WORLD TRADE
ORGANIZATIONWT/WGTCP/W/191
20 June 2002
(02-3437)
Working Group on the Interaction
between Trade and Competition Policy
PROVISIONS ON HARDCORE CARTELS
Background Note by the Secretariat
I. INTRODUCTION
1. This note has been prepared in response to the request by the Working Group during the
informal meeting that was held on 26 February 2002 that the Secretariat prepare a set of background
papers based on the discussions held and materials considered in the previous work of the Group.  The
papers were to deal, respectively, with each of the four substantive elements that are contained in
paragraph 25 of the Doha Ministerial Declaration, namely:  (i) core principles, including transparency,non-discrimination and procedural fairness; (ii) provisions on hardcore cartels; (iii) modalities for
voluntary cooperation; and (iv) support for progressive reinforcement of competition institutions in
developing countries through capacity building.  The first in this series of notes, dealing with the
subject of support for progressive reinforcement of competition institutions in developing countries
through capacity building, was issued as document WT/WGTCP/W/182, dated 17 April 2002.
2. The present note deals with the second subject mentioned above, namely provisions on
hardcore cartels, which is to be the subject of focused attention at the Working Group's meeting to beheld on 1-2 July 2002.  The aim of the note is to provide a synthesis of the issues raised and points
made by Members on the topic.  It has been prepared on the basis of the Working Group's annual
reports, which in turn rely upon the minutes of the Group's meetings and on written submissions by
Members to the Group.  In addition, where appropriate, reference is made of other documentation that
has been discussed in the Working Group, particularly:  (i) a background paper on cartels that wasprepared for the World Bank's 2001 World Development Report (henceforth "World Bank
background paper on international cartels")
1 and which was brought to the attention of the Working
Group at its meeting on 5-6 July 2001;2 (ii) the 1998 OECD Recommendation on Effective Action
Concerning Hardcore Cartels, which has been referred to in various meetings of the Working Group
in 1998, 1999 and 2000;3 and (iii) a report by the OECD entitled Hardcore Cartels:  Meeting of the
OECD Council at Ministerial Level,4 copies of which were made available by the representative of the
                                                     
1 Margaret Levenstein and Valerie Suslow, Priv ate International Cartels and Their Effect on
Developing Countries (Background Paper for the World Bank's World Development Report 2001,9 January 2001) (available on the Internet at http://www-unix.oit.umass.edu/~maggiel/WDR2001.pdf).
2 See Report of the Working Group on the Inter action between Trade and Competition Policy (2001),
WT/WGTCP/5, paragraphs 35 and 98.  (Henceforth in this Note, documents issued in the series
WT/WGTCP/1-5 are referred as "Report (1997—2001)", as appropriate.  Documents issued in the series
WT/WGTCP/W/__ are referred to as W/__).
3 See Report (1998), paragraph 71; Report (1999), paragraph 61; and Report (2000), paragraph 41.
4 OECD, Hardcore Cartels:  Meeting of the OECD Council at Ministerial Level (Paris 2000).This document has been prepared under the Secretariat's own
responsibility and without prejudice to the positions of Members
and to their rights  and obligations  unde r the WTOWT/WGTCP/W/191
Page 2
OECD at the Working Group's meeting of 22-23 March 2001.5  Annex I contains a list of
contributions to the Working Group relevant to the t opic of Provisions on Hardcore Cartels.  The 1998
OECD Recommendation on Effective Action Concerning Hardcore Cartels is reproduced in Annex II.
3. The term "cartel" refers to agreements between firms that would otherwise be in competition
with each other (i.e., "horizontal agreements") that aim to fix prices, reduce output or allocate marketsor that involve the submission of collusive tenders.
6  The term "hardcore" underscores the harm
caused by such arrangements and distinguishes them from joint ventures or other inter-firm
arrangements that involve active collaboration among firms and potentially enhance social welfare.7
In this regard, the OECD Recommendation Concerning Effective Action on Hardcore Cartelsprovides that the term "hardcore cartels" does not include "agreements, concerted practices, or
arrangements that:  (i) are reasonably related to the lawful realization of cost-reducing or output-
enhancing efficiencies, (ii) are excluded directly or indirectly from the coverage of a Membercountry's own laws, or (iii) are authorized in accordance with those laws."
8
4. Hardcore cartels can be domestic or international in scope.  The discussion in the Working
Group has focused principally though not exclusively on issues concerning international hardcore
cartels.9  The same approach is taken in this paper – i.e., the discussion is focused principally on
issues concerning international cartels although reference is also made to domestic cartels and theeffects that these can have on trade and development.
5. The concept of an international hardcore cartel should also be distinguished from that of
export and import cartels.  Export cartels fix prices or outputs in the participating firms' export
markets but not in their home markets.  Import cartels aim to regulate the price or other terms of
goods or services that are imported into the participating firms' home markets.  In contrast,international cartels generally fix prices, outputs or other dimensions of competition across a number
of national markets, often including but not limited to the home countries of the participating firms.
Another distinguishing feature is that export cartels are exempted from the national competition laws
of many countries, in some cases on a condition of public registration, whereas international cartels
often are illegal and typically are carried on in secret unless and until they are investigated anddisclosed.  The discussion in this paper is chiefly concerned with international cartels as such,
although reference is also made to export cartels.
