WORLD TRADE
ORGANIZATIONWT/WGTCP/W/133
15 July 1999
(99-2926)
Working Group on the Interaction
between Trade and Competition Policy
COMMUNICATION FROM THE REPUBLIC OF KOREA
The following communication, dated 9 June 1999, has been received from the Permanent
Mission of the Republic of Korea with the request that it be circulated to Members.
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Multilateral Framework on Competition Policy:  Issues and Suggestions
I. INTRODUCTION
1. At the 9th International Cartel Conference held in Berlin on 10-11 May 1999, some
participants took the position that simply expanding the geographical coverage of the existing networkof bilateral agreements would be sufficient to reinforce cooperation among competition agencies.
However, most participants were of the view that the bilateral approach alone was not sufficient, and
that a multilateral framework for cooperation was needed.  The WTO was considered by most
participants as the best available forum to address this issue.
2. While a consensus has yet to be achieved on the need to develop a multilateral framework on
competition policy within the WTO, it appears that a growing number of Members recognize the
desirability or feasibility of establishing a multilateral framework on competition policy.
3. Arguments in favour of a multilateral framework on competition policy can be summed up as
follows:
(a) Over 70 countries have already enacted competition laws and a number of developing
countries are in the process of introducing such laws.  A sufficient foundation has
thus been laid to start discussing a multilateral framework on competition policy.
(b) The fact that many WTO Members have yet to formulate their own competition laws
does not make launching a negotiation on multilateral framework impracticable.  In
fact, the absence of domestic competition laws may facilitate their incorporation into
national legislations.
(c) Some Members argue that divergences among Members on the substantive provisions
of competition laws and the level of enforcement make it impossible for an agreement
on competition policy to be reached at the multilateral level.  However, the very fact
that each Member's competition law and its enforcement are different from each other
warrants all the more the need for a multilateral framework on competition policy.  A
multilateral framework may provide a level playing field securing legal stability,WT/WGTCP/W/133
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predictability, and transparency in world trade and foreign investment, thereby
helping enterprises to reduce transaction co sts.  Lower transaction costs, in turn,
would contribute to enhancing global economic welfare by expanding international
trade and foreign investment.
(d) Competition policy is generally recognized as a useful policy tool for development.
Indeed, many developing countries have introduced or reinforced their competition
laws as a key component of domestic reforms designed for their better integration
into the world economy.  This suggests that developing countries should be full
participants in initiatives to reinforce international cooperation on competition policy
and that the development dimension must also be an integral part of a multilateral
framework on competition policy.  Developing countries could use the multilateral
framework to introduce a competition law and policy into their own economicstructure.  Making use of this framework would have many advantages;  for example,
it would allow developing countries to restructure their economies in a more
competition-oriented manner while dealing better with conflicting domestic vested
interests.  A multilateral framework would provide fewer inroads for protectionist
stakeholders - often monopolies - than would a domestic framework.
(e) With the globalization of the world economy, cases where anti-competitive behaviour
of a company in one country harms the interests of other countries are multiplying.
The problem, however, is that a single country's national competition law can do little
to tackle cross-border anti-competitive activities, because much of the relevant
information is inaccessible and some of the necessary parties are located abroad.Bilateral cooperation has helped to somewhat remedy these problems.  But it has
fundamental limitations in enhancing the overall level of efficiency, as shown by
international mergers involving more than two different nationalities.  One solution is
the enhancement of multilateral cooperation in responding to the problems arising
from the interaction between trade and competition policy.  That is not to say thatexisting bilateral schemes should be left aside.  Rather, ongoing efforts to enhance
bilateral, regional, and multilateral cooperation and ensure a greater level of
complementarity are instrumental for greater predictability and stability in the world
economy.
(f) Some Members have expressed their concern that a multilateral framework on
competition policy could impose restrictions on their sovereignty or on the
enforcement discretion of competition author ities.  According to these Members, such
a framework would create difficulties in achieving a balance between competition
policy and other economic policies or in taking socio-political considerations fully
into account.  This concern, which is legitimate, may be addressed by careful and
weighed formulation of a multilateral framework on competition policy.  The
multilateral framework should be limited to establishing minimum standards in theadoption and enforcement of each Member's competition law and to promoting
cooperation among the competition agencies of WTO Members.  In no case would a
supra-national competition authority with  investigation power be established.
