigation by DOJ involve
over US$100 million/year in US commerce, while some, such as the Graphite Electrodes  conspiracy,
have affected over US$1 billion/year in US commerce.  These conspiracies, of course, may also
involve very large amounts of non-US commerce.
One important recent case, the citric acid conspiracy, will serve to illustrate common
international cartel themes.  In that case, four firms - Archer Daniels Midland Company, a US firm;  a
US subsidiary of Bayer AG, a German firm;  an d Hoffman-LaRoche and Jungbunzlauer, both Swiss
firms - as well as several foreign nationals all pled guilty to conspiring to fix prices and allocate salesin the United States and elsewhere for citric acid, a food additive, during the period July 1991-
June 1995.  Annual sales of this product exceed US$l.2 billion worldwide.  The conspiracy was
complex.  High-level executives at the firms held secret meetings throughout the world where they
agreed on the broad terms of the conspiracy, leaving it to lower-ranking executives to work out the
                                                     
14 United States v. American Soc’y of Mechanical Engineers, Inc., 1972 Trade Cas. (CCH) ¶74,028
(S.D.N.Y. 1972); United States v. Material Handling Institute, Inc., 1973-1 Trade Cas. (CCH) ¶74,362(W.D. Pa. 1973)
15 US Experience with Antitrust Cooperation Agreements, WT/WGTCP/W/48 (24 November 1997),
at 5-7
16 Such cartels might also utilize customer allocation or production limitations to the same end.
17 In United States v. Heeremac, V.O.F. , No. 97-CR-869 (N.D. Ill. filed 22 December 1997), a Dutch
firm and Dutch national agreed to plead guilty to conspiring to rig bids for heavy-lift marine constructionservices in the United States and elsewhere.  In United States v. Dockwise, N.V. , No. 97-CR-870 (N.D. Ill.
22 December 1997), a related case filed at the same time, a Belgian firm, its US subsidiary, and two Dutchnationals agreed to plead guilty to conspiring to rig bids for semisubmersible heavy-lift transport services in the
United States and elsewhere.  The defendants in th e two cases agreed to pay criminal fines totaling
US$65 million.  These investigations are ongoing.
18 United States v. Showa Denko Carbon, Inc. , No. 98-85 (E.D.Pa. filed 23 February 1997).  In that
case, a US subsidiary of a Japanese firm pled guilty to participating between 1993 and January 1997 in aninternational conspiracy to fix prices and allocate mark et shares worldwide of graphite electrodes, which are
used in the production of steel.  As noted, this conspi racy involved a very large amount of US commerce.  The
investigation is continuing.WT/WGTCP/W/66
Page 6
details and implementation of the agreement.  The cartel members agreed on a sophisticated
enforcement system to police their agreement.  First, they agreed on the prices they would charge for
citric acid and the precise percentage of the total market share that each participant was allowed to sell
worldwide. Next, each company shared its monthly figures for worldwide sales with its co-
conspirators, so that they could see whether each company was staying within its allotted sales
volume percentage.  Finally, the conspirators reviewed the sales of each conspirator at the end of theyear, and any company that sold more than its allo tted share was required in the following year to
purchase the excess from another conspirator that had not reached its volume allocation target.  Total
US criminal fines thus far exceed US$140 million.  Private treble damage actions filed by firms that
allegedly were harmed by the conspiracy are pending.
Most mergers, domestic and international alike, present no significant competitive concerns.
Indeed, an important result of globalization has been the entry of new foreign competition into US
markets, so that some mergers that might previously have been anti-competitive have had no such
effects.  Nevertheless, some international mergers are problematic and may well be reviewed byseveral jurisdictions.  Recent international merger cases brought by US authorities have included the
1995 Kimberly Clark/Scott  case, involving a merger of competing US-based paper product firms that
prompted antitrust investigations in several countries, including the United States, Canada,
Costa Rica, the European Union (EU) and Mexico, and resulted in remedial divestiture orders in
several countries, including the United States.  Another example is the 1994  Allison/ZF  merger case,
in which DOJ and the German Federal Cartel Office each investigated the proposed acquisition of a
US truck transmission producer by a German competitor;  each agency decided to seek to block the
transaction, which ultimately was abandoned by the parties.
