WORLD TRADE
ORGANIZATIONWT/WGTCP/W/130
12 July 1999
(99-2877)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE EUROPEAN COMMUNITY
AND ITS MEMBER STATES
The following communication, dated 1 June 1999, has been received from the Permanent
Delegation of the European Commission with the request that it be circulated to Members.
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The contribution of competition policy to achieving the objectives of the WTO,
including the promotion of international trade
The WTO system has made a major contribution to the promotion of competition  worldwide.
This has been achieved, primarily, though negotiations for the progressive reduction of government
obstacles to trade and the establishment of a binding framework of rules which apply to different
types of government measures with an impact on international trade.  In the context of a new round of
trade negotiations, it can be expected that further progress will be achieved in the liberalization of
obstacles to trade affecting agriculture, services and industry.  The General Council is in the process
of defining an agenda for a new round of negotiati ons, which should be broad-based and respond in a
balanced manner to the expectations of WTO Members.  The particular interests of the developing
countries should be an integral part of such a New Round agenda.  In that context, consideration
should also be given, on the basis of proposals from Members, to improvements in the existing
framework of WTO rules.
At present, however, there is no multilateral framework relating to the application of
competition law to anti-competitive practices by business, which can also have a significant impact on
access to a market.  Competition-related disciplines have been included in a number of WTO
agreements, notably on services, but there is a need to consider a more horizontal approach.
Similarly, competition-related issues can only be appropriately addressed in the WTO framework on
the basis of negotiations which establish the proper scope for any commitments assumed by WTOMembers.  It is clear, for instance, that the non-violation remedies of the WTO are not an appropriate
means to address the interface between competition law and market access.
1  It would be even less
desirable for such issues to be addressed unilaterally outside the context of the sound application of
commonly agreed competition law disciplines.
The need for a multilateral approach to competition law is further reinforced by the
globalization of business activities and the large increase in the number of countries which have
adopted a competition law.  Cooperation has become essential to promote the effective enforcement
                                                     
1 Following the Kodak-Fudji case, it seems that a non-violation claim could be raised under WTO
dispute settlement if it can be established that an anti-competitive practice is supported by the government.WT/WGTCP/W/130
Page 2
of competition law in a manner which avoids jurisdictional conflicts.  Cooperation should not be
limited to OECD countries or to countries which have entered into bilateral agreements.  There is
therefore a need for a framework of cooperation, which can meet the needs of countries at different
stages of development.  Indeed, developing countries have traditionally stressed the need for such
cooperation in support of their efforts to effectively enforce domestic competition law.  A multilateralframework of rules and principles, within WTO, should ensure that such cooperation can be
effectively sustained.  It should also contribute towards the spread of a "competition culture" and to
reducing unnecessary costs to business arising from the application of different competition laws to
the same international transactions.
For the reasons outlined above, the European Community and its member States – together
with other WTO Members at all levels of development – have argued for the development of a
multilateral framework of rules on competition law and policy within WTO.  Within the context of acomprehensive and balanced New Round agenda, we  favour negotiations on a basic framework of
binding principles and rules on competition law and policy as it relates to anti-competitive practices
with a significant impact on international trade and investment.  Decisions on whether to launch
negotiations on this subject are for consideration in the General Council as part of the process of
preparations of the Seattle Ministerial.  The purpose of this submission is to share ideas with WTOMembers as to how a multilateral framework of rules on competition law and policy can contribute
towards achieving the objectives of the WTO.  In this connection, we will, in particular, focus on two
issues: (a) How different elements that could be considered under such a framework can contribute
towards the objective of promoting international trade; and (b) How the development dimension could
be integrated into a multilateral framework on competition.
