WORLD TRADE
ORGANIZATIONWT/WGTCP/W/197
15 August 2002
(02-4461)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English/
                 French/
                 Spanish
COMMUNICATION FROM UNCTAD
The following is the final text of a paper received from UNCTAD which was circulated as an
advance copy for the Working Group's meeting of 1-2 July 2002.
_______________
CLOSER MULTILATERAL COOPERATION
ON COMPETITION POLICY:
THE DEVELOPMENT DIMENSION
Consolidated Report on issues discussed during the Panama, Tunis, Hong Kong and Odessa
Regional Post-Doha Seminars on Competition Policy
held between 21 March and 26 April 2002
Introduction
1. As part of its capacity-building programme on competition law and policy, UNCTAD
organized a series of regional meetings in cooperation with the WTO and other relevant international
organizations, in line with the request made by WTO Ministers in paragraph 24 of the Doha
Declaration of 20 November 2001, which concerns the interaction between trade and competition
policy.  These meetings focused on the decisions made by the WTO Ministerial Conference inparagraphs 23–25 of the Doha Declaration, as reproduced below:
23. Recognizing the case for a multilateral framework to enhance the
contribution of competition policy to international trade and development, and the
need for enhanced technical assistance and capacity-building in this area as referredto in paragraph 24, we  agree that negotiations will take place after the Fifth Session
of the Ministerial Conference on the basis of a decision to be taken, by explicit
consensus, at that session on modalities of negotiations.
24. We recognize the needs of developing and least-developed countries for
enhanced support for technical assistance and capacity-building in this area, includingpolicy analysis and development so that they may better evaluate the implications of
closer multilateral cooperation for their development polices and objectives, and
human and institutional development.  To this end, we shall work in cooperation with
other relevant intergovernmental organizations, including UNCTAD, and  through
appropriate regional and bilateral channels, to provide strengthened and adequatelyresourced assistance to respond to these needs.WT/WGTCP/W/197
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25. In the period until the Fifth Session, further work in the Working Group on
the Interaction between Trade and Competition Policy will focus on the clarification
of: core principles, including transparency, non-discrimination and procedural
fairness, and provisions on hardcore cartels;  modalities for voluntary cooperation;
and support for progressive reinforcement of competition institutions in developingcountries through capacity-building.  Full account shall be taken of the needs of
developing and least-developed country participants and appropriate flexibility
provided to address them."
2. Accordingly, the objectives of the regional meetings were to assist developing and least-
developed countries to "better evaluate the implications" of closer multilateral cooperation in this field
for their development, and to safeguard their interests in possible negotiations concerning a
multilateral competition framework (MCF).  The four regional meetings include the PanamaConference on Competition Law and Policies:  Th e Post-Doha Agenda (for Latin American and
Caribbean countries;  Panama City, 21–23 March 2002), the Tunis Regional Seminar on Competition
Policy and Multilateral Negotiations:  The Post-Doha Mandate (for African and Arab countries;
Tunis, 28–29 March 2002), the Hong Kong Regional Seminar on Competition and Policy and
Multilateral Negotiations (for Asia and the Pacific;  Hong Kong, China, 16–18 April 2002) and theOdessa Regional Seminar for Central and East European and Commonwealth of Independent States
and Black Sea Economic Cooperation (BSEC) member countries (Odessa, 24–26 April 2002).
3. Following this first cycle of regional meetings, UNCTAD, in cooperation with the WTO,
intends to hold a second and third cycle of meetings  at roughly six-month intervals, during the second
half of 2002 and the first half of 2003, respectively.  It is hoped that, by the time the Fifth WTOMinisterial Meeting takes place in the second half of 2003, developing and least-developed countries
as well as countries in transition will have had opportunities to "better evaluate the implications of
closer multilateral cooperation" in this field for their development, as requested in the Doha
Declaration.  In this connection, it should be clearly understood that UNCTAD's participation in the
post-Doha process should in no way be interpreted as a prejudgement about the outcome of thedecisions that WTO Ministers will take at the Fifth Ministerial Meeting in 2003.
4. Following are a number of issues raised and views expressed by participants and experts
during the four meetings.  The material has been consolidated under the following headings:
I. BASIC QUESTIONS ABOUT APPROACHES TO AND MODALITIES FOR
THE ENFORCEMENT OF COMPETITION LAW AND POLICY .................................. 3
II. ISSUES RELATED TO THE PRECISE MEANING OF THE DOHA
DECLARATION ....................................................................................................................... 5
III. GENERAL QUESTIONS CONCERNING A POSSIBLE MULTILATERAL
COMPETITION FRAMEWORK (MCF) .............................................................................. 6
IV. THE ARCHITECTURE OF A POSSIBLE MCF: DIFFERENT SCENARIOS .............. 10
V. WHAT ARE THE TYPES OF SPECIAL AND DIFFERENTIAL
TREATMENT? ....................................................................................................................... 11
VI. WHAT ARE THE CORE PRINCIPLES OF COMPETITION? ...................................... 11
VII. WHAT KIND OF COOPERATION, EVALUATION AND MEDIATION
COULD BE ENVISAGED? ................................................................................................... 12
VIII. TYPES OF TECHNICAL ASSI STANCE AND CAPACITY-BUILDING AND
MEANS OF DELIVERY ....................................................................................................... 14
IX. ISSUES FOR FURTHER CONSIDERATION AND STUDY ........................................... 14WT/WGTCP/W/197
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I. BASIC QUESTIONS ABOUT APPROACHES TO AND MODALITIES FOR THE
ENFORCEMENT OF COMPETITION LAW AND POLICY
A. COMPETITION POLICY AND UNFAIR COMPETITION
5. A distinction was made between two bodies of law: competition law (also called antitrust law,
antimonopoly law, fair trade law, restrictive trade law or restrictive business practices law in certaincountries) and unfair competition law (concurrence déloyale in French, competencia desleal in
Spanish, sometimes also unfair trade law in English).
