COMMISSION REPORT TO THE COUNCIL AND THE EUROPEAN PARLIAMENT ON THE APPLICATION OF THE Agreement between the European Communities and the Government of the United States of America regarding the application of their competition laws - 10 APRIL 1995 TO 30 JUNE 1996
Date: 1996-10-08
Institutions: European Commission
Subjects: United States, agreement (EU), competition law, international cooperation, merger control

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  08.10.1996 
COM(96) 479 final 

COMMISSION  REPORT TO 

THE COUNCIL  AND THE  EUROPEAN  PARLIAMENT 

ON THE APPLICATION  OF THE 

Agreement  between 

the  European  Communities  and 

the  Government  of  the  United  Slates  of  America 

regarding  the  application  of  their  competition 

laws 

10  APRIL  1995  TO  30  JUNE  1996 

a 

COMMISSION  REPORT  TO 

THE  COUNCIL  AND  THE  EUROPEAN  PARLIAMENT 

ON  THE APPLICATION  OF  THE 

Agreement 

between 

the  European  Communities 

and 

the  Government 

of  the  United  States  of  America 

regarding 

the  application 

of  their  competition 

laws 

10  APRIL  1995  TO  30  JUNE  1996 

1. 

Introduction 

On  23  September  1991 the European  Commission  concluded  an  Agreement  with  the 
Government  of  the  United  States  of  America  regarding  the  application  of their  competition 
laws1 ("the Agreement"), the aim of which is to promote cooperation between the competition 
authorities2. 

However,  in  a judgment  of 9  August  1994, the  Court  of Justice  held  that,  under  the 

EEC  Treaty,  it  was  for  the  Council  to  conclude  such  an  act. 

Because  the  Agreement  had  not  been  concluded  by  the  competent  institution  under 
Community  law,  the  defect  had  to  be  remedied.  This  was  done  by  a joint  Decision  of  the 
Council  and  the  Commission  of  10  April  19954 approving  the  Agreement  and  declaring  it 
applicable  from  the  date  it  was  first  signed  by  the  Commission.  On  that  occasion,  the 
Council  and the Commission  also approved  the text of an interpretative letter addressed to the 

Agreement  between  the  Government  of  the  United States  of America  and  the  Commission  of 
the European  Communities  regarding  the application  of  their  competition  laws.  OJ L  95 of 
27.4.95.  pp.47  - 50. 

In this Report,  "the  Commission"  or  "the  European  Commission"  means  the  Commission  of 
the European  Communities:  "the DoJ"  means  the Antitrust  Division  of the US Department  of 
Justice;  and,  "the  FTC"  means  the  US  Federal  Trade  Commission. 

France  v. Commission.  Case  C-327/91 

See  OJ  L  95  of  27.4.95.  pp.  45  and  46. 

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Page  2 

US  clarifying  the provisions  of  the Agreement  relating  to  confidentiality5. 

It  was  also  jointly  agreed  that  the  Commission  should  present  an  annual  report 
evaluating  the  application  of  the  Agreement  to  the  Council  and  the  European  Parliament. 
This is the first of these reports, covering the period  since the approval  of the Agreement, up 
to 30 June  1996. 

The legal  certainty  regarding the status  of  the  Agreement  enjoyed  since  its  approval 
on  10  April  1995  has  allowed  the European  Commission  to  pursue  its  efforts  to  cooperate 
with its US  counterparts. 

Nonetheless, the period covered  by this first  report is relatively  short and therefore  in 
many  instances  it  has  not  been  possible  to  identify  significant  trends  or  to  draw  definite 
conclusions.  Moreover,  the limited  scope of cooperation  during the period  prior  to  10 April 
1995  has meant  that  the  information  available  for  that  period  does  not  provide  a good  basis 
for  comparison. 
In  particular,  during  the  period  following  the  judgment  of  the  Court  of 
Justice, notifications under the Agreement were suspended pending approval of the Agreement 
by  the  Council6.  Notifications  were  made  nonetheless,  in  accordance  with  the  1986  OECD 
Recommendation7. 

Many  of the cases notified  during the period  under  review are still  active,  particularly 
matters falling  under  Articles  85 and  86 of the EC Treaty  and, therefore,  it is not possible to 
discuss  them  in  detail  or  to  mention  them  by  name,  save  where  they  have  already  been  the 
subject  of  a Commission  statement  or  notice. 

At the same time, many merger cases, which gave rise to notifications  and cooperation 
under the Agreement,  are now closed because of the strict deadlines applied under the Merger 
Regulation  and  these  can  therefore  be  discussed  in  this  report. 

In addition, the confidentiality  surrounding the US' own procedures and the obligation 
of confidentiality  to which the European  Communities  are subject  by virtue of Article VIII.2 
of  the  Agreement,  has  meant  that  even  where  the  European  Commission  has  completed  its 
investigations  and  closed  cases,  references  to  specific  cases which  are  still  being  pursued  by 
the US  authorities,  or are otherwise  covered  by  confidentiality  requirements,  have had  to be 
limited. 

Despite  these  limitations,  it  is  intended  that  this  report  will  give  some  sense  of  the 

See  OJ L  131 of  15.6.95, pp.  38-39 

Twenty-fourth  Competition  Report, point 413. 

1986 OECD Revised Recommendation  concerning cooperation between Member countries on 
restrictive  business  practices  affecting  international  trade  [(86)  44  (Final)]. 