6. The remainder of this note is divided into three sections that deal, respectively, with:
- The need for measures to address hardcore cartels.  The focus here is on points made
by Members concerning the harm caused by international and other hardcore cartels,
their implications for the multilateral trading system and the costs they impose on
poor countries as well as on the conditions that give rise to cartels and the otherpoints;
- Points made by Members concerning the measures that are needed to address cartels
at the national level;
- Points made regarding the role of international cooperation in addressing
international hardcore cartels, including at the bilateral level, and the potential
                                                     
5 See Report (2001), paragraph 52.
6 See Contribution of the United States (WT/WGTCP/W/62), Contribution by the European
Community and its Member States (WT/WGTCP/W/140) and OECD, Hardcore Cartels:  Meeting of the OECD
Council at Ministerial Level , op cit.
7 OECD, Hardcore Cartels:  Meeting of the OECD Council at Ministerial Level , op cit.
8 OECD Recommendation on Effective Action Concerning  Hardcore Cartels, op cit., also referenced in
Contribution by Japan (WT/WGTCP/W/176), paragraph 10.
9 Contribution by the European Community and its Member States (WT/WGTCP/W/140).WT/WGTCP/W/191
Page 3
contribution of provisions on hardcore cartels which could be embodied in a
multilateral framework on competition policy.
II. THE NEED FOR MEASURES TO ADDRESS HARDCORE CARTELS
7. The points have been made in the Working Group that hardcore cartels are the most
pernicious type of anti-competitive practice from the point of view of trade and development as wellas of competition law enforcement; that they can have the effect of undermining the benefits that
should flow from international trade liberaliza tion, and hence are an important concern for the
multilateral trading system; that they impose heavy costs on consumers and user industries, and
thereby also on the development prospects of poor  countries; that the magnitude of harm caused
particularly by international cartels has recently b een shown to be greater than was previously known;
and that cartels proliferate wherever countries lack legislative and other tools to deal with them.
These points are elaborated below, with appropriate references.
8. The view has been expressed in the Working Group that cartels are the most pernicious type
of anti-competitive practice from the point of view of trade and development as well as of competition
law enforcement
10 and impose heavy costs on consumers and the economies of Members, including
both developed and developing countries.11  The point has been made that international cartels can
have clear effects on market access, where they allocate national markets among the participatingfirms.
12  Furthermore, even where they do not affect market access per se , international cartels distort
the efficient functioning of international markets and thereby undermine realization of the benefits
that should flow from trade liberalization.13  A particular source of distortion is that they artificially
raise the costs of countries' imports.  For these reasons, cartels are an important and legitimate
concern for the multilateral trading system.14  The point has also been made that cartels operating in
certain service sectors such as international maritime shipping or financial services can be particularly
harmful to trade, since they not only restrain trade wi thin the relevant service but also raised the price
of that service to exporters, introducing another level of distortion.15  Moreover, cartels are highly
unlikely to have valid efficiency-related justifications.16
9. The point has also been made in the Working Group that the magnitude of the harm caused by
international hardcore cartels, particularly to developing countries, has recently been shown to be
higher than was previously known.17  In this regard, the above-noted World Bank background paper
on international cartels which was brought to the attention of the Working Group at its meeting on 5-6
July 2001 refers to examples of international cartels that affected the supply of 16 products in the
1990s.  The total value of developing countries' imports of these products in 1997 was US $81.1
billion.  Available information suggests that the pr ice impact of cartels supplying these products was
in the range of 20-40 percent, on average – implying  a possible cost impact in the range of US $16-32
billion for these products alone.18
10. Reference has been made in the Working Group to a number of examples of international
cartels considered to have affected trade and development.  In particular, reference has been made to
the example of the International Heavy Electrical Equipment Cartel, which fixed prices at higher than
                                                     
10 Report (2000), paragraph 29.
11 Report (2000), paragraph 39.
12 Report (1998), paragraph 84.
13 Report (1998), paragraphs 71 and 85.
14 Report (1999), paragraph 71; Contributions by Japan (WT/WGTCP/W/135), page 2 and
(WT/WGTCP/W/168), paragraphs 1-2.
15 Report (1998), paragraph 87.
16 Report (1998), paragraph 86.
17 Report (2000), paragraph 39; Report (2001), paragraphs 35 and 98.
18 See Hardcore Cartels and Developing Economies (Presentation by Dr. Simon Evenett to the
Symposium on Trade and Competition Policy:  Looking Ahead After Doha, held at the WTO, 22 April 2002).WT/WGTCP/W/191
Page 4
competitive levels in many countries' national markets over a period of several decades.  The
suggestion was made that this case illustrated the impact that cartel arrangements could have not only
on international trade but also on economic developm ent, in that heavy electrical equipment is an
important input to energy production and the cartel raised significantly the cost of such equipment to
developing countries.19  Reference has also been made to the Citric Acid Conspiracy, an international
price-fixing arrangement prosecuted by the United States antitrust authorities that involved actions by
firms from various countries during the first half of the 1990s and to the Fax Paper case, a cartel that
affected the price of thermal fax paper in Canadian and United States markets and involved firms
headquartered in various countries.20  Other examples of cartels believed to have had effects on
international trade and/or development and that have been referred to in the Working Group include
cartels in the markets for synthetic fibers, photographic equipment (that is, prisms, lenses and
lightening equipment), television equipment, chemical textile products, micro-crystalline cellulose,and food preservatives.