6. Competition law,  which is the subject of paragraphs 23–25 of the Doha Declaration, includes
laws governing:
(i) The prohibition of cartels, or agreements among rival firms to stop competing
by fixing prices, allocating (or sharing) markets and fighting outsiders (non-
members of the cartel);
(ii) the control of vertical anti-competitive practices or restraints and the
prohibition of abuses of dominant market power by large firms or
monopolies, which are able to impose such anti-competitive restraints on
their suppliers or distributors;  and
(iii) the control and review of mergers and acquisitions (M&As) which might lead
to the creation of a dominant firm or ultimately to the establishment of a
monopoly.
7. As for unfair competition,  the term generally concerns the use of unfair means to compete,
such as the counterfeiting of an intellectual property right (illicit copy of a patent, copyright or trade
mark), cheating in weights and measures, misrepresentations and misleading advertising, orinfringement of trade laws against dumping and export subsidies (antidumping and countervailing,
respectively).
B. C
OMPETITION POLICY AND ANTIDUMPING
8. The original objective of antidumping was to combat the practice of "dumping", or below-
cost selling, which can result in the anti-competi tive practice of "predatory pricing".  The aim of
predatory pricing by dominant firms is to offer goods at a very low price (sometimes for free) in order
to eliminate weaker competitors from the market.  Once the competitor or competitors are bankrupt
(or weakened so much that they could easily be  acquired by the predator), the latter is able to
monopolize the market and recover the losses it made in the first place by increasing prices to
monopoly levels.  This type of anti-competitive practice is very difficult to prove in practice and has
rarely been prosecuted successfully.
9. Dumping is a similar practice whereby a foreign firm sells goods at a very low price in order
to damage local competitors and to penetrate the local market and eventually monopolize it.  Current
WTO rules allow antidumping action whenever a producer prices goods lower for the export market
than for domestic sales.  Dumping is defined as sales below average total cost, while the traditional
definition of predatory pricing usually relates to sales below marginal cost.
10. According to most national antidumping rules, once a complaint is lodged by domestic firms,
the importing country imposes a provisional antidumping duty until an inquiry is made into the
existence and extent of antidumping.  In theory, if after an inquiry no dumping is found, the
provisional duty should be reimbursed.  If dumping is found, the permanent duty imposed should in
no way exceed the proven amount of dumping.  Often, however, inquiries have taken as long as sixWT/WGTCP/W/197
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months to more than a year, forcing the foreign exporter to go bankrupt unless it was able to divert its
exports elsewhere.  In order to avoid such a damaging situation, foreign exporters have often been
willing to undertake voluntary export restraints (VERs) as a condition of not being subject to
antidumping proceedings in the importing country .  Under such VERs, exporters would typically
agree to limit export quantities and increase prices, a situation very similar to that of a price-fixingand market-allocation cartel.  As a result, domestic firms were often able to control the import market;
hence antidumping rules, which originally were meant to avoid an anti-competitive practice such as
dumping, finally resulted in encouraging the use of anti-competitive practices.  Papers presented to
the meetings argued that in some cases, cartels in importing countries have made use of antidumping
recourse in order to block entry by non-members of the cartel.
11. It was noted that since the Uruguay Round Agreements, the use of VERs has been prohibited
by WTO rules.  Moreover, the objectives of competition rules are not the same as those ofantidumping rules.  The first aim at protecting competition itself and consumers, but not competitors,
while the second aim at protecting competitors (domestic producers).  It was also noted that only
certain regional integration agreements, whereby free-trade areas are created, have replaced
antidumping procedures with competition rules.  This was the case, for example, in the internal
market of the European Union and in ANZCERTA, the free-trade agreement between Australia andNew Zealand.
C. C
OMPETITION AND MARKET -ORIENTED ECONOMIC REFORMS
12. Competition policy is directly relevant to the main elements of market-oriented economic
reforms undertaken in most countries of the world during the last 10–20 years.
13. These include in particular the following:
(i) Price liberalization and scrapping or gradual elimination of administered
pricing;
(ii) deregulation of previously regulated sectors, including state-controlled
monopolies such as utilities and "network industries", considered for the most
part to be "natural monopolies";
(iii) privatization of a large part of previously state-owned enterprises;
(iv) trade liberalization, including significant reductions in import barriers, which
resulted in a considerable opening of domestic markets both in developed and
in developing and transition countries;  and
(v) last but not least, important reforms in the foreign direct investment (FDI)
legislation of many developing countries, which led to considerable
liberalization of inward FDI.
