RESTRICTED
WORLD TRADE WT/WGTCP/W/35
1October 1997
ORGANIZATION(97-4070)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
COMMUNICATION FROM THE UNITED STATES
Thefollowing communication, dated 15September 1997, hasbeenreceived fromthePermanent
Mission oftheUnited States withtherequest thatitbecirculated toMembers.
_______________
Introduction
TheUnited States submits thispaper withtheintention ofhelping toframe theWorking Group ’s
approach toward studying “theinteraction between trade andcompetition policy. ”Given thewide
variation inthecompetition lawandpolicy experience ofMember countries, theUnited States believes
thattheWorking Group ’sintellectual energies should befirstandforemost devoted toestablishing
afirmconceptualization ofcompetition lawandpolicy, especially inrelation tohowthese cansupport
thetrade liberalization objectives oftheWTO. TheUnited States isnotpersuaded thatitwould be
profitable tobegin withanabstract discussion oftrade policy andcompetition policy premised ona
hypothetical world where economies andsocieties arecompletely integrated, where allrelevant markets
areglobal orfreeofentry barriers, andwhere enforcement ofacommon, universal competition law
ensures competitive market outcomes. Despite theremarkable changes which haveoccurred overthe
pasthalf-century, thatisnotthereality ofinternational commerce today. Wehave, therefore, formulated
ourthoughts concerning howcompetition lawandpolicy canfurther thetradeliberalization objectives
oftheWTO inlightofthepresent-day realities which characterize theworld trading system andthe
WTO thatsupports it.
After abriefreview oftheobjectives oftrade liberalization, thispaper accordingly focuses
ontheprinciples, objectives andscope ofcompetition lawandpolicy, onstock-taking ofnational
competition lawsandenforcement policies, andonhowcompetition policy toolscanbeusedtofurther
thetrade liberalization objectives oftheWTO. Anin-depth discussion ofsuchtopics isthenecessary
foundation foranysubsequent work. Asafirststep,however, itmayhelptorecall thefundamental
objectives ofthemultilateral trading system andoftrade liberalization inorder tobetter seethe
contributing rolewhich competition lawandpolicy mayplay.
I. OBJECTIVES OFTRADE LIBERALIZATION
TheMarrakesh Agreement Establishing theWorld Trade Organization recognizes thattrade
liberalization, especially when pursued within anintegrated andviable multilateral trading system,
canplayaninstrumental roleinfurthering theattainment ofabroad anddiverse setofsocial and
economic objectives. Specifically, thepreamble totheMarrakesh Agreement notes thatinternational
trade andeconomic relations should beconducted withaviewtowards:
- raising standards ofliving;
- ensuring fullemployment;WT/WGTCP/W/35
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- ensuring alarge andsteadily growing volume ofrealincome andeffective demand;
- expanding theproduction ofandtrade ingoods andservices;
- allowing fortheoptimal useofresources inaccordance withtheobjective ofsustainable
development; and
- ensuring thatdeveloping countries (especially theleastdeveloped) secure ashare in
thegrowthofinternationaltradecommensuratewiththeireconomicdevelopmentneeds.
Totheseends, theparties totheMarrakesh Agreement established theWTO toserve asaforum
dedicated tothenegotiation andimplementation of“reciprocal andmutually advantageous arrangements
directed tothesubstantial reduction oftariffs andother barriers totrade andtotheelimination of
discriminatory treatment ininternational trade relations. ”
Since theendofthesecond World War, tradeliberalization andthemultilateral trading system
havedonemuch tohelpachieve these underlying social andeconomic goals. Wehavewitnessed a
dramatic reduction oftariffs world-wide and,especially withtheTokyo andUruguay Rounds, significant
progress hasalsobeenmade instrengthening andexpanding therulesanddisciplines needed toensure
thatnon-tariff measures donotunfairly distort trade orserve asunjustifiable impediments tomarket
access. Byreducing tariffs andnon-tariff barriers totrade, trade liberalization asembodied through
theWTO Agreements creates newexport opportunities andspurs international commercial competition,
which inturninduces business investment, technological innovation andlong-term economic growth.
