RESTRICTED
WORLD TRADE WT/WGTCP/W/1
11June1997
ORGANIZATION(97-2406)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
COMMUNICATION FROM THE EUROPEAN COMMUNITY
AND ITSMEMBER STATES
ThefollowingcommunicationhasbeenreceivedfromthePermanentDelegationoftheEuropean
Community anditsMember States withtherequest thatitbecirculated toMembers.
_______________
Background
AttheSingapore Ministerial Conference, itwasdecided to"establish aworking group tostudy
issues raised byMembers relating totheinteraction between trade andcompetition policy, including
anti-competitive practices, inorder toidentify anyareas thatmaymerit further consideration inthe
WTO framework".
Thepurpose ofthispaper istoprovide afirstcontribution tothework oftheWTO inthis
field. Italsoaimstomake some proposals forthework programme oftheGroup.
Introduction
Overthelast50years,theGATT/WTOhasledtoaneffectivereductionofgovernmentalbarriers
totrade. Tariff andnon-tariff barriers aswellasregulatory obstacles havebeeneither reduced or
eliminated. Incontrast, while thebenefits ofrules forbusiness behaviour aregenerally recognized,
nonehasbeendeveloped attheinternational level.
Theworld economy hasalsoevolved andfirms haveadopted global strategies orinternational
production methods. Asaresult, countries havebecome interdependent andthemarkets ofmany goods
andservices havebecome regional orevenglobal.
Itisnoteworthy thatmoreandmorecountries havecome toadopt national competition policies.
There areover50domestic competition laws1today compared toabout adozen 15years ago.Aprimary
concern ofcountries, atalllevels ofdevelopment, hasthusbeentoprevent thatthefruits ofliberalization
andderegulation undertaken bygovernments should benullified bytheestablishment ofbarriers set
upbybusiness having asame effect.
1Competition lawsinthissubmission areunderstood tomean what isusually referred toasantitrust law.
Whilethereareafewcompetitionlaws(suchasintheEC)thatalsoincluderulesrelatingtogovernmentsubsidies,
these arealready covered byrules under theWTO andthere arespecific WTO forainwhich theirfunctioning
isexamined andreviewed. Thesame applies torules relating toother instruments oftrade defence.WT/WGTCP/W/1
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Atthesame time, however, national competition lawsareincertain cases notfullyequipped
toaddress anti-competitive practices withaninternational dimension. Many practices spantheterritorial
scope ofseveral jurisdictions ormayoriginate outside thejurisdictional reach ofadomestic competition
authority. Moreover, when firms divide global orregional markets orotherwise engage intransborder
anti-competitivepractices(forinstancewhencompaniesabusetheirinternationalmarketpowerbydealing
withsuppliers orcustomers onanunfair basis), thiswillnolonger beofexclusive concern tothe
consumers andproducers ofonegiven country.
Developing countries mayhaveaspecial interest inthecompetition debate: withonlylimited
resources forcompetition lawenforcement attheirdisposal, andwithlegislation initsearly stages,
thepromotion ofequal conditions ofcompetition between firms mayhaveaparticular appeal. Itwas
attheinstigation ofdeveloping countries thatUNCTAD adopted, in1980, acomprehensive Code on
restrictive business practices. Work inWTO today could inmany ways takethisinitiative further,
bothinexamining howtobuild uponthis,forexample bytheconferral ofbinding elements toagreed
principles, andbytheconsideration ofnewissues suchasinternational cooperation.
Developing countries mayfacespecial difficulties withrespect totheintroduction ofnational
orother rules; hence special consideration should begiven totheirparticular problems andconcerns.
Trade andcompetition policy perspectives
Competition policy isabasicfeature ofthemarket economies andlegalsystems ofmany WTO
Members. Itaims tomaximize thenational welfare ofcountries whatever theirsizeandlevel of
development. While supporting thecompetitiveness ofindustries, italsoprotects therightofindividual
firms tocompete andofconsumers tobuyatthelowest price. These benefits accrue tosociety as
awhole. Moreover, effectively applied competition lawscanhelpkeepnational economies open, as
wellascontribute toafurther integration ofmarkets.
Theadoption ofcompetition rules atthenational levelcanalsoconstitute ameans totackle
anti-competitive practices thatareimplemented exclusively onadomestic market butarecarried out
byfirms operating from thirdcountries.