19
Similarly, numerous mergers with trans-border effects in the pharmaceutical industry were
reviewed by the FTC and the EU over the last several years, e.g., Glaxo/Wellcome,
Upjohn/Pharmacia  and Ciba-Geigy/Sandoz .20  These cases illustrate that relevant geographic markets
remain "national" for approved medicines and devices - because of national licensing regimes - but
that global markets may exist in products in advanced stages of research, development and testing.Several of these mergers raised concerns that promising new developments might be thwarted before
reaching the market.  In Ciba-Geigy/Sandoz , for example, the parties - both Swiss - entered into a
consent agreement with the FTC whereby they agreed to license certain intellectual property rights in
order to maintain competition in the development of gene therapy treatments for cancer.
Some mergers and acquisitions may have significant effects beyond the borders of the
countries in which the merging parties are based or have production facilities.  For example, inBoeing/McDonnell Douglas , the parties' production facilities were located in the United States, but
their customers were located all over the world.  The merger was cleared after review by the FTC
21
                                                     
19 The OECD has published a study, Merger Cases in the Real World: a Study of Merger Control
Procedures (1994), that contains much useful information on contemporary international merger cases,including nine case studies.
20 Glaxo plc , FTC Docket No. C-3586, reported in  5 Trade Reg. Rpt. (CCH)¶23,784 (1995); The
Upjohn Company , FTC Docket No. C-3638, reported in  5 Trade Reg. Rpt. (CCH) ¶23,914 (1996);  Ciba-Geigy
Ltd., FTC Docket No. C-3725, reported in  5 Trade Reg. Rpt. (CCH) 24,182 (1997)
21 See separate statements by FTC Chairman Pitofsky (with Commissioners Steiger, Starek and
Varney) and by Commissioner Azcuenaga, 1 July 1997, in the matter of the Boeing Co., available on the FTC's
homepage on the World Wide Web, http://www.ftc.gov.WT/WGTCP/W/66
Page 7
and the EU22, after the parties undertook certain commitments to the EU.  Likewise, the 1994
Oerlikon-Buhrle/Leybold23 merger involved production assets located in Germany and Switzerland
but significant distribution in the United States.  The FTC and the German Federal Cartel Office
coordinated their efforts at obtaining relief.
With respect to enforcement against other anti-competitive practices, there are several recent
examples of US cases with an international context.  In the 1994 Pilkington  case, DOJ charged a
British firm and its US subsidiary with monopolizin g the worldwide flat glass market.  The complaint
charged that Pilkington entered into unreasonably restrictive licensing arrangements with its likely
competitors (including US firms) and, for over three decades, used these arrangements and threats of
litigation to prevent US firms from competing to design, build, and operate flat glass plants in other
countries, even though Pilkington no longer had enforceable intellectual property rights to warrant
such restrictions.  The case was settled by a consent decree.24  In another case, a German firm, Bayer
AG, had made extensive preparations to enter the US market with a patented new insecticide likely toprovide potent competition to US-based S.C. Johnson & Sons, the US market leader.  At the last
moment, Bayer decided not to enter the US market, but instead licensed its product to Johnson.
Because Bayer had been likely to enter the US market (either directly or through license), Bayer's
action deprived US consumers of a likely entrant in the insecticides market, without any
countervailing competitive benefits.  DOJ thus challenged the conduct, and a consent decree enjoinedthe license.
25  Three other recent matters - the Microsoft, Sabre , and Nielsen  cases - are discussed in
our recent WTO submission on antitrust cooperation.
B. Import, Export and Investment Effects
For analytical purposes, our discussion of th e import, export and investment effects of the
anti-competitive practices prosecuted by DOJ and FTC will be organized by the type of practice:cartel, merger, and other anti-competitive practices, respectively.
It should be clear from the foregoing discussion that international cartels often have, and are
intended by cartel members to have, a significant impact on all three dimensions of international
trade.  From the time of  American Tobacco , market allocation agreements have had the effect of
restricting, and often totally eliminating, imports into the United States of the affected product orservice from other countries, US exports to other countries, and the possibility of competitive US
investment abroad (and vice-versa).  Other cartel arrangements, like those in citric acid, limit sales
overall, but may not have country-specific limitations .  One effect of our vigorous actions against
cartels has been to open up US markets to foreign competition, and to encourage US firms to export to
countries that they had previously agreed to avoid.