These developments alsoserve tostimulate thecreation ofjobs,promote higher realwages andincrease
labour productivity. Thelowering oftariffs andenhanced competition contribute tolower consumer
andinput prices, while theconsequent expansion oftrade willyield higher incomes. Inshort, the
ultimate objectives andoutcomes ofasuccessful policy oftrade liberalization willinmany instances
closely resemble orcomplement those achieved through theinstruments ofcompetition policy.
II. OBJECTIVES OFCOMPETITION POLICY
There iscurrently noconsensus onwhat should betheoptimal objectives ofanational
competition policy. However, onecansaythatagenerally shared objective ofcompetition policy is
toensure thatmarkets work well. Abasic approach inassessing howwellamarket works istofocus
ontheprocess bywhich themarket delivers goods andservices totheconsumer. Theprocess isefficient
andprotects consumers ifitdelivers avariety ofquality goods toconsumers atlowprices. Economic
theory suggests thatcompetitive markets -because ofthenumber ofproducers (domestic orforeign)
inthemarket ortheindependent nature oftheinteraction between producers -produce those goods
andservices indemand inthegreatest possible variety andatthelowest possible costtoconsumers.
Consumers paynomore andnolessthanitcostssociety asawhole -inrealterms -toproduce those
goods andservices. Andbecause goods andservices insuchmarkets areproduced using themost
cost-effectivecombinationofinputs,givenexisting(butcontinuallyevolvingandimproving)technology,
thecosttosociety asawhole ofthose goods andservices isalsominimized.
AstheUSSupreme Court hasrepeatedly stated, competition policy andtheUSantitrust laws
rest"’onthepremise thattheunrestrained interaction ofcompetitive forces willyieldthebestallocation
ofoureconomic resources, thelowest prices, thehighest quality andthegreatest material progress. ’"
NCAA v.Board ofRegents ofUniv. ofOkla., 468US85,104n.27 (1984) (quoting cases).
Consequently,UScompetitionpolicyfocusesonprotectingcompetitivemarketsandpromotingconsumer
welfare. Thetestformeasuring whether some restraint ofcommercial trade hasanimpact upon
competition and,thereby, consumer welfare iswhether thatrestraint "reduc[es] theimportance of
consumer preference insetting price andoutput." Id.at107.
Given suchanapproach, aprimary objective ofcompetition policy from theUSperspective
istoprotect thecompetitive market process -notindividual firms perse-bysafeguarding andpromotingWT/WGTCP/W/35
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themarket conditions (both static anddynamic) thatgiverisetothatprocess. Forexample, freemarket
entry isanimportant condition because ittends tokeepprices down. There isnosense inincumbents ’
colluding toraiseprices orengaging inother anticompetitive behaviour, ifnewentrants stand ready
andabletobidaway incumbents ’salesornegate theirmove insome other way. Freeentry alsotends
toincrease thediversity ofsupply interms ofproduct selection, selling practices andcustomer service
policies. Market entry barriers, andconduct thatdeters entry, aretherefore important concerns.
Another objective ofcompetition policy ispreserving innovation. Innovation bothfeeds and
isfedbythecontinual competition among firms toinvent neworimproved goods andservices. The
development ofaneworimproved product increases competition (nottomention national wealth),
andtheincreased competition gives risetoanevennewer orbetter product (andevengreater national
wealth) -avirtuous cycle ofsorts. Consequently, competition enhances technological innovation by
driving competitors toproduce improved goods andservices. Moreover, competition lawscanpromote
innovation byprohibiting certain actions, suchasunreasonable restrictions onintellectual property
licensing, thatharm competition withrespect toneworexisting product andprocess (technology)
development.