21
11. The view has been expressed that, in many cases, the harm caused to developing countries by
international cartels has not been adequately addressed.  For example, reference has been made in the
Working Group to a major international cartel alleged to have operated from 1990 to 1995 in the
market for stainless steel tubes used in the exploration and transportation of oil and gas, productswhich are important for many developing countries.  The suggestion has been made that this is an
example of the kind of case in which enhanced possibilities for cooperation with respect to hardcore
cartels could be of particular benefit to developing countries in addressing the harmful impact of
cartels on them.  Moreover, the suggestion has been made in the Working Group that this is far from
being an isolated example.  Often, in decisions co ndemning international cartels in both the European
Community and the United States, mention has been made that the cartel has operated elsewhere.
22  In
fact, hardcore cartels tend to operate wherever countries lack legislative and other tools to deal with
them.23  Accordingly, the argument has been made that developing countries affected by cartels can
only mount an appropriate response if they have st rong competition laws and adequate enforcement.24
12. The importance of action to suppress domestic cartels has also been noted by Members in the
Working Group.25  Such cartels aggravate poverty by raising the prices of goods and services that are
important for consumers and for development-related purposes.  Beyond this, where they are
successful in raising prices, domestic cartels may need to be accompanied by government measures
excluding foreign companies from the domestic market, such as tariffs and non-tariff barriers.
Alternatively, members of a domestic cartel may enga ge in joint exclusionary conduct to prevent the
entry of foreign firms, for example by controlling the distribution of imported goods.26
13. The following factors have been mentioned in the Working Group as contributing to the
harmful effects associated with hardcore cartels as referred to above: (i) the non-existence of a well-
constituted competition law and policy;  (ii) statutory exemptions or protective regulatory regimes
covering the conduct in question; (iii) a failure to adequately enforce existing laws and policies
relating to anti-competitive practices;  (iv) the existence of other government policies that implicitly
or explicitly sanction or encourage anti-competitive conduct;  and (v) the lack of effective rulesgoverning access to essential facilities, in the context of deregulation.
27  The point has also been made
                                                     
19 Report (1998), footnote 143.
20 Report (1998), footnote 143.
21 See Contribution of Japan (W/168).
22 Report (2000), paragraph 54.
23 Report (1998), paragraph 90; Report (2001), paragraph 35; Contribution by Japan
(WT/WGTCP/W/168), paragraph 3.
24 Contribution by Japan (WT/WGTCP/W/168), paragraph 3.
25 Report (1998), paragraph 51; see also Contribution of UNCTAD (W/17); Contribution of Korea
(W/133) and Contribution of Japan (W/134).
26 Report (1999), paragraph 71.
27 Report (1998), paragraph 90.WT/WGTCP/W/191
Page 5
that international cartels are unlikely to respect the neatly defined territories covered by existing
bilateral agreements.  Rather, they tend naturally to act strategically and to seek out the cracks that
exist between relevant regional and bilateral agreem ents.  Only by having a network that covers all
potential areas of cartel activity can Members prevent such behaviour.28
14. With regard to the subject of export cartels,  the suggestion has been made that these are a
clear example of an anti-competitive practice potentially distorting the terms of trade.29  Furthermore,
the suggestion has been made that that the victims of export cartels often include developing countries
that import goods such as machinery or consumer products.30  The point has also been made that the
extent of such cartels and their deleterious effects on trade and development may be greater than is
widely known, since some countries do not insist on registration of such cartels;  they simply turn a
blind eye to them.31  On the other hand, the view has been expressed that the extent of harm caused by
export cartels is less than is sometimes thought, in that not all export-related consortia or similararrangements fix prices or exercise market power.  In any case, these are likely to be of less concern
than situations where both export and domestic markets are subject to cartelization.  Even in the
absence of relevant exemptions, cartels relating purely to export markets might well be outside the
jurisdiction of "home countries" to the extent that their effects are felt abroad rather than in the home
country market.
32
15. Notwithstanding the apparent general condemnation of hardcore cartels, the argument has
also been made that a degree of flexibility may be warranted in regard to the application of
competition law in relation to certain types of inter-firm conduct.33  In this regard, reference has been
made to cases in national systems in which exemptions or exceptions exist or have existed in relation
to cartels, for example depression or structural adjustment cartels, rationalization cartels, cartelsinvolving small and medium-size enterprises (SMEs) and SME cooperatives, and export and import
cartels.
34  Nonetheless, the point has also been made that such exemptions should be kept to a
minimum and, ideally, phased out over time.35
III. DISCUSSION OF THE MEASURES NEEDED TO ADDRESS HARDCORE
CARTELS AT THE NATIONAL LEVEL
16. The view has been expressed in the Working Group that adopting and vigorously enforcing
national competition laws can help countries to prot ect themselves against hardcore cartels and other
market abuses by giving them the tools to investigate and prosecute anti-competitive conduct affecting
their national interests, whether acting alone  or in cooperation with other countries.36  Important
elements of an effective national competition law include a clear prohibition of cartel activity, backed
up by substantial penalties including fines and/or imprisonment, and relevant investigatory powers.
Furthermore, the suggestion has been made that particular attention should be devoted by relevantenforcement authorities to the investigation and prosecution of domestic and international cartels,
                                                     
28 Report (2000), paragraph 58.
29 See, generally, Report (1998), paragraph 89; Report (1999), paragraph 26; and Report (2000),
paragraph 25.