Theabsence ofcommon basic competition disciplines attheinternational levelmayincertain
cases leadtoadefactonullification oftradecommitments undertaken byWTO Members. While some
multilaterally agreed principles havealready beennegotiated intheWTO framework (interaliainthe
fieldofbasictelecommunications), common principles mayincrease thecoherence ofthetrading system
asawhole.
Asaresult ofthecontinued liberalization inWTO theincentive forfirms todivide markets
inanartificial way,ortootherwise engage ininternational anti-competitive practices, mayhaverisen
together withtheincreasing returns ofsuchbehaviour. Certainly asaresult oftheglobalization of
business behaviour thenumber ofcases thatarehandled bycompetition authorities, andthathavean
international dimension, hasseenaspectacular rise.
Globalizationhasothereffectstoo:firmswillincreasinglybesubjecttothespecificrequirements
ofthecompetition lawsthatapply inthedifferent markets inwhich theyareactive. Agradual
convergence ofprocedures andcertain remedies inspecified cases mayreduce theircosts aswellas
increase thelegalsecurity oftheiroperations. Forcompetition authorities itwould reduce possible
duplication ofwork andavoid potential conflicting decisions.WT/WGTCP/W/1
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Globalization infinealsocallsforgreater cooperation between competition authorities. Agood
dealofprogress hasbeenmade inthisfieldinrecent years, notably through bilateral agreements.
Afurther evolution ofthese agreements, bothinscope anddepth, islikely.
From atrade perspective aneffective application ofcompetition lawsbynational authorities
will,inproviding formore integrated andaccessible markets, reduce thescope forunfair trade and
theconsequent needforrecourse toinstruments oftrade defence.
Competition lawsthatareeffectively enforced willsupport autonomous liberalization measures
taken byMembers inthetrade andinvestment fields. They provide fortheappropriate regulatory
frameworktoprotectagainstanti-competitivepracticesonthedomesticmarketbyallproducers,including
bylocally-established (foreign) companies. More generally, strong andneutral competition policies
canusefully accompany andbalance possible adverse effects ofinvestment liberalization.
Whytheadoption ofaninternational framework ofcompetition rules should beconsidered
TheEuropean Community anditsMember States welcome theestablishment oftheWorking
Group:
- there isarolefortheWTO toencourage allitsMembers, irrespective oftheirlevel
ofdevelopment, toenact andeffectively apply adomestic competition law;
- theWTO could usefully examine towhatextent andwhich coreprinciples arecommon
tocompetition lawsofdifferent countries;
- theWTO could usefully examine howtheeffectiveness andcoherence ofthenational
competition policies ofdifferent Members canbeenhanced. Inparallel further
cooperation between national competition authorities maybefostered, insofar as
instruments ofcooperation canovercome theobstacles toenforcement caused bythe
internationalization ofbusiness behaviour;
- work inWTO could contribute totheavoidance ofconflicts oflawandjurisdiction
between countries andtothepromotion ofagradual convergence ofcompetition laws.
Thiswould increase thelegalsecurity offirms operating indifferent jurisdictions, as
wellasreduce theircosts ofcompliance withcompetition laws;
- theWTO could explore whether itisfeasible toforesee theadoption, byconsensus,
ofcertain common binding principles ofcompetition lawandprocedure inthefuture.
Suchanexamination could consider whether theapproach oftheWTO tocompetition
policy might beglobal toallsectors (goods, services, public undertakings) orrather
sectoral.
OECD andUNCTAD areinagood position tocontribute tothiswork. TheOECD has
accomplished significant worktodate,bringing together asitdoescountries withdeveloped competition
policies. Itscontinuing contribution willremain valuable. UNCTAD 'srolehasamongst others been
todebate issues ofparticular relevance todeveloping countries; thisroleshould continue. However,
itwillbeimportant tofoster anyfuture work ofthese organizations notinisolation butcoherent with,
andsupportive of,theWTO process.WT/WGTCP/W/1
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Possible areas ofwork fortheWTO Working Group
TheEuropeanCommunitysupportsagradualandprogressiveworkprogrammefortheWorking
Group. Work could bepursued along consecutive tracks inorder tofacilitate progress (seebelow),
andefforts maybegeared towards issues thathavemultilateral aspects. Onegeneral issuethatcould
betaken intoconsideration istoseehowtoincrease theconfidence ofthetrade community inthe
competition lawprocess. Inthisregard itmaybeuseful, inafirststage, toproceed withanidentification
ofthemain anti-competitive practices thatareconsidered tohaveanegative impact oninternational
trade orinvestment.
