Proposal for a Council Decision concluding the Agreement between the European Communities and the Government of the United States of America regarding the application of their competition laws
Date: 1994-10-12
Institutions: European Commission
Subjects: United States, agreement (EU), competition law, economic concentration, international cooperation, merger control

COMVIISSION  OF  THE  EUROPEAN  COMMUNITIES 

C0M(94)  430 

f i n al 

B r u s s e l s,  1 2 . 1 0 . 1 9 94 

9 4/  0236(CNS) 

Commission  communication  to the  Council 

concerning  cooperation  with  the  United  States  of  America  regarding 

the  application  of  their competition  rules 

Proposal  for a 

COUNCIL DECISION 

concluding  the  Agreement  between  the  European  Communities  and 

the Government  of  the  United  States  of  America  regarding  the  application 

of their competition  laws 

(presented by the Commission) 

Commission  communication  to the  Council 

concerning  cooperation  with  the  United  States  of  America  regarding 

the  application  of  their  competition  rules 

Introduction 

The  increasing  internationalization  of  the economy,  reflected  in  the  steadily  growing 

volume of trade in goods and services, has implications for competition policy.  More 

and  more  often,  practices  in  other  countries  can  have  repercussions  within  the 

Community,  and  it  may  be  difficult  to  deal  with  them  on  the  basis  of  Community 

rules.  For instance,  in Community  law,  one  of  the criteria governing  the  application 

of Articles  85 and 86 of the EC Treaty is that the anti-competitive conduct in question 

should  "affect  trade between  Member  States".  In  its Wood  pulp  decision,  the  Court 

of Justice accepted that the Community  competition rules could apply to undertakings 

based  outside  the  Community  where  the  conduct  in  question  took  place  within  the 

Community.  However,  this approach does not allow effective  action and sanctions to 

be  taken  against  all  restrictive  conduct  originating  abroad. 

Furthermore,  the  problems  encountered  by  firms  operating  at  international  level 

(multinationals)  often  have  a  global  dimension,  and  the  agreements  which  they 

conclude  may  be  examined  by  different  competition  authorities. 

So as to deal with such increasingly  international  situations, cooperation  arrangements 

must  be  established  between  competition  authorities  that  will  permit  improved 

coordination  where  the  same  cases  are  handled  by  a number  of  authorities  and  will 

allow  action  to  be  taken  against  conduct  originating  in  one  country  and  having 

repercussions  in  another 

This  approach  allows  an  effective  solution  to  be  found  to  the  problems  encountered, 

while  at the  same time avoiding  the  conflicts  that  may  arise from  a unilateral  reaction 

based  on  extraterritoriality.  It  is for  this  reason  that  the  Commission  considers  that 

cooperation  agreements  must  be  concluded  between  competition  authorities. 

II. 

The Agreement between the European  Communities and the Government of the United 

States  of  America  on  the  application  of  their  competition  rules 

1. 

In  1991  the  Commission  negotiated  and  signed  a cooperation  agreement  with  the  US 

anti-trust  authorities  (the  US  Department  of  Justice  and  the  US  Federal  Trade 

Commission) 

The  aim  of  the  agreement  is  to  promote  cooperation  between 

competition  authorities  by  encouraging  the  exchange  of  information,  and  to  promote 

dialogue  between  authorities  in  accordance  with  a  1986  OECD  recommendation  on 

cooperation  in  competition  matters. 

However,  the  Agreement  goes  further  than  the  OECD  recommendation,  for  example 

by incorporating  a number of principles established  by US  case-law in order to restrict 

excesses  in  the  extraterritorial  application  of  US  competition  rules  (negative  comity) 

and  by  developing  for  the  first  time  the  concept  of  positive  comity. 

Nevertheless,  the Agreement is  of  mainly  symbolic value.  Although  it was  signed  by 

the  Commission,  the  latter  was bound  by  the  obligations  laid  down  in  the Treaty  and 

in  the  regulations  adopted  by  the Council.  This constraint  is of  particular  importance 

here  because  of  the  confidentiality  requirement  imposed  on  the  Commission  under 

Regulation  No  17  (First  Regulation 

implementing  Articles  85  and  86  of 

the 

EC  Treaty),  a  requirement  from  which  it  could  not  derogate. 

2. 

The  conclusion  of  the  Agreement  was  recently  overturned  by  the  Court  of  Justice, 

which  took  the  view  that  it  was  for  the  Council  to  conclude  such  an  act,  with  the 

exception  of the  elements  relating  to  the  ECSC  Treaty,  for  which  the  Commission  is 

competent.  The  Court  did  not  annul  the  Agreement  itself,  and  it  remains  valid  in 

international  law. 

In  fact,  under  the  Vienna  Convention  on  the  law  of  Treaties 

(Article  46),  an  international  agreement  concluded  by  an  authority  which  is  not 

"manifestly  incompetent" binds the State concerned.  In this case, the Commission  was 

not manifestly  incompetent as it required a reference to the Court of Justice and nearly 

three  years  of  procedure  for  the  Court  to  find  finally  that  the  Council  was  the 

competent  institution.  It can therefore  be  confirmed  that under international  law  the 

European  Communities  are bound  as  regards  the  United  States. 