26  And, obviously, action against trans-border and
even domestic price-fixing agreements benefits foreign as well as domestic consumers.27
                                                     
22 Boeing/McDonnell Douglas , OJ L 336/16 (8 December 1997), Case No. IV/M.877
23 Oerlikon-Buhrle Holding AG , FTC Docket No. C-3555, reported in  5 Trade Reg. Rpt. (CCH)
¶23,697 (1994)
24 United States v. Pilkington plc , 1994-2 Trade Cas. (CCH) ¶70,842 (D.Ariz. 1994); see  Econom ic
Report of the President, supra , at 210
25 United States v. S.C. Johnson & Sons, Inc. , 1995-1 Trade Cas. (CCH) ¶70,884 (N.D. Ill. 1994)
26 The Addison Wesley  case cited above is said to have resulted "in the opening to US publishers of
foreign markets previously closed to them".  1 Hawk, supra , at 20
27 For example, in 1992, DOJ filed a civil complaint charging eight US airlines and the Airline Tariff
Publishing Company (ATP) with price fixing on domestic fares.  ATP, which is owned by a group of airlines,
including the defendant airlines, is an airline fare data collection and dissemination service.  DOJ alleged that,WT/WGTCP/W/66
Page 8
The potential trade effects of anti-competitive mergers - which, of course, ordinarily are
stopped before they occur as a result of US premerger notification requirements - are more difficult to
summarize with any specificity.  Precisely because US merger cases almost always are filed prior to
consummation of the transaction, post hoc  empirical data about trade effects is largely non-existent.
Broadly speaking, however, mergers by competitors can have two types of anti-competitive effects:  a
lessening of competition through coordinated interaction, and/or a lessening of competition throughunilateral effects.
28  Translated to an international contex t, anti-competitive mergers could have some
of the same trade effects as cartels and other anti-competitive practices:  higher prices for US (and
foreign) consumers and/or reduced output, such that some consumers who would purchase the
product at competitive prices do not do so.   For example, in Shell/Montedison29, the FTC alleged that
the merger of the Shell and Montedison polypropylene businesses might impair the ability of the
existing Union Carbide/Shell joint venture to engage in export sales through licensing of
polypropylene technology.  The consent agreement and final order in that case were designed tomaintain competition in the world market for polypropylene technology licensing.
In recent years, the joint venture (sometimes called a "strategic alliance") has been a means by
which firms may "test the water" in a new market.  For example, when the FTC, subject to conditions,
allowed the 1983 General Motors/Toyota  automobile joint venture
30, Honda and Nissan had already
established US production facilities.  Toyota, however, was uncertain about the idea and, instead,entered into a joint venture with GM that also permitted GM to learn about Japanese production
methods.  Another joint venture "learning" arrang ement between Nippon Sheet Glass (NSG) of Japan
and Pilkington plc of the United Kingdom raised competitive concerns at the FTC in 1990.  Pilkington
was the world's largest producer of flat glass produced by the "float" process, and owned
Libbey-Owens-Ford (LOF), one of the largest US producers of flat glass.  NSG was also a significantflat glass producer in Japan and elsewhere in Asia and the Pacific.  NSG entered into an agreement to
acquire 20 per cent of LOF's stock from Pilkington;  ancillary to the stock purchase agreement was a
so-called Capacity Agreement that would have prohibited both Pilkington and NSG from
independently building or acquiring capacity for the production of flat glass in North America, except
through LOF, for a period of five years.  The matter was resolved by a consent agreement wherebythe parties abrogated the Capacity Agreement and agreed not to restrain capacity in North America or
imports to North America.
31  Joint ventures, thus, may have the pro-competitive advantage of
allowing foreign firms or investment into a new market, but should be carefully analysed to ensure
that they will not foreclose subsequent foreign or domestic entry.
                                                                                                                                                                    
using ATP, the airlines were able to engage in an el aborate dialogue with one another about future fares that
(continued … )
( … continued)
resulted in agreement on future fares or the elimination of fare discounts.  The case was settled by consentdecrees whereby all defendants agreed to  refrain from the alleged conduct.  United States v. Airline Tariff Publ.
Co., 1994-2 Trade Cas. (CCH) ¶70,687 (D.D.C. 1994); 1993-2 Trade Cas. ¶70,409 (D.D.C. 1993)
28 For a discussion of these two types of potential effects,  see DOJ & FTC's Horizontal Merger
Guidelines §2 (8 April 1997).  As the Guidelines explain, coordinated interaction "is comprised of actions by agroup of firms that are profitable for each of them only as a result of the accommodating reactions of theothers".  For example, a price increase might be profitable only if rivals follow.  Unilateral effects, as the term
implies, constitute actions - such as increasing prices or suppressing output - that firms may find profitable to
undertake on their own.