14. The point was made that all these economic reforms have one important feature in common:
the need for competition policy if market-oriented policies are to be given the best possible chance of
success.  For example, price liberalization, if not accompanied by competition laws and policy aimed
at controlling economic behaviour and structures, can result in substantial price increases and reduced
benefits for the overall economy.  If monopolistic structures are allowed to continue unchecked, priceliberalization will not proceed satisfactorily.  The same can be said of privatization of state
monopolies into private monopolies.  Finally, opening of markets through import competition and
FDI liberalization might bring enhanced competition, but if no safeguards exist, foreign firms might
also engage in anti-competitive practices and abuse dominant market positions.WT/WGTCP/W/197
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D. COMPETITION , NATURAL MONOPOLIES AND SECTORAL REGULATORS
15. After privatization, network monopolies (e.g. electricity grids, railway operations, or basic
telecommunications operators) need to be guided by competition principles to ensure they do not
abuse their dominant power with respect to end users.  This is why sometimes they are placed within
the purview of the competition authority.  In many countries, special sectoral regulators are created tosupervise the operations of the network operators and are given competition responsibilities which
they share with the competition authority (when such  an authority is in place).  In the multilateral
trade system, rules exist for services (e.g. GATS) as well as for some specific sectors usually
regulated at the national level (e.g. telecommunications).  This issue is further discussed below under
section III D.
II. ISSUES RELATED TO THE PRECISE MEANING OF THE DOHA DECLARATION
A. P
ARAGRAPH 23:  "A DECISION TO BE TAKEN BY EXPLICIT CONSENSUS "
16. While it was understood that only negotiators at the Fifth Ministerial Conference would be in
a position to decide on the exact meaning of text adopted at the Fourth Ministerial Conference, some
participants were of the view that the consensus to be reached at the Fifth Ministerial Conference
would need to relate to a specific or explicit  list of issues for or modalities of the negotiation.
Participants also recalled the reservations of a number of developing countries during the DohaMinisterial Conference as reflected in the Chairman's statement at the closing session.  They pointed
to the legal uncertainty surrounding the status of the Chairman's remarks
1.
B. PARAGRAPH 23:  W HAT ARE THE "MODALITIES OF NEGOTIATIONS "?
17. Some experts considered that the "modalities" could relate both to procedural and to
substantial issues, such as the precise elements to be covered by a possible MCF.
18. The procedural conditions could relate to whether there would be fully multilateral or only
plurilateral negotiations;  whether countries would be free to "opt in" or "opt out" of the negotiations
as had been proposed by the European Union;  whether a further pre-negotiating period would be
necessary before actual negotiations could take place;  whether, before being able to negotiate, all
countries would first need to adopt a domestic competition law;  and so on.  Substantive issues orelements to be covered by the negotiations could include a list of core trade principles such as non-
discrimination and transparency;  should they also include the principle of special and differential
treatment for developing and least-developed countries?  Furthermore, what was meant by
"appropriate flexibility" as mentioned in paragraph 25 of the Doha Declaration?  Some participants
suggested that certain provisions of the UNCTAD Set of Principles and Rules on Competition
2 could
be useful in clarifying this issue.
C. PARAGRAPH 25:  "F ULL ACCOUNT SHALL BE TAKEN OF THE NEEDS OF DEVELOPING AND
LEAST -DEVELOPED COUNTRY PARTICIPANTS AND APPROPRIATE FLEXIBILITY PROVIDED TO
ADDRESS THEM ."
19. Some participants were of the opinion that "flexibility" referred to "enhanced technical
assistance and capacity-building in this area, including policy analysis and development" as called for
                                                     
1 In a statement made prior to the adoption of the Doha Declaration, the Chairman of the Conference, Mr. Youssef
Hussain Kamel (Qatar), expressed his understanding that the requirement in paragraph 23 for a decision to be taken, by
explicit consensus, on the modalities for negotiations before negotiations on competition policy and other "Singapore issues"could proceed, gave "each Member the right to take a position on modalities that would prevent negotiations fromproceeding after the Fifth Session of the Ministerial Conference until that Member is prepared to join a explicit consensus."
See WTO Summary Record of the Ninth Meeting, doc. WT/MIN(01)/SR/9.
2  See UNCTAD document TD/RBP/CONF/10/Rev.2, available at www.unctad.org/competition.WT/WGTCP/W/197
Page 6
in paragraph 24 of the Doha Declaration.  In th is connection, two types of assistance and capacity-
building could be envisaged:
(i) Long-term measures aimed at enhancing national capabilities to adopt and
effectively enforce competition law and policy, upon request;  and
(ii) more short-term help aimed at enabling developing and least-developed
countries to "better evaluate the implications" of a possible MCF for their
development policies and objectives.
20. In order to be a development-friendly instrument, a possible MCF would also need to be
flexible, enabling developing and least-developed countries to take full part in the negotiations and
possibly reach agreement.  In particular, it was felt that developing countries would need to have the
necessary policy space to be able to blend competition policy with industrial policy, if that was
needed for developmental reasons, to ensure optimal chances of development in cases where marketfailures hampered competition.  Such concerns could be taken into account under the principle of
special and differential treatment for developing and least-developed counties, as is further discussed
below in Section V.
III. GENERAL QUESTIONS CONCERNING A POSSIBLE MULTILATERAL
COMPETITION FRAMEWORK (MCF)
A. I
S COMPETITION A PROBLEM AT THE MULTILATERAL LEVEL ?  W HAT CAN A MCF ACHIEVE
THAT CANNOT BE ACHIEVED WITH A DOMESTIC COMPETITION LAW ?
21. Analysis shows that as globalization spreads to all regions of the world and to a growing
number of sectors from manufactures to services, as well as some commodities, it is becoming urgent
for domestic competition rules to be supplemented by international avenues of cooperation.
22. While governmental trade barriers such as tariffs and non-tariff barriers (NTBs) are being
eroded by multilateral trade liberalization in many countries, including many developing countries,
and as a result of regional free-trade agreements (FTAs) and multilateral agreements in the GATT and
then the WTO, there is increasing need to ensure that restrictive business practices (RBPs), also called
anti-competitive practices, do not replace the governmental barriers.