Under  Community  law,  however,  the  agreement  has  not  been  concluded  by  the 

competent  institution.  Measures  must  therefore  be  taken  rapidly  to  remedy  this 

shortcoming  in  Community  law.  There  are two  possible  solutions:  either  terminate 

the Agreement,  or ask the Council  to conclude  it.  The Commission  must also  sign  it 

for the ECSC aspects.  Because of the advantages described  above which accrue from 

international  cooperation  in  competition  matters,  the  Commission  proposes  that  the 

Council  choose the second option.  For this purpose, a proposal  for a Council  Decision 

concluding  the  Agreement  entered  into  between  the  European  Communities  and  the 

Government  of  the  United  States  of  America  regarding  the  application  of  their 

competition  laws  is  set  out  in  Annex  1 to  this  communication. 

3. 

The Commission  considers  that  for  the  Council  to  sign  the  Agreement  would  in  no 

way  alter  the  scope  of  the  commitments  previously  entered  into.  Although  the 

Council  may,  by  concluding  an  international  agreement,  derogate  explicitly  or 

implicitly  from  the  regulations  it  has  adopted,  the  Commission  believes  it  is  not 

appropriate  to  do  so  at  this  stage  by  amending  the  text  of  the  Agreement. 

Furthermore,  Article  XI  contains  a provision  allowing  the agreement  to be reviewed. 

The Commission  considers that this provision  could be invoked  in future to allow  the 

Community  to  conclude  a  more  ambitious  agreement  (which  could,  for  example, 

provide  in  certain  circumstances  for  the exchange  of  confidential  information)  in the 

light of experience with the current Agreement.  The US  Congress will  probably  soon 

adopt legislation allowing agreements to be concluded between competition  authorities 

that  provide  for  the  exchange  of  confidential  information. 

Annex  I 

Explanatory  memorandum 

A. 

Introduction 

. 

• 

1. 

On 23  September  1991  the Commission  negotiated  and signed  an agreement with the 

Government  of the United  States of America  regarding the application  of EC and US 

competition  laws  ("the  Agreement").  In a judgment delivered  on  9  August  1994, the 

Court of  Justice  ruled that the power to conclude  such  an agreement  belonged  not to 

the Commission,  but to the Council.  However,  the Court of Justice did not annul  the 

Agreement,  which  remains  valid  in  international  law. 

In  fact,  under  the  Vienna 

Convention  on the law of Treaties (Article 46),  an international  agreement  concluded 

by  an authority  which  is  not  "manifestly  incompetent" binds the  State  concerned.  In 

this  case,  the  Commission  was  not  manifestly  incompetent  as  it  required  a  reference 

to the Court of Justice and nearly three years of procedure for the Court to find  finally 

that  the  Council  was  the  competent  institution.  It  can  therefore  be  confirmed  that 

under  international  law  the  European  Communities  are bound  as  regards  the  United 

States. 

Under  Community  law,  however,  the  agreement  has  not  been  concluded  by  the 

competent  institution.  To  remedy  this  situation,  steps  must  be  taken  to  correct  the 

deficiency  in the procedure under which the Agreement was concluded.  There are two 

possible solutions: either to terminate the Agreement using the procedure provided for 

in  Article  XI(2),  or  to  have  it  approved  by  the  authority  that  is  competent  in 

Community  law.  Because  of  the  advantages  accruing  from  effective  cooperation 

between  competition  authorities,  it  is  the  second  solution  which  it  is  proposed  the 

Council  adopt. 

It  should  be  noted  that  the  area  covered  by  the  Agreement  also 

includes  the  competition  rules  set  out  in  the  ECSC  Treaty. 

In  as  much  as  the 

*> 

Commission  is  comptent  to  conclude  international  agreements  in  this  area,  the 

Agreement  must  be  concluded  jointly  by  the  Council  and  the  Commission. 

2. 

Community  competition  policy  applies  to  restrictions  of  competition  affecting  trade 

between  Member  States  and  not  to  those  affecting  markets  in  third  countries.  The 

gradual  lowering  and,  in  some  cases,  removal  of tariff  and  non-tariff  barriers to  trade 

since  the  1960s,  together  with  other  liberalization  measures  such  as those  concerning 

capital  movements,  have  led  to  an  enormous  expansion  in  international  trade.  This 

has important  consequences  for  the application  of the  competition  rules:  increasingly, 

non-Community  firms  are  acting  in  an  anti-competitive  manner  within  the  common 

market.  Generally  speaking,  anti-competitive  practices  within  the  Community  are 

often  linked  to similar  practices on  other  markets,  while  anti-competitive  practices  on 

other  markets  produce  effects  within  the  common  market.  Similarly,  as  far  as 

structural  changes  are  concerned,  a  merger  that  exceeds  the  thresholds  laid  down  in 

the  Merger  Control  Regulation  often  has  effects  outside  the  common  market. 

Conflicts  between  the  activities  of  the  various  competition  authorities  are  therefore 

highly  probable,  and  it  is useful  to have  a minimum  level  of  communication  between 

authorities  in  the  application  of  their  rules. 

B. 

Description  of  the  Agreement 

1. 

The  main  objective  of  the  Agreement  is  not  to  create  a  framework  within  which  any 

conflicts  arising  between  the Commission  of  the  European  Communities,  on  the  one 

hand,  and  the  US Department  of Justice and  Federal  Trade  Commission,  on the  other, 

may  be  resolved.  The  objective  is  instead  to  prevent  such  conflicts  from  arising  by 

establishing  a  system  of  cooperation  between  the  relevant  authorities. 

