WORLD TRADE
ORGANIZATIONWT/WGTCP/W/115
25 May 1999
(99-2094)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE EUROPEAN COMMUNITY
AND ITS MEMBER STATES
The following communication, dated 12 April 1999, has been received from the European
Community and its member States with the request that it be circulated to Members.
_______________
The relevance of fundamental WTO principles of national treatment, transparency
and most-favoured-nation treatment to competition policy and vice versa
This submission of the European Community and its member States will focus on the first
item in the Group's work programme: "The relevance of fundamental WTO principles of national
treatment, transparency and most-favoured-nation tr eatment to competition policy and vice versa".  In
this connection, two issues appear to be relevant:  (a) How the WTO principles of transparency and
non-discrimination – including both MFN and national treatment - could be applied to competition
law and policy;  (b) How competition law and policy can contribute to transparent and non-
discriminatory international trade relations.  This second issue is closely connected to the third item in
the WTO agenda, which calls for a consideration of "the contribution of competition policy to
achieving the objectives of the WTO, including the promotion of international trade".  It will not
therefore be the primary focus of this submission.  However, in section 3 we present a brief overviewof how anti-competitive practices can negatively affect equality of competitive opportunities for
foreign firms, including additional examples of discriminatory practices.  (This complements ideas
presented in our 5 March 1998 submission – WT/WGTCP/W/62 – and will be further developed in
our submission concerning item 3 of the Agenda).
The main focus of this submission is therefore the question of the application of the WTO
principles of transparency and non-discrimination to  competition law and policy.  Following a brief
presentation on the role of such principles in the WTO system (Section 1), the submission will
consider the relationship between the principles of transparency and non-discrimination and key
elements of competition law and policy, insofar as these may affect international trade.  The finalsection presents preliminary ideas on the scope for developing within WTO a set of core principles on
competition law and its enforcement.
These submissions should be read together with prior submissions to the WTO Working
Group, as well as with the submissions to be presented in items 2 and 3 of our work programme.Through such submissions, the European Community and its member States have presented the case
for the development of a multilateral framework of  rules on competition within the WTO.  Elements
to be considered under such a framework could include:  (a) Core principles and common rules
relating to the adoption of a competition law framework and its enforcement;  (b) Common
approaches to anti-competitive practices with a significant impact on international trade and
investment;  and (c) Provisions on international cooperation.  The submission on item 2 of our work
programme will essentially focus on the question of cooperation.  Our submission on item 3 will seekWT/WGTCP/W/115
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to bring together the key issues arising from th e three elements above in order to consider how
competition policy can contribute towards achieving the objectives of the WTO.  The European
Community and its member States are firmly convinced that the development dimension should be an
integral part of a multilateral framework of competition rules within the WTO and that developing
country interests should be considered under the di fferent elements of such a multilateral framework.
I. THE WTO PRINCIPLES OF NON-DISCRIMINATION AND TRANSPARENCY
In discussing application of the principles of non-discrimination and transparency to
competition law and policy, this submission will focus on the purpose served by such principles in the
WTO system rather than the more narrow question of the extent to which certain WTO provisions –
such as Article III:4 or Article X – may already be applicable, to a certain extent, to the competition
laws of WTO Members.  Such a broad approach based on principles, rather than on the application ofspecific provisions, allows for a consideration both  of issues relating to the actual application of
competition law, as well as issues relating to the absence of a law or in which the law is not
effectively applied (for instance, due to exclusions or to weaknesses in the enforcement process).
Non-discrimination – including both MFN and nati onal treatment – is the cornerstone of the
multilateral trading system.  It is reflected not only in one basic GATT provision, but throughout the
different WTO agreements.  Several GATT and WTO panels have stressed that the purpose of the
non-discrimination principle is to avoid measures which upset effective equality of competitive
opportunities as between domestic or foreign products or as between products originating in different
WTO Members.  It applies generally both to de jure  discrimination and to de facto discrimination.
The connection between the principle of non-discrimi nation and conditions of competition is perhaps
most clearly expressed in the GATS definition of national treatment, which indicates that "formally
identical or formally different treatment shall be considered to be less favourable if it modifies the
conditions of competition in favour of services or service suppliers of the Member compared to like
services or service suppliers of any other Member".
