WORLD TRADE
ORGANIZATIONWT/WGTCP/W/151
22 September 2000
(00-3815)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM SWITZERLAND
The following communication, dated 21 September 2000, has been received from the
Permanent Mission of Switzerland with the request that it be circulated to Members.
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Promoting Cooperation and Communication in Competition Policy at the
Multilateral Level:  Possible Elements
Discussion Paper
This paper intends to discuss some of the elements which could be included in negotiations
aimed at strengthening and complementing the existing WTO rules-based system at the interface oftrade and competition.  By doing so, the Swiss delegation would like to take up the demands of some
delegations made at the last meeting of the Working Group on the Interaction between Trade and
Competition Policy and contribute to a future discussion on a more concrete level; in order to be able
to judge what the implications of a better multilateral coordination could be, we need to make
assumptions on the content of such coordination.  Of course, such assumptions are for illustrative
purposes only and should in no way preclude the effective outcome of eventual negotiations.  We
propose to use the elements presented hereafter for a more in-depth analysis in up-coming meetings ofthis Working Group.
At this stage, it would certainly be premature to provide an exhaustive list of elements; rather,
we would like to discuss in greater detail those elements which so far have been at the center of
attention with regard to eventual negotiations.  The following elements might be discussed in greater
detail:
A. I
NTRODUCTION
Nowadays, the beneficial effects on the economy of competition policy are widely acknow-
ledged.  Competition policy has shown to have a stabilizing effect in the longer term by, among
others, permanently encouraging re-structuring of the economy, contributing to limiting market power
and to separating political and economic interests, and especially, enhancing efficiency in both itsstatic and dynamic sense.  Furthermore, there is reason to assume that enterprises are prone to refrain
from anti-competitive practices in those countries with effective competition policies while continuing
private restraints in countries without such policies.   Insofar as such anti-competitive practices have a
negative effect on the development of an economy, competition policy supports and complements
developmental efforts in developing countries.WT/WGTCP/W/151
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The argument that each country is autonomous in deciding whether and to what extent it
wishes to realize the advantages of an effective national competition regime, is, of course, very valid.
But there is more to it than just national economic  considerations:  in an increasingly interdependent
world economy there is an enhanced mutual interest  of all countries in promoting stability in the
markets around the world.
Discussions in this Working Group so far have shown that given the globalization of
economic activities there are indeed aspects which speak in favour of a more coordinated approach in
the area of competition policy.  Economic actors can better reap its benefits when there is some
common basis and cooperation.  In particular, certain minimum standards would further improve
predictability of rules in cross-border activities, which is an essential goal of the WTO, and national
authorities facing globally active enterprises could better address anti-competitive behaviour in a
coordinated manner.  Both of which are not least in the interest of smaller states which often are oflimited means and possibilities to carry through their interests.
In our view, the elements which could be most apt to provide additional benefit to the
international community in the area of  competition policy are the following:
- Prohibition of hard core cartels having a negative effect abroad, i.e. of horizontal
agreements to fix prices, rig bids, restrict output, or divide markets.
- Rules on how to improve coordination between the national competition authorities.
- In applying these provisions, the WTO principles of transparency and non-
discrimination need to be observed.
As it was already proposed earlier, a WTO Committee could be entrusted with facilitating the
exchange of information and cooperation as well as monitoring the obligations.
With this limited range of elements to be included in a basic framework, consensus should be
easier to achieve.  Nevertheless, the most important  problems identified during the discussions in the
Working Group would be tackled.
B. S
UBSTANTIVE PROVISIONS OF SUCH BASIC APPROACH
Hard core cartels are probably the only form of a competition restraint which is very widely
considered damaging to the economies.  This would make it pre-destined as a substantive obligation
to be observed by all WTO Members; indeed, the multilateral rules-based system could incorporate as
the only new substantive provision the prohibition of hard-core cartels.  Addressing this problem
appears as sufficient justification for creating a new instrument in the WTO framework.
This would imply that for all other competition policy measures national laws apply
exclusively.  In this respect, it needs to be st ressed that, in our view, even if certain elements
regarding competition policy were to be coordinated at the multilateral level there must remain broad
room for adequate appraisal by the authorities of criteria such as the determination of relevant
markets, assumptions with regard to a dominant position, etc.  Thus, while a certain behaviour might
be seen as violating the law in one country, it may be judged to be in accordance with a similar law inanother country.