30 Comments by the observer from UNCTAD, summarized in M/4, paragraph 30.
31 Report (1998), paragraph 89.
32 Report (2000), paragraph 25.
33 Report (1998), paragraph 88.
34 Contribution by Japan (WT/WGTCP/W/177), page 2.
35 Report (2001), paragraph 77; see also Contribution of Japan (WT/WGTCP/W/177).
36 Contribution by Canada (WT/WGTCP/W/70), page 2; Contribution of the United States
(WT/WGTCP/W/62); Contribution by the European Community and its member States (WT/WGTCP/W/62),pages 4-5; Contribution by Trinidad and Tobago (WT/WGTCP/W/179).WT/WGTCP/W/191
Page 6
given the clear anti-competitive effects of these practices and their harmful impact on the
development prospects of poor countries.37
17. As an example of the effective enforcement of national competition law in relation to
hardcore cartels, reference has been made in the Working Group to criminal prosecutions undertaken
by the United States Department of Justice in re lation to international cartels involving a range of
products and services.   Under relevant U.S. laws, criminal penalties including prison sentences as well
as heavy fines may be imposed in such cases.38  Heavy fines may also be imposed in such cases in the
European Community and certain other jurisdictions, some of which also provide for the possibility of
jail sentences for individual perpetrators of cartels.39
18. The point has been made in the Working Group that developing countries affected by
international cartels cannot rely exclusively on the assistance of developed countries to address the
harm caused to them by cartels.  Competition law enforcement in developed countries is primarilyfocused on addressing the harmful effects of anti-competitive effects in their individual home
markets, though it may also have beneficial spillovers for other countries.  If countries lack adequate
competition laws or the laws are not backed by adequate enforcement, they will be victimised and will
be unable to mount an effective response.
40
19. Notwithstanding the foregoing points, at a more general level, a number of questions have
been raised in the Working Group regarding the need  for countries to adopt national competition laws.
The argument has been made that a country can have an effective competition policy without
necessarily adopting a comprehensive competition law.41  It has been suggested that this can be
achieved through an open trade and investment regime and a general absence of government
intervention coupled with sectoral and other measures to deal with particular problems whererequired.
42  However, scepticism has been expressed by some Members as to whether such an
approach is sufficient to guard against the harm caused by international anti-competitive practices
such as cartels that cut across national markets.43  Furthermore, the view has been expressed that
having a national competition law may have certain other advantages such as ensuring greater
consistency in enforcement approaches across industries;  giving the policy statutory character,enforceability and stability;  enhanced ease of adaptation of new analytical techniques applicable
across sectors;  and a reduced danger of institutional "capture" of a comprehensive competition
authority as compared to the situation of regulators that focus on particular economic sectors.
44
IV. DISCUSSION OF EXISTING AND POSSIBLE FUTURE MEASURES TO ADDRESS
HARDCORE CARTELS AT THE INTERNATIONAL LEVEL
20. Two principal kinds of measures have been discussed in the Working Group to address, at the
international level, the harm caused by international cartels.  The first involves proposals forexpanded cooperation among national competition authorities in the investigation and prosecution of
cartel cases as well as in other types of anti-competitive practices.  Since these proposals will be the
subject of a separate note by the Secretariat, only some particular aspects relating to cartels are
discussed in this paper, in Part IV(A).  More gene ral aspects of cooperation will be considered in the
separate note on this subject (to be issued).  The second kind of measure that has been proposedinvolves "provisions on hardcore cartels", which are discussed below in Part IV(B).
                                                     
37 Report (1998), paragraph 51; Report (2000), paragraph 29 and Report (2001), paragraph 33.
38 Contribution by the United States (WT/WGTCP/W/66), pages 5-6.
39 See Contribution by the European Community and its member States (WT/WGTCP/W/62), pages
4-5 and Contribution by Canada (WT/WGTCP/W/70), page 2.
40 Contribution by Japan (WT/WGTCP/W/168), paragraph 3.
41 Report (1998), paragraph 37; Report (2001), paragraph 80.
42 Report (1998), paragraph 37; Report (2000), paragraph 19; and Report (2001), paragraph. 80.
43 Report (1998), paragraph 38.
44 Report (1998), paragraph 38.WT/WGTCP/W/191
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A. THE ROLE OF GENERAL COOPERATION MECHANISMS IN RELATION TO THE SUBJECT OF
HARDCORE CARTELS
21. The view has been expressed in the Working Group that the need for cooperation among the
competition authorities of WTO Members is particul arly clear in the case of international cartels,
which impose heavy costs on economic and consumer welfare and often originate outside the marketsof the affected countries.  It is difficult for any one country to effectively regulate such behaviour by
itself.
45  The required cooperation may be as simple as the exchange and dissemination of basic
information such as legislation and enforcement guidelines or may extend to the exchange of
information related more specifically to particular cases (discussions in the Working Group have
focused principally on the benefits that might be achieved through more widespread exchange of non-
confidential information regarding relevant firms and cases as opposed to confidential information)46.
The suggestion has been made that, even at this basic level, cooperation facilitates the development ofuseful channels of communication between national competition authorities and can engender a
dynamic of common interest.  Cooperation of this kind may be particularly valuable in the
investigation of hardcore cartels.