Yetanother objective ofcompetition policy istoenhance efficiency. Competition oftendrives
firms toachieve acertain minimum sizeordegree ofintegration ordiversification. Competition policy
isdesigned tosortpro-competitive, efficiency-enhancing mergers fromthose mergers thatposeathreat
tocompetition (even though anincrease inproduction oroperational efficiency maybeachieved).
Another waythatcompetition policy enhances efficiency istomake surethatgoods areallocated through
theprice system tothose buyers whovalue them most interms ofwillingness topay. Bypursuing
theeliminationofcartelsandsupracompetitiveprices(andforcingpricestowardmarginalcost),enforcers
promote thissortofallocative efficiency.
Itisfairtosaythatsuchanapproach thatemphasizes consumer welfare, thecompetitive process
andeconomic efficiency isageneral guideline formostnational competition policies. National policies
essentially differ intheextent anddegree towhich theyfocus onthese factors ortakeother factors
intoaccount.IntheUnitedStates,whilepromotingconsumerwelfare,protectingthecompetitiveprocess
andenhancing economic efficiency arenowtheprincipal touchstones ofcompetition policy, US
competition policy inthepastwasequally concerned withtheverysizeofenterprises andtheneed
topreserve small businesses fortheirownsake. Over time, efforts toanalyze competition problems
more rigorously andaccurately haveresulted intheincreasing incorporation ofeconomic theory and
analysis intheformulation ofUScompetition policy andintheapplication ofcompetition law.
III. THE SCOPE OFCOMPETITION POLICY
Thescope ofcompetition policy isaproduct ofitsobjectives. IntheUnited States, forexample,
thescope ofcompetition policy isbroad, asreflected inthediverse setoflawsandpolicies designed
topromote consumer welfare andensure thatmarkets work efficiently. Antitrust laws, consumer
protection laws, regulatory policies designed tocorrect market failures andmarket deregulation policies
allwork toensure thatcompetition among goods producers andamong service providers, andaccurate
information inthehands ofconsumers, generate thebestproducts atthelowest prices, spurefficiency
andinnovation, strengthen theeconomy, andproduce benefits forconsumers, workers, andinvestors
alike.
IntheUnited States, competition lawprevents businesses from engaging inawiderange of
anticompetitive practices thatdiminish theoutput ofgoods andservices, product quality, innovation
andconsumer choice. Actionable behaviour includes, among other things, efforts tocartelize amarket
andfixprices, bidrigging andmarket allocation, certain kinds ofvertical priceandnon-price restraints,
including restraints ondistribution, tyingarrangements andunwarranted restraints onthedisseminationWT/WGTCP/W/35
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oftechnology, andmergers thatsubstantially lessen competition. Theenforcement "umbrella ”isequally
wide. Competition lawisenforced domestically atthefederal levelbytheDepartment ofJustice and
theFederal Trade Commission, andatthestatelevelbystateattorneys general. Private parties who
havebeeninjured byallegedly anticompetitive conduct alsohavetherighttochallenge suchconduct
instateandfederal courts.
IntheUnited States, competition policy alsoextends tomarket regulatory policy, which involves
thegovernment acting asareferee tooversee andintervene inmarket activity, usually toallocate scare
resources (e.g.radiofrequencies), takepreventative stepsagainst anticompetitive behaviour inregulated
markets where therearesignificant risksofsuchbehaviour given theparticular market characteristics
(e.g.telecommunications), andtoprevent orremedy market failure (e.g.toprotect orimprove public
health andsafety, theenvironment orthewell-being ofthecitizenry). USregulatory policies generally
aimtobepro-competitive inthattheystrive tobecost-effective, result inminimum market restrictions
orinterventions, andimprove theefficiency ofmarkets. Forexample, inSeptember 1993,
President Clinton issued Executive Order 12866 which initiated aprocess toreform andmake more
efficient theUSfederal regulatory process. Theleading principle ofthisinitiative isthatfederal agencies
should regulate onlywhen required bylaworwhen regulations arenecessary tointerpret thelawor
tomeetacompelling public need. Furthermore, “indeciding whether andhowtoregulate, agencies
should assess allcosts andbenefits ofavailable regulatory alternatives, including thealternative of
notregulating. ”
Education/advocacy isanother dimension ofcompetition policy. Advocacy ensures public
awareness ofcompetition principles andkeeps competition andregulatory lawsandpolicies up-to-date
withthelatestunderstanding ofcompetition inthemarketplace. Competition advocacy canbestatutorily
prescribed: antitrust agencies sometimes haveastatutory rightorduty(although perhaps lessinthe
United States thaninsome other countries) toprovide toregulatory agencies theirviews onpending
regulatory matters, forexample, ontelecommunications services applications orbank mergers.
