WORLD TRADE
ORGANIZATIONWT/WGTCP/W/168
19 July 2001
(01-3582)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM JAPAN
The following is the final text of a paper received from the Permanent Mission of Japan
which was circulated as an advance copy for the Working Group's meeting of 22-23 March 2001.
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International Anti-Competitive Practices and their Implications
1. Introduction
1. The rounds of negotiations in the past have reduced trade barriers such as tariffs substantially
and abolished discriminatory treatment in internatio nal trade.  As a result, the trade liberalization
produced benefits such as raising standards of living, ensuring full employment and a large steadily
growing volume of real income and effective demand, developing the full use of the resources of the
world and expanding the production and exchange of goods.  On the other hand, it has been pointed
out that the benefits of liberalized trade could be distorted by anti-competitive business practices as
well as governmental measures that are the direct obj ect of regulation by the WTO rules.  That is the
reason why the need for the WTO to address anti-competitive practices has been discussed.
2. A number of anti-competitive practices have been pointed out as directly or potentially
diminishing the benefits of free trade.  Prime among them is the formation and operation of
international cartels.  Because international cartels  impact markets in multiple countries, they both
have an important impact on trade and work to the detriment of competition and consumers in all of
these countries.  However, because the parties to  such international anti-competitive practices are
located in multiple countries, it is very difficult for any one country to respond adequately in
regulating such behaviour.
3. Since some of those anti-competitive practices seriously impact developing country markets,
they undermine the developing countries' development policies and economic health.  Yet a
developing country severely affected by anti-competitive practices can only mount an appropriateresponse on its own if it has strong competition laws and adequate enforcement.  If the country does
not have adequate competition laws or the laws are not backed by adequate enforcement, the country
will simply be victimised and will be unable to mount an effective response.  When a country finds its
national interests injured by international anti-competitive practices, the fastest way to regulate such
behaviour is to adopt and strengthen national competition law and competition policy.  Yet the truth isthat adopting and strengthening competition law and competition policy is not necessarily a high-
priority policy area for many Member developing countries.WT/WGTCP/W/168
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4. This paper looks at a number of international anti-competitive practices and puts forth a
number of points for discussion in considering what kinds of frameworks might be worth pursuing
within the WTO.
2. Specific Anti-competitive Practices and their Implications
5. International cartels are the form of anti-competitive practice that has the most serious impact
on the benefits of trade liberalization and the clearest detrimental impact on competition and
consumer interests across national borders.  Given this, this paper's specific examples focus on
international cartels.
(i) International cartel to divide up the markets for synthetic fibers (1972)
6. Japanese and German companies formed a cartel  to divide up the international markets for
acetate, rayon thread, staple fiber, and nylon.  Under the terms of the cartel, they allocated the Asian
markets to the Japanese companies and the African markets to the German companies, the parties tothe cartel agreeing not to export to the other side's markets.
(ii) International cartel in prisms, lenses, and lighting equipment (United States vs. Holophane
Co, 119 F.Supp.114 [1954])
7. Three companies - one each in the United States, the United Kingdom, and France - formed
an international cartel to divide up the markets for prisms, lenses, and lighting equipment.  Under the
cartel, North America, the Philippines, and Japan were assigned to the US firm; Belgium, Spain,
Portugal, Switzerland, and Italy to the French fi rm; and the other areas to the UK firm (although
South America was later reassigned to the US firm).
8. The three parties to the cartel agreed to stop exporting to each other's regions, to actively seek
to block exports by non-cartel members, to cease all activity in each other's domains, and not to file toregister patents, trademarks, or other intangible property rights in each other's territories.  The US firm
further agreed that, in selling products in the US , it would request the purchaser not to export the
product to the territory of either the French firm or UK firm and would suspend trading with any
customer that did not comply with this request.