47  However, even at this basic level, to be of genuine value,
cooperation has to develop over time, and to be founded on a mutuality of interest, trust and
commonality of purpose.48
22. As an illustration of the role that cooperation can play in cases involving hardcore cartels,
reference has been made to the Thermal Fax Paper  case, which involved an international conspiracy to
raise the price of thermal fax paper in North America.  The conspiracy involved participants based in
Japan, Canada and the United States.  The conspiracy was uncovered by the Canadian Competition
Bureau; however, much of the evidence was located in the United States.  Cooperation between the
enforcement authorities of the two countries resulted  in guilty pleas, fines and prohibition orders against
the various participants.49
23. Cooperation mechanisms of the type used in the Thermal Fax Paper  and other cases already
exist in a number of agreements at the bilateral level.50  Some Members have proposed the adoption of
similar mechanisms at the multilateral level, as  part of a WTO agreement on competition policy.51  The
view has been expressed that mechanisms of this na ture could be of particular assistance to developing
countries in addressing the harm caused to them by international cartels,52 although their scope and
application would not be limited to cartels.   A numbe r of more general points have been made regarding
the proposed cooperation modalities, including with respect to their pros and cons (see the separate note
to be provided on this subject).
                                                     
45 Contribution by Japan (WT/WGTCP/W/168), paragraph 2.
46 Report (2000), paragraph 41; Report (2001), paragraph 65.
47 Report (2000), paragraph 41.
48 Report (1998), paragraph 92
49 Contribution of Canada (WT/WGTCP/W/70), pages 2-3.
50 Contribution of the United States (WT/WGTCP/W/148).
51 See, e.g., Contribution of the Czech Republic (WT/WGTCP/W/165);  Contribution of Japan
(WT/WGTCP/W/167;  and Contribution of the European Community and its member States
(WT/WGTCP/W/173).
52 Contribution by the European Community and its member States (WT/WGTCP/W/140), page 6 and
Annex.WT/WGTCP/W/191
Page 8
B. VIEWS EXPRESSED IN THE WORKING GROUP REGARDING THE POTENTIAL CONTRIBUTION OF
PROVISIONS ON HARDCORE CARTELS IN A MULTILATERAL FRAMEWORK ON COMPETITION
POLICY IN THE WTO
1. Nature of the proposal
24. A key element of current proposals by some Members for the development of a multilateral
framework on competition policy is a commitment to the prohibition of hardcore cartels.53   In this
regard, the view has been expressed that there exists a strong international consensus that hardcore
cartels should be prohibited  on the ground that they have serious, and unambiguously harmful effects
on consumers, on the economies of Members, including both developed and developing countries,
and on international trade.54  The point has also been made that the majority of existing competition
laws contain some kind of ban against hardcore cartels.  However, many Members, particularly
developing countries, lack such provisions.55  Concern about the impact of cartels and the need for
strengthened action against them at the national and international levels is already embodied in an
OECD Recommendation on the subject as well as in relevant provisions of the United Nations Set of
Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices
(see especially Parts D(3) and (4) and text on the need for international cooperation).56  However, the
precise nature of the provisions that are proposed to be adopted in the framework of the WTO remainsto be elaborated.
25. As a source of insight into the nature and scope of possible provisions on hardcore cartels in
the framework of the WTO, reference has been made in the Working Group by a number of members
to the above-noted OECD Recommendation Concerni ng Effective Action Against Hardcore Cartels
(attached as Annex I).
57  Essentially, the Recommendation provides that OECD member countries
should ensure that their competition laws effectively halt and deter hardcore cartels, in particular by
providing for (i) effective sanctions, of a kind and level adequate to deter firms and individuals from
engaging in cartel practices; and (ii) adequate enforcement powers and institutions including powers
to obtain documents and information.  The Recommendation also commits members to cooperate
with each other in enforcing their laws against cartels and sets out a number of principles to governsuch cooperation.  The OECD Competition Committee is charged, among other tasks, with reviewing
Members' experience in implementing the Reco mmendation.  Non-OECD member countries are
invited to associate themselves with the Recomme ndation.  The point has been made in the Working
Group that the kind of cooperation sought to be engendered by this Recommendation has the
advantage of promoting the adoption of "best practices" which, in turn, increases the possibilities for
convergence in approaches, or "soft harmonization", in the long-run.
58  The point has also been made
that the commitment to take action against hardcore cartels which has been called for by some WTOMembers would provide the basis for a common language and for cooperation among different
competition policy regimes but would in no way constitute a harmonization of competition law.
59
2. Potential benefits of provisions on hardcore cartels in a WTO framework
26. A number of potential benefits have been referred to by the proponents of a WTO agreement
on competition policy regarding the inclusion of a prohibition on hardcore cartels in such aframework.  In essence, it has been argued that such a prohibition is important to assist developing
and other countries to deal effectively with international cartels, and thereby to alleviate the above-
                                                     
53 Paragraph 34, Report 2001;  Report (2000), paragraph 34.
54 Report (2001), paragraph 73; Report (2000), paragraph 39; Report (1998), paragraph 93.  See also
Contribution by the United States (WT/WGTCP/W/185), page 3.