Council Regulation (EEC) No. 4064/89 of 21 December  1989 on the control of concentrations 
between  undertakings,  OJ  L  395, 30.12.1989, p.  1: as  corrected  in  OJ L  257, 21.9.90,  p. 13. 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Page  3 

nature  and  degree  of  cooperation  between  the Commission  and  the  US  authorities. 

2. 

The  Agreement 

Q 

Q 

• 

Q 

As a brief reminder, the main provisions of the Agreement are recalled.  They include: 

notification  of  cases handled  by  the competition  authorities  of one Party,  when  these 
cases  concern  the important  interests  of the other  Party  (Article  II),  and  exchange of 
information  on general  matters relating to the implementation  of the competition  rules 
(Article  III); 

cooperation  and  coordination  of  the  actions  of  both  Parties'  competition  authorities 
(Article  IV) ; 

a "traditional  comity" procedure by virtue of which each  Party  undertakes to take into 
account  the  important  interests  of  the  other  Party  when  it  takes  measures  to  enforce 
its  competition  rules  (Article  VI); 

a  "positive  comity"  procedure  by  virtue  of  which  either  Party  can  invite  the  other 
Party  to  take,  on  the  basis  of  the  latter's  legislation,  appropriate  measures  regarding 
anti-competitive  behaviour  implemented  on  its  territory  and  which  affects  the 
important  interests  of  the  requesting  Party  (Article V). 

In addition, the Agreement  makes clear that none of its provisions may be  interpreted 
in a manner which  is inconsistent with  the legislation  in force  in the European Union  and the 
United States of America (Article IX).  In particular, the competition  authorities remain bound 
by their  internal  rules regarding the protection  of the confidentiality  of information  gathered 
by  them  during  their  respective  investigations  (Article  VIII). 

3. 

Notifications 

3.1 Number  of cases  notified* 

Notifications  were  made  by  the  Commission  in  fifty-four  cases  during  the  period 

between  10 April  1995  and  30 June  1996.  These  cases  are  listed  in  Annex  1. 

During the same period, the Commission received notifications from  the US authorities 
in  forty-four  cases,  twenty-four  from  the  DoJ  and  twenty  from  the  FTC.  These  cases  are 
listed  in  Annex  2. 

The figures given  represent the number of cases in which  notifications  were made and not the 
total  number of  notifications.  Under Article  II of the  Agreement,  notifications  are made at a 
number  of  specified  stages  of  the  investigation  and  formal  procedure  in a case. 

REPORT  ON THE  APPLICATION  OF THE EC/US AGREEMENT 

Page  4 

The  majority  of  notifications  in  both  directions  concerned  merger  cases  (44  EC  and 
22  US).  The  number  is  particularly  high  in  the  case  of  the  notifications  made  by  the 
Commission  and  reflects  the  procedure  under  the  Merger  Regulation  whereby,  on  receipt  of 
a  notification,  the Commission  publishes  a notice  of  the fact  of the notification  in  the  Official 
Journal..  Thus  the  proposed  merger  is  made  public  at the  outset  and  all  mergers  meeting  the 
criteria  for  notification  to  the  US  are  notified,  even  where,  on  subsequent  examination,  they 
do  not  raise  competitive  concerns  The  corresponding  US  legislation10  requires  that  the  fact 
of  a merger  filing,  as well  as  its content,  remain  confidential.  Thus  the  US  authorities  notify 
the  Commission  only  when,  after  a  preliminary  examination,  they  decide  to  open  an 
investigation  into  the  proposed  merger. 

Table  1 sets out  in figures  the  notifications  made  under  the  Agreement  and  the  OECD 

Recommendation  since  23  September  1991. 

Table  1 

NOTIFICATIONS 

Year 

No. of EC 
notifications 

No. of US 
notifications 
FTC  DoJ 

No. of  merger 
notifications 

1991 

1992 

1993 

1994 

5 

26 

44 

29 

1995 (to 9/4) 

9 

10 

20 

22 

16 

3 

2 

20 

18 

19 

5 

3 (EC) + 9 (US) 

11 (EC) + 31 (US) 

20 (EC) + 28 (US) 

18 (EC) + 20 (US) 

4 (EC) + 6 (US) 

1995 (from  10/4) 33 

11 

16 

27 (EC) +  12 (US) 

1996 (to 30/6)  21 

9 

8 

17 (EC) +  10 (US) 

10 

Hart-Scott-Rodino  Act.  1976.  15 U.S.C.§ 18A(h) 

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3.2 Practical  steps 

During the period under review, the Commission  took some practical  steps to improve 
internal  coordination  and  to  ensure  that  cases  meeting  the  criteria  for  notification  are  duly 
notified. 

The first  practical  step taken  by DG IVn  was the elaboration  of a set of guidelines  for 
its  case  handlers,  identifying  the  criteria  which  would  trigger  notification  and  the  stages in 
the  procedure  when  notification  should  be  made.  These  guidelines  have  now been  inserted 
in  DG IV's  internal  manual  of  procedures. 

The  second  DG IV initiative was the development  of a database  recording  the details 
of notifications  made under the Agreement,  in line with  DG IV's policy  of computerizing  its 
work,  wherever this brings efficiencies.  This allows case handlers in the operational  units to 
feed  into  the  database  the  information  necessary  to  make  a  notification.  This  is  done  by 
creating a link between  the various databases used  within  DG IV.  The notifications  database 
does not, however,  contain  any of the confidential  information  collected  by DG IV during the 
investigation  of the case as this is contained  in a file to which  access has been restricted.  The 
new database will  facilitate  making  notifications  - they  should  be made more quickly  and be 
more  complete  - and  following  up  on  notified  cases. 