2. 

Article  I of  the  Agreement  gives  a definition  of  its  scope.  As  far  as  the  Community 

is concerned,  it covers Articles  85,  86,  89 and  90 of the EC  Treaty,  Regulation  (EEC) 

No  4064/89  on  the  control  of  concentrations  between  undertakings,  Articles  65  and 

6 

66 of the ECSC Treaty and the implementing regulations adopted on the basis of those 

provisions. 

As far  as the United  States is concerned,  the Agreement covers the Sherman  Act, the 

Clayton  Act,  the  Wilson  Tariff  Act  and  part  of  the  Federal  Trade  Commission  Act 

(Article  1.2ii). 

In  so  far  as  the  scope  of  these  various  rules  is  not  the  same  on  both  sides  of  the 

Atlantic, there is not necessarily a perfect balance in the information  to be exchanged: 

thus,  Articles  85  and  86  of  the  EC Treaty  cover  sectors  that  do  not  fall  within  the 

scope  of  the  above-mentioned  US  acts;  on  the  other  hand.  Regulation  (EEC) 

No 4064/89 covers only large-scale mergers (i.e. those meeting the threshold  criteria 

specified  in the Regulation).  This leads to a commensurate reduction  in the volume 
of information  which  the Commission  is liable to  supply  to the US authorities.1 

The  overall  balance  of the  agreement  is satisfactory,  particularly  given  the inclusion 

of Article  11(5) (see below). 

3. 

Article  II  provides that  the  other  competition  authority  is to be notified  if  any  of its 

"important interests" are affected.  The Agreement describes some situations in which 

this test is satisfied. 

It also defines  the point at which notification  is required.  Thé 

general approach  here is that notification  is to take place at a stage in the proceedings 

early  enough  to allow  account  still  to be taken  of the other party's opinion. 

Paragraph  5  of  this  Article  merits  some  clarification. 

It  requires  notification 

whenever  a competition  authority  participates  in  a regulatory  or judicial  proceeding. 

It was inserted  at  the  Commission's  request  in  order  to  rectify  the  above  imbalance, 

which  derives from  the wide-ranging  scope of  Articles  85 and  86 of the EC Treaty. 

Articles  85 and  86 apply  to all  sectors of the economy,  whereas  in the United  States 

i 

Most  of the  information  exchanged  since the  entry  into  force  of the  Agreement  has 
in fact  related  to mergers (see point C). 

^ 

different  sectors  are  supervised  by  separate  regulatory  bodies.  But  the  Department 

of  Justice  and  the  Federal  Trade  Commission  may  take  part  in  proceedings  before 

such  bodies  and,  if  they  do,  they  will  have  to  notify  the  Commission  accordingly 

provided  that  the  other  conditions  laid  down  in  that  paragraph  are  met.  The  same 

applies where the Department  of Justice  or the Federal  Trade Commission  takes part 

in judicial  proceedings,  a possibility  not open to the Commission  before  the  national 

courts. 

Article  11(6)  is  to  be  read  in  conjunction  with  Articles  VIII  and  IX,  which  will  be 

discussed  below. 

4. 

Article  III  is  general  in  scope  and  provides  for  the  exchange  of  information  and 

bilateral  meetings  between  the  competition  authorities  in  cases  other  than  those 

specified  in  Article  II.  This  provision  is  also  subject  to  Articles  VIII  and IX. 

5. 

Article  IV  is  more innovative.  The  parties agree here not only  to  assist  one  another 

whenever  their  laws,  their  important  interests  and  the  available  resources  allow,  but 

also  -  in  some  cases  -  where  they  both  have  an  interest  in  pursuing  enforcement 

activities  with  regard  to  related  situations.  This  clause  deals  more  specifically  than 

the rest of  the  Agreement  with  the case  already  referred  to in which  anti-competitive 

conduct  on  the  market  of  one  party  may  be  associated  with  identical  conduct  on  the 

market  of  the  other.  In  such  circumstances,  the  competition  authorities  of  the  two 

parties can profitably  coordinate their activities and provide each other with assistance, 

always to the extent compatible  with their respective laws and important interests and 

provided  their  resources  so  permit. 

Such  coordination  may  take  place  even  in  cases  where  one  party  takes  the  initiative 

of  applying  its  rules while  the other abstains from  applying  its own  rules, and it may 

also involve  sharing the work  of  enforcement  between  the parties  in accordance  with 

their capabilities.  As  Article  IX  of  the  Agreement  recalls,  this  possibility  is  subject 

to  compliance  with  the  parties'  own  laws.  The  Merger  Control  Regulation,  for 

example,  lays  down  strict obligations  which  will  prevent these  forms  of  coordination 

S 

in  the  examination  of  a  merger.  A  further  limitation  is  imposed  by  the  rules  on 

confidentiality. 

The  Agreement  is  the  first  of  its  kind  to  consolidate  the  rules  on  comity  in  a  legal 

instrument.  Article  VI  provides  as follows:  "Within  the framework  of  its own  laws 

and  to  the  extent  compatible  with  its important  interests,  each  Party  will  seek,  at  all 

stages in  its enforcement  activities, to take  into  account the  important  interests  of  the 

other Party."  This means that party  A may  refrain  from  exercising its powers, or may 

exercise them  only  in part,  provided  that it has discretion  in the matter  and  within  the 

limits  imposed  by  its  own  law.  This  is  to  be  done  in  cases  where,  by  exercising  its 

powers,  party  A  would  damage  party  B's  interests  to  a  greater  extent  than  it  would 

damage  its  own  interests by  taking  no  action. 