Alternatively, regulatory agencies mayberequired toconsider theviews ofthecompetition agencies
oncertainmatters.Competitionadvocacyalsomaybeself-initiatedbytheantitrustagenciesorrequested
byCongress, federal agencies, statelegislators, orregulators. Advocacy often tends tooccur inthe
caseofindustries undergoing deregulation, restructuring orconsolidation (e.g.telecommunications,
financial services, electricity anddefence), aswellasincases involving intellectual property andhealth
care.
IV. STOCK-TAKING OFUSCOMPETITION LAWS AND ENFORCEMENT POLICIES
1. Instruments ofCompetition Policy
TheUnited States implements itscompetition policy using avariety ofdomestic laws. Ofthese,
thecompetition (antitrust) laws, consumer protection laws(which protect buyers fromfraudulent sellers
andensure thatconsumers receive accurate, non-deceptive information), provisions inregulatory laws
mandating consideration ofcompetition interests, andmarket deregulation acts(affecting, forexample,
thecommercial airline service, motor carrier, telecommunications andfinancial service industries and
natural gasandelectricity suppliers) arethemostimportant. Within thisframework, competition laws-
referred tointheUnited States as“antitrust laws”-arethecritical andtested tools forensuring a
competitive marketplace.
2. USCompetition Laws
(a) Sherman Act-1890. ThisActprohibits contracts andconspiracies inrestraint oftrade
aswellasmonopolization oforattempts tomonopolize trade. Section 1oftheSherman
Actreads:WT/WGTCP/W/35
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Every contract, combination intheformoftrustorotherwise, orconspiracy,
inrestraint oftrade orcommerce among theseveral States, orwithForeign
nations, isdeclared tobeillegal ...
Section 2oftheSherman Actreads:
Every person whoshallmonopolize, orattempt tomonopolize, orcombine
orconspire withanyother person orpersons, tomonopolize anypartoftrade
orcommerceamongtheseveralStates,orwithForeignnations,shallbedeemed
guilty ofafelony andissimilarly punishable ...
Section 1requires some sortofcollective action bytwoormore firms. Section 1cases
therefore tendtofocus onestablishing theexistence ofananticompetitive agreement
thatposes athreat tocompetition. Section 2,ontheother hand, isconcerned more
withmarket structure andmarket concentration levels (theexistence ofmonopoly) and
whether monopoly power hasbeenwrongfully gained orused. Thefocus ofsection 2
isnotonmonopoly, perse,butonhowthemonopoly wasgained orismaintained.
Itbears noting thattheSherman Actdoesnotdictate desirable conduct (or“regulate
away”undesirable conduct) bymeans of"active" government controls orlimitations
onbusiness activity. Instead, theSherman Actsimply proscribes certain business
conduct andrelies onpowerful remedies suchascriminal penalties andtreble damages
todeter suchconduct.