3.3 Notifications  to the Member  Stales 

The  text  of  the  interpretative  letter  sent  by  the  European  Communities  to  the  US 
provides that the Commission,  after  notice to the US competition  authorities, will  inform  the 
Member  State  or  Member  States,  whose  interests  are  affected,  of  the  notifications  sent  to it 
by the US antitrust authorities.  Thus, when notifications  are received from  the US authorities, 
they  are forwarded  immediately  to the  relevant  units  of DG  IV and  at the  same time  copies 
are  sent  to  the  Member  States,  if  any,  whose  interests  were  affected.  Equally,  at  the  same 
time  that  DG  IV  makes  notifications  to  the  US  authorities,  copies  are  sent  to  the  Member 
State(s)  whose  interests  are  affected. 

The assessment  of which  Member  State should be notified  is made on the basis of the 
Commission's statement to Council  of  10 April  1995, which largely  reproduces the provisions 
In  most  instances,  the  US  authorities  also  notify  the 
of  Article  II.2  of  the  Agreement. 
Member  States  directly,  under  the  OECD  Recommendation12. 

The  Directorate  General  for  Competition  of the  Commission  of  the  European  Communities, 
which  is  primarily  responsible  within  the  Commission  stnicturc  for  the  application  of  the 
Community's  competition  rules. 

Revised  recommendation  of  the  OECD  Council  concerning  co-operation  between  Member 
countries on anti-competitive  practices affecting  international  trade, adopted  27/28 July  1995 

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4. 

Cooperation 

The  Commission's  experience  of  cooperation  with  its  US  counterparts  in  individual 
cases  since  10 April  1995  has been  very  positive.  However,  as stated  above,  many  of  the 
cases  where  there  have been  contacts  are  still  under  investigation,  on  one  side  or  the  other, 
and  so  cannot  be  discussed.  Therefore,  of  the  recent  cases  of  cooperation,  it  is  mainly  the 
merger cases which  are discussed  in this report.  This is not to say that non-merger  cases are 
less important from  the point of view of cooperation.  In fact  non-merger  cases probably lend 
themselves to greater cooperation  and coordination  of enforcement  activities because, on both 
sides  of  the  Atlantic,  the  competition  authorities  have  greater  scope  for  control  of  timing. 
Indeed, there may ultimately be more to be gained from  coordination  of enforcement  activities 
in  non-merger  cases,  in  particular  if  greater  cooperation  facilitates  the  investigation  and 
prosecution  of  hard-core  cartels. 

The  nature  of  cooperation  depends  on  the  individual  case,  and  can  relate  to  such 
matters  as  simple  enquiries  regarding  the  timing  of  procedures  or  to  coordination  of  the 
proposed  remedy  in  a case. 

4.1  Timing 

Most  cases  of  cooperation  between  the  Commission  and  the  US  agencies  start  by a 
discussion  of  the  timing  of  the  respective  procedures.  Checking  when  each  step  in  the 
procedure  is  likely  to  be  taken  is  a  key  element  in  determining  the  evolution  of  future 
cooperation  and the scope for  coordination  of enforcement  activities.  It is important  that the 
cooperating  authorities  know  approximately  when  important  steps  may  be  reached  in  their 
respective  procedures, 
a) 
b) 

to  ensure  that  they  do  not  undermine  the  other  side's  investigation 
to  see  whether  coordination  in  the  timing  of  certain  events  can  in  itself  be  a  useful 
tool  in  case  handling 
and 
in  cases  having  a common  interest  for  both jurisdictions,  it  is clearly  useful  to  arrive 
at  a  point  where  coordinated  action  may  be  taken  at  more  or  less  the  same  time,  as 
was done  in  the Microsoft  case. 

c) 

On occasion, an undertaking may be tempted to put pressure on one authority  to finish 
its  enquiry  quickly  by  misstating  the  stage  reached  in  the  enquiry  on  the  other  side:  It  is 
therefore  useful  to  know  the  approximate  timing  of  the  other  authority's  procedure  in  order 
to  resist  such  pressure. 

4.2 Assessing  each other's  view of the competitive effects of a  transaction  or  certain 
kinds  of behaviour 

4.2.1 Product market 

Discussions  between  the  case  handlers  frequently  focus  on  the  product  market  to 
determine whether both sides have arrived at similar conclusions.  These discussions are based 
on general  information  which  is publicly  available.  There is no doubt that  exchanges  of this 

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Page  7 

sort  have  disclosed  a  high  degree  of  similarity  between  the  market  analyses  of  the 
Commission  and  the  US  authorities.  This  is  very  important,  given  the  need  to  have 
meaningful  exchanges  while  observing  the  rules  on  confidentiality.  If  the  Commission  and 
the US  authorities  took  different  initial  views  on  market  definition,  it  might  not  be  possible 
to  explore  fully  the  reasons  for  the  different  approaches  without  discussing  confidential 
information  which the parties had provided.  Under our present rules, this could  only be done 
with  the  agreement  of the parties. 

In Kimberly-Clark/Scott Paper  the  different  product  markets  involved  in  the  merger 
were one of the first  topics discussed.  There was considerable  satisfaction  that the  definition 
of  the  product  markets  reached  independently  in  the  DoJ  and  in  the  Commission  was 
identical.  However,  the  different  geographical  markets  in  question  meant  that  the  product 
In  the  Commission's 
markets  presenting  competition  problems  for  each  authority  differed. 
decision  the  parties  were  required  to divest  the  KC's Kleenex  brand  toilet  tissue  and  Scott's 
Andrex  brand  facial  tissue  and  hankies  in  the  UK  and  Irish  markets.  In  the  US,  divestiture 
of  Scott's  facial  tissue  and  baby  wipes business  was  required. 