(iii) International cartel in television equipment (United States vs. Scophoney Corp., 333 US 795
[1975])
9. A UK company was engaged in the manufacture and sale of television equipment and was the
owner and licensor of patents covering television picture transmission and reception.  Under an
agreement concluded in 1942 with its US subsidiary and other corporations, it was agreed that the UK
Company would not ship its products to the Western  Hemisphere and a corporation in the US would
not export its products to the Eastern Hemisphere.
(iv) Cartel to divide up the international market in chemical textile products (United States vs.
Imperial Chemical Industries, 100 F. Supp. 504 [1954])
10. A US company and a UK company used a number of cross-licensing agreements to create a
de facto  cartel dividing up the markets for their products.  Under a 1929 agreement covering
gunpowder, cellulose synthetics, dyes and paints, fertilizers, nylon, and other products, for example, it
was agreed that the US company would get the United States and Central American markets and theUK company the British and European markets, with other markets to be shared.  This market
division did not take the form of a direct market allocation cartel but worked by designating regions
and then stipulating which of the party's patents would have exclusive application in that region.WT/WGTCP/W/168
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(v) International cartel to divide up the microcrystalline cellulose market (2000)
11. A US company and a Japanese company both engaged in the sale of microcrystalline
cellulose (MCC) agreed in 1984 to divide the terr itory between them.  Under the agreement, the US
company agreed not to sell any MCC products to any customers in Japan and East Asia without the
Japanese company's consent and the Japanese company agreed not to sell any MCC products to anycustomers in North America or Europe without the US company's consent.  In 1995, in an effort to
eliminate the competition from two Taiwanese manufacturers, the US company proposed to one
Taiwanese firm that it grant the US company exclusive rights to distribute all its MCC products and
proposed to the other firm that it sell its MCC outp ut exclusively to the US company.  In the same
year, it proposed a market-sharing agreement to a US company, a competitor in the North American
and European market.
(vi) International price-fixing and market-sharing cartel for food preservatives (1999)
12. A US company, a German company and a Japanese company conspired for 17 years to fix
prices, raise prices, maintain prices, and divide up the market share for the food preservative thorbate.
13. There are a number of issues that run through all of these examples of international anti-
competitive practices:
1
• Grossly distorting the benefits of trade liberalization and impeding the efficient flow
of goods and services on a global scale, they are inevitably trade issues;
• Because the actions of a few companies distort global markets, there is a very high
probability that such practices have a detrimental impact on the developing countries;
• The affected countries need to improve their competition laws and competition policy
to rectify this situation;
• At the same time, however, it is impossible for any one country to deal with these
issues adequately alone, and a global approach is much more likely to prove effective.
3. The WTO's Suitability as a Forum for an International Approach
14. Because anti-competitive practices (particularly those by international hard-core cartels) have
a nullifying impact on the benefits of free trade, it would be very much in line with the optimizationof the WTO's function for the WTO to take action to deal with these practices.
15. While specific anti-competitive practices should be curtailed to protect the interests of the
developing countries, there are some Member developing countries that would find it difficult to
allocate the necessary resources to adopting and strengthening domestic competition law and
competition policy.
16. The WTO has the ability to provide technical assistance and other capacity-building support
for such Member countries.  While the OECD is pr imarily an organization of developed countries and
the UNCTAD primarily an organization of developing countries, the WTO has both developed and
developing Member countries, making it possible for the developing countries to learn from the
                                                     
1 Sometimes it is pointed out that the international cartels to fix prices in the maritime service have
negative effects on the benefits from trade liberalization. (See the Submission from EC:WT/WGTCP/W/140.)The agreements to fix prices in the maritime service,  however, have some positive aspects including price
stabilizing effect and that they are exempted from national competition law in Japan and many other countries.WT/WGTCP/W/168
Page 4
developed countries' experience and to gradually enhance their competition law and competition
policy.
17. Putting all of this together, a useful approach  for the WTO in handling this as a competition
policy issue would be to focus on international cartels as anti-competitive practices that effectively
diminish the benefits of trade liberalization and to seek to create a framework that would be in theinterests of the developing countries.
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