RESTRICTED
WORLD TRADE WT/WGTCP/W/45
24November 1997
ORGANIZATION(97-5153)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
SUBMISSION BYTHE EUROPEAN COMMUNITY AND ITSMEMBER STATES
Thefollowing communication, dated 12November 1997, hasbeenreceived fromthePermanent
Delegation oftheEuropean Commission withtherequest thatitbecirculated toMembers.
_______________
Introduction
Inprevious submissions totheWorking Group, theEuropean Community anditsmember States
havepresented overall views ontheissues arising fromtheinteraction between trade andcompetition
policy, aswellasadescriptive document, illustrating howcompetition lawfunctions within the
Community anditsmember States andsharing experiences inthisregard thatmaybeofinterest to
other WTO Members. Inthiscontext, animportant feature ofcompetition lawwithin theEuropean
Union isthecoexistence ofCommunity lawandthatofthemember States, aswellasthecomplementary
roles played byCommunity authorities andthose ofthemember States.
Thissubmission intends tocomplement previous onesbyfocusing onhowcompetition policy
interacts withtrade inthecontext ofanincreasingly integrated andliberal world economy, andwhat
theimplications ofthisdevelopment areforallWTO Members. Inthiscontext, consideration isalso
given tothedevelopment dimension and,inparticular, todeveloping country interests intheactive
enforcement ofcompetition policy andenhanced multilateral cooperation totackle anti-competitive
practices. Thissubmission ispresented inthecontext ofdiscussions ofitems IandIIoftheGroup 's
agenda andincludes suggestion ofissues thatrequire more detailed attention bytheGroup.
1. Theobjectives ofcompetition andtrade policies andtheirdevelopment
1.1 Competition policy
Competition policy aimsatsafeguarding andenhancing theprocess ofprice formation and
otherconditions ofresource allocation thereby correcting restrictive practices andotheranti-competitive
measures which mayotherwise develop inimperfect market conditions. Anactive competition policy
enforced bypublic authorities remains akeyguarantor foreconomic efficiency andconsumer welfare
andcontributes togreater availability totheconsumer ofabroader range ofproducts andservices at
lower prices. Anopen competitive environment alsofosters innovation andefficiency, thereby
contributing totheoverall competitiveness ofproducers. Bypromoting optimal allocation ofresources,
competition policy contributes toeconomic growth anddevelopment andsupports other objectives of
macroeconomic policies. While theabove could beconsidered tobethecoregoals ofcompetition
policy, which arecommon todifferent legalsystems, competition authorities mayalsopursue other
competition-related goals. Forinstance, inthecaseofthecompetition lawandpolicy oftheEuropean
Community animportant objective hasbeentofoster market integration byapplying aparticularlyWT/WGTCP/W/45
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strict enforcement policy vis-à-vis anti-competitive practices which havetheeffect ofpartitioning the
single market.
Anessential instrument foraneffective competition policy istheenactment andactive
enforcement oflegislation prohibiting anti-competitive practices byprivate andpublic undertakings.
Competition lawpromotes transparent, legitimate andrule-based economic activity. Itsapplication
should beneutral inthesense thatforeign firms should begranted thesame rights, andbesubject to
thesameobligations, asdomestic firms. Italsoimplies thatallfirms should haveaccess tothedomestic
enforcement authorities, including national courts, onequitable, transparent andnon-discriminatory
terms.
Asnoted inthe1997UNCTAD World Investment Report, thetrend inmany partsoftheworld
towards adopting andstrengthening competition lawssuggests thatacompetition culture isemerging.
Currently over70countries, atdifferent levels ofdevelopment, havecompetition lawsandmany others
areconsidering theirintroduction. Inrecent years, many oftheselawshavebeenstrengthened intheir
scope andenforcement. More than35developing countries haveenacted competition lawssince1990.
