./.RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTCP/W/77
 25  June 1998
(98-2555)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM TURKEY
The following communication, dated 9 June 1998, was received from the Permanent Mission
of Turkey with the request that it be circulated to Members.
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The Impact of Anti-competitive Practices of Enterprises and Associations
on International Trade
In the last three meetings, this Working Group focused on the relationship between trade and
competition policy, in general.  This time, the Group will try to elaborate on the issue of
anti-competitive practices and their impact on international trade.
Anti-competitive business practices in domestic and international markets can often have
negative impacts on international trade.  These practices may be analysed in two broad categories:
those impeding market access for exporters and new competitors and those exercised by exporters in
foreign markets.
Market access
Trade liberalization focuses on the access of exporters to foreign markets without facing any
barriers to entry.  In this respect, liberal trade policy aims to eliminate the restrictions on imports by
decreasing tariffs and removing non-tariff measures.  However, liberalization of trade is a necessary
but not a sufficient condition for market access .  For example, if an import market lacks effectively
implemented competition rules, some practices of domestic private/public enterprises may also limit
the entry of exporters into the market.  Thus, competition policy and its effective enforcement will
support trade liberalization agreements and improve market access.
Among anti-competitive practices, vertical and horizontal restrictions and abuse of dominant
position can be mentioned as the major ones.
Vertical restrictions  refer to arrangements or relationships between manufacturers and
suppliers, or manufacturers and distributors, such as tying, exclusive dealing, territorial restraints and
resale price maintenance.
Horizontal agreements  refer to arrangements between firms selling the same product or
group of products, including price fixing, output restrictions and other forms of cartelization.
Abuse of dominant position  refers to attempts by one or more firms to monopolize the
market in which it has a significant share by price discrimination, predatory pricing, other
exclusionary practices or excess pricing policies.WT/WGTCP/W/77
Page 2
The conditions for anti-competitive practices in a domestic market may exist when:
- there is a lack of necessary competition rules;  or
- there are some sectoral or other exceptions/exemptions in competition rules;  or
- competition rules are not implemented effectively.
Although, in theory, perfect competition can be achieved without any intervention of
government, in practice, such interventions  may be needed to establish a competitive environment
and to counteract the anti-competitive practices of enterprises.  On the other hand, the very existence
of competition rules is not sufficient to attain a competitive market .  In fact, these rules may be
implemented ineffectively, the rules may be poorly designed, or the government itself may tolerate,
encourage or engage in anti-competitive practices.
In any one of the above cases, anti-competitive practices in the home market may have
externalities abroad.  While these practices may construct unseen barriers for exporters to enter into amarket, they may also distort international trade by enabling domestic firms to have excess profits in
domestic markets which provide them an unfair advantage in international markets.
Anti-competitive practices of exporters
Almost all countries are supporting a free and fair trade system and attempting to increase
their shares in international markets.  However, not all activities that aim to increase this share are in
conformity with free and fair trade principles.  Today's trading system may even encourage some
anti-competitive practices .  This is due to the fact that the international trading system does not have
some necessary rules and disciplines, e.g., those regarding anti-competitive activities of export cartels,
international cartels and global/transnational companies.
Actually, as the number and size of transnat ional firms increase, the likelihood of
transfrontier anti-competitive practices also increases .  These practices are similar to the ones seen
in domestic markets but mostly in magnified scales.  Examples are abuse of dominant positions in
international markets, agreements excluding other in ternational competitors, international cartels and
international mergers and acquisitions with anti-competitive effects.  Unfortunately, domestic
competition rules are hard to apply at the interna tional level to restrict these activities since the
operations of these firms are not limited to a single territory, even if many competition laws contain
provisions incorporating the "effects doctrine".
On the other hand, at the domestic level – although in a restricted manner – remedies for
anti-competitive practices of transnational firms are available.  That is because jurisdiction can be
established on practices that affect the home market.  However, it must be remembered that any
remedy applied in domestic markets will not solve the problem globally .  This failure is mostly
due to the fact that there are neither international norms and standards nor an international
forum to regulate international competition .
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