In  Glaxo/Wellcome there  were  numerous  product  markets  to  be  considered.  Initial 
contacts were useful  to assure both sides that they had concentrated  their analysis on the same 
product market - migraine treatments.  While there were several  competing  products to those 
already marketed separately by Glaxo and Wellcome, the effect  of the parties' individual R&D 
programmes  in  developing  new  drugs  was also  a factor  which  had  to be  taken  into  account. 
Both  Glaxo  and  Wellcome  had  similar  anti-migraine  treatments  at  an  advanced  stage  of 
development  and  it  was  considered  that  the  time  and  cost  involved  for  a  competitor  in 
reaching  the  same  stage  of  development  were  such  that  it  was  essential  to  maintain  both 
products in competition  with  each  other. The approaches taken  by the European  Commission 
and the FTC to resolve this problem  were  different;  the FTC considered  a horizontal  market 
for  R&D for  anti-migraine  drugs  on  its own,  while the Commission  looked  at the  spill-over 
effects  of R&D in the market for  the sales of medicines.  The Commission  decision  therefore 
provided  for  the  merged  company  to  license  one  of  the  two  anti-migraine  treatments  in 
development  and  so retain  a potential  competitor,  while the FTC  requirecffull  divestiture of 
Wellcome's R&D  for  this  anti-migraine  treatment. 

It  is  interesting  to  note  that,  during  1995,  there  have  been  contacts  between 
Commission  officials  and  their  US  counterparts  outside the  framework  of  a specific  case to 
exchange  views  on  the  manner  in  which  product  market  analysis  is  carried  out  in  the 
pharmaceutical  sector,  following  a series  of  mergers  in  that  sector  (Hoechst/Marion Merrill 
Dow,  Glaxo/Wellcome and  Upjohn Pharmacia). 

4.2.2 Geographical market 

Discussion  of  the  geographical  market  tends  to  be  more  limited,  as  usually  the 
Commission  and  the  US  authorities  are  concentrating  on  the  competitive  effects  of  the 
behaviour  or  transaction  on  their  own  markets,  even  in  cases  where  the  activity  under 
investigation  is  organized  on  a  transatlantic  or  worldwide  scale,  as  in  the  Microsoft  or 
Shell/Montecatini cases. 

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As  already  mentioned,  the  different  geographical  markets  identified  in  the Kimberly 

Clark/Scott Paper  case  resulted  in  different  divestiture  requirements. 

In  Lockheed  Martin/Loral  the  effect  of  the  merger  on  the  satellites  market  was 
investigated and the question of the relevant geographical  market discussed.  The Commission 
had, in its previous decisions relating to satellites, considered the relevant  market to be global 
and  did  so also in  this  case.  However,  the  US ultimately  considered  the  relevant  market to 
be  the  US,  because  of,  among  other  things,  differences  in  price,  quality  and/or  technology 
between  US  and  non-US  manufacturers. 

In  another  merger  case,  again  the  relevant  geographical  market  was  discussed. 
Although  the  merger  ultimately  raised  no  problems  for  the  FTC,  and  was  cleared  by  the 
European  Commission  in  the  first  phase,  the  discussions  demonstrated  a different  approach 
to geographical  markets,  with  the  European  Commission  considering  the  Community  as the 
relevant  market  while the US  considered  the  market  to be global. 

4.2.3 Anti-competitive effect 

In the Atlas  case, which  was of concern  to the DoJ because of its implications for  the 
Phoenix joint  venture  it was reviewing  during  1995, the Commission  provided  the DoJ with 
a version  of the warning letters to Deutsche Telekom  and France Telecom, from  which all the 
confidential  elements  had  been  removed.  This  enabled  the  DoJ  to  understand  fully  the 
Commission's  concerns  relating  to  the  Atlas  joint  venture  which  had  previously  been  the 
subject  of a Commission  press release and public comment by the parties.  The US authorities 
also received  advance copies of the draft  Article  19(3) notices in the Atlas and Phoenix cases, 
with  the  consent  of  the parties. 

In  certain  cases  under  Articles  85  and  86  of  the  EC  Treaty,  with  the  consent  of  the 
complainants,  the Commission  and the US authorities  have been  able to discuss the evidence 
offered  by  complainants  in  relation  to anti-competitive  behaviour.  In  one case  still  pending 
under Articles 85 and 86 and the US antitrust  legislation, the US complainant  agreed to copies 
of  its  depositions  being  provided  to  the  Commission  to  assist  in  its  enquiries.  In  the  same 
case, the Commission  was able to provide the US side with copies of requests for  information 
pursuant to Article  11 of Council  Regulation  No.  17/62 drawn  up on the basis of  information 
provided  by  the  complainant,  again  with  the  complainant's  consent. 

In  another  case  pending  under  Articles  85  and  86  and  under  US  legislation,  the 
complainant  provided  each  authority  with  copies of the complaint  lodged  with  the other and 
so facilitated  a first meeting between  the competition  authorities  to discuss  how  each  would 
deal  with  the  complaint. 

In the  shipping  sector,  Commission  and  DoJ  officials  considering  distinct  cases were 
able  to  exchange  views  on  the  anti-competitive  effect  or  otherwise  of  a contingency  clause 
(price changes dependent upon an event not connected  with the contract) which  was common 
to  the  contracts  offered  in  both  cases.  What  appeared  from  press  reports  to  be  different 
treatment  of  similar  problems  on  further  examination  turned  out  to  be  a  similar  economic 
analysis  applied  to  dissimilar  problems. 