Thistrendbears witness totherecognition thatcompetition lawisanessential instrument formaximizing
thenational welfare ofcountries ofallsizesandlevels ofdevelopment. Atthesame time, theprocess
ofdeveloping acomprehensive domestic competition legal framework, including thesetting upof
competitionauthoritieswithbroadinvestigativepowersandensuringeffectiveenforcement,isprogressive
innature. Thespecial difficulties thatdeveloping countries, andinparticular theleastdeveloped among
them, mayfaceinthisregard require specific consideration.
Several ofthesubmissions andinterventions made totheGroup havehighlighted theexperience
ofdeveloping countries which haveintroduced orreinforced domestic competition lawinconjunction
withtheprocess oftrade andinvestment liberalization. Trade andinvestment liberalization havean
important contribution tomake intackling anti-competitive practices, since suchpractices aremore
difficult tosustain intheabsence ofgovernment barriers toentry. Atthesame time, aneffective legal
framework forcompetition isofparticular importance evenwhen countries undertake asubstantial
opening oftheirmarkets toforeign competition. Insheltered markets which areprogressively opening
upandwithalimited number ofdomestic andforeign incumbents, firms mayhaveparticular incentive
toenter intocollusive arrangements dodeter newentrants. Moreover, asmentioned byKorea inits
16Septemberintervention,anti-competitivepracticesinthedomesticmarketmayposesubstantialbarriers
totheenhancement ofcompetitiveness ofdomestic firms ininternational trade. Allthese elements,
together withthefactthatatimelagisoftenrequired before competition authorities develop aneffective
enforcement capacity, argue forbothtradeliberalization andtheintroduction ofdomestic competition
lawatanearly stage intheprocess ofdevelopment. Theimportance foreconomic growth and
development ofanactive competition policy hasgreatly increased inthecontext oftheglobalization
ofmarkets andtrade liberalization. TheECanditsmember States would welcome further sharing
oftheexperiences gained bydeveloping countries inthisrespect.
Another issuethatdeserves consideration, fromadevelopment perspective, istherelationship
between theliberalization ofinvestment andthereinforcement ofdomestic competition policy structures.
Useful insights onthisquestion areprovided bythe1997 UNCTAD "World Investment Report".
Theliberalization offoreign direct investment regimes inmany developing countries hasintroduced
asignificant newsource ofcompetition andcantherefore beexpected tomake asubstantial contribution
toenhancing efficiency, welfare, growth anddevelopment. Atthesametime,somedeveloping countries
haveexpressed concern thatincertain instances foreign enterprises mayabuse adominant position
inthemarket orengage inother types ofanti-competitive practices. Competition lawprovides a
legitimate andnon-discriminatory instrument, based onmarket-oriented standards, tocounter anti-
competitivepracticeswithanimpactonthedomesticmarket,regardlessofwhethersuchpracticesinvolve
foreign ordomestic firms.WT/WGTCP/W/45
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1.2 Trade policy
Thefirstrecital ofthepreamble totheWTO Agreement setsoutthecentral objectives ofthe
multilateral trading system. Thereference to"raising standards ofliving" and"optimal useofthe
world 'sresources inaccordance withtheobjective ofsustainable development" makes clear that
enhancing efficiency andglobal welfare areamong suchobjectives. Inorder toachieve these goals,
WTO Members engage inreciprocal andperiodic negotiations tosubstantially reduce barriers totrade.
Atthesametime,theWTO agreements represent arule-based framework fortheconduct ofinternational
trade relations, based onabalance ofrights andobligations. Trade policy measures, including those
aimed atensuring thattrade takes place under fairconditions, mayonlybeadopted onthebasis of
clearly defined multilateral disciplines, which werethesubject ofdetailed negotiations intheUruguay
Round.