23. Studies show that international RBPs, such as international cartels, abuses of dominance by
multinational firms (including exclusive distribution channels of such firms) and mega-mergers are
able to distort trade to the advantage of dominant firms or cartel members, which then can reap
monopolistic rents on individual markets while excludi ng and eliminating the firms of weaker trading
partners.  Domestic competition laws, where they exist, often lack the necessary extra-territorial reach
to counter such anti-competitive practices at the global level.
24. National laws are limited by domestic borders, while some highly damaging anti-competitive
practices are transborder by nature.  Their adverse effects are felt in developing countries, but they
can be operated from headquarters overseas.  Action at the national level in countries that have
competition legislation is often ineffective in such cases when the proof of infringement is outside the
national territory. Hence the imperative need for cooperation agreements at the international level, in
order for the affected country to be able to take the necessary remedial action.
25. Some developed countries promote bilateral cooperation agreements.  Such bilateral
competition cooperation agreements exist, for exam ple, between the United States and the European
Union, Germany, Japan, Canada and Australia. Very few exist between developed and developing
countries.  (An exception is the newly signed ag reement between Canada and Costa Rica, and of
course, NAFTA, which has provisions for exchange of information and consultations on competitionWT/WGTCP/W/197
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matters.)  Nevertheless, the view was expressed that large economies would likely be less interested in
cooperating with small economies than with equal pa rtners – hence the interest in regional groupings
(e.g. the European Union, but also developing-country groupings such as ASEAN, CARICOM,
COMESA, MERCOSUR, SADC, SARC or UEMOA).  It was also indicated that while many
countries may become members of regional agreements , such agreements are usually slow to develop
effective competition rules (except in the case of the EU, E.E.A and NAFTA).  The urgency of the
matter is shown by a study presented in Tunis by Professor Simon Evenett which estimates the annual
loss for developing countries from a few known international cartels to be about 1.7 per cent of these
countries' GDP, and, as the author indicates, this estimate is probably conservative, given that it
covers data from only 14 of 39 known international cartels.  It might therefore be useful for smaller
trading partners to reach agreement in a MCF, provided it had sufficient binding force – through a
dispute settlement mechanism (DSM) or otherwise – to redress damages suffered.
B. IS THERE A NEED FOR A MCF BEFORE DOMESTIC COMPETITION LAWS ARE ENACTED AND
EFFECTIVELY IMPLEMENTED IN DEVELOPING COUNTRIES ?
26. It was noted that the process of law enactment and effective enforcement is a slow one.  Many
developing countries now have such laws.  Others are in the process of drafting competition bills, but
many countries have not even begun to prepare such laws.  Obviously, if there is a chance to acteffectively, one would need to proceed as soon as possible in order to be able to take effective action.
Moreover, it was felt by some experts that adopting a MCF would induce many countries to give the
competition issue higher domestic priority, which might accelerate the adoption of domestic
legislation and effectively control anti-competitive practices.
C. W
OULD IT NOT BE MORE LOGICAL TO PROCEED FIRST WITH NATIONAL LEGISLATION , THEN
WITH REGIONAL ARRANGEMENTS AND FINALLY WITH A MULTILATERAL FRAMEWORK ?
27. Yes, but while countries strive to draft and adopt domestic legislation or to negotiate proper
competition rules in regional integration arrangements, anti-competitive practices at the global level
will continue to take their toll on developi ng countries, hampering their competitiveness,
impoverishing them and retarding their development.
D. COMPETITION -RELATED PROVISIONS IN EXISTING WTO AGREEMENTS : IS IT NECESSARY TO
HAVE A MCF IN ADDITION TO EXISTING SECTORAL AGREEMENTS IN THE WTO?  I F THERE
WERE A MCF, HOW WOULD IT RELATE TO EXISTING SECTORAL AGREEMENTS ?
28. A number of Uruguay Round and post-Uruguay agreements contain important provisions
related to competition policy.  Perhaps the most  important are the GATS, the TRIPS Agreement and
the Telecommunications Reference Paper.
29. GATS Article VII provides that each member country will ensure that any monopoly supplier
of a service in its territory does not, in supplying the monopoly service in the relevant market, act in a
manner inconsistent with that member's obligations relating to most favoured nation treatment under
Article II and specific commitments.  The GATS also specifies that when a monopoly supplier
competes, either directly or through an affiliated company, a member will ensure that the supplier in
question does not abuse its monopoly position in one market to dominate another market in a manner
inconsistent with its commitments.  These provisions also apply in cases of exclusive service
suppliers, where a member, formally or in effect, authorizes or establishes a small number of service
suppliers and substantially prevents competition among these suppliers on its territory.
30. Article VIII:3 of GATS provides for the Council of Trade in Services to act in connection
with a complaint by a member against a monopoly supplier of a service of any other member, byrequesting information from that member relating to the supplier's product.  Article VIII.4 furtherWT/WGTCP/W/197
Page 8
provides for notification by members to the Council of the grant of monopoly rights regarding
services covered by their commitments.
31. The TRIPS Agreement recognizes (Article 8) that appropriate measures may be needed to
prevent (i) "the abuse of intellectual property rights by right holders" and (ii) "recourse (by right
holders) to practices that unreasonably restrain trade or adversely affect the international transfer oftechnology".
32. Article 40 of the TRIPS Agreement (section 8 on Control of Anti-Competitive Practices in
Contractual Licenses), provides that "some licensing practices or conditions pertaining to intellectual
property rights which restrain competition may have adverse effects on trade and impede the transfer
and dissemination of technology".  It provides that "nothing in this Agreement shall prevent Members
from specifying in their legislation licensing practices or conditions that may in particular cases
constitute an abuse of intellectual property rights having an adverse effect on competition in therelevant market" or from adopting appropriate measures to prevent or control such practices.