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Page  9 

4.3.  Ascertaining  law and fact  in the other jurisdiction 

Cooperation between the competition authorities can help clarify  a point of foreign  law 
relevant to the interpretation  of an agreement  or to the efficacy  of a remedy.  Similarly  news 
media may be readily  available only to one authority.  The public filing with  other  regulatory 
the  US  authorities  examine  this  as a 
agencies  in  the  US  can  supply  valuable  information; 
routine  part  of their  enquiries  and  can  direct the  Commission's  attention  to  relevant  aspects. 

The Lockheed Martin/Loral merger was an example of this.  Early in the investigation, 
the FTC was able to draw the Commission's attention  to information  filed  with the  Securities 
and  Exchange  Commission  and  thus  on  public  record  in  the  US.  This  proved  helpful  in 
evaluating  the  effects  of  the  merger  on  the  satellites  market. 

In  the  same  case,  the  Commission  had  concerns  about  the  relationship  between  the 
merged company  and  a company  which  was being spun off  in the course of the merger.  The 
parties  provided  the  Commission  with  a written  agreement  which  satisfied  the  Commission, 
under the Merger Regulation, that the merged company would not have control  over the spun-
off  company.  However,  as  the  agreement  had  been  drafted  in  conformity  with  US  law,  it 
proved  useful  to  discuss  with  the FTC  the  implications  of  its different  provisions. 

4.4 Remedies 

It  is  clearly  desirable  that  two  competition  authorities  dealing  with  the  same  case 
should  not  reach  conflicting  results  in  a  common jurisdiction,  that  the  results  in  their 
respective jurisdictions  should  not  be  contradictory  and  that,  all  things  being  equal,  the 
remedy  imposed  in its own jurisdiction  by  one  authority  should  not be much  more  or much 
less rigorous than the remedy  imposed /// its own jurisdiction  by the other.  Joint  consultation 
on  drafting  can  help  to  tighten  remedies,  particularly  where  undertakings  are  given  by  the 
parties. 

Where  case  handlers  could  not  enter  into  detail  on  the  proposed  remedies  without 
disclosing  confidential  information,  discussions  have  been  limited  to  the  remedies  the 
Commission  and the US authorities have adopted  in previous cases raising  similar  problems. 
For  example,  in  the  Atlas  and  Phoenix  joint  ventures,  an  early  discussion  of  the  US 
investigation  of the Phoenix case was  related  to the outcome  of  the BT/MC1 case. 

However,  with  the consent  of the  parties,  it  has been  possible to  discuss the  specific 
remedies  in detail, as in the Lockheed Martin/Loral and  Kimberly Clark/Scott Paper merger 
cases. 

4.5  Use of waivers 

The positive experience of the Microsoft case, and the use of waivers of  confidentiality 
to  permit  the  competition  authorities  to  exchange  information,  encouraged  both  agencies  to 
seek  waivers  wherever  this would  be  helpful  to the  investigation. 

REPORT  ON  T HE APPLICATION  OF  T HE  EC/US  AGREEMENT 

Page  10 

Waivers  were  requested  and granted  in order 
to permit agencies to discuss remedies in specific  cases (Kimberly Clark/Scott Paper, 
Lockheed Martin/Loral) 
to exchange specific documents disclosing anti-competitive behaviour (in two pending 
cases under  Articles  85 and 86 of the EC Treaty  and under  US antitrust  legislation) 
to disclose the decision  of the Commission  is a case where it had not yet been  made 
public 
to  permit  the  Commission  to  provide  Article  11  letters  containing  confidential 
information  to the US  agencies (in a case pending  under  Articles  85 and  86). 
to allow the  Commission  to provide  advance copies of official  notices  setting out  its 
analysis and the terms of the  proposed  settlement  of  a case  (Atlas/Phoenix) 
to  permit  the Commission  and the DoJ to  discuss  in  detail  all  aspects  of  a  case 
pending  under  Articles  85 and 86 and under  US  antitrust  legislation. 

Early  last  year,  the  Commission  requested  the  complainants  in  a  case  to  waive 
confidentiality  and to provide  the DoJ with  copies  of the  complaints  and the incriminating 
documents  they  contained.  The complainants  refused  however.  The effects  of this  refusal 
cannot be fully  assessed  although  it placed  serious limitations on discussion  of the case with 
the US  authorities. 

5. 

Confidentiality 

The  Commission  is  very  conscious  in  the  application  of  the  Agreement  of the 
importance of respecting the  EU's rules on confidentiality.  In the guidelines  introduced  into 
DG  IV's internal  manual  of  procedures,  case  handlers  are reminded  of their  obligation  as 
regards  the  confidentiality  of  information. 
In  addition,  telephone  contacts  with  the US 
agencies are normally  conducted  in the presence of at least two officials  from  DG IV, one of 
whom is from  the unit responsible for the international  aspects of competition  policy.  In this 
manner, officials  can act as a check on one another and so ensure that the confidentiality  rules 
are  fully  respected. 

6. 

Information  to Member  States  on cooperation 

In its interpretative  letter to the US Government,  the European  Communities  provide 
that the Commission,  after  consultation  with  the US competition  authorities,  will  inform the 
Member  State  or  Member  States  whose  interest  are  affected  of  any  cooperation  or 
coordination of enforcement  activities.  However, as regards such activities, either competition 
authority  will  respect  the other's  request  not to disclose  the information  which  it  provides 
when necessary to ensure confidentiality,  subject to any contrary requirement of the  applicable 
law. 