It can be seen therefore that there is a close connection between the WTO principle of non-
discrimination and the basic objectives of competition law.  Indeed an effective competition law
regime is essential to combat anticompetitive practices which deny to foreign producers effective
equality of competitive opportunities, thereby undermining WTO market-opening commitments. In
the same way, domestic competition law can ensure that foreign companies are not allowed to act in
an anticompetitive manner when operating in the ma rket.  In examining the relationship between the
WTO principle of non-discrimination and competition law and policy, there appear to be three sets of
issues to be considered:  (a) Whether there are provisions under the competition law regime of WTO
Members, including both substantive law and procedures, which imply formal discrimination vis-à-vis
foreign enterprises;  (b) Whether the competition law regime of a WTO Member is effectively
equipped so as to address anti-competitive practices which deny to imported products (or to foreignfirms established in the market) effective equality of competitive opportunities;  and (c) Whether in
the actual application and enforcement of competition law, there may be instances in which de facto
less favourable treatment is applied to cases involving foreign interests vis-à-vis  similar cases which
essentially involve domestic interests.
Transparency is another fundamental principle of the WTO system.  Basic provisions on
transparency are contained in Article X of GATT and Article III of GATS.  These provide for the
publication of a wide range of measures of general application affecting the operation of the
agreements and, in the case of GATT, basic provisions concerning the administration of such
measures in a uniform, impartial and reasonable manner, as well as procedures for the administrativeor judicial review of actions relating to custom s matters.  (The Kodak-Fuji Panel has interpreted
Article X as also covering administrative rulings in individual cases where such rulings establish or
revise principles or criteria applicable in future cases.)  Transparency, as a principle, is however much
broader than the provisions of Article X of GATT or Article III of GATS.  Each of the WTO coveredWT/WGTCP/W/115
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agreements has developed specific transparency provisions, which aim at ensuring that the principle is
properly applied to different types of government measures with an impact on trade. Such provisions
are very varied and depend on the particular context of each agreement.  However, two types of
transparency provisions deserve particular mention:  (a)  In the case of WTO agreements dealing with
Trade Remedies (i.e., Antidumping, Subsidies, Safeguards), there are detailed transparency provisionsdealing with the rights of all interested parties in the proceedings which can lead to the adoption of
trade measures, as well as with the need to fully motivate the decisions taken in individual cases;  and
(b) In the TRIPS Agreement, there are provisions concerning the enforcement procedures that should
be available under the legislation of a Memb er.  Such provisions are concerned both with
transparency stricto sensu  and with ensuring an effective enforcement of IPR legislation.
In examining the relevance of the principle of transparency to competition law and policy,
three sets of issues appear to be of particular importance:  (a) Transparency as to the general provision
of the law, and the criteria used for its application;   (b) Transparency in the process of enforcement of
competition law, including both administrative and judicial procedures;  and (c) Rights of firms in
competition procedures.  From a multilateral perspective, there is of course another fundamental
dimension of transparency, which includes procedures for notification and consultation among WTOMembers, establishment of "enquiry points" and procedures for multilateral surveillance and review.
This aspect of transparency will be considered under our submission on international cooperation and
would not therefore be further considered here.
II. KEY ELEMENTS OF COMPETITION LAW AND POLICY AND THEIR
RELATIONSHIP TO TRANSPARENCY AND NON-DISCRIMINATION
The Group has benefited from an exchange of experiences on the competition law regimes
applied by different WTO Members.  Such an exchange of views has shown that there is variety of
national experiences, arising from different legal and institutional contexts, as well as differences in
levels of development.  At the same time, there are important elements of commonality.  Everycompetition law regime has sought to ensure that the principles of non-discrimination and
transparency are appropriately reflected not only in the basic legal framework, but also in the
procedures for administration and enforcement of the law as well as through an active public
information policy.
The primary concern in the WTO is that a domestic competition law regime be adequately
equipped to address those anti-competitive practices which have a significant impact on the interestsof other WTO Members, in particular practices which foreclose access to a market and thereby deny
effective equality of competitive opportunities.  There should be moreover effective procedures for
the administration and enforcement of the law.  Formal discrimination, on the basis of nationality, is
contrary to the very rationale of competition law and therefore there are hardly any instances in which
such discrimination is reflected in the laws of WTO Members.  Issues may arise, on the other hand, asregards the actual application of competition law when it comes to matters that affect the competitive
relationship of imported and domestic products (or competition between domestic and foreign firms).
A comprehensive competition law, backed by an effective and transparent enforcement structure, is
the best guarantee against the risk of any such discrimination.  Indeed, a transparent competition law
framework and enforcement process significantly contributes towards addressing concerns about theimpact on market access of anticompetitive practices. Transparency also has a number of additional
advantages:  (a) Competition rules are complex and undertakings need to be in a position to assess,
with a reasonable degree of certainty, those practices and decisions which are prohibited;
(b) Transparency is essential so that firms are in a position to seek redress against anti-competitive
practices before competition authorities or in the courts.  Similarly, consumers need to know howcompetition rules can contribute to the protection of their rights;  (c) Guarantees of "due process" in
the enforcement of competition law are important both for reasons of fairness and to reduce
unnecessary costs to business.  As more countries adopt a competition law regime, there is a strong
case for ensuring that different national regimes are based on high standards of transparency;WT/WGTCP/W/115
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(d) Competition advocacy is a key dimension of transparency.  Competition authorities should
encourage other branches of government to take competition concerns into consideration, for example
in the adoption of trade measures or regulations.