The  converse  may  also  arise,  where  a  party  would  be  entitled  to  act  but  prefers  not 

to and  its failure  to enforce  the  rules  runs counter  to an  important  interest  of the  other 

party.  This  situation  is  dealt  with  in  Article  V.  Known  as  the  "positive  comity" 

clause,  it  allows  a party  whose  interests are adversely  affected  by  activities  within  the 

other  party's jurisdiction  to  bring  the  matter  to  the  other  party's  attention.  That  party 

might  have  been  unaware  of  the  problem  or  might  not  have  considered  it  a  priority. 

Once  it  is  aware  of  the  situation  and  of  the  fact  that  it  affects  the  important  interests 

of the  other  party,  the  party  notified  may,  at  its own  discretion  and  having due  regard 

to  this  problem,  undertake  enforcement  of  the  rules. 

The  concept  "important  interests"  is  defined  in  Article  VI.  It  must  be  understood  in 

terms  of  the  purpose  of  the  Agreement,  which  is  the  establishment  of  effective 

cooperation  in  the  competition  sphere.  The  interests  referred  to  must  therefore  be 

important  by  reference  to  that  objective.  However,  point  3(e)  also  mentions  the 

possibility  of  conflict  with  the  other  party's  "articulated  economic  policies".  This  is 

intended  to  ensure  that  enforcement  of  the  competition  rules,  whether  territorial  or 

extraterritorial,  does  not  run  counter  to  a  clearly  stated  objective  of  the  other  party. 

1 

7. 

Article  VII,  which  establishes  consultation  machinery,  calls  for  little, 

if  any 

clarification. 

8. 

Article  VIII  is a fundamental  provision  which  underlies the whole of the  Agreement. 

It states that information  can be exchanged  under the Agreement only  where this does 

not infringe  the  rules of  confidentiality  of  either  party. 

On the  Community  side,  the essential  rules  here are Article  20  of  Regulation  No  17 

and  the  corresponding  provisions  in  the  other  regulations  applying  the  competition 

rules,  where  it  is  stipulated  that  information  which  the  Commission  acquires  in  the 

exercise  of  its  powers  under  the  Regulation  is  to  be  confidential. 

In  practice,  this 

means  that  the  Commission  may  not  pass  on  to  the  US  competition  authorities 

information  which  is  freely  supplied  by  firms  when  they  notify  agreements  or  is 

obtained  by  the  Commission  through  inquiries  or requests for  information. 

But  the  Agreement  is  not  thereby  rendered  devoid  of  substance.  The  Commission 

frequently  comes  into  possession  of  information  which  has  not been  acquired  on  the 

basis  of  Regulation  No  17,  and  it  may  be  that  such  information  can  usefully  be 

exchanged  with  the US  competition  authorities.  For example,  the fact that an inquiry 

involving certain undertakings is in progress is not information  which the Commission 

has  acquired  using  its  powers  of  investigation  and  is  not  therefore  subject  to  the 

obligation  in Article  20.  Paragraph  2  of the Article  VIII should be interpreted in this 

light:  it  requires both  parties to maintain  the confidentiality  of  information  provided 

to  them  under  the  Agreement. 

Article  IX  confirms  the general  principle  that the Agreement  does  not  derogate  from 

the  existing  rules.  It was  included  because  the  Agreement  was  originally  signed  by 

the  Commission,  which,  unlike  the  Council,  is  not  empowered  to  derogate  from  the 

existing  regulations. 

9. 

Lastly,  Article  XI(3)  provides that the Agreement  can be reviewed  within  24  months 

of  its entry  into force.  This  provision  has not yet  been  applied  because  of  the  legal 

A* 

challenge brought before the Court of Justice.  However,  the Commission  does intend 

to  invoke  it  in  future  in  order to  refine  the  Agreement  on  the basis  of  the  experience 

acquired: problems arising in the competition sphere increasingly have an international 

dimension, and cooperation between  competition  authorities needs to be intensified  in 

order to  deal  with  them  effectively. 

C. 

Practice 

1. 

The  practice  which  has  developed  since  the  Agreement  was  concluded  can  be 

summarized  as follows  (23  September  1991  to  9  August  1994). 

The  Commission  has  sent  61  notifications  to  the  US  authorities.  Of  these, 

45  concerned  mergers  and  16  other  matters. 

In  compliance  with  the 

Commission's  obligation  of  confidentiality,  notifications  have been  made in a 

standardized form, giving the names of the undertakings concerned, the reason 

why  proceedings have been  initiated  and the stage reached  in the proceedings. 

The  Commission  has  received  112  notifications  from  the  US  authorities, 

comprising  77  merger  cases  and 35  other cases. 

2. 

So  far  no  channels  have  been  established  for  keeping  the  Member  States  informed. 

In  the  new  context,  the Commission  proposes  to  set  up the following  machinery: 

the Member  State or Member  States whose  important  interests were found  to 

be  affected  by  reference  to  the  criteria  laid  down  in  Article  II  of  the 

Agreement  would  be  informed  of  notifications  sent  to,  or  received  from,  the 

US  authorities; 

information  on the working  of  the Agreement  would be provided twice  a year 

to  a  committee  of  government  competition  specialists;  the  meetings  would 

follow bilateral  meetings with the US competition authorities.  These principles 

are  set  out  in  a Commission  statement  attached  to this  proposal. 

