. /.WORLD TRADE
ORGANIZATIONWT/WGTCP/W/237
24 July 2003
(03-3975)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM KUWAIT
The following is the final text of a communication received from the Permanent Mission of
Kuwait, which was circulated as an advance copy for the Working Group's meeting of 26-27 May
2003.
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Hardcore Cartels
By submitting this paper, Kuwait would like to shed some light  on some conceptual elements
relevant to the definition and scope of a "hardcore cartel", without prejudice to any future
developments on Kuwait's position.
The previous discussions of the Working Group on Interaction between Trade and
Competition (WGTCP) on the issue of "hardcore cartel" illustrate without any doubt the deep
concerns of Members towards the harm caused by such cartels.  Many delegations' contributions
relevant to this item made a clear indication that "hardcore cartels" are the most destructive and
pernicious type of anti-competitive practice that surely will undermine the benefits emerging from
international trade liberalization and impose a heavy cost on customers and the Members' economies,especially the developing countries.  Kuwait echoes such concerns and concurs with others on this
regard.
Whatever the form of the WTO's Multilateral Framework on Competition Policy, Kuwait
would like to see a provision in the definition and scope of international "hardcore cartel" that
excludes not only intergovernmental agreements but also any restrictive business practices
related to  such agreements.  We believe that part IV - section B, para.9 of the definition and scope
of the application of the "UN Set of Multilaterally Agreed Equitable Principals and Rules for the
Control of Restrictive Business Practices" states explicitly this clause.
Kuwait is aware of the fact that one observer (the distinguished UNCTAD representative) had
referred to this clause in the Working Group meeting which took place in July 2002.  But since the
deliberations under WTO and related bodies is a Member driven process, my delegation finds  it very
appropriate to affirm and reflect on this notion in the current meeting.
Moreover, Kuwait is of the view that cartels employ various strategies to gain competitive
advantage and extract rents from markets. Such tactics include price fixing, bid rigging, market
allocation, blocking entry of newcomers, limitation on transfer of technology, strategic alliances and
joint ventures to control and limit entry, and finally, mergers and acquisitions.WT/WGTCP/W/237
Page 2
Without going further into the details of the practices that characterize a "hardcore cartel",
which we believe that the "UN Set"  and "OECD  Recommendations" have adequately touched upon
these practices, given that the above-mentioned exclusion of the intergovernmental agreements is
being taken into consideration.  Nevertheless the issue of mergers is a missing element in the previous
two definitions.
At the turn of the century, the world witnessed a huge wave of mergers among different
companies and enterprises in various economic activities and industries.  Energy, the oil industry in
particular, was one of the sectors that experienced what had been called "Mega Mergers".  Those
mergers brought into existence some multinational s uper-major corporations, which in turn represent
a serious challenge to developing countries whose economies are highly dependent on income
generated from the production, processing and export of oil and petroleum products.
$ million 2001 Financial Data
Company Date for Merger
CompletionRevenues Net Income Total Assets
Exxon/Mobil - 2nd half 1999 191,201 15,320 143,174
BP - 2nd half 1998 with Amoco
- 1st half 2000 with Arco176,551 8,008 141,158
Chevron/Texaco - 2nd half 2001 99,699 3,288 77,572
Total/Fina/Elf - 2nd half 1999 with Petrofina
- 1st  half 2000 with Elf95,677 6,844 79,315
Conoco/Phillips - 2nd half 200286,909 3,534 35,217
Royal Dutch/ Shell 138,252 10,852 111,543
Source: PIW, December 23, 2002
One way to signify this challenge is when we compare the 2001 financial data of those super
majors with Kuwait GDP for the same year, which was around $33,523 million (the crude and
petroleum sector accounts for $16,536 million).
It is worth noting that some mergers significantly raise the risk of abuse by concentrating
economic power within an industry.  That's why merger evaluation forms an integral component of
competition law enforcement in most jurisdictions, especially in developed countries.  Actually, there
is some coordination between some of developed countries' anti-trust agencies for future merger
reviews.
In world globalization, merger review cooperation will be incomplete if it doesn't take into
consideration the effects in all countries.  Hence, mergers should be within the scope of the "hardcore
cartel" definition if it poses a threat to international competition, and merger review should be subject
under international cooperation in the Multilateral Framework on Competition Policy.
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