In order to further consider the relevance of the principles of transparency and non-
discrimination, this section will consider how these principles can be applied in connection with
different aspects of a domestic competition law structure.  The focus will be limited to those key
elements of competition law and policy which appear to be relevant for the multilateral trading
system. In order to illustrate how competition law and policy has sought to address issues relating to
non-discrimination and transparency, reference is made in certain instances to experiences under
European Community competition law or the law of its member States1.  This is not meant to imply,
however, that the approaches followed in the European Community are the only possible ones.  Theaim should be rather to seek to define common principles, which are based on high standards of
transparency and non-discrimination.  The scope for such common principles is further discussed in
the last section of this submission.
A. S
COPE AND COVERAGE OF COMPETITION LAW
1. Adoption of a Comprehensive Competition Law
A comprehensive competition law is a key instrument to address anti-competitive practices
that deny effective equality of competitive opportunities and foreclose access to a market.  The
discussions in the Group have shown that, although there are variations in the substantive scope of
domestic competition law regimes, most competition laws include provisions on anti-competitiveagreements among firms and on monopolization or abuse of a dominant position.  Anti-competitive
practices with a foreclosure effect can arise as a result of horizontal or vertical agreements among
firms or of certain types of conduct by a firm in a position of market power.  Such practices may be
undertaken by foreign or domestic firms and by public or private undertakings.  An approach based on
non-discrimination should therefore aim at ensuring  that there is a domestic competition law regime
which is effectively equipped to tackle such practices and that the law is actually applied in a non-
discriminatory manner regardless of whether foreign or domestic interests are affected. The adoption
of a comprehensive competition law regime does not exclude the setting up of enforcement priorities,
which allow a competition authority to focus limited resources on those practices which have a greater
impact on the structure of competition in a market.  Indeed, the setting up of priorities is often
necessary to boost the enforcement operations of a competition authority.  This may be of particular
importance for newly-established competition authorities in developing countries.
An issue which has been the subject of much discussion in the Working Group is the extent to
which provisions on merger control are a necessary component of a comprehensive competition law
regime.  From a pure competition law perspective, th ere is a strong argument in favour of developing
procedures through which mergers which establish or reinforce an anti-competitive market structurecan be subject to control before they come into force. It may be, however, that, in terms of the
interaction between trade and competition policy, the concern should not be so much whether
countries decide or not to introduce a merger control regime.  Practices resulting in market foreclosure
could normally be addressed, albeit less effectively, under the law relating to abuse of dominance or
monopolization. What would in any event be relevant for the trading system is that merger control
procedures, when they exist, are in accordance with principles of transparency and non-discrimination
and that procedures for cooperation are envisaged in relation to multi-jurisdictional mergers.
Transparency is a key concern of competition authorities.  Most competition laws prohibit
certain types of conduct, which are defined in very general terms.  Publication of the basic legal and
                                                     
1 An overview of the competition laws of the European Community and its Member States is contained
in Document WT/WGTCP/W/34.WT/WGTCP/W/115
Page 5
regulatory framework is of course essential, but hardly a sufficient condition for ensuring legal
certainty for business and consumers.  For instance, under the European Community competition law
regime, several additional steps have been introduced to ensure transparency.  These include:  (a) The
publication of communications or guidelines concerning the criteria used by competition authorities to
interpret or apply certain aspects of competition law;  (b) General publications on EuropeanCommunity competition law;  (c) An annual report which comments on legislative development and
enforcement in individual cases;  (d) A regular European Competition Policy Newsletter, which is
issued three times a year.  Information is also included in Europa, the European Union's World Wide
Web server
2.  Similar steps have been taken by the European Community member States as regards
national competition law.  While different approaches can be followed to ensure transparency, it is a
matter of considerable importance that under any su ch approach there is sufficient information not
only about the basic legal regime, but also on how the law is applied in practice.
2. Exclusions from the application of competition law
Competition law should in principle apply to all sectors of the economy, and exclusions
should be kept at a minimum.  The Group has already undertaken an initial discussion on the issue of
exclusions from the application of competition law.  Under many competition law regimes, certaineconomic sectors are totally or partially excluded from the application of competition law.  In other
instances, the non-application of competition law is the consequence of domestic regulatory regimes.