/^ 

D. 

Legal  basis 

In so far as this Agreement relates to the competition rules of the EC Treaty, the legal 

basis  is  Article  87  read in  conjunction  with  Article  228(3),  first  indent,  of  the EC 

Treaty.  In fact, the objective of the Agreement is to ensure that Article 85 and 86 of 

the EC Treaty are observed, which is one of the objectives set out in Article 87(2) of 

the EC Treaty.  This legal basis involves a consultation of the European Parliament. 

For the aspects covered by the ECSC Treaty, the Commission is competent to ensure 

the application of the competition rules, including external aspects, as a consequence 

of the AETR jurisprudence. 

Conclusion 

The Commission accordingly  proposes that the Council jointly with the Commission 

conclude the Agreement between  the European Communities and the Government of 

the United States of America regarding the application of their competition laws. 

/fl 

PROPOSAL  FOR A COUNCIL  DECISION 

concluding the Agreement  between  the European  Communities and 

the Government of the United  States of America  regarding the  application 

of their competition  laws 

THE COUNCIL OF THE  EUROPEAN  UNION, 

THE COMMISSION  OF THE  EUROPEAN  COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Coal  and  Steel  Community,  in 

particular  Articles 65 and 66, 

Having regard  to the Treaty  establishing the European  Community,  and in  particular  Article 

87 read  in conjunction  with  Article 228(3), first  indent, 

Having regard  to the proposal  from  the Commission, 

Having  regard  to the opinion  of the European  Parliament, 

Whereas, given the increasingly pronounced international dimension of competition problems, 

international  cooperation  in  this field  should  be  strengthened; 

Whereas, to this end, the Commission  has negotiated  an Agreement  with  the Government of 

the  United  States  of  America  on  the  application  of  the  competition  rules  of  the  European 

Communities  and  of the United  States of America; 

A'S 

Whereas,  the  Agreement  negotiated  by  the  Commission  and  the  Government  of  the  United 

States of  America  regarding  cooperation  on competition  law should  be  approved, 

HAS DECIDED  AS FOLLOWS: 

ARTICLE  1 

The Agreement  between  and  the European  Communities and the Government  of the United 

States of America  regarding the application  of their competition  laws is hereby  approved on 

behalf  of the  European  Coal  and  Steel  Community  and  the European  Community. 

The text of the Agreement  is attached  to this  Decision. 

ARTICLE 2 

The  President  of  the  Council  will  lodge  the  notification  provided  for  in  Article  XI  of  the 

Agreement  on behalf  of  the  European  Community.  The  President  of the  Commission  will 

lodge the said  notification  on behalf  of the  European  Coal  and  Steel  Community. 

Done at Brussels, 

For the Council 

The President 

For the  Commission 

The  President 

11 

/}U 

Statement  by  the Commission 

In  order  to  provide  the  Member  States  with  sufficient  information  on  the  content  of  the 

information  exchanged  under  the  Agreement  between  the  European  Communities  and  the 

Government  of  the  United  States  of  America  and  the  Commission  of  the  European 

Communities regarding the application of their competition rules, the Commission will  notify 

the Member  State  or Member  States whose  interests  are  affected  by  information sent  to, or 

received  from,  the  US  competition  authorities.  For  the  purposes  of  this  statement,  any 

Member  State in which  one of the parties (or one of the companies controlling  one of these 

parties) to a practice that is the subject  of a notification  has its headquarters will be regarded 

as having  such  an  interest. 

In  addition,  at  meetings  of  government  conupetition  specialists  to  be  held  twice  a year,  the 

Commission  will  notify  all  the  Member  States  of  the  information  exchanged  under  the 

Agreement.  This meeting will take place after the bilateral  meetings with the US competition 

authorities  provided  for  by  the  Agreement. 

12 

•1A 

AGREEMENT 
BETWEEN 

THE  EUROPEAN  COMMUNITIES  AND  THE  GOVERNMENT OF  THE UNITED 
STATES OF AMERICA REGARDING THE APPLICATION OF THEIR COMPETITION 
LAWS 

The European Coal and Steel Community,  and the European Community on the one hand, 
( hereinafter "the European  Communities ") 

and 

The Government of the  United States of America, on the other hand, 

Recognizing that  the  world's  economies are  becoming  increasingly interrelated, and  in 
particular that this is true of the  economies of the European Communities  and the United 
States of America; 

Noting that the European  Communities and the Government of the  United States of America 
share the  view that  the sound and effective enforcement of  competition law is a  matter of 
importance to the efficient operation  of their respective markets and to trade between them; 

Noting that the sound and effective enforcement of the  Parties' competition laws would be 
enhanced by  cooperation and,  in  appropriate  cases,  coordination between  them  in  the 
application of those laws; 

Noting further  that from  time to time differences  may arise between the Parties  concerning 
the application of their competition laws to conduct or transactions that implicate significant 
interests of both Parties; 

Having regard to  the  Recommendation  of  the  Council of  the  Organization for  Economic 
Cooperation and  Development  Concerning  Cooperation Between  Member  Countries on 
Restrictive Business Practices Affecting International Trade, adopted on June 5,  1986; 

and 

Having regard to the Declaration  on  US-EC Relations adopted on November 23, 1990; 

Have agreed as follows: 

Article I 

PURPOSE AND DEFINITIONS 

1. 