I. THE CONTRIBUTION OF A MULTILATERAL FRAMEWORK ON
COMPETITION TOWARDS THE PROMOTION OF INTERNATIONAL TRADE
The discussions in the Working Group have greatly contributed to enhance understanding of
the importance of effective competition policy disciplines to underpin the process of trade
liberalization.  Three points arising from such discussions deserve particular mention:(a) Competition law and policy plays an essential role in ensuring that the benefits of trade and
investment liberalization are not negated by anti-competitive practices by business; (b) Anti-
competitive practices increasingly have an international dimension.  Effects on international trade can
arise when an anti-competitive practice forecloses access to a market, has an impact on several
jurisdictions or is conceived in a different market to that in which it is implemented; and (c) While
there are significant differences in domestic legal and institutional frameworks, there is also a very
large degree of convergence on the essentials of competition law and policy.  This relates both to thebasic approaches followed in relation to anti-c ompetitive practices with a significant impact on
international trade and investment and to the core principles - such as transparency and non-
discrimination - which should guide the application of competition law.
With a view to enhancing the contribution of competition law and policy towards the
promotion of international trade, it appears therefor e desirable to follow a flexible approach to the
development of principles and rules within the WTO.  It is clear that the WTO should not develop
powers of investigation and enforcement on private anti-competitive practices:  this is a matter best
left to domestic competition authorities.  Nor would it be appropriate to envisage a broad
harmonization of substantive competition law or of the domestic legal and institutional settings.  The
European Community and the Member States, as well as other WTO Members, have instead arguedfor a basic framework agreement on competition, which would fully recognize differences in
domestic legal and institutional settings as well as levels of development.  A multilateral framework
on competition would be based on a commitment by WTO Members to adopt and enforce a domestic
competition law, on the basis of commonly agreed principles and rules.  Elements that could be
considered in this connection include: (a) Core principles and rules on competition law and itsWT/WGTCP/W/130
Page 3
enforcement, which would be incorporated in th e domestic legislation of WTO Members; (b) A
specific focus on anti-competitive practices with a significant impact on international trade and
investment; and (c) Modalities of international cooperation.
The European Community and its member States have put forward ideas in relation to each of
the three elements above in other submissions to the Working Group.  We have also greatly benefitedfrom the ideas and comments put forward by Memb ers of this Working Group, both in writing and
orally.  As a contribution to our discussions, we would wish to share some basic considerations on
how each of these elements could contribute towards furthering the WTO objective of the promotion
of international trade.
A. C
ORE PRINCIPLES AND RULES ON COMPETITION LAW AND POLICY
Considerable interest has been expressed in the Working Group on the application to
competition law and policy of core principles and rules based on transparency and non-discrimination.
The issue is not a mechanical transposition of ex isting WTO rules, but rather considering how such
principles could be adapted to a competition framework in a manner which enhances the contribution
of competition law and policy towards the prom otion of international trade.  Commonly agreed
principles and rules would be incorporated in domestic legislation and would not therefore represent
an additional layer of rules in relation to domestic competition laws.  In its submission to the lastmeeting of the Working Group (WT/WGTCP/W/115), the European Community and its member
States suggested some issues that could be further considered in developing such principles.  The
comments that follow are intended to highlight why the principles of non-discrimination and
transparency are essential both for an effective application of competition law and to enhance its
contribution towards the promotion of WTO objectives.
The principle of non-discrimination is central to the application of competition law and is
generally recognized in the law of WTO Members.  The principle is closely connected to the WTO
objective of promoting equality of competitive opportunities for all firms operating in a market.  This
suggests that there would be great value in confirming  such principle at the multilateral level.  At the
same time, the best guarantees for an effective application of the principle would include:(a) Ensuring that there is a domestic competition law regime which covers key anti-competitive
practices and is backed up by an effective and transparent enforcement structure; (b) Limiting, in a
progressive manner, the scope for exclusions from the application of competition law; and
(c) Explicitly recognizing the advocacy role of competition authorities in relation to different forms of
government intervention.
There is an intimate connection between the principles of transparency and non-
discrimination.  Despite differences in legal and institutional settings, all competition law regimeshave developed guarantees of transparency to ensu re legal certainty and promote awareness of firms
and consumers.  Transparency, both as regards the legal framework and enforcement procedures, is
the best guarantee of a non-discriminatory application of competition law.  It provides opportunities
for firms to raise, at the domestic level, concerns about anti-competitive practices, and also includes
guarantees of "due process".  Multilateral agreement on transparency provisions can be seen thereforeas a key contribution towards the reinforcement of competition law, as well as towards addressing
possible concerns about the impact of anti-competitive practices on international trade.