(b) Clayton Act-1914. Early enforcement oftheSherman Actdidnotmake sufficiently
clearwhatconstituted unlawful conduct andwhatdidnot,giving risetoconcerns about
effectiveantitrustenforcement,businesses’needforguidance,andincreasedconsistency
andpredictability inthelaw.TheUSCongress, however, wasconcerned thatdetailed
specifications would provide firms withoverly specific guidance forevading antitrust
rules. Theoutcome -theClayton Act-reflected agreement thatgeneral condemnation
withsome guidance -rather thandetailed enumeration -wasthebestapproach and
could provide theflexibility needed torespond tochanging business practices over
time.
TheClayton Act,among itsother provisions, istheprincipal USlawprohibiting
anticompetitive mergers. TheActmakes illegal stock acquisitions thathavetheeffect
ofsubstantially lessening competition between theacquiring andacquired corporations,
aswellaspricediscrimination, tying andexclusive dealing when competition islikely
tobeinjured. TheRobinson-Patman Act(1936) subsequently amended theClayton
Acttoprohibit pricediscrimination incertain circumstances; andtheCeller-Kefauver
Act(1950) amended theClayton Actsothatitcovers asset acquisitions (aswellas
thestock acquisitions covered bytheoriginal 1914Act)andacquisitions offirms that
arenotdirect competitors (conglomerate mergers).
(c) Federal Trade Commission Act-1914. ThisActcreated theFTCandauthorized it
toprevent firms from engaging inunfair methods ofcompetition. Thecourts have
construed “unfair methods ofcompetition ”toencompass those practices thatviolate
theSherman andClayton Acts. Inaddition, theFTCAct’sprohibition sweeps more
broadly thantheSherman Act. Itreaches conduct thatiscontrary tothebasic policy
oftheSherman Actwithout directly violating thatAct,orthatconstitutes anincipient
violation ofthatAct-solongastheapplication oftheFTCActdoesnotconflict with
thepolicies embodied intheSherman Act.WT/WGTCP/W/35
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(d) Hart-Scott-Rodino Antitrust Improvements Act-1976. After repeated difficulty on
theantitrust agencies ’partinundoing anticompetitive mergers aftertheyoccurred,
CongresspassedtheHart-Scott-RodinoAct.Itrequiresfirmstonotifyproposedmergers
oracquisitions exceeding certain size-of-party andsize-of-transaction thresholds. It
alsoprevents consummation oftheproposed transaction before theendofaprescribed
waiting period. Thiswaiting period enables theantitrust authorities toinvestigate and
tostopormodify aproposed merger thatislikely tolessen competition.
(e) National Cooperative Research andProduction Act-1984and1992. Given theinterest
inpromoting innovation, thisActclarifies theapplication ofantitrust lawstojointR&D
activities andjointproduction activities. Italsolimits toactual (nottreble) damages
themonetary relief forwhich qualifying research anddevelopment andproduction joint
ventures thathavebeennotified totheantitrust agencies maybeliable inprivate civil
suits. Interestingly, notasmany jointventures asanticipated havetaken advantage
ofthese statutory benefits.
3. Jurisdictional Scope ofUSDomestic Competition Laws
Thejurisdictional reach ofUSantitrust lawsextends toanyanticompetitive conduct thataffects
USdomestic commerce orUSforeign commerce, e.g.,import orexport commerce, regardless ofwhere
suchconduct occurs -inside oroutside theterritorial boundaries oftheUnited States -orthenationality
oftheparties involved. Thus, theactions ofaforeign citizen intheUnited States aresubject toUS
antitrust law,likethose ofanyAmerican citizen, asaretheactions ofanyindividual, American or
otherwise, located outside oftheUnited States, thathavetherequisite anticompetitive impact onUS
commerce. InthecaseofUSimport commerce, actionable conduct is(foreign-based) conduct that
"was meant toproduce anddidinfactproduce some substantial effect intheUnited States." Inthe
caseofUSforeign commerce otherthanthatinvolving imports (e.g.USexport commerce), thestandard
isanticompetitive conduct (occurring abroad) that“hasadirect, substantial andreasonably foreseeable
effect”onUScommerce. UScourts mustbeabletoobtain jurisdiction overpersons orfirms engaged
insuchconduct, andUSantitrust agencies areprepared towork withforeign competition authorities
iftheyarebetter situated toremedy theconduct occurring overseas.