2. 

The purpose of this Agreement is to promote cooperation and coordination and lessen 
the possibility or impact of differences between the Parties in the application of their 
competition laws. 

For the purposes of  this Agreement,  the following  terms shall  have the following 
definitions: 

A. 

"Competition  law(s)" shall mean 

(i) 

(ii) 

for  the European Communities, Articles  85,  86,  89 and 90  of the 
Treaty establishing the European Economic Community,  Regulation 
(EEC)  no.  4064189  on  the  control  of  concentrations  between 
undertakings,  Articles  65  and  66  of  the  Treaty  establishing the 
European Coal and Steel Community  (ECSC),  and their implementing 
Regulations including High Authority Decision no. 24 54,  and 

for the United States of America, the Sherman Act (15 U.S. C.  §§  1-7), 
the  Clayton Act  (15 U.S.C.  §§ 72-27;,  the  Wilson  Tariff Act (15 
U.S.C. §§ 8-11), and the Federal Trade Commission Act (15  U.S.C. 
§§  41-68,  except  as  these  sections  relate  to  consumer protection 
functions), 

as  well as such other laws or regulations as the Parties shall jointly  agree in 
writing to be a  "competition  law" for  purposes of this Agreement; 

B. 

"Competition authorities"  shall  mean  (i) for  the  European  Communities,  the 
Commission  of the European Communities,  as to its responsibilities pursuant to the 
competition laws of the  European Communities, and (ii) for  the United States, the 
Antitrust Division of the  United States Department of Justice and the Federal Trade 
Commission; 

C. 

"Enforcement  activities " shall mean any application of competition law by way  of 
investigation  or proceeding conducted by the competition authorities of a Party; 

and 

D. 

"Anticompetitive  activities"  shall  mean  any  conduct  or  transaction  that  is 
impermissible under the competition  laws of a Party. 

"?r 

Article  II 

NOTIFICATION 

Each Party shall notify the other whenever its competition authorities become aware 
that their enforcement activities may affect important interests of the other Party. 

Enforcement activities as to which notification  ordinarily will be appropriate include 
those that: 

a) 

b) 

c) 

d) 

e) 

Are relevant to enforcement activities of the other Party; 

Involve anticompetitive activities (other than a merger or acquisition) carried 
out in significant part in the other Party's territory; 

Involve a  merger or acquisition in  which one or  more of  the parties  to the 
transaction,  or  a  company controlling one  or  more  of  the  parties  to  the 
transaction, is a  company incorporated or  organized under the  laws of the 
other Party or one of its states or member states; 

Involve conduct believed to have been required,  encouraged or approved by 
the other Party; or 

Involve  remedies  that  would, in  significant  respects,  require  or  prohibit 
conduct in the other Party's territory. 

3. 

With  respect  to  mergers  or  acquisitions  required by  law  to  be  reported  to  the 
competition authorities, notification under this Article  shall be made: 

a) 

In the case of the Government of the  United States of America, 

(i) 

(ii) 

not  later  than  the  time  its  competition  authorities request, 
pursuant  to  15  U.S.C.  §  18a(e),  additional  information or 
documentary material concerning the proposed transaction, 

when  its  competition authorities decide  to  file  a  complaint 
challenging the transaction,  and 

(Hi)  where this is possible, far  enough in advance of the entry of a consent 
decree to enable the other Party's views to be taken into account; and 

b) 

In the case of the Commission  of the European  Communities, 

(i) 

when  notice  of  the  transaction  is  published  in  the  Official 
Journal, pursuant  to  Article  4(3)  of  Council Regulation no. 
4064/89,  or  when notice of the transaction is  received under 

A? 

Article 66 of the ECSC Treaty and a prior authorization from 
the Commission is required under that provision, 

(ii) 

when  its competition authorities decide to initiate proceedings 
with respect to  the proposed transaction,  pursuant to Article 
6(1 )(c) of Council Regulation no. 4064/89, and 

(Hi)  far  enough  in advance of the adoption of a  decision in the case to 

enable the other Party's views to be taken  into account. 

With respect to other matters, notification shall ordinarily be provided at the 
stage in an investigation when it becomes evident that notifiable circumstances 
are present, and in any event far  enough in advance of 

(a) 

(b) 

the issuance of a statement of objections in the case of the Commission 
of the European Communities, or a complaint or indictment in the case 
of the Government of the United States of America,  and 

the adoption of a decision or settlement in the case of the Commission 
of the European  Communities,  or the entry of a consent decree in the 
case of the Government of the United States of America, 

to enable the other Party's views to be taken into account. 

5. 

Each Party shall also  notify the other whenever  its  competition  authorities 
intervene or otherwise participate in a regulatory or judicial proceeding that 
does not arise from its enforcement activities, if the issues addressed in the 
intervention or participation may affect the other Party's important interests. 
Notification under this paragraph shall apply only to 

a) 

b) 

c) 

regulatory or judicial proceedings that are public, 

intervention  or participation that  is public  and pursuant to formal 
procedures, and 

in  the  case  of  regulatory  proceedings  in  the  United States,  only 
proceedings before federal agencies. 