Moreover, the Telecommunications Schedules of Specific Commitments Reference papers contain
specific references to anti-competitive practices in telecommunications.
33. Appropriate measures are provided for the purpose of preventing suppliers, alone or together
with others, from engaging in or continuing to engage in anti-competitive practices.  These mayinvolve (i) anti-competitive cross-subsidization;  (ii) using information obtained from competitors
with anti-competitive results;  and (iii) not making available to other service suppliers on a timely
basis technical information about essential facilities and commercially relevant information which are
necessary for them to provide services.
34. Is it necessary to have a MCF in addition to sectoral agreements?   Some participants
noted that the present piecemeal approach is not satisfactory, as the risk exists that various provisions
relating to competition in different trade agreements  may be inconsistent with each other.  Moreover,
there is a danger that developing countries – especially those that are not acquainted with competition
law and policy – might be unable to take advantage of those provisions.  Hence the need for more
systematic, across-the-board coverage of competition law and policy principles.
35. If there were a MCF, how would it relate to sectoral agreements?   A parallel was made
with the situation in individual countries having competition legislation and a competition authority,
and its relationships with competition provisions in rules governing sectoral regulators.  In case of
inconsistencies, there would need to be a decision as  to which rules would prevail:  those in the MCF
or those in the sectoral agreement.
E. W
HY A MCF IN THE WTO INSTEAD OF IN UNCTAD?
36. The United Nations General Assembly adopted the "Set of Principles and Rules on
Competition" in 1980.  The Set has been in operation since, and the Fourth United Nations
Conference to Review all Aspects of the Set (Septe mber 2000) has reaffirmed the validity of the Set.
37. However, the Set is in the form of a recommendation to States;  it is not a binding document.
In 1985, at the First Review Conference, the G-77 had requested that the Set be transformed into a
binding instrument, but this was never achieved.
38. An agreement within the framework of the WTO would have the potential to be (or to
become, after an evolutionary period) a binding instrument covered by some sort of dispute-
settlement mechanism, in the same way as most other WTO agreements.
39. Another rationale for a MCF in the WTO is that the WTO represents today's international
trading system, and such a system would be incomplete if it covered only government barriers toWT/WGTCP/W/197
Page 9
trade, not enterprise-level barriers or distortions such as anti-competitive practices (RBPs), as was the
original objective of Chapter V of the Havana Charter.
F. WHAT WOULD DEVELOPING COUNTRIES AND LDC S GAIN FROM A MCF IN THE WTO?
40. In principle, multilateral agreements are favourable for weaker or small trading partners
because they give them the possibility to seek redress for infringements by other members.  Doubtswere expressed about this argument, as it was feared that dispute settlement in other areas (e.g.
bananas) might not redress imbalance, even after a country – or groups of developing countries –
gained favourable panel or appellate body decisions.  Others felt that the position of developing
countries would still be strengthened, especially if the resulting MCF contained some sort of DSM,
and if such a mechanism took due account of the flexibility afforded to developing countries under an
appropriate special and differential (S&D) treatment still to be defined (see V below).
41. In any event, a MCF could be useful in helping developing countries resolve cases of
anti-competitive practices operated from abroad (such as international cartels) having adverse effects
on their territory.
G. W
OULD IT BE MANDATORY FOR DEVELOPING COUNTRIES TO ADOPT A DOMESTIC
COMPETITION LAW IN CASE A MCF WERE ADOPTED ?
42. Initial proposals by the European Commission were to require members to the agreement to
undertake the adoption of domestic competition legislation.  Some countries have expressed
reluctance to do so.  Others have felt that similar obligations were forced upon them by the
International Monetary Fund or the World Bank as a sort of necessary evil.  One could imagine a
possible MCF without such an obligation.  However, what would be the case, for example, of
cooperation agreements?  Without a domestic competition authority, a developing country would beunable to provide any information, and in case it needed to challenge a RBP, it would be unable to do
so anyway.  So the capacity for cooperation would not exist.  Hence, if they felt hampered by specific
anti-competitive practices, countries would adopt such legislation as they saw the necessity for it and
found it was in their interest to have such a law and enforce the MCF.  In other words, they could
negotiate and adopt an MCF without having a domestic competition law, but the MCF would remaininoperative for them as long as they did not have the national legislation.  It was felt that it should be
left to members to decide when it was appropriate for them to adopt a competition law, and hence to
be able to take advantage of the cooperation provisions of a possible MCF.
H. T
HE NEED TO FULLY TAKE INTO ACCOUNT THE SOCIAL , CULTURAL , HISTORICAL AND
DEVELOPMENT CONTEXT OF DIFFERENT COUNTRIES
43. Concerns were expressed that developing countries could not be expected to adopt
competition laws copied from those of developed countries.  Attention was drawn to the fact thatwhile the basic principles of controlling cartels, vertical restraints and abuse of dominance, as well as
mergers, were followed, all countries had legislation tailored to their specific situation (level of
development, customs, socioeconomic system, cultural context, etc.).  It was generally agreed that a
MCF would not impose a "one size fits all" type of domestic legislation.