Thedispute settlement mechanism isalsoakeyfeature oftheWTO system aimed atpromoting
compliance withcommitments andmaintaining thebalance ofrights andobligations. TwokeyWTO
principles arenon-discriminatory treatment offoreign anddomestic firms andtransparency. GATT
andWTO panels haveconsistently stressed thatabasic function ofWTO rulesistoprotect legitimate
expectationsasregardsconditionsofcompetition.Indeed,enhancingconditionsofcompetitionworldwide
canbeconsideredastheprimaryobjectiveoftheGATT/WTOsystem,whichhasbeenpromotedthrough
successive Rounds ofprogressive trade liberalization andacareful balance ontheuseoftrade policy
instruments.
Thescope oftheGATT/WTO system hasbeenprogressively enlarged, mostnotably asaresult
oftheUruguay Round negotiations. Apart from theexpansion insectoral coverage tointellectual
property andservices, theUruguay Round gaveincreased attention todomestic policy measures with
asignificant incidence oninternational trade. Another important development hasbeentheintroduction
inanumber ofareas ofspecific disciplines inrespect oftherights thatMembers should grant under
domestic lawtoprivate parties regarding domestic proceedings, including forinstance asregards access
tocivilandadministrative procedures andremedies.
Theissueofanti-competitive practices hasbeenaconcern oftheGATT fromitsveryinception.
TheDecision oftheCONTRACTING PARTIES of18November 1960 recognizes that"business
practices which restrict competition ininternational trade mayhamper theexpansion ofworld trade
andtheeconomic development inindividual countries andthereby frustrate thebenefits oftariff
reductions andremoval ofquantitative restrictions ormayotherwise interfere withtheobjectives of
GATT". With theincreased globalization ofbusiness activities andthesubstantial reduction of
government barriers totrade, thepertinence ofsuchrecognition has,ifanything, increased.
TheinformalnotepreparedbytheSecretariatillustrateshowseveralUruguayRoundagreements
include competition-related provisions dealing withthepractices ofprivate orpublic undertakings.
Some oftheseprovisions impose anobligation onMembers toensure compliance withWTO disciplines
bycertain categories ofenterprises, suchasmonopolies andexclusive service suppliers (Article VIII
ofGATS), orthose which areengaged inactivities equivalent tothose performed bygovernments (for
instance, standard setting). Bothunder GATS andTRIPS, Members arecommitted toenter, upon
request, intoconsultations onrestrictive business practices ortheabuse ofintellectual property rights,
including cooperation through thesupply ofpublicly available information orotherinformation, subject
todomestic lawandtheconclusion ofsatisfactory agreements tosafeguard confidentiality (Article IX
ofGATS andArticle 40ofTRIPS). Itisalsoworth mentioning thatinArticle IXofGATS, Members
recognize "thatcertain business practices ofservice suppliers ...mayrestrain competition andthereby
restrict tradeinservices". Inthetelecommunications sector, Members haveinscribed intheirschedules
detailed andbinding disciplines toprevent anti-competitive practices.WT/WGTCP/W/45
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Anexamination ofcurrent WTO rulesbears witness totherecognition byMembers thatanti-
competitive practices mayhaveasignificant incidence oninternational trade. Atthesame time, it
isclearthatcurrent WTO rules onlyinclude averylimited number ofdisciplines inrelation toanti-
competitive practices. Initsinitial submission totheWorking Group, theECanditsmember States
already indicated some ofthereasons whytheadoption ofaninternational framework ofcompetition
rules should beconsidered.
Discussions sofarintheGroup haveshown thatthereissubstantial agreement ontheproposition
that, when pursued effectively, trade liberalization andtheapplication ofcompetition policy are
complementary andmutually reinforcing. Trade andcompetition policy share thecommon objective
ofpromoting economic efficiency andwelfare andarebased oncommon principles suchastransparency,
non-discriminationandtheneedforrule-basedeconomicbehaviour.Moreover,complementaritybetween
thetwopolicies isakeyrequirement fortheireffectiveness. Intheabsence ofaneffective competition
policy, thegains oftradeliberalization maybecompromised asaresult ofrestraints ontradebyprivate
orpublic undertakings. Conversely, intheabsence ofasustained process oftrade liberalization, the
impact ofcompetition policy inpromoting thecontestability ofmarkets islimited.