When there have been  contacts on a particular  case, DG IV has informed  the Member 
State(s)  whose interests are affected  by letter of the contacts and their  subject  matter.  These 
letters are intended  to keep  such  Member  State(s)  informed  that  there has been  a follow-up 
to the notification 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Page  11 

To  date,  the  US  has  not  relied  on  the  terms  of  the  interpretative  letter  to  ask  the 
Commission  not  to  disclose  information  nor  to  defer  the  disclosure  of  information  to  a 
Member  State. 

7. 

Positive  comity 

The  positive  comity  provision  of  the  agreement  (Article  V)  has  not  been  formally 
invoked by either  side, although  a number of matters have been  identified  by one side or the 
In  several  cases  under  active  investigation  by  the 
other  as  raising  comity  questions. 
Commission,  the  US  authorities  have  chosen  to  defer  possible  action  of  their  own  while 
maintaining  regular  contact  with  Commission  pending  the outcome  of  its investigations  and 
any  remedial  action  taken  as a consequence.  This experience  shows that,  in many  instances, 
a  formal  request  under  Article  V  is  unnecessary  if  a  case  can  be  dealt  with  through 
cooperation.  At  the  same  time,  the  use  of  the  positive  comity  provisions  can  be  seen  in  a 
positive light in that it marks a commitment by one Party to forego unilateral  action  in favour 
of  the  other  Party  enforcing  its  rules  in  cases  falling  within  its jurisdiction.  Therefore,  the 
Commission  would  not be concerned by the use of Article V by the US authorities and would 
in  its turn  invoke  Article  V in  cases  affecting  the  Community's  important  interests. 

It may  appear that the US has greater  scope than  the EU to apply  the positive  comity 
instrument  in  that  the  extraterritorial  nature  of  its  legislation  has  encouraged  companies  to 
complain to the US authorities when anti-competitive activity  on foreign  markets affects  their 
exports.  By  contrast,  the  Community's  competition  rules  have  been  more  inward  looking. 
Nonetheless, the Commission  considers that the positive comity  instrument  in the Agreement 
can be applied  in both  directions and that the Community  may  ask the US authorities to take 
action  where  anti-competitive  behaviour  on  the  US  market  threatens  European  companies' 
ability  to compete.  In  order  to do this, the  Commission  would  welcome  European  business 
bringing  such  situations  to  its  attention. 

8. 

Bilateral  meeting  of  13 November  1995 

The  high  level  meeting with  the US authorities  on  13 November  was the first formal 

meeting  since  20  September  1993. 

As this  was the  first  meeting  since the  approval  of the  Agreement  by  the  Council,  it 
was  felt  appropriate  to  depart  from  the  previous  format  and  concentrate  in  the  main  on  the 
mechanics  of  cooperation:  reviewing  the  current  notification  system  and  the  timeliness  and 
content of notifications;  determining  whether  requests for  cooperation  were being  adequately 
dealt with; and, possible improvements to current practices, e.g. greater use of waivers where 
appropriate. 

It was agreed  that, whenever  possible, the Commission  and the US authorities  would 
give greater  recognition  to  cooperation  under  the  Agreement  in  press  releases  on  individual 
cases and in  speeches, while respecting each  side's confidentiality  rules and the provisions of 
the  Agreement  in  this  regard. 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Page  12 

The  meeting  also  gave  rise  to  a  brief  exchange  of  views  on  future  international 
cooperation, both in the context of the US International  Antitrust Enforcement  Assistance Act, 
which  the  US  delegation  presented  to  the  Commission,  and  the  recommendations  of  the 
Report  of  the  Group  of  Experts  entitled,  "Competition  Policy  in  the  New  Trade  Order: 
Strengthening  Cooperation  and  Rules".  In  this  regard,  the  Commission  was  able  to  inform 
the  US  of  the  creation  of  a  working  group  by  the  Community's  Directors  General  for 
Competition  and  the  Commission  in  order  to  consider  issues  related  to  deeper  bilateral 
cooperation.  On the  multilateral  side, the US expressed  its sympathy  for  efforts  to  promote 
greater  debate  on  trade  and  competition,  but  had  doubts  about  the  likelihood  of  achieving 
much  progress  in  the  short  to  medium  term.  However,  the  US  authorities  proposed  that  it 
would  be  useful  to  identify  the  core  of  competition  principles  on  which  all  countries  agree 
(e.g.  cartels)  as well  as identify  the  various  exceptions  which  exist. 

The  final  session  of  the  meeting  was  devoted  to  a discussion  of  innovation  markets, 
the rapidly developing sectors on which competition authorities are increasingly concentrating. 
This  was  particularly  interesting  in  the  light  of  the  FTC  hearings  on  innovation  and 
globalization,  held  in  the  latter  part  of  1995. 

9. 

Conclusions 

As  indicated  at  the  outset,  it  is  hard  to  draw  firm  conclusions  from  the  relatively 
limited  experience  since  10 April  1995.  However,  an  overall  assessment  of the  application 
of the Agreement  is that  it has proved  to be a useful  vehicle for  cooperation,  for  exchanging 
views on competition  policy generally, e.g. at the meetings anticipated  in its Article III.2, and 
for  cooperating  in individual  cases.  It is probably  in this latter  area that the experience  since 
10 April  1995  has been  most  interesting. 