Broad sectoral exclusions from the application of competition law are a matter of concern both from
the point of view of discrimination and transparency.  The absence of effective competition law
disciplines in a sector of economic activity can result in anti-competitive practices by domestic firms,which deny access to a market to foreign competitors.  When sectoral exclusion applies, or when
government regulation affects the application of competition law, it is also important that the scope
and criteria for any such exclusions are clearly set out.  In this connection, it is worth noting that, as
already mentioned in the Working Group, there has been a clear trend under most competition law
regimes to eliminate existing exclusions from the ap plication of competition law or to define those
exclusions which subsist in narrow terms.  This is without prejudice to the fact that certain types of
horizontal exclusions may have a development rationale and hardly have any impact on international
trade.  For instance, one of the conditions of application of Article 85 of the EC Treaty is that the
agreement must have an "appreciable" effect on competition and on trade between member States, a
condition which is most often not fulfilled in cases of agreements between  small and medium sized
enterprises.
The relationship between competition law and government regulation has been the subject  of
detailed consideration in the Working Group.  Under most competition law regimes, government
regulations as such fall outside the scope of application of competition law.  Because of its market
integration objectives, the situation is different under EC competition law, which under certain
conditions applies to measures applied by the member States.  It is not suggested, however, that asimilar framework could be applied at the multilateral level.  It is essential, however, that competition
law applies on the same basis to private and public undertakings.  Similarly, it would be important to
clarify that government intervention does not justify broad derogations from the competition law
disciplines applicable to firms.
Export cartels are not included in the application of most competition law regimes.  In some
cases, this may be the result of an outright exclusion; in others, competition law would not be
                                                     
2 Http//europa.eu.int.  DG IV's homepages contain information on the main aspects of competition
policy, namely antitrust, mergers, liberalization, state aids and international aspects.  Under each of these
headings, the user can find sections containing press rel eases, acts published in the official journal, full texts of
legislative provisions and a list of Commission decisions and judgements of the European Court of Justice andthe Court of First Instance.  Other information of competition law and policy is also included, as well as linkswith the websites of other competition authorities.WT/WGTCP/W/115
Page 6
applicable under general jurisdiction principles, insofar as the cartel has no impact on the market of
the exporting country.  Certain export cartels can be considered as a form of "beggar-thy-neighbour"
policy, which results in discriminatory conditions between the domestic and export markets.  There is
a case therefore for examining how the principle of non-discrimination could be relevant for the
treatment of export cartels, while taking into account that – for jurisdictional reasons – the applicationof the competition law of the exporting country is not necessarily the appropriate solution in all cases.
Cooperation between competition authorities could play  an important role here and contribute to the
effective enforcement of competition law.
B. E
NFORCEMENT OF COMPETITION LAW
The effectiveness of competition law in addressing anti-competitive practices, including those
which deny foreign firms effective equality of competitive opportunities, crucially hinges on theactual degree of enforcement action.  Enforcement procedures vary across legal systems on such
issues as the balance between public and private enforcement, the powers of competition authorities
or the nature and level of sanctions.  What is requi red for an effective enforcement is the combination
of an active enforcement policy by competition authorities and enforcement through private action in
the national courts. The setting up of an effective enforcement structure is a challenge for all countriesand can only be achieved in a progressive manner.  It is clear that the particular difficulties of
developing countries in this regard deserve special recognition and concrete support. This section
would consider how the principles of transparency and non-discrimination can be applied at the
different stages of the enforcement of competition law, including those guarantees that would ensure
its reasonable, objective and impartial administration.  Because of their particular importance, issuesrelating to the rights of firms in competition procedures will be considered in the following section.
1. Enforcement by competition authorities
In order to ensure an effective enforcement of competition law, it has been considered
necessary under the different competition law regimes to set up a competition authority which hassufficient power to undertake investigations into anti-competitive practices, including consideration of
complaints by affected firms.  Such a competit ion authority should have the necessary means to
obtain information and be well-endowed to undertake the complex economic, legal and factual
analysis, which is crucial for the establishment of an infringement of competition law.  For instance,
under the EC competition law regime, the Commi ssion is empowered to obtain all necessary
information from the companies involved, from third parties and from the competition authorities of
the member States.  The actual investigation procedure has different steps including a decision toopen an investigation, fact-finding, a formal act through which firms are notified of the objections
concerning alleged anti-competitive practices, and which states the factual and legal reasoning,
hearings with the participation of all interested parties and the adoption of a reasoned decision, which
can be challenged before the European Court of First Instance.
Each member State of the European Union ha s set up a national authority responsible for
implementing competition law.  The member States also may, under certain conditions, apply
Articles 85 and 86 of the EC Treaty.  It is interesting to note that in some member States, competition
authorities have more extensive powers of investigat ion than those of the Commission, in particular as
regards the availability of police powers to obtain information and the imposition of penalties forfailure to cooperate. Depending on the different administrative regimes, different modalities of
investigation procedure can be envisaged.  What matters is that, regardless of the particular regime,
there are sufficient guarantees both of the effectiveness and the transparency of the procedures.  At the
same time, it is essential that there are guarantees for the protection of confidential information.   In
the Community, the right of confidentiality is guaranteed by Article 214 of the Treaty of Rome.  ThisArticle states that officials and other employees of the Community must not disclose information of
the kind covered by the obligation of professional secrecy, in particular information aboutWT/WGTCP/W/115
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undertakings, their business relations or their cost components.  The national legislation of the
European Union member States also contains provis ions on the protection of confidential information.