2. Keyelementsforaneffectiveandefficientcompetitionpolicyandtheircontributiontoenhancing
national andglobal economic welfare andimproving access tomarkets forallcountries
Theprogressive development andeffective application byWTO Members ofacompetition
lawframework canmake amajor contribution toenhancing national andglobal welfare andimproving
access tomarkets.
Thecase, fromatrade policy point ofview, foraneffective application ofcompetition policy
isclear. Acountry thathasundertaken trade liberalization measures hasevery interest inensuring
thatthewelfare andefficiency benefits arising fromsuchmeasures arenotlostduetoanti-competitive
practices byfirms. Avoiding thenullification orimpairment oftrade liberalization commitments, as
aresult ofsuchpractices, isalsoamatter oflegitimate concern fortrading partners. Competition laws
andpolicies donotnormally havespecific tradeobjectives, suchaspromoting market access. However,
inpursuing thegoals ofpromoting economic efficiency andconsumer welfare, aneffective application
ofcompetition lawisessential fortackling barriers toentry setupbybusiness inthemarket orother
anti-competitive practices which affect bothforeign anddomestic producers. Asstated byBrazil at
the16Septembermeeting:"Competitionpolicycansuppressbarrierswheretradepolicyislesseffective.
Itispossible toimagine acountry thatstrictly follows GATT rules butwhere cartels, exclusivity
arrangements andother forms ofrestrictive practices prevail impeding market penetration. Inthat
hypothetical case, competition policy could beveryhelpful toimprove market access".
Inorder tofoster better understanding onhowcompetition policy cancontribute toenhancing
welfare andimproving access tomarkets, itwould beuseful fortheGroup toconsider thekeyelements
foraneffective andefficient competition lawandpolicy andhowtheserelate totrade. Inthisconnection
itwould appear necessary todiscuss threeaspects ofcompetition lawandpractice: (a)anti-competitive
practices which aretypically covered under competition lawregimes; (b)thesectoral application of
competition law; (c)theenforcement ofcompetition law. What follows aresome initial views ofthe
ECanditsmember States onthese subjects.WT/WGTCP/W/45
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(a) Anti-competitive practices
Competitionlawtypicallycoversatleastpotentialrestrictionsoncompetitionrelatingtohorizontal
restraints, vertical restraints andabuses ofdominant position. Merger review control isalsogenerally
considered averyimportant component ofcompetition law. Aneffective andefficient competition
lawregime would needtodevelop disciplines tocontrol anti-competitive behaviour arising ineach
ofthese fourcategories. Atthesame time, fromthepoint ofviewofthemultilateral trading system,
theessential concern relates tothose practices which limiteffective competition fromforeign producers
andtherefore limitmarket access andhaveasignificant international dimension. Account should also
betaken oftheextent towhich there isalready significant convergence intheapproaches followed
bythecompetition authorities intackling suchpractices. Thefollowing aresome issues thatwould
merit further discussion intheGroup:
Horizontal restrictions asaresult ofagreements orother forms ofcollusion among actual or
potential competitors, canhaveasignificant impact inlimiting effective competition andthereby limit
market access. Thiswould particularly bethecaseforhorizontal restrictions suchasagreements to
fixprices, rigbids,limitoutput, divide markets byallocating customers orterritories. These agreements
aregenerally considered asserious infringements under thedifferent competition lawregimes. Within
thecontext ofOECD, work hasbeeninitiated toprepare arecommendation on"hard-core" cartels.
Othertypesofhorizontalagreementsamongcompetitors,suchasjointventuresorcooperationinresearch
anddevelopment, require acareful assessment oftheiroverall competitive impact, taking intoaccount
theefficiency gains thatmayresult fromsuchagreements. Theattention oftheGroup could therefore
focus initially onthose horizontal agreements withaclear anti-competitive impact. Inthiscontext,
consideration should alsobegiven tothetreatment under competition lawofexport cartels. Insome
jurisdictions, export cartels areexempted from theapplication ofcompetition law. Inothers, they
maynotbecoveredundergeneraljurisdictionrules,intheabsenceofasignificantimpactonthedomestic
markets. While theimporting country could normally assert jurisdiction oversuchcartels, theremay
bedifficulties inundertaking effective fact-finding procedures orinenforcement.