II. SUGGESTED KEY ELEMENTS IN A MULTILATERAL FRAMEWORK ON
COMPETITION POLICY
A. G
ENERAL PRINCIPLES
4. During the discussions at the Working Group, there was a wide recognition of the need to
ensure that every Member respects the principles of non-discrimination and transparency in theWT/WGTCP/W/133
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application of its competition law and policy.  However, views were less converging over the scope
and coverage of these principles.  Further discussions to define the exact metes and bounds of the
principles are therefore in order.  The following is a brief summary of Korea's preliminary views on
the scope and coverage of the principles of non-discrimination and transparency in the application of
competition law and policy.
Scope and Coverage of Non-Discrimination Principle
5. As most Members have introduced or are willing to introduce the non-discrimination
principle in their regulatory framework of competit ion policy, it would not be difficult to incorporate
the principle into a multilateral framework.  Discrimination against foreign enterprises under a
Member's regulatory framework could therefore be subject to the WTO dispute settlement procedures.
It is necessary to ensure that the non-discrimination principle should also be observed in theenforcement of competition law.  However, discrimination in the enforcement of competition law may
not be subject to the WTO dispute settlement procedures until a pattern of discriminatory practices
has been established as a result of continuing such practices.
6. Members also need to respect the principle of non-discrimination in making individual
decisions.  In practice, however, it would be difficul t to apply the principle to individual decisions in a
uniform manner because the structures of the relevant markets, the behaviours of concerned
enterprises, and the substantive provisions of competition laws and their interpretation vary from case
to case.  For this reason, it would be neither desirable nor feasible to resort to the WTO dispute
settlement procedures for cases involving discrimination in individual decisions.
7. It would be an extremely exceptional case if a Member's competition law were to contain
provisions explicitly discriminating against foreign enterprises.  However, there may be many cases
where less favourable treatment is applied de facto to cases involving foreign enterprises compared
with similar cases involving only domestic firms.  Therefore, the non-discrimination principle needs
to be applied not only to de jure  discrimination but also to de facto discrimination.
Scope and Coverage of Transparency Principle
8. Transparency would be greatly enhanced by requiring each Member to clearly set the scope
of sectoral exclusions and establish inquiry points where foreign enterprises can get information on
the domestic competition law as well as on the administrative and judicial procedures concerning their
application.
9. Transparency could also be encouraged in other areas.  For example, Members may notify
without undue delay their decisions with a reasonable explanation to the parties concerned, andprovide public access to detailed information on legislative developments and statistics of antitrust
cases by means of publication of annual reports, internet service, etc.
Scope and Coverage of a Multilateral Framework
10. The application of a multilateral framework on competition policy should be confined to areas
where international trade and/or foreign investment are affected.  The multilateral framework should
not address business practices that have domestic effects only.WT/WGTCP/W/133
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B. SUBSTANTIVE PROVISIONS
Adoption of Competition Law and Establishment and Maintenance of Competition Authorities
11. Members are required to make a commitment to introduce and enforce competition law
covering substantially all sectors, and to establ ish and maintain a competition agency entitled to
formulate, implement and enforce the competition law and policy.  Members should also make a
commitment to provide remedies against breaches of  competition law with a view to maintaining its
integrity and effectiveness.  Developing countries should be granted appropriate grace periods in
undertaking the commitment depending on their level of economic development and social structure.
Prohibition of Hard-Core Cartels
12. Every Member should have appropriate remedies and enforcement procedures against anti-
competitive or collective behaviours among competitors resulting in price-fixing, output restriction,
market division, and bid-rigging.  Prohibiting hard-core cartels is one of the areas where Members can
reach a common understanding without much controversy.  Therefore, priority should be given to
hard-core cartels when deciding what constitutes a serious infringement of competition law in the
multilateral framework.