55 Report (2001), paragraph 100.
56 Report (2000), paragraph 39.
57 See Report (1998), paragraph 71; Report (1999), paragraph 61; and Report (2000), paragraph 41.
58 Report (2000), paragraph 41.
59 Report (2001), paragraphs 72 and 73.WT/WGTCP/W/191
Page 9
described adverse effects of cartels on their cons umers, growth and development prospects.  For
example, coupled with related commitments on cooperation and on support for progressive
reinforcement of competition institutions in developing countries, it would provide the means for
developing countries to intervene effectively in cases in which, currently, they are often powerless to
act.60  The view has also been expressed that a multilateral framework might be of assistance in
dealing with the impact of export cartels61 which, as mentioned above, may not be subject to the
application of national competition law for various reasons.62
3. Concerns/reservations expressed regardi ng possible provisions on hardcore
cartels/related aspects of a WTO framework
27. Relatively little has been said in the Working Group by way of concerns or reservations
specifically in relation to possible provisions on hardcore cartels in a WTO agreement on competition
policy.  However, a range of related but more general concerns have been expressed regarding theproposals for a possible multilateral framework.  Fo r example, concerns have been expressed that:
(i) the proponents' interest in a multilateral framework is motivated principally by market access
concerns;
63 (ii) the adoption of a multilateral framework would entail an undesirable degree of
harmonization in the field of national competition laws and policies;64 (iii) developing countries lack
the requisite institutional infrastructure and human resources;65  and (iv) the proposed framework
might entail undesirable costs in terms of limiting countries' options in the area of industrial policy.66
A number of counter-arguments and points have been made in response to each of these concerns.For example, the points have been made that the co ntent of the current proposals does not reflect any
undue emphasis on market access;
67 that harmonization of national laws would not be required since
the proposed framework would be based on principles rather then detailed requirements or modellegislation;
68 that assistance would be provided for developing countries to develop any necessary
institutions over time and appropriate transition periods provided;69 and that the principles to be
embodied in the proposed framework would apply to national competition law/policy as such and not
to wider aspects of industrial policy.70  In any case, how far these general concerns and reservations
would apply in the specific context of possible provisions on hardcore cartels is an issue that theWorking Group may wish to clarify.
________________________
                                                     
60 Report (2002), paragraphs 39 and 54.
61 Report (2000), paragraph 25; Report (1999), paragraph 26.
62 Report (2000), paragraph 25.
63 Report (2001), paragraph 58.
64 Report (2001), paragraph 17.
65 Report (2001), paragraph 28.
66 Report (2001), paragraph 51; M/17, to be issued.
67 Report (2001), paragraph 58.
68 Report (2001), paragraph 73.
69 Report (2001), paragraph 55.
70 Report (2001), paragraph 20.WT/WGTCP/W/191
Page 10
ANNEX I
Working Group on the Interaction between Trade and Competition Policy
CONTRIBUTIONS RELEVANT TO THE
TREATMENT OF HARDCORE CARTELS
SYMBOL:
(WT/WGTCP/-)MEMBER/
OTHER SOURCEPARAGRAPH/
PAGE
REFERENCEMATTERS DISCUSSED
W/17 UNCTAD para. 12 (c) techniques of cartel control
W/21 OECD passim OECD experiences with cartels
W/23 Poland page 1 national institutions lacking means
to deal with international cartels
W/28 Singapore para. 11, 15 (b) implications of exemptions for
import and export cartels
W/42 Canada page 3 implications of exemptions for
export cartels
W/43 Turkey pages 3, 4, 6 necessity of suppression of cartels
page 5 analysis of horizontal restraints
page 8 problems of developing countries
with international cartelsW/45 European
Community
page 9 priority for examination of
hardcore cartels
W/48 United States page 4 mentioning the OECD
Recommendation on Cartels
W/51 Canada page 19 international cartels as emerging
problem for competition policy
W/56 Korea page 2 implications of exemptions for
export cartels
W/61 European
Communitypage 3 role of competition authorities in
preventing cartels
pages 4 et seq. analysis of cartel cases in
European lawW/62 European
Community
pages 13 et seq. proposals for WTO discussions on
cartel issues
W/66 United States passim experiences with international
cartels
W/70 Canada pages 2-3 examples of enforcement action
against cartels
W/71 Czech Republic page 3 export cartels
W/72 Canada page 5 focus of Canadian authorities on
cartel cases
W/78 European
Communitypage 14 benefits of a WTO commitment on
hardcore cartels
W/95 Kenya para. 9 (e) significance of cartels in the
informal sector
page 1 impact of cartels W/100 Brazil
page 2 cooperation to prevent cartels
W/104 Hong Kong, China para. 13 exemption of export cartels from
competition law in some countriesWT/WGTCP/W/191
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SYMBOL:
(WT/WGTCP/-)MEMBER/
OTHER SOURCEPARAGRAPH/
PAGE
REFERENCEMATTERS DISCUSSED
page 2 competition policy as a tool for
addressing hardcore cartelsW/108 Japan
page 3 cooperation between national
competition authorities
W/115 European
Communitypage 5 et seq. implications of exemption of
export cartels from national
competition laws
page 5 cooperation agreements and
control of cartelsW/116 United States
page 7 reference to OECD
Recommendation on Hardcore
Cartels
para. 8 (and 16) desirability of prohibition of
hardcore cartelsW/117 Switzerland
para. 12 publication of anti-cartel laws
W/118 Hong Kong, China para. 9 implications of exemption of
export cartels from national
competition laws
pages 2, 4 importance of suppressing
hardcore cartelsW/119 Japan
page 4 exemption of export cartels
W/124 Korea page 3 OECD Recommendation on
Hardcore Cartels
W/126 Zimbabwe
on behalf of the
African Grouppage 2 cartels as priority for developing
countries in their approach to
competition policy
W/130 European
Communitypage 4 need for provisions on hardcore
cartels
W/133 Korea para. 12 feasibility of common
understanding on prohibition of
hardcore cartels
page 1-2 cartels and development (including
in domestic markets)W/134 Japan
pages 2-3 formerly authorized cartels in
Japan
W/135 Japan passim impact of cartels on international
trade
page 3 impact of international cartels on
developing countries
pages 6, 8-9 cooperation in cartel cases
page 8 need for agreement of WTO
Members on hardcore cartelsW/140 European
Community
pages 13 et seq. cartel cases:  examples
W/141 Hong Kong, China para. 10 (a) relevance of differing approaches