Notification shall be made at the time of the intervention  or participation or 
as soon thereafter as possible. 

6. 

Notifications under this Article shall include sufficient information to permit an 
initial evaluation by the recipient Party of any effects on its interests. 

4*> 

Article I/I 

EXCHANGE OF INFORMATION 

1. 

2. 

3. 

4. 

The Parties agree that it is in their common interest to share information that will (a) 
facilitate  effective  application of their respective competition  laws,  or  (b) promote 
better understanding by them of economic  conditions and theories relevant to their 
competition authorities ' enforcement activities and interventions or participation of the 
kind described in Article II, paragraph 5. 

In furtherance  of this common  interest, appropriate officials from the  competition 
authorities of each Party shall meet at least twice each year, unless otherwise agreed, 
to (a) exchange information on their current enforcement activities and priorities, (b) 
exchange  information  on economic  sectors of common  interest, (c) discuss policy 
changes which they are considering, and (d) discuss other matters of mutual interest 
relating to the application of competition  laws. 

Each Party will provide the other Party with any significant information that comes 
to the attention  of its competition authorities about anticompetitive activities that its 
competition authorities believe is relevant to, or may warrant, enforcement activity by 
the other Party's competition authorities. 

Upon  receiving a request from the other Party, and within the limits of Articles  VIII 
and  IX,  a  Party  will provide  to  the  requesting Party such information  within its 
possession  as  the requesting  Party may describe that is relevant to an  enforcement 
activity  being  considered  or  conducted  by  the  requesting Party's competition 
authorities. 

Article IV 

COOPERATION AND  COORDINATION 
IN ENFORCEMENT ACTIVITIES 

1. 

2. 

3. 

4. 

The  competition  authorities  of each Party will render assistance  to  the  competition 
authorities of the other Party in their enforcement activities, to the extent compatible 
with the assisting Party's laws and  important interests, and within its  reasonably 
available resources. 

In  cases where both Parties have an interest in pursuing enforcement activities  with 
regard to  related situations, they may agree  that it  is  in  their mutual interest to 
coordinate their enforcement activities.  In considering whether particular enforcement 
activities  should be  coordinated, the  Parties shall  take  account of  the following 
factors,  among others: 

a) 

b) 

c) 

d) 

the opportunity  to make more efficient  use of their resources  devoted to the 
enforcement activities; 

the  relative  abilities  of  the  Parties'  competition  authorities  to  obtain 
information  necessary to conduct the enforcement activities; 

the effect of such coordination  on the ability of both Parties to  achieve  the 
objectives of their enforcement activities;  and 

the possibility of reducing costs incurred by persons subject to the enforcement 
activities. 

In any coordination arrangement,  each Party shall conduct its enforcement activities 
expeditiously and, insofar as possible, consistently with the enforcement objectives of 
the other Party. 

Subject to appropriate notice to the other Party, the competition authorities of either 
Party may limit or terminate  their participation in a coordination arrangement and 
pursue their enforcement activities independently. 

n 

Article  V 

COOPERATION REGARDING ANTICOMPETITIVE ACTIVITIES IN 

THE TERRITORY OF ONE PARTY THAT 
ADVERSELY AFFECT THE INTERESTS OF THE OTHER PARTY 

1. 

2. 

3. 

4. 

The Parties note that anticompetitive activities may occur within the territory of one 
Party that, in addition to  violating  that Party's competition  laws,  adversely  affect 
The  Parties agree that it  is  in both their 
important  interests of the other Party. 
interests to address anticompetitive activities of this nature. 

If a Party believes that anticompetitive  activities carried out on the territory of the 
other Party are adversely affecting its important interests, the first Party may notify 
the other Party and may request that the other Party's competition authorities initiate 
appropriate enforcement activities.  The notification shall be as specific as possible 
about the nature of the anticompetitive activities and their effeas  on the interests of 
the notifying Party, and shall include an offer of such further information and other 
cooperation as the notifying  Party is able to provide. 

Upon receipt of a  notification  under paragraph 2,  and after such other discussion 
between the  Parties as  may be  appropriate and  useful in  the  circumstances,  the 
competition  authorities of the notified Party will consider whether or not to initiate 
enforcement activities, or to expand ongoing enforcement activities, with respect to the 
anticompetitive activities identified in the notification.  The notified Party will advise 
the notifying Party of its decision.  If enforcement activities are initiated,  the notified 
Party will advise the notifying Party of their outcome and, to the extent possible, of 
significant interim developments. 

Nothing in this Article limits the discretion of the notified Party under its competition 
laws and enforcement policies as to whether or not to undertake enforcement activities 
with respect to the notified anticompetitive activities, or precludes the notifying Party 
from undertaking enforcement activities with respect to such anticompetitive activities. 

Article  VI 

AVOIDANCE OF CONFLICTS OVER ENFORCEMENT ACTIVITIES 

Within the framework of its own laws and to the extent compatible with its important interests, 
each Party  will seek, at  all  stages in  its  enforcement  activities,  to  take into account  the 
important interests of the other Party.  Each Party shall consider important interests of the 
other Party in decisions as to whether or not to initiate an investigation or proceeding, the 
scope of an investigation or proceeding, the nature of the remedies or penalties sought,  and 
in other ways, as appropriate.  In considering one another's important interests in the course 
of their enforcement activities, the Parties will take account of, but will not be limited to, the 
following principles: 

1. 