9.1 Cases where cooperation has  improved case handling 

As  previously  stated,  cooperation  on  individual  cases  has  shown  a  remarkable 
similarity  in  the  analyses  of  the  Commission  and  its  US  counterparts.  There  have  been 
relatively  limited  divergences  of  view.  This  is,  in  the  main,  attributable  to  the  consistency 
of  the  economic  analysis  of  the  competition  authorities,  but  also  to  the  working  method 
adopted  under the Agreement.  Once a case has been  identified  as being  of common  interest, 
there are contacts between  officials  in the Commission  and the US authority  dealing with the 
case  and  these  contacts  allow  any  potential  differences  in  appreciation  of  the  case  to  be 
identified  at  an  early  stage. 

Although  EU  merger  deadlines  offer  only  limited  scope  for  cooperation,  experience 
to date  in  cases  such  as Lockheed Martin Loral  and Kimberly Clark Scot! Paper  has  proved 
to  be  very  valuable,  in  assessing  the  product  market  and  in  ensuring  that  the  remedies 
imposed  by  each  authority  do  not  conflict. 

Non-merger  cases offer  greater possibilities for coordination  of enforcement  activities. 
Neither  agency  is subject  to the same time constraints as in merger cases.  However,  it is also 
the  case  that  parties  may  be  more  reluctant  to  allow  information  to  be  shared  between  the 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Page  13 

competition authorities if it might disclose anti-competitive behaviour on their part and expose 
them  to  sanction  in  both jurisdictions. 

9.2 

Positive  comity and  limitation of unilateral action 

One  of  the  main  aims  of  the  Agreement  is to  promote  greater  cooperation  between 
competition  authorities  and to reduce the need  for  unilateral  action.  In  its dealings  with  the 
US, the Commission has seen evidence of the US authorities' preparedness to forego unilateral 
action  in preference  for  closer  cooperation  with  the Commission.  As previously  mentioned, 
a  number  of  cases  have  raised  comity  questions,  although  Article  V  has  not  been  formally 
invoked.  In  several  of  the  cases  investigated  by  the  Commission,  the  US  authorities  have 
aligned  their  enforcement  activity  to  that  of  the  Commission,  as  the  anti-competitive 
behaviour  in  question  is targeted  on the European  market  and  the (secondary)  effects  on the 
US  market  may  be  resolved  indirectly  through  a resolution  of  the  problem  within  the EU. 

Cases  where  cooperation  has  been  curtailed  because  of  the  limits  of  the 

9.3 
Agreement 

Some aspects of cooperation  do not  require  an  exchange  of  confidential  information, 
e.g.  timing  of  procedures  or  market  analysis  where  much  of  the  product  information  has 
already  been  filed  with  public  agencies  (as  frequently  happens  in  the  pharmaceutical  and 
chemical  sectors etc.)  However,  restrictions on the information  which  can be provided  make 
discussions more difficult,  and although there have been no significant  divergences of analysis 
in cases falling  within  both  EU and  US jurisdictions,  the confidentiality  rules would  make it 
more difficult  to discuss in detail the reasons why conflicting views might be arrived at, based 
on  our  respective  analyses  of  a case. 

The experience  of cooperation  since  10 April  1995 has demonstrated  that  restrictions 
on  the  exchange  of  confidential  information  have  been  felt  in  a  number  of  cases.  The 
increasing use of waivers by the Commission  and its US counterparts demonstrates that there 
are  clear  advantages  to  be  obtained  where  both  sides  are  able to  share  their  knowledge  in a 
case.  Waivers have thus been  successfully  requested  in a number of cases.  In all these cases, 
however,  it  was  clearly  in  the  interests  of  the  parties  granting  the  waiver  to  see  that  the 
investigation  was  pursued  or  that  there  was  a speedy  resolution  of  the  matter. 

In  one case, the failure  to obtain  the complainants'  consent  to share  information  may 
have  frustrated  DG  IV's  attempts  to  engage  fully  the  US  authorities  in  an  investigation  of 
alleged  anti-competitive  conduct. 

It  is interesting  to  note that  none  of the cases  of  cooperation  cited  in  this  report  is a 
cartel  investigation,  and  it  is  in  this  area  particularly  that  the  confidentiality  rules  restrict 
cooperation between  the EU and the US.  Yet, both the EU and US authorities have  affirmed 
on  numerous  occasions  that  the elimination  of cartels  is a priority.  US enforcement  activity 
in  this  area  increased  significantly  over  recent  years  and  the  EU  has  imposed  an 
unprecedented  level  of fines in cartel  cases.  It is therefore  perhaps to this area  that  we must 
look  to  find  a  means  of  improving  and  deepening  cooperation  where  there  is  a  common 
interest  in  a case. 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Page  14 

ANNEX 1 

NOTIFICATIONS  BY  THE  EUROPEAN  COMMISSION  TO  THE  US  AUTHORITIES13 

MERGER  CASES: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9 

IV/M.269 -  Shell/Montecatini  (review of  commitment) 

IV/M.  551  - ATR/BAe 

IV/M.553  - RTL/Veronica/Endemol 

IV/M.560 -  EDS/Lufthansa 

IV/M.566  -  CLT/Disney/SuperRTL 

IV/M.573 -  ING/Barings 

IV/M.577  - GE/Power  Controls  B.V. 

IV/M.580  - ABB/Daimler-Bcnz AG 

IV/M.587  -  Hocchst  A.G./Marion  Merrill Dow. US 

10. 

IV/M.588 -  Ingersoll-Rand  Co , US/Clark  Equipment,  US 

11. 

IV/M.589 -  Seagram  Company  Ltd/MCA 

12. 