to export and import cartels among
WTO Members
W/143 Trinidad and Tobago page 3 impact of international cartels on
small open economiesWT/WGTCP/W/191
Page 12
SYMBOL:
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OTHER SOURCEPARAGRAPH/
PAGE
REFERENCEMATTERS DISCUSSED
W/145 Japan page 4 anti-cartel legislation as priority
for competition law enforcement
W/149 India page 2 potential advantages of cartels as
reflected in some countries'
industrial policies
W/151 Switzerland pages 2, 4 anti-cartel provisions necessary on
a multilateral level
page 2 importance of anti-cartel law
enforcement
pages 5, 7, 8 feasibility of a multilateral
framework to address anti-
competitive practicesW/152 European
Community
pages 11-12 cooperation and assistance in
regard to cartels
W/154 Korea pages 2-3 cartels as problem for the
international trading system
page 2 importance of national rules and
international cooperation
page 4 OECD Recommendation on
Hardcore CartelsW/155 Canada
page 6 common enforcement action as
first step of cooperation
W/156 Japan para. 3 (b) unique added value of multilateral
agreement in area of export cartels
pages 4-5 examples of EC cartel cases as
argument for international
cooperationW/160 European
Community
page 7 cartel legislation as priority for
developing countries and for a
multilateral agreement
W/161 Romania pages 1-2 cartels as major topic for
multilateral agreement
W/164 United States page 2 anti-cartel law enforcement as
priority of antitrust agencies
W/165 Czech Republic pages 1, 4 anti-cartel legislation as a priority
for a multilateral agreement
W/168 Japan para. 2, 5 et seq. cartels as a problem for trade and
development;  examples
W/173 Canada and Costa
Ricapage 1 provisions addressing cartels/other
matters in a bilateral free trade
agreement
W/175 European
Communitypassim effects of cartels, development
dimension
W/176 Japan para. 8 et seq. adverse effects of cartels on
development
W/177 Japan passim status of cartel exemptions in
JapanWT/WGTCP/W/191
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SYMBOL:
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OTHER SOURCEPARAGRAPH/
PAGE
REFERENCEMATTERS DISCUSSED
W/179 Trinidad and Tobago page 2 enforcing anti-cartel legislation as
a priority for small developing
economies in area of competitionpolicy
page 3 importance of universal ban on
hardcore cartels
page 5 exchange of information in cartel
casesW/184 European
Community
page 8 impact of cartels on developing
countries
W/185 United States passim importance of anti-cartel
provisions as component of
national competition policyWT/WGTCP/W/191
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ANNEX II
OECD COUNCIL RECOMMENDATION CONCERNING EFFECTIVE ACTION AGAINST
HARDCORE CARTELS71
(adopted by the OECD Council at its 921st Session on 25 March 1998 [C/M(98)7/PROV])
THE COUNCIL,
Having regard to Article 5 b) of the Convention on the Organisation for Economic
Cooperation
and Development of 14th December 1960;
Having regard to previous Council Recommendations' recognition that "effective application
of competition policy plays a vital role in promoting world trade by ensuring dynamic national
markets and encouraging the lowering or reducing of entry barriers to imports" [C(86)65(Final)]; and
that "anticompetitive practices may constitute an  obstacle to the achievement of economic growth,
trade expansion, and other economic goals  of Member countries" [C(95)130/FINAL];
Having regard to the Council Recommendation that exemptions from competition laws
should be no broader than necessary [C(79)155(Final)] and to the agreement in the Communiqué of
the May 1997 meeting of the Council at Ministeria l level to "work towards eliminating gaps in
coverage of competition law, unless evidence suggests that compelling public interests cannot be
served in better ways" [C/MIN(97)10];
Having regard to the Council's long-standing position that closer cooperation is necessary to
deal effectively with anticompetitive practices in one country that affect other countries and harminternational trade, and its recommendation that when permitted by their laws and interests, Member
countries should co-ordinate investigations of mutual concern and should comply with each other's
requests to share information from their files and to  obtain and share information obtained from third
parties [C(95)130/FINAL];
Recognising that benefits have resulted from the ability of competition authorities of some
Member countries to share confidential investigator y information with a foreign competition authority
in cases of mutual interest, pursuant to multilateral and bilateral treaties and agreements, and
considering that most competition authorities are currently not authorized to share investigatory
information with foreign competition authorities;
Recognising also that cooperation through the sharing of confidential information
presupposes satisfactory protection against improper disclosure or use of shared information and may
require resolution of other issues, including poten tial difficulties relating to differences in the
territorial scope of competition law and in the nature of sanctions for competition law violations;
Considering that hardcore cartels are the most egregious violations of competition law and
that they injure consumers in many countries by raising prices and restricting supply, thus making
goods and services completely unavailable to some purchasers and unnecessarily expensive for
others; and
                                                     
71  Brought to the attention of the WTO Working Group on the Interaction between Trade and
Competition Policy at various meetings in 1998, 1999 and 2000 (see Report (1998), paragraph 71; Report
(1999), paragraph 61; and Report (2000), paragraph 41).WT/WGTCP/W/191
Page 15
Considering that effective action against hardcore cartels is particularly important from an
international perspective -- because their distortion of world trade creates market power, waste, and
inefficiency in countries whose markets would otherwise be competitive -- and particularly dependent
upon cooperation -- because they generally operate in secret, and relevant evidence may be located in
many different countries;
I. RECOMMENDS as follows to Governments of Member countries:A. CONVERGENCE AND EFFECTIVENESS OF LAWS PROHIBITING HARDCORE
CARTELS
1. Member countries should ensure that their competition laws effectively halt and deter
hardcore cartels.  In particular, their laws should provide for:
(a) effective sanctions, of a kind and at a level adequate to deter firms and individuals from
participating in such cartels; and
(b) enforcement procedures and institutions with powers adequate to detect and remedy
hardcore cartels, including powers to obtain documents and information and to impose
penalties for non-compliance.