Vertical restrictions involve agreements among firms engaged indifferent stages ofproduction
anddistribution andcaninvolve suchpractices asexclusive dealing orpurchase agreements, territorial
restrictions,resalepricemaintenance,etc.Undercertaincircumstances,verticalrestraintsareconsidered
aninfringement ofcompetition law. However, competition authorities follow different approaches
toassess thecompetitive impact ofvertical restraints. Atthesame time, concern hasbeenexpressed
about theimpact oncompetition andaccess tomarkets ofcertain types ofexclusive distribution and
supply agreements which cansubstantially raisebarriers toentry byforeign producers. TheGroup
would benefit from further clarification anddiscussion ofthese issues.
Abuses ofdominant position canhaveasignificant impact onbothtrade andcompetition, in
particular iftheyinvolve theexercise ofmarket power inorder todeterorforeclose actual orpotential
competition. Under mostjurisdictions, exclusionary practices bydominant firms would constitute an
infringement ofcompetition law. Different approaches may, however, persist about suchissues as
theassessment oftherelevant product andgeographical market, therelevant criteria todefine what
constitutes adominant position, theroleofbarriers toentry etc.Attention could therefore focus on
theidentification ofthose practices which haveanexclusionary effect orotherwise limit effective
competition from foreign firms andwhich therefore areamatter ofparticular concern intheWTO
context.
Mergers havegreatly expanded inrecent years andhaveanincreasing international dimension.
Competition authorities havetherefore developed specific instruments toassess thecompetitive impact
ofmergers before theyenter intoforce. Theprocedural andsubstantive criteria fortheassessment
ofmergers significantly varyamong jurisdictions. With theglobalization ofmarkets andthegrowthWT/WGTCP/W/45
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oftransnational alliances, mergers areincreasingly subject tocompetition screening bydifferent
jurisdictions under different procedures. TheGroup could therefore eventually focus itsattention on
thescope forgreater convergence ofprocedural requirements formerger notification andmayalso
consider other means toenhance cooperation inthefieldofmergers soastoreduce thescope for
conflicting decisions.
(b) Sectoral coverage
Thepositive welfare effects ofacompetition lawarethelargest ifitscoverage isas
comprehensive aspossible. Under thelawsofseveral countries, certain sectors oftheeconomy are
totally orpartially excluded fromtheapplication ofcompetition law.Itwould beuseful fortheGroup
tohaveabetter understanding ofthescope andrationale ofthesectoral derogations applied byWTO
Members. Onthisbasis, consideration could begiven totheissue ofwhether suchderogations may
haveasignificant impact ontheinterest ofother WTO Members andwhatmight bethescope fortheir
reduction orelimination. Inthisconnection, account should betaken ofthefactthatlimits tothe
application ofcompetition lawarenotnecessarily theconsequence ofsectoral derogations, butcan
alsobetheresult ofother lawsregulating economic activity. TheGroup could alsoconsider the
experience ofderegulation oftraditional monopoly sectors, asforexample telecommunications, which
haveinvolved close cooperation between trade andcompetition authorities andwhich hasbecome of
increased importance inthecontext ofglobalization andliberalization oftheworld economy.
(c) Enforcement action
Theeffectiveness ofcompetition lawinaddressing anti-competitive practices, including those
which haveanegative impact ontrade withother countries, crucially hinges ontheactual degree of
enforcement action bythecompetition authorities andtheroleofthejudiciary intheenforcement of
competition law. Enforcement procedures varyacross legal systems onsuchissues asthebalance
between public andprivate enforcement, thepowers ofcompetition authorities orthenature andlevel
ofthesanctions thatmaybeimposed vis-à-vis firms engaged inanti-competitive practices. Effectiveness
wouldimplythecombinationofanactiveenforcementpolicybycompetitionauthoritiesandenforcement
through private action inthenational courts.