C. C
OORDINATION BETWEEN COMPETITION AUTHORITIES
A pre-condition for meaningful coordination and cooperation is, in our opinion, the existence
of a clearly defined "contact point" within the national government, which can give and receiveWT/WGTCP/W/151
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information.  In most cases, such is the role of the national competition authority.  The specific tasks
and competencies of such an authority may vary between countries.  However, in our view,
meaningful cooperation is not possible without the existence of such an authority having adequate
means at its disposal to function effectively.
Coordination could, for instance, encompass the following areas:1. Exchange of information:  a system of mutual notification of laws, investigations
and/or decisions would certainly be a center-piece of a coordination arrangement.
2. Exchange of experience:  a forum could be established where exchange of
information and experience can take place in a structured and institutionalized
manner.  While a similar activity takes place in the OECD already, it seems
appropriate, given the increasing application of competition regimes in non-OECD
countries, to expand the possibility for such contacts based on a multilateralagreement.  Such a forum could prove especially valuable for smaller countries
whose possibilities for contacts could otherwise be limited due to constraints in
human and financial resources and perhaps also because of a lack of interest of the
"big players".  Exchange of experience on the various approaches to competition
policy would also promote knowledge on best practices.  Thanks to personal contacts
information could be shared on an informal basis without complicated procedures.
3. Technical Assistance and Capacity Building:  as the discussion on the EC paper
"Development Dimension" (WT/WGTCP/W/140) demonstrated, it seems advisable
to go one step further and address facilitation and assistance in establishing not only
laws and competition authorities, but also measures to improve the effectiveness ofinvestigations and law enforcement.  Such assistance has been taking place on various
levels already, and long-established and experienced competition authorities would
play a key role in that context.  More coordination of and information on the on-going
activities by the various actors might be helpful, and analyzing how this key issue
could be addressed in an eventual agreement would be a valuable contribution to thisWorking Group.  What would also need to be discussed is cost-sharing of such
activities, which in the end are beneficial for everybody, as indicated above.
International cooperation and technical assistance are indeed very important
instruments for building up a culture of competition and developing the necessary
institutions in all countries.
4. Information sharing in investigations:  it might be worthwhile to also discuss
questions of exchange of information beyond pure notification, to the extentpermitted by legal requirements (regarding especially confidentiality).
5. An even further reaching coordination approach could be discussed:  consultation in
concrete cases.  If other countries’ interests are at stake it might be useful to establish
some kind of consultation mechanism with a goal of searching for mutually
acceptable solutions that would take into account different interests involved.
1  Such
                                                     
1 As put forward by Fox in some recent articles (see e.g. Eleanor M. Fox "The Problem of State Action
that Blesses Private Action that Harms 'the Foreigners'", in R. Zäch: "Towards WTO Competition Rules",1999), more emphasis would be put on "world welfare standard" rather than a purely "national welfarestandard".  Fox' principle idea is that: "When a nation considers regulatory action that will perceptively have
unwelcome impacts beyond its borders, it should count the costs and benefits beyond its borders as if the outside
impacted area were within its borders".WT/WGTCP/W/151
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an approach, however, presupposes the existence of high standard competition laws
in the countries involved.
In internationalized markets, coordination is certainly important and its advantages most
obvious – even if only small parts of the above-mentioned areas were realized, this would mean a
significant progress.  Still, the limitations and obstacles, as mentioned in (4) and (5) above, should bekept in mind; the fact that national authorities ha ve limited resources and must for that reason remain
free to decide whether to investigate a case or engage in a cooperation may well serve as an
illustration of the limitations.
D. P
RINCIPLES OF TRANSPARENCY AND NON-DISCRIMINATION
In WT/WGTCP/W/114, the Secretariat presented in a general way the WTO experience with
the application of the principles.  It has been reco gnized that in the context of trade and competition
some adaptation may be necessary.  Earlier communications, among others by Switzerland(WT/WGTCP/W/117), have attempted to elaborate on some ideas, but more work would certainly be
necessary.  Questions to be answered could be whether it would make sense in an eventual agreement
that WTO Members:
- either commit themselves, in a quite narrow interpretation, to apply the WTO
principles only to those elements contained in  the agreement, i.e. in the context of this
paper: to hard core cartels and to cooperation; and maybe additionally, commit
themselves to apply on a voluntary basis the principles to other elements of the
national competition regime, as specified e.g. in a positive list;
- or commit themselves to generally apply the principles to the whole set of the
national competition regime.