2. For purposes of this Recommendation:
(a) a "hardcore cartel" is an anticompetitive agreement, anticompetitive concerted practice,
or anticompetitive arrangement by competitors to fix prices, make rigged bids
(collusive tenders), establish output restrictions or quotas, or share or divide markets by
allocating customers, suppliers, territories, or lines of commerce;
(b) the hardcore cartel category does not include agreements, concerted practices, or
arrangements that (i) are reasonably related to the lawful realization of cost-reducing or
output-enhancing efficiencies, (ii) are excluded directly or indirectly from the coverage
of a Member country's own laws, or (iii) are authorized in accordance with those laws.
However, all exclusions and authorizations of what would otherwise be hardcore cartels
should be transparent and should be reviewed periodically to assess whether they areboth necessary and no broader than necessary to achieve their overriding policy
objectives.  After the issuance of this Recommendation, Members should provide the
Organisation annual notice of any new or extended exclusion or category of
authorization.
B. INTERNATIONAL COOPERATION AND COMITY IN ENFORCING LAWS
PROHIBITING HARDCORE CARTELS
1. Member countries have a common interest in preventing hardcore cartels and should co-
operate with each other in enforcing their laws against such cartels.  In this connection, they shouldseek ways in which cooperation might be improved by positive comity principles applicable to
requests that another country remedy anticompetitive conduct that adversely affects both countries,
and should conduct their own enforcement activitie s in accordance with principles of comity when
they affect other countries' important interests.
2. Cooperation between or among Member countrie s in dealing with hardcore cartels should
take into account the following principles:WT/WGTCP/W/191
Page 16
(a) the common interest in preventing hardcore cartels generally warrants cooperation to
the extent that such cooperation would be consistent with a requested country's laws,
regulations, and important interests;
(b) to the extent consistent with their own laws, regulations, and important interests, and
subject to effective safeguards to protect commercially sensitive and other confidential
information, Member countries' mutual interest in preventing hardcore cartels warrants
cooperation that might include sharing documents and information in their possession
with foreign competition authorities and gathering documents and information on
behalf of foreign competition authorities on a voluntary basis and when necessary
through use of compulsory process;
(c) a Member country may decline to comply with a request for assistance, or limit or
condition its cooperation on the ground that it considers compliance with the request to
be not in accordance with its laws or regulations or to be inconsistent with its important
interests or on any other grounds, including its competition authority's resource
constraints or the absence of a mutual interest in the investigation or proceeding inquestion;
(d) Member countries should agree to engage  in consultations over issues relating to
cooperation.
In order to establish a framework for their cooperation in dealing with hardcore cartels, Member
countries are encouraged to consider entering into bilateral or multilateral agreements or other
instruments consistent with these principles.
3. Member countries are encouraged to review all obstacles to their effective cooperation in the
enforcement of laws against hardcore cartels and to consider actions, including national legislation
and/or bilateral or multilateral agreements or other instruments, by which they could eliminate or
reduce those obstacles in a manner consistent with their important interests.
4. The cooperation contemplated by this Reco mmendation is without prejudice to any other
cooperation that may occur in accordance with prior Recommendations of the Council, pursuant to
any applicable bilateral or multilateral agreements to which Member countries may be parties, orotherwise.
II. INSTRUCTS the Competition Law and Policy Committee:1. to maintain a record of such exclusions and authorizations as are notified to the Organisation
pursuant to Paragraph I. A 2b);
2. to serve, at the request of the Member countr ies involved, as a forum for consultations on the
application of the Recommendation; and
3. to review Member countries' experience in implementing this Recommendation and report to
the Council within two years on any further action needed to improve cooperation in the enforcement
of competition law prohibitions of hardcore cartels.
III. INVITES non-Member countries to associate themselves with this Recommendation and to
implement it.
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