44. Concern was also expressed regarding the need for countries to preserve their cultural
heritage, while some others also needed to implement affirmative action policies to preserve social
and political stability in their economy.WT/WGTCP/W/197
Page 10
IV. THE ARCHITECTURE OF A POSSIBLE MCF:  DIFFERENT SCENARIOS
A. WHAT ELEMENTS SHOULD A MCF CONTAIN ?  O F THESE , WHICH ONES COULD BE ADOPTED
INITIALLY WITHOUT MUCH DIFFICULTY ?  W HICH ONES COULD BE ADOPTED LATER ,
CONSIDERING THE POSSIBILITY OF AN "EVOLUTIONARY SYSTEM ", INCLUDING ONGOING
MEETINGS AND FURTHER POSSIBLE NEGOTIATIONS ?
45. Different scenarios were envisaged.  It was suggested that a comprehensive MCF could
ideally contain (i) the core trade principles :  non-discrimination, transparency and due process, with
inclusion of special differential treatment;  and (ii) the main competition principles :  prohibition of
hard-core cartels, control of vertical restraints and abuse of dominance as well as control of M&As.
Such an agreement could be covered by (iii) voluntary cooperation rules , including "positive" and
"negative" comity principles, exchange of information, including confidentiality safeguards,
consultations, peer reviews, and possibly a dispute settlement or mediation mechanism limited tospecific cases.  It was made clear at the outset that such a dispute-settlement mechanism would not
aim at second-guessing decisions made by national jurisdictions in the application of domestic
competition rules.  Rather, such a system could be used to resolve or mediate disputes arising from
conflicts of jurisdiction or infringements of core trade principles.  (This question is discussed in more
detail in VII-D).
46. If one accepts the idea of a possible evolutionary  system, one that would evolve from simpler
to more complete, one could imagine starting with a simpler scenario, trying to achieve an agreement
on voluntary cooperation principles;  another scenario could cover agreement on the core principles of
international trade in (i), then parts of (ii) on hard-core cartels, and (iii) a provision on cooperation and
conciliation procedures, perhaps including a peer-review mechanism, which might be acceptable.  Amore comprehensive scenario could include some DSM as discussed below in VII-D.
B. A
N "EVOLUTIONARY " OR "BUILDING -BLOCK " SYSTEM ?
47. Some delegations expressed concern that if negotiations were launched at some point in time
to reach agreement on minimalist, voluntary rule s, those who were reluctant to develop a more
complex mandatory agreement would still risk being dragged into it because once a "building block"was set in place, others would follow sooner or later in future rounds.  Other participants considered
the same argument as a favourable one, proposing that a minimalist agreement could be concluded
immediately, leaving the negotiation of a more complex MCF for later, when parties would be ready
to tackle it.
C. A 
PLURILATERAL AGREEMENT ?
48. Strong reservations were expressed about initiating negotiations at a plurilateral level, as was
proposed by the European Commission.  This has also been suggested as an "opt-in/opt-out" scenario,where countries could opt out if they were unhappy with the evolution of the negotiation, or opt in
when they felt they were ready to enter into such an agreement.  The danger of plurilateral
negotiations was that later, developing countries having opted out would face an agreement which did
not take into account their needs, and which was even less development-friendly.  There was also
concern that plurilateral agreements might eventually become part of a "single undertaking" orpackage, as was the case for a number of agreements at the end of the Uruguay Round.
D. T
HE CORE TRADE PRINCIPLES
49. Some participants expressed the wish for more in-depth study of the interlinkages of the core
principles such as MFN, non-discrimination, national  treatment, and transparency with S&D in the
field of competition.WT/WGTCP/W/197
Page 11
V. WHAT ARE THE TYPES OF SPECIAL AND DIFFERENTIAL TREATMENT?
50. While existing WTO Agreements had many types of S&D-related provisions, basically, four
types of S&D treatment could be considered:
(i) Technical cooperation , capacity-building and exchange of experience.
(ii) Transition periods  allowing for temporary flexibility and graduality –
flexibility with respect to the law's adoption and implementation, and
graduality in the full coverage by the law of all the main elements contained
in a competition law.  The transition period could be decided across the
board, with longer terms for LDCs.
(iii) Exceptions and exemptions .  These could be sectoral exceptions or
exemptions covering certain anti-competitive practices under certain
specified conditions.  In the same way that most developed countries atpresent exempt certain sectors (e.g. agriculture for the European Commission
or baseball for the United States), the MCF could give developing countries
the right to declare certain sectoral exceptions for developmental reasons.  It
was suggested that such exemptions would not be subject to a time limit, but
that it might be useful to review the applicability of sectoral exemptionsperiodically.
(iv) Specific undertakings for developed countries  to eliminate their own
exceptions and exemptions on a non-reciprocal basis.  These could involve
still existing sectoral exceptions or exemptions of specific practices,
including export cartels.
51. Some experts were of the view that in the early stages of development, a certain degree of
industrial policy might be necessary to make up for market failures in developing countries.  At higher
levels of development and as industrialization progressed, such policies would gradually become less
effective than competition policy.  Nevertheless, as part of S&D treatment, developing countries,
especially LDCs, would be able if they so wish, to exempt certain sectors, possibly on condition that
the principle of transparency was respected.
52. Many participants felt that transition periods were inappropriate.  Others expressed concern at
the relative weakness of S&D treatment when faced with the principles of non-discrimination and
national treatment.  They felt that developing countries might face considerable pressures, irrespective
of the inclusion of S&D principles in a possible MCF, to apply equal treatment to foreign firms and to
open their markets to FDI.
53. It was proposed that as an additional element of S&D, developed countries should envisage
renouncing existing exemptions or exceptions in th eir competition laws in cases where it is known
that such provisions affect important interests of developing countries.  This could apply to export
cartels, as well as sectoral exemptions in service sectors essential for the commercial competitiveness
of developing countries, such as transport services and tourism.