B. A 
WTO FOCUS ON ANTI -COMPETITIVE PRACTICES WITH A SIGNIFICANT IMPACT ON
INTERNATIONAL TRADE AND INVESTMENT
In the WTO framework, there is a need to focus attention on those anti-competitive practices
which have a significant impact on international trad e and investment.  The analysis undertaken in the
Working Group has benefited from the presentation of a large number of examples of how differentWT/WGTCP/W/130
Page 4
types of anti-competitive practices can have a negative impact on the WTO market opening
objectives.  There is also a large degree of common understanding on a typology for the analysis of
such practices, which draws attention to three types of situations:  (a) An anti-competitive practice
which forecloses access of goods, services or investment to a third country market (for instance,
import cartels, certain vertical agreements or abuses of a dominant position);  (b) An anti-competitivepractice which has an impact on several markets (for instance, international cartels, multijurisdictional
mergers); and (c) An anti-competitive practice whose effect is primarily felt in a different market from
that in which it was conceived.  (Export cartels would be typical examples, although certain mergers
or abuses of dominant position may also fall in this category.)
The WTO could focus on exploring the scope for developing common approaches to better
address the above types of anti-competitive practices.  In our submission to the Working Group of
March 1998 (WT/WGTCP/W/62), we put forward so me ideas about how such work could proceed.
Once again, the objective would not be to achieve a  harmonization of substantive competition laws.
We should explore instead a range of options – including common rules in relation to cartels, common
criteria for assessment in relation to other practices foreclosing access to a market and principles to
foster cooperation in relation to multijurisdictional mergers and export cartels – which can be
modulated to take into account the degree of possible convergence.  In all cases, the focus of the workshould be on practices with a significant impact on international trade and investment.  Domestic
competition laws apply regardless of whether an anti-competitive practice has an impact on
international trade.  WTO disciplines would only focus on those cases in which an anti-competitive
practice has an international dimension and need not be concerned with anti-competitive practices of a
purely domestic nature.
Particular priority could be given to so-called "hard-core cartels", which are agreements
among actual or potential competitors involving price-fixing, bid-rigging , output restrictions or
allocation and market division.  Such horizontal agreements have a clear trade distortive effect and are
considered as a serious infringement of most competition law regimes.  There appears therefore to be
particular interest in seeking to establish a common rule in this area and to foster internationalcooperation in order to ensure an effective enforcement.
In relation to other anti-competitive practices which may foreclose access to a market
(i.e. certain vertical agreements or abuses of a dominant position), competition authorities need to
undertake an assessment of the situation in a market.  A common rule prohibiting certain types of
practices would therefore appear to be too rigid.  Instead, there would be merit in further considering
the possibility of developing common criteria for the assessment of whether certain practices restrict
competition and have a negative effect on access to a market.  It is obvious that this work wouldrequire further exchange of views on how such practices are being considered under different
domestic competition law regimes.  The main advantage of a common approach in this area is that it
would foster transparency and reduce the scope for disagreement about the impact on international
trade of such anti-competitive practices.  It goes without saying that any possible common criteria,
which may be developed, could only be based on sound competition law analysis.
Fostering international cooperation should be a key objective in relation to export cartels and
multijurisdictional mergers.  Competition authorities in the importing country may have particular
difficulties in enforcing their competition law vis-à-vis  export cartels.  For jurisdictional reasons, the
application of the competition law of the exporting country is not necessarily the appropriate solution
in all cases.  There should be, however, effective cooperation among competition authorities so as toenhance the enforcement of competition law in relation to export cartels.  As regards mergers, it
would be appropriate to consider principles on merger control aimed at promoting convergence of
procedural requirements and enhanced cooperation in relation to mergers affecting different
jurisdictions.WT/WGTCP/W/130
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C. MODALITIES OF INTERNATIONAL COOPERATION
In a separate contribution to this Working Group, the European Community and its member
States have put forward ideas about the WTO co ntribution to enhanced cooperation in relation to
competition law as it interacts with trade.  Many WTO Members have stressed that modalities for
international cooperation should be a key component of any WTO agreement on competition.  Inorder to ensure that cooperation is effective and can be sustained, it should be based on a common
framework of rules and principles agreed at the multilateral level.  The modalities to be established
should be sufficiently flexible to meet the needs of countries at different levels of development.