TheUSantitrust authorities, andmostUScourts, takeconsiderations ofinternational comity
intoaccount indetermining whether theextraterritorial application ofUSantitrust lawsisappropriate
inparticular circumstances.
4. International Cooperation Agreements Regarding Competition Issues
Theincreasing integration ofmarkets hasinmany jurisdictions ledtoaheightened awareness
ofcross-border, regional andglobal market considerations. Antitrust authorities relywithincreasing
frequency onarrangements designed topromote international cooperation andadherence toprinciples
ofcomity. Antitrust authorities arefinding thatcoordinated bilateral orplurilateral approaches are
particularly useful forremedying anticompetitive practices thataffect more thanonejurisdiction.
TheUnited States isparty toseveral bilateral agreements designed toimprove cooperation
intheapplication andenforcement ofnational competition laws. These cooperation agreements have
provisions fornotifying other parties (countries) totheagreement when theirimportant interests are
affected, forconsulting andexchanging nonconfidential information onmatters ofjointconcern, for
cooperatinginand,ifappropriate,coordinatinginvestigationsandenforcementactions,andforrespecting
eachothers ’sovereign interests. TheUnited States isalsoparty toandfullyrespects plurilateral, non-
binding OECD "Recommendations" governing cooperation among competition authorities. Inaddition,
recent USlegislation -theInternational Antitrust Enforcement Assistance Actof1994 -authorizesWT/WGTCP/W/35
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theUSantitrust authorities toexchange otherwise confidential investigative information pursuant to
reciprocal agreements thatinclude guarantees against improper useordisclosure oftheinformation,
among other required provisions.
Totheextent thatexperience incooperating under theseagreements tendstofurther convergence
inthinking about andapplying competition lawandprinciples, bothtrade andcompetition benefits
result. Forexample, ifcountries cooperated moreeffectively inbreaking upinternational cartels, buyers
(whether businesses orconsumers) inallaffected countries would benefit from increased output or
reduced prices. Ifcountries harmonized theirpre-merger notification filing forms, regulatory barriers
andtransaction costswould decrease forbusinesses proposing tomerge andantitrust authorities could
better cooperate inevaluating andunderstanding theconsequences andeffect ofthemerger ontheir
jurisdictions.
Incertain instances, trade policy concerns maybeabletobeaddressed byagreements that
enable orfurther a"positive comity" approach tocompetition lawenforcement. Under positive comity,
where anticompetitive conduct adversely affects more thanonecountry, affected countries canask
theauthorities bestabletoinvestigate andremedy theconduct todoso.Often, thiswillbetheauthorities
ofthecountry inwhich thefirms arelocated, theevidence ismost readily available, theconduct is
principally occurring andtheprincipal anticompetitive impact isfelt. Ofcourse, theuseofthis
mechanism assumes thattherequested country haslawsandinstitutions, andiswilling todevote
resources, todealadequately withtheconduct inquestion. Thisfosters amore efficient allocation
ofenforcement resources, heightens thelikelihood ofsuccessful enforcement (since theevidence and
theenforcer willlargely beinthesamejurisdiction) andeffective imposition ofremedy andminimizes
friction overtheextraterritorial enforcement oflaws.
V. COMPETITION POLICY ’SCONTRIBUTION TOTRADE LIBERALIZATION
Toelaborate onwhathasbeentouched upon above, there areanumber ofways inwhich the
existence ofadequate competition laws, appropriately enforced, cancontribute toincreased market
access andtrade liberalization. Deregulation andregulatory reform isalsoimportant toviewinthis
context. Abriefexamination ofsome oftheabove-mentioned aspects ofUScompetition lawsand
enforcement policies against thebackdrop ofmarket access interests willillustrate thispoint.