A key dimension of transparency is the need to provide full reasoning  of decisions concerning
the enforcement of competition law.  Competition law is essentially case-driven, including bothdecisions by competition authorities and judgements by the courts.  Motivation of competition
decisions is therefore important, not only for the parties directly affected by a particular case, but also
for reasons of general legal certainty and to clarify enforcement criteria, which can be applied in
future cases.
2. Enforcement by the courts
The judiciary has a crucial role in the enforcement of competition law.  Enforcement of
competition law by the judiciary can also help to reduce excessive administrative costs and facilitate
the setting of priorities by competition authorities.  In general terms, judicial enforcement can take
three different modalities:  (a) Direct action by private parties before the national courts, which can
include disputes concerning the enforcement of a contract, actions for damages etc.;  (b) Enforcement
action before national courts (or special tribunals) initiated by the competition authorities;  (c) Judicialreview of the decisions taken by competition authorities.
Under EC competition law, there is a complementary role played by Community institutions
and the courts of the member States.  The Treaty of Rome gave the European Commission a leading
role in the application of EC competition rules.  At the same time, national competition authorities are
also, in most cases, empowered to apply EC comp etition law.  The Commission’s decisions can be
appealed in the Court of First Instance.  The C ourt's rulings may themselves be appealed in the
European Court of Justice on points of law.  The principle of direct effect of Community law implies
that the courts of the member States also have the competence to apply the EC competition rules.  The
said courts may, in general, issue injunctions or ru le-disputed agreements to be void or adopt interim
measures.  Firms that sue in national courts for infringement of EC competition law have access to all
the procedures and means of redress provided by national legislation.  The means of redress and
procedural rules applied by national courts for infringement of EC competition law may not be less
favourable than those provided for comparable infringements of national law.
As in the case of enforcement procedures before competition authorities, the enforcement role
of the judiciary would vary among different legal systems.  It is important, however, that effectivemeans are recognized to seek redress through domestic courts against infringements of competition
law, although the particular modalities would depend on the balance between private and public
enforcement.
3. Remedies against breaches of competition law
Different types of remedies can be available against breaches of competition law.  These
would include injunctions, cease and desist orders, administrative sanctions or fines, criminal
penalties, nullity of contracts, award of damages etc.  Whatever the particular remedies available
under different competition law regimes, the credibility of an enforcement system would depend on
the availability of sanctions at a level severe enough to have a deterrent effect.
C. R
IGHTS OF PRIVATE PARTIES IN COMPETITION PROCEEDINGS
The rights of private parties in competition proceedings are central for the application of both
the principles of transparency and non-discrimination.  The best guarantee for a transparent and non-
discriminatory enforcement of competition law is to recognize all firms, whether domestic or foreign,effective means to seek redress against anti-competitive practices under domestic competition law.WT/WGTCP/W/115
Page 8
Thus the importance both of the right to bring comp laints before competition authorities and of the
right of action before the courts.
An OECD study on the rights of foreign firms under competition laws came to the conclusion
that foreign firms are not generally subject to differentiated treatment under competition laws.  At thesame time, the study showed that there are important differences across countries in the type of
systems used for competition enforcement and that such differences affect the rights of any firm to
petition the competition authority or to bring a private suit.
In this context, it seems appropriate to analys e, as an illustration, how this question has been
tackled under EC competition law.  Any firm, whether domestic or foreign, can lodge a complaint
with the Commission.  A standardized form may be  used for these purposes.  The Commission would
acknowledge receipt of such a complaint and subseque ntly inform the complainant of the steps taken
as a follow-up to such a complaint, including info rmation on the steps taken as regards enterprises that
are the object of such a complaint on other complaints lodged on the same facts.  The Commission is
bound to examine carefully the factual and legal elements laid before it by the complainant.  In
accordance with a 1992 ruling by the Court of First Instance, the Commission may reject a complaint
on the grounds that no significant Community interests are at stake and that the issue could be settled
satisfactorily through national courts.  Where the Commission, having received a complaint, considers
that on the basis of the information in its possession there are insufficient grounds for initiating an
investigation, it must inform the complainant of its reasons and fix a time-limit for him to submit
further comments in writing.  The complainant is also  entitled to obtain a definitive decision from the
Commission on the complaint and that decision may be challenged in an action for annulment before
the Court of First instance.  As already noted, firms also have the right to invoke competition law in
proceedings before the national courts.