Theapplication ofcompetition lawoften requires acomplex economic, legal andfactual
assessment, aswellasbroad fact-finding powers sothatthecompetition authority isinaposition to
obtain thenecessary information. Thelegalmeans ofimplementation should include theimposition
ofsanctions atalevelsevere enough tohaveadeterrent effect. Administrative andjudicial procedures
should besubject tostandards ofdueprocess bothforaffected firms andcomplainants, including
guarantees against thedisclosure ofconfidential information. Theneedforadequate enforcement staff,
andanappropriately funded competition authority, istherefore crucial. Another essential dimension
forenforcement iseffective access bydomestic andforeign firms tothejudicial system andtoprovide
forthenullity ofagreements inbreach ofthecompetition rules, which therefore become unenforceable
before national courts.
Aspreviously noted, theprinciples oftransparency andnon-discriminatory treatment offoreign
anddomestic firms arecommon tobothcompetition lawandthemultilateral trading system. TheGroup
could further explore howthese twoprinciples arebeing applied byWTO Members atthedifferent
stagesoftheenforcementofcompetitionlaw,includingthoseguaranteesthatwouldensureitsreasonable,
objective andimpartial administration. Thiscould include issues suchastherightoffirms tobring
complaints before thecompetition authorities, administrative proceedings, decisions bythecompetent
authorities, judicial review, access tothejudicial system forprivate enforcement. TheGroup should
alsoconsider specific problems thatdeveloping countries inparticular theleastdeveloped countries
mayfaceinensuring effective enforcement ofcompetition law.WT/WGTCP/W/45
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3. International aspects andimplications forWTO
Theinternational economy ischaracterized byaparallel process ofglobalization ofbusiness
strategiesandtransactionsandtheliberalizationoftradeandinvestmentregimes.Thistrendhasprofound
implications fortheapplication ofthecompetition lawsandpolicies ofallcountries. Competition law
isessentially concerned withthepromotion ofdomestic welfare andhastherefore evolved inadomestic
setting. There are,however, increasing limits ontheability toapply competition policy effectively
andtoavoid conflicts without taking fullyintoaccount itsinternational dimensions. Inassessing market
conditions, competition authorities increasingly needtotakeintoaccount theglobalization ofmarkets,
including theimpact offoreign trade andinvestment. Competition authorities areconfronted with
theneedtoassess theimpact onthedomestic market ofanti-competitive practices implemented outside
thatmarket. Some anti-competitive practices, aswellasmergers, aremoreover global innature and
haveanimpact onseveral domestic jurisdictions. Some competition authorities haveresponded to
thisbyseeking toapply theircompetition lawsextraterritorially, butthishastended toleadtoconflicts
ofjurisdiction. Cooperation among competition authorities would belikely tohelpminimize therisks
ofsuchconflicts andensure effective enforcement procedures.
There isanequally strong caseforenhanced cooperation inthecompetition fieldfromatrade
policy perspective. AllWTO Members would benefit from theeffective application ofcompetition
lawtoanti-competitive practices which limitaccess tothemarkets ofothercountries forgoods, services
andinvestment. Thesubstantial reduction ofgovernment obstacles totrade, asaresult ofsuccessive
Rounds oftrade liberalization hasgreatly contributed toenhanced conditions ofcompetition. Atthe
same time, intheabsence ofaneffective competition lawframework firms mayhaveanincentive to
engage inanti-competitive behaviour withaview toprotect thedomestic market against foreign
competition. Theriskofconflicts ofjurisdiction arising fromtheapplication ofcompetition lawcan
alsohaverepercussions forthemultilateral trading system. Thescope forsuchconflicts isthegreater
ifcompetition authorities areseentopursue trade policy objectives byseeking toapply domestic
competition lawtoanti-competitive practices affecting exports andwhich donothaveasubstantial
impact onthedomestic market. There isalsoariskthat,intheabsence ofeffective remedial action
inthecompetition field, pressure could grow fortheunilateral useoftradesanctions orofsuchbilateral
trade agreements thatmayruncounter totheprinciples ofthemultilateral trading system. Clearly,
thewin-win situation insuchinstances would beforacountry toapply itsdomestic competition law
topractices which arebothcontrary todomestic welfare andthelegitimate interests ofitstrading
partners.