Enactment ofCompetition Laws
Inanincreasingly integrated world market, thelackofcompetition laws orofadequate
competition lawsinsome countries and/or theinadequate coverage ofcompetition lawsmayposean
increasing barrier tomarket access. Basic competition lawsshould prohibit unreasonable restraints
ontrade, including cartels tofixprices, bidrigging, agreements tofixproduction volumes orquantities
soldand/or todivide markets byallocating consumers orterritories. Theyalsoshould prohibit vertical
restraints thatsubstantially lessen competition (including distribution arrangements), monopolistic and
other predatory practices andmergers, acquisitions andjointventures thataltermarket structure so
astosubstantially lessen competition. Inaddition, exemptions from competition laws, whether for
particular sectors, entities ortypes ofactivities, should bekepttoaminimum. Unwarranted exemptions
canhavetheeffect ofallowing anti-competitive conduct thatshields markets from competition from
newproducers (foreign anddomestic).
Cartel Behaviour
Oneprovision ofcompetition lawwithmarket access implications istheprohibition ofcartels
(horizontal price-fixing, bid-rigging, fixing quantities tobeproduced orsold, dividing markets by
allocating customers orterritories) orofboycotts toaccomplish theabove objectives ofcartels. TheseWT/WGTCP/W/35
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arepractices thatontheirfacealways oralmost always tendtorestrict competition byreducing output
orraising prices. Forexample, foreign exporters benefit insofar asUSantitrust lawsprohibit competing
firms located intheUnited States from dividing markets ortying upalldistribution systems, which
would inhibit orprevent foreign goods fromentering ourmarket. Foreign exporters alsobenefit from
USlawspreventing firms fromusing regulations tostiflecompetition byrequiring, forexample, that
onlyaparticular UStechnology standard beusedandrefusing toallow thedistribution ofnon-US
products. Similarly, theprotection afforded byUSlawagainst collusive bidding practices isofbenefit
topotential foreign aswellasdomestic market entrants.
Impact ofVertical Restraints
Anotherprovisionofcompetitionlawthatmayoperatetoimprovemarketaccessistheprohibition
ofvertical restraints thatlimitoutput orraiseprices andharm consumers. Some vertical arrangements,
suchasexclusive purchasing orbuying agreements, thatmayhaveanticompetitive effects arealsothe
typeofagreements thatmaytendtoexclude other firms, including foreign firms, from themarket.
Thisisparticularly trueifitisdifficult toenter themarket andtheinput, output ordistributor that
istiedupbytheexclusivity agreement iscritical toafirm'sability tocompete inthatmarket. (Itbears
noting, however, thatthere alsomaybesituations where vertical restraints between amanufacturer
anditsdistributors donotimpede competition anddoimprove efficiency, particularly when there are
numerous competing manufacturers, eventhough thepractice mayrestrict market access forcertain
firms.)
Monopolies &Market Access
Theprohibition against monopolization andattempted monopolization isanother competition
lawprovision relevant totrade issues andmarket access. Because firms withmarket power maybe
abletoprevent others ’entry orexpansion intheirdomestic market, foreign firms benefit from this
prohibition against abuse ofdominance andmarket power. USexporters havefrequently faced such
monopolistic discrimination and/or exclusion from foreign telecommunications andgovernment
procurement markets. Market access problems canalsoariseinsituations where amonopolist may
havecontrol oversome essential facility, e.g.needed interconnection oranexisting distribution grid.
Thisfrequently occurs withstate-owned enterprises thatareinadominant position withthepower
todiscriminate. Thisrelationship between monopolistic behaviour andmarket access difficulties is
addressed intherecent WTO Agreement onBasic Telecommunications Services. Inthatagreement,
aCompetition Framework (the"Reference Paper") wasnegotiated toavoid themarket access problems
thatcanarisefromaformer monopolist 'sability andincentive torestrict newentrants 'access toessential
facilities inthetelecommunications sector.