29 Montedison/Shell , FTC Docket No. C-3580, reported in  5 Trade Reg. Rpt. (CCH) ¶23,749 (1995)
30 General Motors Corp. , 103 F.T.C. 374
31 Nippon Sheet Glass Co., Ltd., 114 F.T.C. 568WT/WGTCP/W/66
Page 9
The potential trade effects of other anti-competitive practices vary, of course, with the type of
practice at issue.  The conduct in some US cases involving agreements among competitors, such as
the Singer, Material Handling , and S.C. Johnson  cases discussed above, had the effect of excluding
foreign competitors from US markets (with or without their consent).  Other cases, such as DOJ's
recent Laminated Tubes  case32, involved broader agreements to keep US firms out of foreign markets
and foreign firms out of the United States.  Still other cases, such as DOJ's Pilkington case, involved
monopolistic conduct aimed at keeping US exporters out of foreign markets.
C. Product and Geographic Scope
As shown above, the US experience in international antitrust enforcement has been that
anti-competitive conduct has occurred with respect to a very wide range of products and services.
While many of the products involved in cartel agreements have been non-branded, commodity-type
products ( e.g., titanium, lysine, sodium gluconate), that has not always been the case ( e.g., military
optical equipment, plastic dinnerware).  Even though there have been relatively few internationalcartel cases thus far involving services (the shipping, airline, and marine construction and
transportation cases are obvious exceptions), the extensive US enforcement experience with bid-
rigging in domestic government and private procurement, as well as the increasing globalization of
financial, telecom, and other services markets, su ggest that there may be more such cases in the
future.  Many cases involving other anti-competitive practices ( e.g., Singer, Canadian Radio Patents,
Pilkington , and S.C. Johnson ) have involved the anti-competitive use of real or asserted intellectual
property rights with respect to branded products, while other cases have involved services ( e.g., Sabre
and Nielsen ).  It would be difficult to make any generalizations at all about the products and services
involved in our international merger cases, except to say that they cover a wide range of products and
services, from telecom to truck transmissions.
With respect to the geographic scope of international antitrust matters, the US agencies
obviously are required by statute to concentrate their attention on the effect of anti-competitive
conduct on US domestic and foreign commerce.  That is true for cartel matters, mergers, and other
practices alike.  The anti-competitive international behavior targeted by US antitrust enforcement has
been focused, entirely or in crucial respects, on imports into and/or exports from the United States.The market allocation cartel cases, from American Tobacco  to the ongoing Graphite Electrodes
matter, illustrate this fact.  But the point of thes e cartel agreements, of course, has been to protect
foreign firms as well as US firms from the rigors of competition (while the consequence has been to
harm US and foreign consumers).  A significant number of them have had a foreign geographic
component;  depending on the market conditions involved and the desires of the cartel members,some agreements thus have involved the United States and Europe, some North America, and some
the entire world.
It is important to recognize, however, that while US antitrust authorities focus on the effect of
anti-competitive practices on prices and output in US commerce, many of these practices affect
foreign firms' ability to enter markets or obtain low-priced inputs.  These practices also prevent not
only US but often foreign consumers from purchasing quality goods at competitive prices.
D. Remedies, Deterrence and Possible Improvements in International Enforcement
Over the years, the US Congress has given US antitrust agencies the tools they need to
enforce the antitrust laws.  From the beginning, violations of the Sherman Act have been punishable
as crimes as well as civil violations, and individuals as well as firms are subject to prosecution.
Punishments for criminal violations are significant: fines of up to US$10 million for corporate
                                                     
32 United States v. American National Can Co. , 1996-2 Trade Cas. (CCH) ¶71,641 (D.D.C. 1996)WT/WGTCP/W/66
Page 10
defendants, and jail sentences of up to three years and/or fines of up to US$350,000 for individual
defendants.33  In cases involving mergers and other anti-competitive practices under the Sherman,
Clayton, or FTC Acts, the agencies can obtain injunctive relief necessary to halt or otherwise remedy
the anti-competitive conduct at issue.
The question whether US antitrust laws and associated remedies provide a suitable level of
deterrence against anti-competitive private conduct is one that the US agencies often ask themselves.For example, our recent international cartel prosecutions have demonstrated that even a century of
vigorous antitrust enforcement has not brought an end to cartel behavior on a grand scale.  It is for this
reason that DOJ recently has asked Congress to incr ease maximum corporate fines for price-fixing,
bid-rigging, and market allocation to US$100 million.  In the same way, current DOJ and FTC actions
and investigations in the computer and defense sectors have raised questions about how the antitrust
laws can and should be applied to high-technology markets.  But the history of US international
antitrust enforcement shows that when intern ational cartels are broken up, when monopolistic
behavior on an international scale is thwarted, and when anti-competitive international mergers are
required to be restructured or prohibited altogether, then the positive effects on competition (and often
on trade) are soon felt, and consumers are well-served.