The other important dimension relating to the rights of firms concerns "due process
guarantees" in enforcement proceedings before competition authorities.  Again it is worth mentioning
briefly the basic rights recognized to firms under EC competition law.  In a nutshell, such rights
include:  (a) Notification to all the parties concerned of a "statement of objections", which sets out in
detail the objections against the practice involved;  (b) The right to reply in written and oral form to
the objections raised by the Commission.   Invitations to a hearing are not limited to the parties to
whom an objection has been addressed, but also include other interested third parties, such as
complainants;  (c) The right to have access to the fi le with the exception of documents which are of a
confidential nature;  (d) The right to protection of confidential information;  (e) The right to judicial
review of competition decisions.
As previously noted, several WTO agreements have developed specific provisions on the
rights of private parties in relation to administrative or judicial proceedings.  In order to promote aneffective, transparent and non-discriminatory enforcement of competition law, there is a strong case
for examining common principles relating to the rights of firms under competition law.  The aim
should not be a harmonized enforcement system, since there are important and valuable differences
among domestic competition law regimes and judicial systems.  The approach should be rather to
consider which are the basic rights which should be guaranteed, taking into account differences innational enforcement proceedings.
III. THE CONTRIBUTION OF COMPETITION LAW TOWARDS ENSURING NON-
DISCRIMINATION AND TRANSPARENCY IN INTERNATIONAL TRADE
It is vital for an undertaking which chooses to operate in a foreign country that its ability to
compete on an equal footing will not be undermined by measures taken by governments or by
business.   The fundamental principles of the WTO ensure that such a firm should not be prevented
from doing so by discriminatory government measures.  Competition rules also aim at ensuring thatWT/WGTCP/W/115
Page 9
abusive discriminations by other undertakings will not affect the normal functioning of the market,
thereby creating, for example, barriers to entry.
In its submission of 5 March 1998 (WT/WGTC P/W/62), the EC and its member States
discussed the impact of anti-competitive practices on trade.  It was there suggested that, from theWTO perspective, a particular concern relates to anti-competitive practices which significantly raise
barriers to entry into a market (i.e. foreclosure effect) or are primarily aimed at export trade.  Such
practices deny foreign producers effective equality of competitive opportunities or otherwise entail
discrimination in international trade.  They are also  therefore of particular relevance for the discussion
under this agenda item.
At the March 1998 meeting of the Working Group, there was a rich discussion on the impact
of anti-competitive practices on international trade.  As noted in the report of the Working Group, a
large number of specific examples were provided of anti-competitive practices of enterprises that
affected international trade.  There was also a high degree of convergence on a framework for the
analysis of such practices.  Our March 1998 s ubmission offered a number of examples of anti-
competitive practices affecting international trade, including horizontal agreements, verticalagreements, abuse of a dominant position and mergers.  As a complement, we would wish to offer
some additional examples of cases in which Article 85 and Article 86 of the EC Treaty have been
applied to anti-competitive practices which deny to producers from another member State or from a
third country effective equality of competitive opportunities.
Collective boycotts are a type of anti-competitive practice contrary to Article 85 of the Treaty.
An example of the application of EC competition law to such practices is provided by the "Boat
Equipment Case"3.
Boat equipment case
Barriers raised by means of pressure from competing firms in relation to access to certain facilities,
which a manufacturer would like to use to provide information about its product, may constitute an
appreciable restriction of competition.
The Commission's action followed a complaint filed by  a British supplier of boat equipment when the
only two Belgian specialist journals in this field, Sur l’eau and Ik vaar, which belonged to the same
group, had refused to continue to carry advertisements similar to those published in the past.  The
journals had been approached by Belgian manufacturers who alleged that they were competing under
serious cost and tax disadvantages.
The British supplier complained that his sales in Belgium had suffered seriously as a result and boat
equipment purchasers in Belgium had also been deprived of access to a cheaper and wider source of
supply in another member State.
Discrimination can also be a form of abuse of dominance.  Article 86 of the EC Treaty is
applicable only to dominant firms or to firms occ upying a collective dominant position.  Such firms
operate on a market where competition is already weakened and where discrimination can be used
successfully as a strategy to deter the entry of new competitors or to limit the expansion of existing
competitors on the market.
                                                     
3 European Community Report on competition policy, 1980, p.82.WT/WGTCP/W/115
Page 10
On the other hand, as discrimination cannot be sustained in the long run on competitive
markets, this provision does not, except in the case of a collective dominant position, prohibit
discriminations by a non-dominant firm.  Indeed, such a firm has no influence over price or output.