The European Community and its Member States are convinced that, in a globalized world
economy, competition law and policy affects the interests of all countries.  Cooperation cannot be
limited to countries which have decided to enter into bilateral agreements or to the framework of
cooperation which has been developed among OECD countries.  Bilateral agreements play animportant role in fostering close cooperation in enforcement activities.  At the same time, as noted in
the Working Group, at initial stages in the development of competition law, countries may lack the
resources to enter into bilateral agreements.  Th is should not mean, however, that such countries
should not benefit from modalities of international cooperation.  There is a risk moreover that if
cooperation develops exclusively at the bilateral level, the interests of countries which are not partiesto such agreements could be neglected.  On the other hand, a multilateral framework for cooperation
could support and be complementary to the prog ressive development of bilateral agreements.
There is therefore considerable merit in develo ping, within WTO, modalities for international
cooperation geared toward two objectives:
(a) Cooperation in support of the progressive reinforcement of the domestic competition law
framework, including enhanced and better coordinated technical assistance:
Important ideas in this respect have been put forward by a number of developing country
WTO Members.  This could include a framework to facilitate the exchange of experiences and
information on competition law and its enforcement, voluntary peer reviews, and the possibility of
periodic reports on global trends in competition law and policy.  We see considerable merit in suchsuggestions, which could be of considerable value for all WTO Members.  Indeed, they would
contribute towards reinforcing domestic capacity a nd to the spread of a competition culture.  The
Group has also benefited from the presentations made by international organizations - such as
UNCTAD, the World Bank and the OECD - of their current technical assistance activities in the
competition field.  A multilateral framework on competition could contribute towards enhancing the
priority attached to such assistance and fostering a coordinated approach among all relevant
institutions in full partnership with the developing countries.
(b) Cooperation in relation to cases affecting the interests of several WTO Members:
Anti-competitive practices with an impact on international trade and investment affect the
interests of several countries.  It is essential therefore that cooperation be established to better address
such practices.  Flexible modalities for cooperation have been developed, for instance, within the
framework of the OECD or under certain bilateral agreements.  There is no reason, however, whydeveloping countries should not benefit from the modalities of international cooperation.  Indeed,
many developing countries have stressed the importance of such cooperation in order to support their
efforts to enforce domestic competition law.  Cooperation could include such elements as notification,
consultation and exchanges of non-confidential information.  Positive comity could also be addressed
in a multilateral agreement, but there should be no binding obligation to investigate on behalf of athird country.WT/WGTCP/W/130
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Dispute settlement modalities will need to be further considered once there is greater clarity
about the scope of the commitments to be assumed under a WTO agreement so that they are well
adapted to the specifics of competition law.  In any event, there should be no dispute settlement
review of individual decisions.
II. THE DEVELOPMENT DIMENSION AS AN INTEGRAL COMPONENT OF A
MULTILATERAL FRAMEWORK ON COMPETITION
The development dimension has been an integral and essential component of the discussions
held in the Working Group.  The synthesis paper prepared by the Secretariat on this subject
(WT/WGTCP/W/80), as well as the report of the Working Group, illustrate the importance attached to
the relationship of trade and competition policy to development and economic growth.  The large
number of contributions, both in oral and written forms made by developing country WTO Members
are a clear indication that the contribution of competition law and policy to development needs to be acentral element for consideration in the WTO.  Indeed, developing countries have traditionally
attached high priority to enhancing international cooperation in relation to anti-competitive practices.
Discussions seem to suggest that there is now considerable scope for addressing this issue on the basis
of common interest.
An important point arising from the discussions in the Working Group is that, in the context
of a globalized world economy, competition policy should be considered as a tool for development.
In this connection, it has been noted that the introduction or reinforcement of a domestic competition
law has been a key component of domestic reforms aimed at fostering effective competition and
integration in a globalized world economy.  Effective competition disciplines are seen as part of a
policy package, which also includes trade and investment liberalization and regulatory reforms.  Manydelegates have also stressed the importance of a clear and enforceable legal framework and the setting
up of a competition authority with well defined powers.