The US enforcement experience of recent years, which is discussed in our previous
submission on antitrust cooperation, has convinced the US antitrust agencies that they need toimprove their ability to work with their foreign coun terparts in international investigations, on a basis
of assured confidentiality and mutual benefit.  In particular, DOJ and FTC are seeking to create a
network of bilateral mutual assistance agreements to obtain and share evidence for use in antitrust
cases.  More broadly, what needs to be done to improve the climate of international antitrust
enforcement is to develop an international culture of sound antitrust enforcement, built on the basis of
shared experience, bilateral cooperation, and technical assistance to countries that are just starting out
on the difficult task of enacting and enforcing competition laws.  This Working Group provides an
important forum for helping to develop such a competition culture.
III. ANTI-COMPETITIVE PRACTICES:  THE PERSPECTIVE OF TRADE POLICY
From the trade perspective, the issue of anti-competitive practices has taken on much greater
significance in recent years due largely to two, interrelated factors:  globalization and international
progress in reducing border barriers to market access.  The initial focus of concern for trade policy
experts tended to be on anti-competitive business practices tolerated or sanctioned by national
governments and their effects on inhibiting access to foreign markets.  However, some also assert that
enterprise practices which distort or restrain international trade have become more evident as
multilateral rules to address governmental barriers have been extended and elaborated.  Moreover,
with the growing integration of the world economy, many anti-competitive practices appear to have
increasing trans-border dimensions and effects.  Thus, the appreciation of the issue has come to
encompass the potential for both private anti-competitive practices and related government actions (or
inaction) to serve as barriers to international trade.   Some dimensions of the issue include the role of
state-owned monopolies, exclusive rights and regulatory policies which will be discussed in more
detail at subsequent meetings of the Working Group.
In short, we can observe a gradual evolution in trade policy toward a broader understanding
of the potential impediments to market access.  This evolution looks beyond border barriers such as
tariffs in order to secure other meaningful impr ovements in market access conditions, by turning
                                                     
33 Criminal antitrust fines may be increased to twice the gain to the conspirators or twice the loss
suffered by the victims, if either of those amounts is greater than the statutory maximum fine of US$10 million
for corporations.WT/WGTCP/W/66
Page 11
attention to the range of barriers that affect conditions of competition in the market and that may
restrict the ability of foreign firms to effectively operate in a given market.  This broader notion of
market access encompasses the degree of openness of a given market to competition from foreign
firms, either through exports or investment.  Thus, it looks not only to the "border" barriers to trade
and establishment barriers for investors, but also to the nature of the conditions of competition faced
by goods, services, service providers and investors once in the market in question.
The international business community also has highlighted the need to view trade,
competition and investment issues as part of a broader market access concept.  Increasingly, the
business community has indicated that it sees a growing overlap between the traditional trade
concepts of market access, investment policies and restrictions on foreign investment, and the ability
to compete effectively once access and/or establishment is facilitated.  In this regard, the 1996
Program of Action for the International Chamber of Commerce (ICC) states that "[i]t is no longer
sufficient to focus on 'trade' barriers as the primary impediment to doing business across frontiers.Instead, the focus must increasingly shift to a wider conception of market access - to the international
rules for doing business on a global basis".
This broader market access focus has given rise to a significant expansion of trade policy
disciplines regarding barriers other than border tariffs.  For example, GATT/WTO rules in areas such
as standards, customs valuation, import licensing and government procurement have been in existencefor nearly two decades, while rules on services, trade-related investment measures and intellectual
property are relatively new.
A. A Possible Framework for Analysis
While there may be widespread recognition of this broader perspective of market access,
there are significant divergences of view among policy makers and within business and academiccommunities as to where this recognition should lead in terms of policy approaches.  One fairly
balanced conclusion, however, is that "the benefits that accrue from international trade liberalization
will not be fully realised unless effective competition prevails in the domestic markets of trading
nations, and fostering effective competition in domestic markets becomes more difficult and costly, if
not impossible, unless international trade and investment is liberalized.  Neither trade policy norcompetition policy are individually sufficient to ensure effective market contestability and global
economic efficiency".
34
In an attempt to analyse the various ways in which restrictions on competition intersect with
market access concerns, we have constructed an analytical matrix based on two parameters:
(i) whether all competitors, or just foreign competitors, are affected by the restriction;  and(ii) whether the restriction falls within a general category of measures traditionally subject to antitrust
disciplines.