Preventing Abuse of Market Dominance or Monopolistic Position
13. Monopolistic or oligopolistic market structure and anti-competitive practices deriving from
such structures function as barriers to market access and equal opportunities for foreign firms.  No
Members deny the necessity of regulating such market dominance appropriately.  However, given thedifferences between the competition laws enforced by Members, a multilateral framework on
competition policy may have to be confined to setting a minimum standard on this issue.
C. I
NTERNATIONAL COOPERATION
14. As shown in the areas of international cartels or mergers that involve more than two national
firms, there is a growing need to enhance intern ational cooperation among competition agencies for
better enforcement of competition law and policy.  Greater cooperation would generate many benefits.
For instance, Country A could be requested to notify Country B before enacting or enforcing
competition policies that may incur costs for the latter.  Also, in a case where more than two
jurisdictions are engaged in investigation on anti-c ompetitive practices in international trade, greater
coordination would certainly help their efforts.
15. It would also be useful to discuss how to incorporate positive comity into a multilateral
framework to impose greater discipline on cross-border anti-competitive practices.  As shown in theOECD Secretariat report adopted in the OECD/CLP meeting held in May of this year, positive comity
is at present incorporated in a number of bilatera l agreements since the US and the EC introduced it in
their 1991 bilateral agreement.  Although the WTO Members lack experience in this area and have
only a few cases in which positive comity has actually been used, the benefits of positive comity are
real.
16. As regards international mergers and acquisitions, it may not be feasible to harmonize
substantive rules of merger regulations.  However, it remains worthwhile to examine possible means
of enhancing cooperation among competition authorit ies such as common procedures for the review,
harmonization of filing formats and filing deadline, a common filing office, etc.
17. Dealing with the exchange of confidential information under a multilateral framework on
competition policy is premature at this stage, gi ven the differences in Members' national competitionWT/WGTCP/W/133
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laws governing the exchange of information and exercise of investigation power on behalf of foreign
countries.  Firms' confidential information should not be required to be provided unless the firms in
question allow it.
D. DEVELOPMENT DIMENSION
18. A number of incentives could help Members engage in the negotiations on a multilateral
framework on competition policy and accept their outcome.  Providing a grace period, exemptions of
certain obligations, waivers, reservations and technical assistance are all examples of what could
smooth the transition - especially for developing countries.
19. As stated above, a multilateral framework on competition policy should reflect the economic
and social structures of the developing countries so as to contribute to their economic development.
Other means should also be studied to achieve this goal, including incentives in terms of rights and
obligations under WTO agreements.
E. COMPETITION ADVOCACY ROLE
20. Every Member has sectoral exclusions from the application of its competition law to
accommodate political, economic and social needs, although the substance of these exclusions may
vary from country to country.  In a multilateral framework, legitimate domestic regulations should be
respected as long as the regulations are formulated to factor in a Member's inherent political,economic and social realities.
21. Due to the differences among Members not only in their levels of economic development but
also in their social and cultural structures, it would be very difficult to suggest a priori  a required level
of competition that each Member should achieve.  Therefore, it would be practically impossible to
obligate competition authorities of each Member to assume a competition advocacy role.  However, itwould be desirable to encourage Members to expressly state their political will to enhance
competition in their market structure, and to promote the competition advocacy role of competition
authorities.
F. I
NSTITUTIONAL PROVISIONS :  DISPUTE SETTLEMENT PROCEDURES
22. As noted above, recourse to the dispute settlement procedures should be confined to cases
involving the regulatory framework of WTO Members.  Whether a pattern of practice in violation of  
the multilateral framework can be subject to the WTO dispute settlement procedures is open to
discussion.  Individual decisions, however, should not be subject to the WTO dispute settlement
procedures.  Still, Members should be required to have fair, non-discriminatory and transparent
procedures for local remedies in their domestic judiciary system.
III. GOVERNMENTAL MEASURES WHICH AFFECT INTERNATIONAL TRADE
23. Trade-related governmental measures can have anti-competitive effects on international trade
similar to those caused by private anti-competitive practices.  As such, competition-oriented reforms
of the existing WTO rules may be necessary in such areas as anti-dumping, safeguards and
countervailing duties, etc.
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