A type of discriminatory practice, which is contrary to Article 86 of the Treaty, is the
application by a dominant firm of dissimilar conditions to equivalent transactions.  The application of
Article 86 may therefore involve an evaluation of the nature (composition, quality, variety, etc.) and
the cost (quantity discounts based on cost savings, cost of delivery and of marketing, etc.) of the
product or service concerned.  For instance, Article 86 is not applicable when the dominant company
can justify different costs in providing a given product or service4.  Discrimination has been
frequently used in recently liberalized sectors.  An example of a discriminatory practice in rail
transport, which had an impact on trade, is provided by the Deutsche Bahn AG case 5:
Deutsche Bahn AG case
The Court of First Instance decided that the Ge rman rail operator Deutsche Bahn AG infringed the
provisions of Article 86 by abusing its dominant position on the rail transport market in Germany:
Deutsche Bahn imposed discriminatory tariffs on the market for the inland carriage of sea-borne
containers.  These tariffs were higher for instance for transport between a Belgian or a Dutch port
and Germany than between any place in Germany and a German port.  In other words, Deutsche
Bahn applied dissimilar conditions to equivalent tr ansactions, thereby placing non-German ports at a
competitive disadvantage.
Under certain circumstances, the conclusion of exclusive contracts by a dominant firm can
deny access to a market to foreign competitors.  An interesting example, which involved
discrimination vis-à-vis  a US supplier of retail tracking services, is provided by the IRI-Nielsen case 6:
                                                     
4 For instance, in the Corsica Ferries case (ECJ, 18 June, Case C-266/96) the European Court of Justice
stated that it is not incompatible with Articles 85 and 90 of the Treaty to include in the price of a service ofgeneral economic interest a component designed to cover the cost of maintaining this service, inasmuch as it
corresponds to the supplementary costs occasioned by the special characteristics of that service, and to lay down
for that service different tariffs on the basis of the particular characteristics of each port.
5 TFI 21 Oct 1997, case T-229/94.
6 EC Commission Report on the application of the 1991 EC/US Agreement, 8 October 1996 (COM(96)
346), p.5.WT/WGTCP/W/115
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IRI v Nielsen
In 1995, the Commission launched an Article 86 in vestigation into alleged abuse of a dominant
position by AC Nielsen Company, a US-based company  which is the world's leading provider of retail
tracking services with a dominant position in the market of almost all member States.  Retail tracking
services consist of gathering and processing information on product sales and other marketing data.
The Commission investigation had been initiated foll owing a complaint by Information Resources Inc.
(IRI), another US-based company which, following the introduction of new technology, had won a
large share of the US market.  The anti-competitive practices addressed in the Commission
investigation included:  (a) Exclusive contracts in the Austrian market which prevented any
competitor from obtaining the relevant data and ther efore entering the market;  (b) Contracts which
prevented retailers to sell data to third parties at a more favourable price than that offered to Nielsen,
thereby allowing Nielsen to set prices at a high level raising barriers to entry; (c) Discounts and
rebates offered to multinational companies which bought services from Nielsen in several countries.
The case was settled on the basis of an undertaking by which Nielsen agreed not to conclude exclusive
contracts or contracts including any restriction on retailers' freedom to supply data.  There was also
an undertaking to unbundle contracts covering more than one country, so that multilateral customers
could switch to a competitor in a country without losing conditions offered in other countries, as well
as a prohibition on fidelity rebates.
IV. SCOPE FOR DEVELOPING WITHIN WTO CORE PRINCIPLES OF
COMPETITION LAW AND ITS ENFORCEMENT
The EC and its member States have argued that an important component of a multilateral
framework of competition rules would be the development of core principles on competition law andits enforcement.  Many other WTO Members have expressed an interest in further exploring such an
option.  This submission has intended to show that there is a close connection between the WTO
principles of transparency and non-discriminati on and key elements of competition law and its
enforcement.  At the centre of the interaction between trade and competition policy is the need to
promote effective equality of competitive opportunities.  Together with a framework of rules dealing
with government obstacles to trade, there is a need to consider a basic framework of disciplines to
address anti-competitive practices by enterprises which have a similar impact on the trade andinvestment of other WTO Members.  This can be best achieved through a commitment to introduce a
comprehensive competition law and an effective enforcement structure, based on principles of
transparency and non-discrimination.  This could be complemented with common approaches to anti-
competitive practices with a significant impact on international trade and investment and modalities
for international cooperation.