                                                     
34 Draft report of the International Chamber of Commerce Joint Working Party on Competition and
International Trade, distributed and discussed at the "Consultative Forum on Competition and Trade Policy inthe Global Arena: An International Business Perspective" , Paris, 12 February 1998.  In this same draft report,
the ICC states that "a great deal of work remains before the issues arising from the trade and competition
interface can be addressed in a multilateral negotiating process".  The views reflected in this report do not
officially constitute the views of the ICC membership until such time as they are approved and adopted.WT/WGTCP/W/66
Page 12
Framework for Analysis of Competition Issues
from a Market Access Perspective
Traditionally subject to
antitrust remedy35Regulatory and other issues
generally falling outside
antitrust remedy
Affects foreign and domesticcompetitorsType A1 issues Type B1 issues
Affects principally foreign
competitorsType A2 issues Type B2 issues
The approach represented by the above matrix seeks to recognize that some anti-competitive
practices may raise barriers against all new entrants, whether foreign or domestic.  Others may
discriminate principally against foreign competition.  The A1 and A2 issues were among those
discussed in section II of this submission.  On the other hand, whether or not targeted specifically atforeign competitors, not all practices of the kind discussed in this section of the paper would in all
cases be viewed as appropriate objects of remedy under antitrust law.
Therefore, as noted in the introduction to this submission, significantly different policy and
practical issues may arise as policy-makers attempt to address appropriately the practices and
measures falling within, and across, the four quadrant s of the matrix.  In this regard, one point implicit
in this matrix is that, from a market access perspective, the practices or conditions that may distort
international trade are not limited to those involv ing firms located in different countries that are
engaged in private anti-competitive practices, or that affect firms or consumers in different countries.
Thus, the scope of concern includes, but also goes beyond, cases of international antitrust
enforcement.  It also needs to be recognized that real-world barriers to competition can result fromsituations in which both government and private anti-competitive activity work to distort trade.
B. Applying the Framework:  Examples of Interaction between Practices or Measures Which
May Restrict Competition and Market Access
Type A1 issues.   In cases involving domestic or trans-border markets, private anti-competitive conduct
will not merely affect domestic competitors and potential domestic entrants.  It may also act to deny
or impede market access to foreign competitors.  This could apply to virtually the entire range of
anti-competitive practices normally subject to an titrust review and potential remedy, including
conduct such as bid-rigging, market allocation and other hard-core cartel activity, vertical restraints
(including distribution arrangements), monopolistic practices, and other restrictions on competition by
firms with market power.
In addition, private anti-competitive practices induced, tolerated or enabled by government
action (or inaction) can affect both domestic and foreign competitors.  For example, market structures
involving business groupings with substantial horizontal and vertical relationships may tend to createanti-competitive barriers both to entry by domestic firms which do not belong to one of these business
groupings and to foreign competitors in terms of denied market access.  These types of issues may not
always fit neatly within the A1 category, however .  Especially given the governmental relationships
                                                     
35 Either through per se  prohibitions or a finding of anti-competitive conduct under a rule of reason
approach.WT/WGTCP/W/66
Page 13
and their structural characteristics, these issues may frequently fall just as readily within the
B1 category, discussed below.
Type A2 issues.   In other cases, the relevant restriction may be one that principally affects foreign
firms.  Perhaps the clearest examples of this type of situation would be horizontal arrangementsamong domestic competitors seeking to exclude foreign participants from the market.  A host of
mechanisms could potentially be employed, including discrimination in industrial standards setting,
professional licensing or other restrictions by industry associations, certain import cartel activities,
restrictions on access to essential facilities, discriminatory prequalification requirements, restrictions
on access to initial product design stages, etc.
Type B1 issues.  Government-sponsored measures can also restrict domestic competition and impede
market access by foreign competitors.  One obvious example is state-owned monopolies and state
trading enterprises, and any special rights or  privileges which may be accorded to them by
government.  Government industrial policies also can be used to restrain market access by foreign
competitors and even to pick "winners and losers" among domestic competitors.  Less obviously,
domestic regulatory schemes can create unnecessary burdens on competition and undermine thecompetitive process.  This can happen when regulatory policy indirectly promotes monopolies and
oligopolies, favours some domestic competitors over other domestic (and foreign) competitors, and
fails to keep up with new technologies and become s an inflexible restraint on change - leading to
entry and market access barriers and removing the need for companies to innovate and become
efficient, and often concerning itself more with the health of incumbent firms than with competition
(whether domestic or foreign) in the industry.