Clearly, this last interpretation appears to be the most appropriate solution because it follows
the spirit of competition policy which deals with the well-functioning of markets independent of the
nationality of the subjects.
Furthermore, to bring the discussion to a concre te level, it would appear useful to analyze in
detail some of the possible implications of the principles in the context of competition policy, for
instance using hypothetical examples.
As to transparency, the objective would be to increase the predictability of all competition-
related activities of the authorities for all economic actors.  Such transparency is very important in
areas where the scope for discretionary measures is relatively large, as is the case in competition
policy, due to the rule of reason approach.  Living up to this basic WTO principle may include, in apurely indicative way:
- public information about the competition regime, e.g. publication of laws and
regulations (including exemptions and gaps of coverage), judicial decisions and
administrative rulings, in order to provide information to the economic actors; as well
as
- notification to the WTO of the competition regime, and all changes thereof, and of
international competition agreements; and
- notification of initiations of investigations and decisions by the competition
authorities with the aim of enabling coordination and cooperation with other
authorities concerned.  To increase transparency with regard to investigations,WT/WGTCP/W/151
Page 5
concepts used in other agreements, such as the Anti-dumping Agreement, could
possibly be applied (confidential data, etc.).
As to national treatment this could, for instance, mean:
- from a substantive point of view, not to differentiate between foreign and national
citizens and enterprises, i.e. to treat the former not less favourable.  This would, for
example, imply that an authority must not only prohibit and prosecute price fixing of
foreign-based firms while allowing the same behaviour of domestic firms.  The
relevance of this example seems, however, minor in the context of competition
policy.
- from a procedural point of view, that national treatment would guarantee equal access
of foreign-based and domestic firms to domestic judicial or administrative remedies.
As to most-favoured national treatment this could, for instance, mean:
- In addition to the principle of national treatment, MFN would ensure equal treatment
of enterprises independently of their geographic origin when applying themultilaterally agreed standards (or the competition law as such).  However, unless a
country gives the nationals of another country or selected countries more favourable
treatment than to its own nationals, the prin ciple of NT would seem to be of greater
relevance than MFN.  With one possible exception:
- Regarding cooperation, MFN could be interpreted in such way that a competition
authority should basically be ready to cooperate with the competition authority of any
other WTO Member, and reasons would need to be given when in a concrete case
such cooperation were denied to a country with a comparable standard of competition
policy.
E. C
ONCLUSIONS AND PROPOSAL
The asymmetry between the global market power of firms and the domestic reach of
competition law is a major concern, especially for smaller countries and countries with a limited
market power.  Private restraints could hamper states’ efforts to liberalize trade.  Accordingly, it
seems advisable to consolidate market opening measures by a more coordinated approach towards
private restraints.
In substance, the trade relevance of competiti on issues with adverse impacts across the border
justifies the inclusion of trade and competition in the frame of the WTO.  A possible agreement and
the perspective of a coordinated approach by all WTO Members could give an additional impetus to
governments to overcome political pressure by vested interests against an enhanced culture of
competition.
In order to advance the discussions on the usefulness of enhanced cooperation on competition
policy, it seems advisable to concretely address and analyze the elements of a possible agreement.
This would certainly be in line with the educative work as intended by this Working Group, and
should not be viewed as to preclude any decisions as to the contents of eventual negotiations.
While this paper has attempted to address some of these issues, we are aware that many
questions remain open which require further discussion.  It may, for instance, be useful to go into
details regarding the consequences of an agreement on competition policy for other policies, and more
generally, for the sovereignty of the national authority:WT/WGTCP/W/151
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- Is there a potential for conflicts with industrial policy?  By examining a "model
competition law" it could be demonstrated which governmental practices (using
concrete examples of industrial policy) could be affected, and in which way.
- Similarly, is there a potential at all for conflicts with investment policy?- Assuming a very limited range of substantive provisions and accordingly increased
scope for flexibility dealing with other form s of anti-competitive behaviour, is there
an additional need for special and differential treatment of developing countries?
- To what extent would the de jure  independence of many competition authorities from
political influence by the government be affected by the fact that governments arecommitting themselves to observe certain obligations?
Addressing these and other topics in this and future meetings of the Working Group would
certainly be helpful in order to better understand the implications of increased coordination in
competition policy.
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