VI. WHAT ARE THE CORE PRINCIPLES OF COMPETITION?
54. These are found in all competition laws (see UNCTAD Model Law
3), which broadly cover (i)
a prohibition of cartels;  (ii) case-by-case control (based on rule of reason) of vertical restraints,
especially by dominant firms;  and (iii) control of concentrations through mergers and acquisitions or
                                                     
3 The Model Law is available on UNCTAD website at www.unctad.org/competition.WT/WGTCP/W/197
Page 12
other forms of concentrations such as joint ventur es, whenever such concentrations may lead to the
creation of a dominant firm and ultimately a monopoly.
A. HARD-CORE CARTELS
55. Such cartels include agreements to fix prices, allocate markets, and strive to eliminate outside
competition.  They are also particularly damaging in cases of collusive tendering (bid-rigging) ingovernment procurement tendering procedures.  Export cartels are often exempted by law in many
countries;  a repeal of such exemptions could and should be envisaged.
56. In principle, so far, the prohibition against cartels has been on agreements among firms to fix
prices and eliminate competition.  This prohibition does not exist with respect to price undertakings
made by sovereign states (Sovereign Acts of State) with respect to a basic commodity such as oil, for
example.  Hence, as indicated in the United Nations Set of Principle and Rules on Competition
(Article 9, Section B), "intergovernmental agreements, (or) restrictive business practices directlycaused by such agreements", such as OPEC would be exempted.  This question should still be
clarified and a specific exemption for developing countries reaffirmed in case of negotiation of a
MCF.
B. V
ERTICAL RESTRAINTS AND ABUSE OF DOMINANCE
57. While all competition laws contain provisions to control such practices, definitions and the
degree of prohibition vary widely from country to country.  It might be more difficult to reach
agreement on these elements in a MCF.  Perhaps there could be an agreement to establish a standing
committee to further study these issues with a view to incorporating an agreement on vertical
restraints into the MCF at a later stage, once a reasonable degree of convergence of views has been
reached among all states.
58. It was noted, however, that vertical restraints can be especially important in developing
countries, whose markets are often small and where subsidiaries of foreign multinationals easily attain
a dominant position.  Some also manage to convince privatization officials to grant them a long-term
monopoly on the occasion of the sale of a state monopoly to the private sector.
C. MERGERS AND ACQUISITIONS
59. Some developing countries stated that they did not need M&A control in their domestic
legislation for the moment and that in case of abuse of dominant power they could still take effective
action under provisions against abuse.  Others recalled that once a merger had taken place, it was
much more difficult to "unscramble the eggs".  (A  study has shown, for instance, that some prohibited
cartels later try to reconstitute their market controlling power through mergers).
60. It was noted that multinational firms were starting to call for a multilateral discussion of
mergers in order to facilitate notification procedures in case of mega-mergers where multinationalspresent in many countries have to satisfy multi-jurisdictional requirements.
VII. WHAT KIND OF COOPERATION, EVALUATION AND MEDIATION COULD BE
ENVISAGED?
61. As was discussed in previous sections of this report, a possible MCF in the WTO might be
beneficial to developing countries seeking to obtain information located outside their national territoryin a case affecting their market.  Under this heading, a number of cooperation and dispute mediation
procedures were considered, from voluntary c ooperation and exchange of publicly available
information to consultations, peer reviews and specific types of limited dispute settlement
mechanisms.WT/WGTCP/W/197
Page 13
A. VOLUNTARY COOPERATION
62. One option or scenario envisaged for a possible MCF was that it could simply contain a
voluntary cooperation agreement.  Such a provision, akin to those that exist in the United Nations Set,
would provide for "negative" comity  (i.e. voluntary supplying of information on a law or case
initiated in one country which had effects or concerned an anti-competitive practice having effects inanother country).  It could also provide for "positive"  comity  (positive action in response to a request
for cooperation).  In both cases, the exchange of  information would be voluntary and subject to
confidentiality rules .  Concern was expressed that the voluntary nature of the process, supplemented
with a confidentiality safeguard, made this kind of cooperation very hypothetical, especially for
smaller partners, which were unlikely to have as many cases of information to provide as of requests
they would likely address to big trading partne rs.  Another concern, however, was that small
developing country authorities with limited resources might be submerged by requests for informationunder cooperation agreements.
63. The case of more formal bilateral cooperation agreements (as opposed to voluntary) was
invoked, in which the degree of mutual trust is such that even certain confidential information can be
shared.  It was felt, however, that this could more easily apply to bilateral cooperation among similar
partners.
B. C
ONSULTATIONS
64. A MCF could envisage different types of mechanisms, beginning with periodic consultations
between States on specific issues relating to competition.  Such a mechanism exists under the Set, and
consultations do take place during the annual  meetings of UNCTAD's Intergovernmental Group of
Experts on Competition Law and Policy.
C. PEER REVIEWS
65. Another proposal would be to organize periodic "peer reviews" such as are presently taking
place in the OECD.  Such reviews begin with a study by independent consultants of the economic
conditions of the country being reviewed, as well as a review of the competition law and
accompanying rules and guidelines or decrees of application, the competition authority and itsfunctioning, the implementation of the law, the authority's budget, actual cases decided, and so forth.
The in-depth evaluation, which can be quite critical, is presented to the competition authority for a
first review;  then the heads of the competition authority are "examined" in a public session at the
OECD by representatives of two other competition authorities (the peers), after which they respond to
any questions posed by all the peers present.  Finally, a list of recommendations for improvements
and "best practices" is submitted to the Government of the country being reviewed.