This intersection between competition restrictions and market access has made it necessary, in
some cases, to address competition issues when pu rsuing trade liberalization.  For example, it was
clear to negotiators of the WTO Agreement on Basic Telecommunications Services that market access
commitments without concomitant assurances of non-discriminatory access to distribution networks
and other essential facilities maintained by previous monopoly suppliers would likely fail to yield the
anticipated benefits of liberalizing trade.  A further example is the inclusion of GATS Article VIII,
which addresses abuse of monopoly or exclusive service supplier position that may restraincompetition and thereby restrict trade in services.  Finally, there is encouragement in the GATS
"Understanding on Commitments on Financial Services" to the removal or limitation of a range of
facially non-discriminatory measures affecting, for example, the range of services a given entity may
provide, territorial limits on establishment/expansion of operations, and "other measures that ... affect
adversely the ability of financial service suppliers of any other Member to operate, compete or enterthe Member's market".
Furthermore, the trade policy community has focused on the need to ensure that restraints on
competition do not undercut the value of trade or investment liberalization once in place.  In additionto being the subject of the recent dispute over a ccess to the Japanese market for photographic film,
this concern is evidenced in cases involving Article II of the GATT which indicate that the integrity of
market access commitments needs to be secured against certain restrictive practices inside the border
which are a function of market structure, such as exploitation of monopoly power.
36
In many cases, restraints on competition or market access arising from such governmental
interventions or regulatory control are not subject to action by antitrust authorities or the courts
                                                     
36 See report of the panel in "Canada - Import, Distribution and Sale of Alcoholic Drinks by Canadian
Provincial Marketing Agencies" (1988).  In cases wher e practices of a state-owned monopoly beyond the reach
of antitrust enforcement by the domestic competition authority are serving to restrict entry and access
principally by foreign competitors, this might be seen as a type B2 case.WT/WGTCP/W/66
Page 14
pursuant to antitrust statutes.  During processes of privatization or deregulation, however, competition
policy can provide essential safeguards to ensure that private restraints do not replace government
regulation as a means of limiting competition.  An effectively functioning competition policy is
needed to ensure that incumbent firms, having learne d to work with regulators and each other to shape
the rules of the game in the previous state-entity or regulatory environment, do not collude after
deregulation to deter entry and maintain non-competitive prices.  Moreover, an effective competitionpolicy also needs to ensure that regulators do not tolerate private anti-competitive practices through
either government inaction or acquiescence in issuing unwarranted industry-supported standards or
regulations.  In this capacity, competition policy also helps ensure improved market access conditions
for foreign firms.
Type B2 Issues.  Some government-sponsored practices may be directed principally against foreign
suppliers.  In such cases, the issues are much the same as those described under B1 above, with the
added dimension of discrimination.  Thus, discriminatory regulatory structures, restrictions applyingto foreign direct investment that do not equally apply to domestic investors in like circumstances,
certain arbitrary standards and certain government procurement practices might all be examples of
this type of issue.  In each of these cases, the restrictions in question would make it more difficult for
foreign firms to establish and/or compete effectively in the domestic market, posing a problem of
market access from the trade perspective.
Again, should deregulation or liberalization of the government-sponsored restriction occur in
these situations, the effective application of competition policy would also help safeguard the
expected benefits from such liberalization policies, including those stemming from improved
conditions of market access for foreign goods or services.
C. Possible Remedies and Their Implications
Recalling a point to which we have alluded generally on several occasions in the above
discussion, from the competition policy perspective, not all practices that restrict business choices
represent a net loss to consumer welfare.  Beyond those relatively few cases where restraints are
clearly welfare-inhibiting ( e.g., price-fixing and bid-rigging) and the practices are per se  illegal,
competition analysis employs a fact-specific, "rule of reason" approach, which attempts to weigh thepotential losses of commercially restrictive practices against any potential efficiency gains that might
result.  Thus, in a given case, analysis might suggest that a contractual arrangement between a
manufacturer and distributor creates sufficient efficiency gains (in terms of reduced organizational
costs, provision of better services to consumers, etc. ) to more than offset the potential risk of limiting
competition by rival producers.
In a cross-border context, this relative weighing of gains versus losses undertaken by the
domestic antitrust authority might be perceived differently by trade (and/or competition) policy
officials in the foreign market.  Reasons for this vary, and there is a thought-provoking discussion of
this situation in Section III.3 of the Trade and Competition Policy chapter of the 1997 WTO Annual
Report.  Here, the author concludes that "the mere fact that a national competition policy decision
negatively affects a foreign country does not in itself make it unwarranted from a world efficiency
point of view.  In order for the competition policy to be undesirable in this sense, it must involve adistortion, that is the negative consequences for foreign interests must exceed the benefits to domestic
agents".