Enhanced international cooperation inthecompetition fieldwould therefore result insignificant
gains from boththetrade andcompetition policy perspectives. These gains canbesummarized as
follows: (a)addressing obstacles tomarket access arising fromanti-competitive practices. Thiswould
notonlyresult inanexpansion oftradeliberalization andgreater security ofmarket access commitments,
butalsointhemore consistent application ofcompetition lawasacomplement totheprocess oftrade
liberalization; (b)fostering closer cooperation among competition authorities through suchmeans as
notification, exchange ofinformation andtheapplication ofcomity principles.1Bilateral agreements
arelikely toprovide thebestbasisfordeepening suchcooperation, butthereisacaseforasupportive
rolebyamultilateral framework; (c)limiting thescope forjurisdictional conflicts. Thiswould result
inmore effective competition lawenforcement andavoid asource ofconflict inthemultilateral trading
system; (d)thepromotion ofgradual convergence ofcompetition lawsandpolicies. Even ifsuch
convergence would have toberealistically limited tosome keyelements andcoreprinciples of
competitionlaw,suchconvergencewouldpromoteenhancedcooperationamongcompetitionauthorities,
1Theprinciple ofnegative comity provides thataParty willtakeintoaccount theimportant interests ofanother
Party before action istaken. Through positive comity, aParty mayrequest another toactonthebasis ofits
ownpowers toinvestigate activities which adversely affect theimportant interests ofthefirstParty.WT/WGTCP/W/45
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avoidance ofconflicts andexpansion ofmarket access through abroader application ofcompetition
lawandprinciples.
Binding disciplines forenhanced cooperation inthecompetition fieldhaveessentially developed
inabilateral framework. Atypical example, inthisregard, isthe1991 EC-US Agreement. Key
elements ofthisagreement areprovisions forthenotification toeachparty ofcompetition investigations
which arelikely toaffect important interests oftheother party, exchange ofinformation and,most
significantly, thedevelopment oftheconcepts ofnegative andpositive comity. Theconcept of"positive
comity" hasconsiderable potential forreducing thescope forjurisdictional conflicts onthebasis of
closecooperation among competition authorities withtheobjective ofprotecting thecompetitive process
including when foreign interests areatstake. TheECandtheUSarecurrently intheprocess of
concluding afurther agreement tofoster theapplication ofpositive comity principles, including an
indication ofthecircumstances inwhich thecompetition authorities oftherequesting partywillnormally
defer orsuspend enforcement activities infavour oftheenforcement activities oftherequested party.
Though bilateral agreements arelikely toplayanimportant roleindeepening cooperation among
competition authorities, thereisgrowing awareness oftheneedforanadditional rolebyamultilateral
framework. TheWTO isparticularly well_equipped forthistasksince itcaninvolve countries atall
levels ofdevelopment andcombine theestablishment ofbinding disciplines withtheflexibility required
totakeintoaccount differences incompetition lawandpractice andtheparticular concerns ofdeveloping
countries. Thepossible development ofsuchamultilateral framework under theWTO would effectively
complement trade liberalization efforts andcontribute towards theachievement oftheobjectives of
themultilateral trading system.