A WTO agreement could therefore establish a basic framework of rules, relating to the
adoption and enforcement of domestic competition law, and provisions on cooperation among WTO
Members.  It would not at all be envisaged that the WTO should develop any powers of investigation
or enforcement on anticompetitive practices.  The commitments assumed under the multilateralframework will be incorporated in the domestic competition law of WTO Members.  An eventual
agreement would not therefore impose obligations on firms and will not in any way affect the nature
of the WTO as a framework of rights and ob ligations among WTO Members.  Moreover, WTO
disciplines should be clearly geared towards the objective of better addressing those anticompetitive
practices which have a significant impact on international trade and investment and therefore affectthe WTO market-opening objectives.  Anticompetitive practices of a purely domestic nature need notWT/WGTCP/W/115
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be a concern in the WTO.  Nor would a framework of multilateral rules in any way hinder the
application of more developed disciplines under the competition laws of WTO Members.
The discussions in the Group have shown that there is a general recognition that competition
policy should be considered as a tool for development.  Indeed, many developing countries haveintroduced or reinforced a competition law framework as a key component of domestic reforms aimed
at fostering integration in a globalized world economy.  This shows that developing countries should
be full participants in efforts to reinforce international cooperation on competition policy and that the
development dimension must also be at the centre of the considerations of a multilateral framework of
competition rules within the WTO.
In its submission on item 2 of the Agenda, the EC and its member States will share some
initial ideas on how to address developing country concerns relating to the need to enhance
international cooperation against anti-competitive practices.  Some general considerations are,
however, worth mentioning here.  The adoption of a comprehensive competition law, backed up with
an effective enforcement structure, entails clear benefits from a development perspective, but also
represents a challenge for developing country administrations.  Transitional periods, together withflexibility in the rules, should be an integral pa rt of any multilateral framework on competition within
the WTO.  However, for developing countries to derive full benefits from enhanced international
cooperation, there is a need to more actively examine how to address the specific needs of developing
country administrations. This should imply consideration within WTO of two complementary sets of
issues:  (a) How to ensure that developing countries can derive maximum benefits from modalities ofinternational cooperation, including sharing of experiences, exchanges of non-confidential
information, consultations, etc.;  (b) How to reinfo rce domestic capacity relating to the administration
and enforcement of competition law.  A WTO framework on competition should play a catalytic role
in promoting enhanced technical assistance geared towards commonly agreed goals.  This should also
imply enhanced cooperation between WTO, UNCTAD, other multilateral organizations as well asbilateral donors in full partnership with the developing countries.
As a conclusion to this submission, the EC and its member States wish to share some initial
thoughts about elements that could be considered, within WTO, as regards the development of core
principles and rules on competition law and its enforcement.  The aim is not to provide an exhaustive
outline of principles or rules, but rather to indi cate in broad terms some of the areas that could be
covered by such principles or rules.  Attention should particularly focus on those aspects ofcompetition law and policy which are more relevant for the multilateral trading system, while fully
recognizing the development dimension and differences in domestic legal and institutional
frameworks.  The key objective would be to promote the adoption of a comprehensive competition
law, backed up by an effective enforcement structure, based on principles such as transparency and
non-discrimination.
In this connection, the EC and its member States suggest that some of the issues that could be
further considered would include the following:
(a) Adoption of a Comprehensive Competition Law: A commitment could be undertaken to
apply a comprehensive competition law, subject to appropriate transitional provisions.  The basic
coverage of such law could be specified, in particular as to the type of anti-competitive practices
covered and the application both to private and public undertakings.  The principle of non-
discrimination, including both de jure  and de facto discrimination, could be confirmed.  Transparency
provisions could be developed relating not only to the basic legal framework, but also to general
guidelines and other means of promoting awareness both by firms and consumers.  Exclusions from
the application of competition law could be specified.  Consideration could also be given to a
commitment to avoid new sectoral exclusions and to progressively reduce exclusions with a negative
impact on international trade.  Consideration could also be given to clarifying the relationship
between regulatory policies and other forms of government intervention and the application ofWT/WGTCP/W/115
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competition law.  Government intervention should not justify broad derogations from the application
of competition law disciplines to firms.  The advocacy role of competition authorities could be
specifically acknowledged, so as to promote consideration of competition concerns in relation to
regulatory policies or other forms of government intervention.
(b) Administration and Enforcement of Competition Law:  A key element could be the
establishment of a competition authority with sufficient powers of investigation into anti-competitive
practices.  Competition laws would be administered in a non-discriminatory, reasonable, impartial and
uniform manner.  Transparency provisions could be developed as regards different steps in the
administration and enforcement of competition law, including the motivation of individual reasoned
competition decisions.  Basic provisions could be considered on remedies including sanctions at a
level severe enough to have a deterrent effect.
(c) Rights of Private Parties:  Procedures through which private parties can have access to the
competition authorities could be recognized, including both petitions to administrative authorities and
access to the courts.  Consideration could also be given to the recognition of "due process" guarantees
in the administration and enforcement of competition law.  Basic standards concerning the protectionof confidential information could also be developed.  The role of the judiciary in the enforcement of
competition law could be recognized, including both direct access to the courts and review of
administrative decisions.
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