37
                                                     
37 See p. 55.  Of course, whether or not it is a good rationale for increased international cooperation, it
should hardly be necessary to remark that, at present, neither competition nor trade policy officials would be
expected to base decisions of national law or even policy on considerations of "world efficiency".  On the other
hand, even from a national perspective, some argue that it may be legitimate to question whether, in some cases,WT/WGTCP/W/66
Page 15
Trade policy officials will be concerned whenever there are restrictions, public or private, that
meaningfully impede access to foreign markets.  Thus, trade policy officials would be concerned, in
principle, with restrictions occurring in each of the four boxes of the above matrix.  Moreover, these
need not be discriminatory restrictions, as government or private barriers applying to all potential
entrants in the case of either a domestic or an international market also would be viewed from a trade
policy perspective as a potential or actual barrier to market access.
With this background, we can evaluate the various scenarios with a view towards
understanding the trade policy official's possible interest in the measures or practices in question as
well as in the nature of any remedies to be applied.
1. Type A1 Issues
From a trade policy perspective, effectively functioning competition law should be able to
address restrictions of this type, thereby resolving both the domestic competition and the market
access concerns.  Thus, assuming the existence of adequate competition laws and their enforcement inforeign markets, trade policy officials would just as soon leave A1 type issues to the attention of their
competition policy colleagues.   Specific examples of "international antitrust enforcement" by US
authorities have already been described in detail in section II of this document.
In such cases, the possibility for divergence in interest between trade and competition policy
officials could arise if restrictions on commerce were judged under a rule of reason to be insufficientto warrant intervention in the market by antitrust officials, and yet a trade problem persisted.  To the
extent that these commercial restrictions were perceived as contributing significantly to the market
access concern, trade policy officials might then reassess their predisposition not to become involved
(e.g., they may reach the conclusion that these were, in fact or predominantly, B1 practices).  A
similar trade policy calculus may result in cases where antitrust laws either do not exist or are notenforced in the market in which the restrictions are occurring.
2. Type A2 Issues
Many of the same considerations apply to type A2 issues.  In principle, antitrust remedies
should function appropriately to resolve anti-competitive practices, thus also resolving the
impediment to market access.   It may be, however, that A2-type restrictions (those that affectprincipally foreign competitors) will not come as  readily to the attention of the competition law
officials in that market, particularly if foreign firms are unable to challenge these practices under the
laws of that country.  Thus, in some cases, these may first need to surface in a trade context before
they can be analysed and dealt with from the competition policy perspective.  Again, similar
possibilities exist for divergence of interest and authority between trade and competition policyofficials, especially where antitrust laws do not exist or are not enforced or where these practices may
tend to involve or implicate B2 issues.
3. Type B1 Issues
Where antitrust remedies do not address the restrictions in question, trade policy officials in
the exporting or investing country will typically have a much greater interest in being involved in
defining approaches to ensure that commercial conditions do not effectively inhibit market access.
Given the fact that regulatory reform and the removal of market access barriers generally have pro-competitive effects that reinforce the functions of competition law and policy, there would appear to
be a strong natural convergence of interest between trade officials and competition policy officials in
the target market to advocate for such reform and/or liberalization.  It is clear that reducing or
removing barriers to foreign competition has the strong potential for stimulating competition in the
                                                                                                                                                                    
competition policy analysis of the potential gains and losse s of a restrictive practice may have given insufficient
regard to the benefits which could accrue from potential foreign competition.WT/WGTCP/W/66
Page 16
domestic market and thus increasing welfare.  This would be in addition to the global allocative
efficiency benefits that derive from economies exploiting their comparative advantages through trade.
4. Type B2 Issues
This would appear to be an area in which trade policy officials would have to play the major
role both in bringing attention to the issues and devising possible approaches for addressing the
practices that are restricting access from abroad.  Here again, however, there may be someconvergence of interests between trade officials of the exporting or investing country and host country
competition policy officials in seeing the practices liberalized.
IV. CONCLUSION
As indicated in the introduction to this paper, we offer the above analysis and discussion
neither as an exhaustive treatment of the effects which anti-competitive practices exert over
international trade, nor as a detailed or perfect prescription for dealing with such practices from either
a competition or trade policy perspective.  The phenomenon of globalized investment, production andcommerce offers interesting new challenges to experts and policy makers within both communities.  It
is clear, however, that the varied and complex nature of these issues defies a simplistic or ready made
solution.  We must, therefore, be both methodical and attentive to valid policy and sectoral
distinctions as we further refine our understanding of these issues in the particular context of the
WTO and its provisions.
__________