Consideration ofamultilateral framework ofrules oncompetition mayalsobeofparticular
interest fordeveloping countries. Inthefirstsection ofthissubmission some ofthereasons why
developing countries would benefit fromtheprogressive introduction andreinforcement ofadomestic
competition lawhavealready beendiscussed. There isalsoaneedtoconsider developing country
interests inamore active enforcement ofcompetition lawbytheirtrading partners inrelation toanti-
competitive practices withanegative impact ontheirexports. Developing country producers areoften
small suppliers andnewentrants intothemarket andmaytherefore beparticularly affected byrestrictive
practices withanimpact ontheirexports. They mayalsohaveparticular difficulties inenforcing their
competition lawvis-à-vis international cartels withanimpact onseveral markets. Amultilateral
framework would moreover needtoenvisage appropriate flexibility fordeveloping countries, andin
particular theleastdeveloped among them, inrecognition ofthefactthattheintroduction and/or
reinforcement ofacompetition lawandaneffective enforcement capacity would havetobeprogressive
innature. Itcould alsoassist developing countries intheprocess ofprogressively setting upeffective
domestic enforcement capacities. Amultilateral framework could moreover envisage different degrees
ofcooperation among competition authorities depending onthelevel ofdevelopment ofdomestic
competition legalstructures, while being based oncommon rules andprinciples.
4. Issues suggested forfurther discussion
Theinteraction between trade andcompetition policy isacomplex one. Discussions inthe
Group haveillustrated howaneffective competition policy cancomplement andsupport theprocess
oftrade liberalization, aswellastheclose relationship between theobjectives andprinciples oftrade
andcompetition policy. Inorder toachieve abetter understanding, theGroup would benefit from
amore focused consideration ofcertain issues arising from theinteraction oftrade andcompetition
policy. Theconsideration ofsuchissues should beinaccordance withtheopen, non-prejudicial and
evolutionary nature oftheGroup 'swork programme andtheChairman 'schecklist ofissues suggested
forfurther study. Onthebasis ofthissubmission, andongoing discussion intheWorking Group,WT/WGTCP/W/45
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theECanditsmember States consider thatthefollowing issues would benefit fromfurther exploratory
discussions intheGroup.
4.1 Identification ofanti-competitive practices byenterprises with asignificant international
dimension
TheGroup could haveamore detailed consideration ofthetypes ofanti-competitive practices
likely tohaveasignificant international dimension andexamine, inparallel, howsuchpractices are
being addressed under different competition lawregimes. While allpotential anti-competitive practices
should becovered under suchexercise, priority attention could begiven toso-called "hard-core cartels",
including export cartels. Onthebasis ofsuchanalysis, theGroup maywishtoexplore thescope for
developing common approaches totackle anti-competitive practices withasignificant international
dimension.
4.2 Identification ofkeyelements foraneffective andefficient competition policy astheycontribute
tofurthering theobjectives oftheWTO system
Thiswork would benefit from thestocktaking andexchange ofexperiences, onnational
competition policies, lawsandinstruments. Itcould cover areas ofsubstantive law(anti-competitive
practices covered, sectoral derogations) andenforcement procedures (complaints, administrative
procedures, powers ofcompetition authorities, sanctions, roleofnational courts). Attention could
begiven totheimplications oftheprinciples oftransparency andnon-discrimination. Onthebasis
ofsuchanalysis,theGroupmaywishtoexplorethescopeforidentifyingwithinWTOcommonprinciples
ofcompetition lawandpolicy anditsenforcement.
4.3 Identification ofhowcooperation inthecompetition policy fieldcanenhance themutual
supportiveness oftrade andcompetition policy
Thisworkwouldbenefitfromthestocktakingandanalysisofcurrentinstrumentsofcooperation.
Onthebasis ofsuchanalysis, theGroup maywishtoconsider whatinstruments ofcooperation are
likely toenhance effective competition policy enforcement andwhether andhowcooperation between
authorities canbesupported within theWTO. Particular attention could begiven toprocedures for
notification andtheexchange ofinformation, theconcept ofpositive comity andmeans foravoiding
conflicts ofjurisdiction.
Inconsidering eachoftheissues above, itwould benecessary tointegrate thedevelopment
dimension, including consideration ofspecific developing country interests.