IV/M.591 - Dow  Europe  S A/Buna  Sow Lcuna 

13 

IV7M.600  - Employers  Reinsurance  Corp  AG/Frankona  Ruckversichenmg 

14. 

15. 

16. 

17. 

18. 

19. 

20. 

21. 

IV/M.601  - Employers  Reinsurance  Corp  AG/Aachencr  Ruckversichenmg 

IV/M.603  - Crown  Cork  &  Seal/Carnaud  Mctalbox 

IV/M.612  -  RWE-DEA-Enichcm-Augusta 

IV/M.613  - Jefferson  Smurfit  Group  plc/Munksjo  AB 

IV/M.615 - Rhone-Poulenc/Engelhard 

IV/M.617 -  Crédit  Local  dc France/Hypothckcnbank  in  Berlin 

IV/M.623  - Kimberly-Clark  Corporation/Scott  Paper  Co. 

IV/M631-Upjohn/Pharmacia 

Due to confidentiality  requirements, this list includes only those investigations or cases which 
have  been  made  public. 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Pane  15 

ANNEX  1  (CONTINUED) 

22. 

23. 

24. 

25. 

26. 

27. 

28. 

29. 

30. 

31. 

32. 

33. 

34. 

35. 

36. 

37. 

38. 

39. 

40. 

41. 

42. 

43. 

IV/M.632 - Rhone Poulcnc/Fisons 

IV/M.642 - Chase  ManhaUan/Chcmical  Banking 

IV-M.651- AT&T/Philips Electronics  N.V. 

IV/M.656 -  Seagate/Conner 

IV/M.659 - GE Capital/Solvac 

IV/M.660 - RTZ/CRA 

IV/M.663  - Dow/Dupont 

IV/M.666 - Johnson Controls/Roth Frcrcs 

IV/M.675  -  Alumix/Alcoa 

IV/M.673  - Channel  Five 

IV-M.681- Royal  Bank of  Scotland/Bank  of  Ireland 

IV/M.683  - GTS-Hcrmes  Inc/HIT Rail  BV 

IV/M.689 - ADSB/Belgacom 

IV-M.697  - Lockheed  Martin Corp/Loral  Corp 

IV-M.699  - Tomkins/Gates 

IV/M.700 - Emerson/Caterpillar 

IV/M.717 -  Viacom/ Bear Steams 

IV/M.721-Te.\tron/Valois 

IV/M.726  - Bosch/Allied  Signal 

IV/M.737  - Sandoz/Ciba-Geigy 

IV/M.741  - Ford/Mazda 

IV/M.758 -  Sara Lee/Aoste  Holding SA 

44. 

IV/M.768 - Lucas/Varitv 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Pane  16 

ANNEX  1  (CONTINUED) 

NON-MERGER  CASES: 

1. 

2. 

3. 

4. 

5. 

6. 

IV/35.147-Microsoft 

IV/35.239  - IRI/A.C.  Nielsen 

IV/35.652 - Europe On Line (Meigher Communications Ltd. Partnership/Interchange Network Holding 
Co.) 

IV/35.836  -  Austrian  Airlines/Swissair/Sabena/Delta  Airlines  Inc. 

IV/35.897  -  American  Express/Visa 

IV/35.972  - Deutsche  Lufthansa/United  Airlines 

REPORT  ON  THE  APPLICATION  OF  THE  EC/US  AGREEMENT 

Page  17 

ANNEX  2 

NOTIFICATIONS  BY  THE  US  AUTHORITIES  TO  THE  EUROPEAN  COMMISSION14 

MERGER  CASES: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

11. 

12. 

13. 

Oerlikon-Buhrle/Toolex  Alpha  (divestiture  of  assets  following  merger) 

Kimberly-Clark  Corporation/Scott  Paper Co. 

British  Petroleum  Company,  PLC, Britain/Campaign  de  Saint  Gobain,  France 

T&N  PLC,  UK/Kolbenschmidt  AG. Germany 

Hoechst  A.G./Marion Merrill  Dow. U.S. 

Ingersoll-Rand  Co., New  Jersey/Clark  Equipment.  Indiana 

Devro  International  PLC, UK/Teepak  International.  Inc.. US 

Lockheed  Martin  Corporation  /  Loral  Corporation 

St. Gobain/Carborundum  Company 

Genencor  International  Inc./Solvay  SA 

Koninklijke  Ahold  nv/  Stop and  Shop Companies  Inc. 

Fresenius  A.G./ National  Medical  Care 

T&N  pic  (modification  of  consent  order) 

Due  to confidentiality  requirements,  this  list  includes only  those  US  investigations  or  cases 
which  have  been  made  public  by  the  US antitrust  authorities. 

REPORT  ON  THE  APPLICATION  OF THE  EC/US  AGREEMENT 

Page  18 

ANNEX 2  (CONTINUED) 

NON-MER«;ER  CASES: 

1. 

2. 

3. 

4: 

5. 

6, 

Lykes Bros.  Steamship Co., lac. /Universal Shippers  Association 

IBM 

International  Association of Conference  Interpreters ("AIIC") 

Delta Air Lines. Swissair, Austrian Airlines. Sabcna Belgian World Airlines 

United Airlines Inc./ Deutsche Lufthansa  AG 

AmericanAirlines/BritishAirwavs 

43 

ISSN 0254-1475 

COM(96) 479  final 

DOCUMENTS 

11  08 

EN 

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Catalogué number  : CB-CO-96-486-EN-C 

ISBN 92-78-09694-6 

Office  for Official  Publications of the European Communities 

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