At the same time, it has been pointed out that competition authorities in developing countries
face difficult challenges.  In the first stage, there is the need to define a domestic competition law
which is well adapted to the institutional capacity of the country.  Once a law has been introduced,there is a need to clearly establish the role of co mpetition authorities and to reinforce progressively
their enforcement and advocacy role.  This imp lies the setting up of enforcement priorities and
addressing institutional weaknesses which may result in under-investment.  Cooperation can play an
important role at each of these stages.
The Community and its member States consider that the development dimension must also be
at the centre of the considerations of a multilateral framework of competition rules in the WTO.  We
are ready to discuss and consider positively idea s put forward by developing countries on how to
integrate developmental interests and concerns into  any future framework of rules on competition
within WTO.  At this stage, and taking into account  elements brought to the attention of the Working
Group, we wish to share some preliminary ideas on how developmental considerations could be fully
integrated into a framework of rules:
Progressivity:  Any commitments relating to the introduction of a competition law would
have to be progressive in nature, so as to take into account differences in levels of
development.  Progressivity could also apply as regards limitations on sectoral exclusions
from the application of competition law.  Moreover, as common principles and rules are
discussed relating to the enforcement of competi tion law, consideration should be give to the
capacity-constraints of countries at different levels of development.  It may be, for instance,that certain commitments relating to the admi nistration of competition law could only be
introduced by countries at early stages of development in a progressive manner.WT/WGTCP/W/130
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Flexibility:  As already indicated, a multilateral framework on competition should not aim at a
broad harmonization of competition law and should fully take into account differences in
legal and institutional settings.  Flexibility would therefore be an in-built element of any
common rules or principles to be defined at the multilateral level.  This point can be
illustrated by two examples.  Several developing countries have indicated that the adoption ofa domestic regime for merger control may be difficult to envisage for certain developing
country administrations or that such a regime can be best adopted at the regional level.  This
is the one of the reasons why, in our submission to the April meeting of the Working Group
(WT/WGTCP/W/115), we suggested that, when defining the coverage of a competition law, it
may not be necessary to envisage adoption of a regime for merger control.  Concerns have
also been expressed about the application of  competition law to small and medium sized
enterprises.  As we noted in prior submissions, such enterprises would normally lack marketpower and it is unlikely that agreements among them would have a significant impact on
international trade.  Common principles or rules in the WTO would not therefore hinder a
flexible application of competition law disciplines to small and medium-sized enterprises.
We believe therefore that common rules and principles can be defined in a flexible manner,
which takes into account developmental considerations.  We are ready, of course, to discussany specific concerns that developing countries may have in this respect.
Cooperation:  The development dimension of a WTO agreement should not be limited to the
issues of transitional periods and flexibility in the rules.  Particular attention should be give to
ensuring that developing countries can derive maximum benefits from modalities of
international cooperation.  Developing countries have often raised in international fora theneed for international cooperation in relation to anti-competitive practices, including both
general exchanges of experiences and cooperation in individual cases.  A multilateral
framework in the WTO must address these concerns.  Indeed, a key consideration for the
development of common principles and rules in the WTO is to ensure that all countries can
benefit and participate in flexible modalities of cooperation, which take into account theneeds of countries at different levels of development.  Elements that could be considered in
this connection have been mentioned in the first part of this submission, as well as in the
separate submission on cooperation.
Technical assistance and capacity-building:  Significant technical assistance in the
competition field is currently being provided both bilaterally and by several international
organizations.  At the same time, it has been noted that there is considerable scope for
enhancing the priority attached to capacity-bu ilding relating to the adoption of a competition
law and its enforcement and that coordination of efforts, in full partnership with developing
countries, could be improved.  A WTO agreement, which includes common rules and
principles, would play a catalytic role in ac hieving these goals.  It would therefore be
important to discuss in the WTO, in parallel to the consideration of common rules, means of
promoting a more coordinated and integrated approach to technical assistance based oncooperation among all relevant international organizations.  Once an agreement has been
established, it would also be necessary to monitor the progress achieved in this regard.
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