Indefining itswork programme theWorking Group could:
(1) Identify which arethemain anti-competitive practices thatrestrict international trade
ordevelopment andtakestock ofthedevelopment ofcompetition regimes inWTO
Member countries
Thiswork could facilitate anassessment ofhowaneffective, coherent andnon-discriminatory
application ofcompetition policies might beenhanced. TheGroup could identify which arethemain
anti-competitive practices thatrestrict international trade ordevelopment, orthreaten todoso,inthe
increasingly openworld economy.
Bywayofexample, theGroup could examine theparticular problems andconcerns facing
developing countries withrespect tocompetition rules, including suchissues suchastheeffects of
international cartels ontheirmarkets.
TheGroup could further examine which WTO Member countries have adopted domestic
competition lawsforcontrolling restrictive agreements, monopolies andmergers. Inparallel, existing
international agreements andarrangements relating tocompetition might becatalogued.
(2) Examine thefeasibility ofacommitment byallWTO Members toadopt domestic
competition lawsandenforcement systems, taking account ofthestructures andlevels
ofdevelopment ofnational markets
Thiswork could include thefollowing questions:
Which arethebasic features ofcompetition lawsthatcanbesaidtobeofgeneral application?
Material law: Which types ofbusiness behaviour aregenerally covered bycompetition laws
andhowaretheycategorized? Which practices areconsidered anti-competitive inmostjurisdictions?
Howarepractices evaluated bycompetition authorities? Towhich extent docompetition lawsapply
toallsectors oftheeconomy (goods, services, public undertakings)? What exceptions existinthe
lawsofMembers? What istherationale forsuchexceptions andhowaretheytaken careofinpractice?
Might there beroom fortheirreduction/elimination?
Procedural law: Which procedures apply indifferent countries? Which aretheareas where,
asaresult ofdiverging procedures indifferent jurisdictions, theapplication ofcompetition lawcan
giverisetodifficulties orincreased costs ofcompliance?
Access tonational courts: Inmostjurisdictions competition lawsarepartofthenational law
ofcountries andcreate rights andobligations between individuals interse.Howisaccess tocourts
orindependent review bodies forcompetition cases generally regulated indifferent jurisdictions? Do
anythresholds orother barriers existincertain countries?WT/WGTCP/W/1
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Effective andnon-discriminatory enforcement: Enforcement byacompetition authority with
itsownpowers ofinvestigation isanintegral partofcompetition lawstructures nexttoprivate action.
Which legalpowers areattributed tocompetition authorities inmostjurisdictions, howdotheyoperate
andhowareresources usually allocated? How arerights forfirms toseekaction byacompetition
authority regulated? Aresanctions ofMembers generally commensurate withtheeconomic harm of
theconduct andsevere enough tohaveadeterrent effect?
Transparency: Howisthetransparency ofcompetition lawenforcement ensured indifferent
jurisdictions? Isthere room forfurther improvement?
(3) Examine whether andhowcooperation between authorities canbesupported within
theWTO
Theneedforinternational cooperation hasincreased asaresult oftheglobalization ofbusiness
behaviour. TheWorking Group might make acatalogue ofcurrent practices andlessons tobedrawn
fromthisexperience: whatisthenature ofpresent international provisions (with respect tothesharing
ofinformation intherequested party'spossession, thegathering ofinformation onbehalf ofthe
requesting party, thesafeguarding ofinformation)? Then itcould beexamined whatinstruments of
cooperation arelikely toenhance effective competition policy enforcement.
(4) Examine whether WTO Members could identify acoreofcommon principles thatmight
beadopted atinternational level
Work could identify relevant issues inthefieldofprocedures (such aswithrespect tomergers,
access todomestic courts, cases subject tointernational cooperation) andinthefieldofsubstantive
lawsorprinciples (cartels, including bid-rigging andexport cartels, boycotts, alliances, mergers, abuse
ofdominance, vertical practices).
(5) Examine inasecond stage towhatextent dispute settlement might beapplied inWTO
inorder toensure compliance withanymultilateral provisions oncompetition policy