Merger Review
Pro-competitive merger policy alsowillkeepdomestic markets operating efficiently andopen
toentry byforeign firms. However, ifmerger control isusedasaninstrument ofindustrial policy
tostrengthen thecompetitive position ofdomestic firms attheexpense oftrading partners, orto
undermine theposition offoreign firms fornon-competition reasons, tradeinterests canbenegatively
impacted.
Enforcement ofCompetition Laws
Another market access problem arises fromtheinadequate enforcement ofcompetition laws.
Inorder foranticompetitive activities tobeeffectively deterred andcontrolled, theremustbeadequate
funding ofthecompetition authority andtheagency needs tobeindependent ofpolitical pressure.
There alsomust beeffective sanctions ofakindandatalevelthatareadequate todeter firms fromWT/WGTCP/W/35
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participating inanticompetitive activities. Inaddition, there needtobeenforcement procedures and
institutions thatareequipped withinvestigative andadjudicative powers sufficient todetect andremedy
violations. Suchprocedures andinstitutions include thepower toobtain documents andinformation
andtheability toimpose penalties when firms failtocomply withreasonable demands forinformation.
Finally, there should alsobeagenuine commitment onthepartofthegovernment toguard against
thefostering ofanticompetitive practices through thegovernment ’saction orinaction.
Deregulation andRegulatory Reform
Enactmentandenforcementofcompetitionlawsalonewillnotresolveallmarketaccessproblems.
Enforcement ofsuchlawsmustbecoupled withactive market deregulation and,where regulation is
absolutely necessary, withpro-competitive regulatory policies. Excessive regulation thatforecloses
competition andmarket entry/exit canalsohavesignificant market access impacts. Domestic regulatory
schemes cannegatively impact competition andmarket access when theypromote monopolies and
oligopolies orfavour some domestic competitors orstatetrading companies overother domestic (and
foreign) competitors. There should becontinual andcomprehensive evaluation oftheneedtoexpand
thecoverageofexistingregulatorypoliciesandtheneedtodevelopnewpolicies.Competitionauthorities
canplayanimportant roleinthisregard.
Government Acquiescence toAnticompetitive Conduct
Government complicity inortolerance ofprivate anticompetitive actions creates another market
accessbarrier.Suchgovernmentaction(orinaction)canmanifestitselfinthesanctioningofgovernment-
sponsored cartels, inimproper (andunsupervised) delegation ofgovernment functions toprivate groups
orinafailure tosafeguard competition when industries areprivatized orderegulated. Market access
mayalsobeimpeded when government acquiesces inissuing unwarranted industry-supported standards
orregulations which stifle competition.
Conclusion
ThisWorking Group willhaveaccomplished much ifwesucceed merely inestablishing ashared
understanding ofthebasicprecepts ofcompetition policy andthesubstance andemphasis theseprecepts
aregiven under various national andregional systems. Theimportance ofbuilding thiseducational
foundation should notbeunderestimated, asthemeaning andimpact ofcompetition policy canmanifest
itself quite differently when oneconsiders thatcommon economic andlegalconcepts cansometimes
takeondivergent meanings astheyevolve through different cultures ofpolicy, administration and
jurisprudence.
Once thisknowledge andunderstanding arefirmly established, theUnited States believes that
much might alsobegained from learning andexploring themanner inwhich thedevelopment and
application ofcompetition lawandpolicy cancontribute tothefuller realization oftheobjectives of
tradeliberalization andthemultilateral trading system, astouched uponinsections IV.4andVabove.
Thisexploration could include consideration ofmeans ofpromoting theadoption ofsound competition
principles aswellasways toimprove andstrengthen international cooperation intheapplication and
enforcement ofcompetition laws. Through theseefforts, wecanprofitably fulfiltheMinisterial mandate
toexamine theinteraction between competition policy andtradewithaviewtowards furthering greater
market access, economic growth andsustainable development.