. /. WORLD TRADE
ORGANIZATIONWT/WGTCP/W/215
26 September 2002
(02-5153)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM INDIA
The following communication, dated 24 September 2002, has been received from the
Permanent Mission of India with the request that it be circulated to Members.
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Transparency and Procedural Fairness
Both transparency and procedural fairness are no doubt desirable qualities that any
administrative or judicial process must ensure.  However, in the context of competition policy, if they
are interpreted to mean that the rules should be  precisely formulated so as to admit only one
interpretation, then international experience shows th at this is not possible.  There is very little
agreement amongst theorists on many competition issues, and legally the same competition principlehas been interpreted in different ways in different jurisdictions, and also differently at different times
within the same jurisdiction.  For example, predatory pricing behaviour is regarded by one school to
be irrational and therefore not worthy of consideration by competition authorities, while another
school holds that "rational predation" is a distinct possibility under various circumstances.  For
practical purposes, a comparison of price with average costs is widely used as a test of predatory
pricing, but economists believe that a price below marginal costs is neither necessary nor sufficient to
establish predation.  There is a similar lack of consensus about the efficiency properties of verticalrestrictions and mergers, and in developed countries rules and interpretations have changed
significantly even without any change in the relevant statutes. Since developing countries have much
less experience with competition policy, there will be a "learning-by-doing" process in which some
amount of inconsistency and evolution is inevitable.  This is where assistance for capacity-building
can play a vital role in developing administrative guidelines that are appropriate to the policyobjectives, data availability, and institutional framework of developing countries.  Since these will
differ from country to country, there cannot be a simple transfer of a blueprint that is used in countries
at a very different stage of economic and institutional development.  Such guidelines, made available
to competition agencies and firms, can go a long way to reduce uncertainty and the costs of vexatious
litigation.
In the context of international trade, the issues of transparency and procedural fairness
confront us with another problem.  If regulators are to be bound by transparent procedures, what about
the firms they are supposed to regulate?  Vital evidence may not be forthcoming if the firms have
foreign bases, and are protected by their governments in the name of commercial confidentiality.
Further, the process of transfer pricing of transact ions between branches of multinational corporations
remains opaque and impenetrable.  Cooperation between competition agencies of different countries
can play a role here, but developing countries are yet to see this kind of cooperation forthcoming from
those who propose to introduce competition policy into the WTO framework.  As in the case of
National Treatment, if the same rules cannot be enforced equally on domestic and foreign defendants,
it will be to the detriment of the former.  Even though National Treatment formally requires "no lessWT/WGTCP/W/215
Page 2
favourable" treatment of foreign suppliers, a system that has an in-built bias in their favour cannot be
said to be fair, and  such a system will not find widespread acceptance.
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