2. 

3. 

While an important interest of a Party may exist in the absence of official involvement 
by the Party with the activity in question, it is recognized that such interests  would 
normally be  reflected in antecedent laws,  decisions or statements  of policy  by  its 
competent authorities. 

A Party's important interests may be affected at any stage of enforcement activity by 
the  other  Party.  The Parties  recognize,  however, that  as  a  general matter the 
potential  for  adverse  impact  on  one  Party's  important  interests  arising from 
enforcement activity by the other Party is less at the investigative stage and greater 
at the stage at which conduct is prohibited or penalized, or at  which other forms of 
remedial orders are imposed. 

Where it  appears  that  one  Party's  enforcement  activities  may  adversely affect 
important interests of the other Party, the Parties will consider the following factors, 
in addition to any other factors that appear relevant in the circumstances,  in seeking 
an appropriate accomodation of the competing interests: 

a) 

b) 

c) 

d) 

e) 

the relative significance  to the anticompetitive activities involved of conduct 
within the enforcing Party's territory as compared to conduct within the other 
Party's territory; 

the presence or  absence of a purpose  on the part  of those engaged in the 
anticompetitive activities to affect consumers, suppliers, or competitors within 
the enforcing  Party's territory; 

the relative significance of the effects  of the anticompetitive activities on  the 
enforcing  Party's interests as  compared to  the effects on the  other Party's 
interests; 

the existence or absence of reasonable expectations that would be furthered or 
defeated by the enforcement activities; 

the degree of conflict or consistency between the enforcement activities and the 
other Party's laws or articulated economic policies;  and 

V 

f) 

the extent to which enforcement activities of the other Party with respect to the 
same  persons,  including  judgments  or  undertakings  resulting from such 
activities, may be affected. 

Article  VII 

CONSULTATION 

1. 

2. 

1. 

Each Party agrees to consult promptly with the other Party in response to a  request 
by the other Party for  consultations  regarding any matter related to this Agreement 
and  to  attempt  to  conclude consultations  expeditiously with  a  view  to reaching 
mutually  satisfactory conclusions.  Any request for  consultations  shall include  the 
reasons therefor and shall state whether procedural time limits or other considerations 
require the consultations to be expedited. 
These consultations  shall take place  at  the appropriate level,  which may include 
consultations between the heads of the competition authorities concerned. 

In  each  consultation  under paragraph  1,  each Party shall  take  into  account the 
principles of cooperation set forth in this Agreement and shall be prepared to explain 
to the other Party the specific results of its application of those principles to the issue 
that is the subject of consultation. 

Article  VIII 

CONFIDENTIALITY OF INFORMATION 

Notwithstanding any other provision of this Agreement,  neither Party is required to 
provide  information  to  the  other  Party  if  disclosure of  that  information  to  the 
requesting Party (a) is prohibited by the law of the Party possessing the information, 
or  (b)  would be  incompatible  with important interests of the  Party possessing the 
information. 

Each Party agrees to maintain, to the fullest  extent possible, the confidentiality of any 
information provided to it in confidence by the other Party under this Agreement and 
to  oppose,  to  the fullest  extent possible,  any  application for  disclosure  of  such 
information by  a  third  party  that is  not authorized by the  Party that supplied the 
information. 

Article IX 

EXISTING LAW 

Nothing in this Agreement shall be interpreted in a manner inconsistent with the existing laws, 
or as  requiring any change in  the  laws,  of  the  United States of America or the European 
Communities or of their respective states or member states. 

Article X 

COMMUNICATIONS  UNDER  THIS AGREEMENT 

Communications under this Agreement, including notifications under Articles II and  V,  may 
be carried out by direct oral, telephonic, written or facsimile communication from one Party's 
competition authority to the other Party's authority.  Notifications under Articles II,  V and 
XI, and requests under Article VII, shall be confirmed promptly in writing through diplomatic 
channels. 

Article XI 

ENTRY INTO FORCE, TERMINATION AND REVIEW 

1. 

2. 

This Agreement shall be approved by the Parties in accordance with their respective 
internal procedures. 

The Parties shall notify one another of the completion  of those procedures. 

This Agreement shall  remain in force  until 60  days after the date  on  which either 
Party notifies the other Party in writing that it wishes to terminate the Agreement. 

1Ï 

3. 

The Parties shall review the operation of this Agreement not  more than 24 months 
from  the  date  of  its  entry  into force,  with  a  view to  assessing their cooperative 
activities,  identifying additional areas  in  which they  could  usefully cooperate and 
identifying any other ways in which the Agreement could be improved. 
The Parties agree that this review will include, among other things, an analysis of 
actual or potential cases to determine whether their interests could be better served 
through closer cooperation. 

The undersigned,  being duly authorized,  have signed this Agreement. 

Done at  Washington, in duplicate, this twenty-third day  of  September 1991, in the 
English language 

FOR THE COUNCIL  OF THE EUROPEAN 
UNION 

FOR THE GOVERNMENT OF 
THE UNITED STATES OF AMERICA: 

FOR THE COMMISSION OF 
THE EUROPEAN COMMUNITIES; 

IC 

ISSN 0254-1475 

COM(94) 430  final 

DOCUMENTS 

EN 

1108 

Catalogue number : CB-CO-94-457-EN-C 

ISBN 92-77-81111-0 

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