66. This system, which is quite time consuming and expensive (since it involves engaging
consultants, etc.) has been found useful by OECD countries being examined, because the
recommendations for improvement then serve to conv ince the Government to increase the budget,
amend the law to make it more effective, and so on.
67. Some non-OECD members such as South Africa have volunteered to be reviewed as well.
One could imagine a system where countries could volunteer to be reviewed under an OECD-typepeer review, or could simply be reviewed through periodic competition policy review mechanisms
similar to the trade policy review mechanism (TPRM) which presently exists at the WTO.  Some
participants worried that the periods between such reviews might be too long and the process too
costly.  Others opined that the system would result in pressure being exerted on developing countries
and asked to what extent the authorities of developed and developing or LDC countries could beconsidered peers.  Still others questioned the usefulness of such a voluntary mechanism.WT/WGTCP/W/197
Page 14
D. A WTO-TYPE DSM ?
68. As for controversies or differences concerning the application or non-application of national
competition law in breach of core principles of international trade (non-discrimination, transparency,
S&D, etc.), some participants expressed the view that a proper dispute settlement mechanism of the
WTO-panel type could be envisaged in a possib le MCF.  Such a mechanism would cover, for
example, procedural breaches such as non-application of national competition law to an
anti-competitive practice aimed at eliminating a foreign competitor, or an RBP aimed at unduly
protecting a local firm or firms against a foreign firm or firms.  (An example could perhaps have been
the Kodak/Fuji case).  In any event, all agreed that this mechanism should in no way create a
multilateral body second-guessing the application of laws by national jurisdictions.
VIII.  TYPES OF TECHNICAL ASSISTANCE AND CAPACITY-BUILDING AND MEANS
OF DELIVERY
A. TYPES OF ASSISTANCE
69. It was noted that two distinct but mutually reinforcing types of assistance were needed by
developing countries:  (i) long-term help with creating a "competition culture" and developing a
"tailor-made" competition law, as well as bui lding the necessary implementing capacity for the
national competition authority (through training of officials, exchanges of personnel, study tours, andadvice regarding possible improvements and amendments to existing competition legislation);  and
(ii)  in the shorter term, help with the capacity-building needed by developing and least-developed, as
well as transition countries to better evaluate the possible contours and implications of an eventual
MCF in the WTO.
B. N
ORTH /SOUTH COOPERATION
70. It was felt that while North/South cooperation and assistance were very much welcome,
South/South cooperation was also a key element needed in order for developing and least-developed
countries to take advantage of recent experiences of other developing countries, which faced similar
difficulties in trying to implement competition rules under the realities of development.
IX. ISSUES FOR FURTHER CONSIDERATION AND STUDY
71. Looking forward to the next stages of the process of capacity-building for developing
countries under the post-Doha mandate, the following issues were highlighted:
A. THE NEED FOR A PROACTIVE APPROACH BY DEVELOPING COUNTRIES IN THE WTO PROCESS
72. The point was made that developing countries, in order to safeguard their interests in a
possible multilateral framework, need to be proactive by presenting proposals on the clarifications and
assessment of the various concepts, principles and approaches to the mandate on competition policy
issues agreed on at the Doha WTO Ministerial Conference.  Proposals could include measures topromote the role of developing countries' private sectors in international trade and development and
further proposals to enhance S&D treatment, such as requiring developed countries to agree on some
development-friendly undertakings (e.g. eliminating sectoral exemptions and export cartels affecting
the interests of developing countries).WT/WGTCP/W/197
Page 15
B. THE NEED TO REINFORCE THE POST -DOHA PROCESS OF CONSULTATIONS IN ORDER TO
IDENTIFY MEASURES THAT COULD SAFEGUARD THE INTERESTS OF DEVELOPING COUNTRIES IN
FUTURE AGREEMENTS , INCLUDING MEASURES TO PROMOTE CONTRIBUTIONS BY THE PRIVATE
SECTOR TO EXPORTS AND DEVELOPMENT
73. The majority of participants expressed the need  for capacity-building to deal with the post-
Doha mandate in this area and to evaluate the implications of this mandate for their development.
Increasing human and institutional capacity would assist developing countries in clarifying and
evaluating the substantive aspect of the mandate, identifying areas of concern to them and proposing
measures that would safeguard their interests in a possible multilateral framework on competition.
Measures to promote a bigger role for the private sector of developing countries, in particular, small
and medium-size enterprises in international trade and investment should be identified and given
adequate attention in future agreements on competition.
C. THE NEED FOR STUDY OF THE ROLE OF COMPETITION LAW AND POLICY
74. More study is needed of the interface between competition, competitiveness and
development.  In particular, more research needs to be devoted to the interface between competition
and industrial policy in developing economies.  What is the appropriate mix of such policies?  To
what extent would exemptions for developmental reasons be useful in this respect, and to what extentwould they be applicable in the overall context of the WTO Agreements?
D. T
HE NEED FOR STUDY OF THE CORE WTO PRINCIPLES AND THEIR INTERFACE WITH
COMPETITION
75. Future workshops and research should focus more on the core principles of the WTO.
Further studies should clarify the interface of the core principles of the WTO with market access.
E. THE NEED FOR FURTHER STUDY OF THE TRIPS A GREEMENT
76. Another question touched on the need to clarify how developing countries can make use of
the competition provisions in the TRIPS Agreemen t.  These provisions and the scope for their
utilization would probably need to be clarified in the course of the TRIPS Agreement negotiations.
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