The Fordham Corporate Law Institute 22nd Annual Conference on International Antitrust Law & Policy, Fordham University Law School
New York, N.Y.
The views expressed are those of the Chairman and do not necessarily reflect the views of the Federal Trade Commission or any other Commissioner.
I will begin with a "report from Washington" on noteworthy matters, both international and domestic, that have occurred in the last year, but even my written text discusses only the highlights. I want to focus on where we are going, not where we have been.
To that end, after a quick review of the last year, I will move to a discussion of what I see as the FTC's role in competition policy within the U.S. and around the world, focusing on the antitrust policy review that is currently taking place at hearings before the FTC. Finally, I will offer some thoughts about possible future multilateral approaches to antitrust enforcement, such as within the North American Free Trade Area (NAFTA), between the U.S. and the European Union, or under the World Trade Organization.
I. Developments Since the Last Fordham Conference
Since the last Fordham conference, a number of events have occurred that will foster international cooperation in antitrust enforcement. Some may not seem of great significance but I believe that they are necessary, incremental steps in facilitating more practical cooperation between antitrust enforcement agencies.
First, about a week after last year's conference, President Clinton signed the International Antitrust Enforcement Assistance Act of 1994 ("IAEAA"). Anne Bingaman last year gave a thorough description of the Act and described the kind of cooperation envisioned by the Act and the potential to begin a new era of cooperation in international antitrust enforcement. I congratulate Anne and Diane Wood for their initiative on this project, which in the U.S. took information-sharing from a policy issue to implementation concerns in record time. I don't mean to downplay the importance or potential difficulties of the implementation work -- which is ongoing -- but at the policy level we can move on to other concerns.
Second, in April of this year the European Union gave its final approval to the EC/US cooperation agreement. That may not have been seen as big news, because the U.S. and the European Commission had all along maintained that under the 1986 Vienna Convention, the agreement remained valid and in force even after the European Court of Justice held that it would need to be approved by the EC Council of Ministers. Still, it could not be assumed that the Council of Ministers would approve the agreement. In fact, the Council, the Parliament, and the Member States all subjected the agreement to a critical examination, reviewing the benefits of cooperation to that point and the treatment of confidential information by both U.S. authorities and the European Commission. We are, naturally, pleased that the agreement passed the examination, and we continue to pursue every opportunity to share information and cooperate in the enforcement of our competition laws. Later in my remarks, I will discuss the Shell/Montedison case, which exemplifies the need for, and the benefits of, EC/US cooperation as contemplated in the Agreement.
Another manifestation of progress in cooperative antitrust enforcement was the adoption of a new agreement between Canada and the United States. This agreement seals the positive relationship that has developed between Canada and the U.S. through numerous cooperative and effective law enforcement efforts in recent years on both antitrust and consumer protection matters. We are particularly pleased that for the first time ever, the agreement covers deceptive marketing practices, a problem that seems to have grown with increased reliance by fraudulent operators on telemarketing as a device to exploit consumers.
Another noteworthy event of the past year was the issuance in April of the Antitrust Enforcement Guidelines for International Operations by the Department of Justice and the FTC. Those of you who attended last year's Fordham Conference will recall that the agencies had just published their draft Guidelines for public examination and comment. As a result of the comments received, the Guidelines were revised to emphasize our commitment to work closely and cooperatively with our foreign counterparts to achieve our antitrust enforcement needs. I think that this is a most important feature of the Guidelines. It does not mean that we will be any less determined to enforce our law but the Guidelines reflect the fact that more and more countries share the same values of fostering competitive markets and protecting consumers. We feel that the combination of shared values and respect for sovereignty provides a basis for achieving effective antitrust enforcement.
In this same vein, I want to mention and commend the report of a panel of experts that was issued for public debate in July of this year by the European Commission. The report offers a justification for cooperation, an examination of the current state of cooperation, and some suggestions on how to proceed. It provides not only a useful framework in which to examine these issues, but also some specific suggestions in the light of our respective experiences in enforcing competition laws.
While these international developments were occurring, we made some adjustments in the way that we conduct our business at home.
First, in March of this year, the Justice Department and the FTC jointly issued a series of reforms to the premerger notification process. One of these reforms addressed a concern voiced by Bill Baxter at this conference last year about what happens during the initial 30 day waiting period under the Hart- Scott-Rodino Act. That concern was that the longer it took the two agencies to decide which would conduct the investigation, the more likely a second request would issue simply because of the lack of time to make the initial examination. The Department and the Commission in March committed themselves to make the initial clearance determination normally within 6 days after notification of the merger has been filed and in no case longer than 9 days. To date, we have adhered to that schedule with time to spare.
Second, we have taken steps to increase cooperation with the States in merger enforcement. In so doing, we hope that, in appropriate cases, the State or States in which the effects of the merger will be primarily felt might be better situated to take the lead in the investigation. This could foster a more reasonable allocation of the Commission's resources.
Finally, we have revised our policy on requiring prior approval provisions in merger consent agreements. We feel that we can rely upon the coverage of the Hart-Scott-Rodino premerger law to provide the FTC with the opportunity to review potentially anticompetitive mergers. This action brings the FTC's policy more in line with that of the Department of Justice in consent agreements.
Looking back over the past year, it is easy for me to praise the many accomplishments without a hint of embarrassment, because many of them occurred, or were in the works, before I came on board as Chairman. For that effort, I thank my predecessor, Janet Steiger, who led the FTC with spirit, wisdom and dignity from 1989 through April 1995. Appreciation also should go to Jim Rill and Anne Bingaman for their stewardship of the Antitrust Division over the same period. The issuance of joint guidelines on mergers, health care, international operations, and intellectual property testify to the dedication of these individuals to work across agency lines and party lines to foster clear and consistent enforcement of our antitrust laws.
II. The Need for an Examination of Antitrust Policy and Analysis
Last year, this Conference devoted considerable attention to how the European Commission enforces European competition law. During the course of this examination, the U.K.'s Dan Goyder said, "it appears from the study of history that it is essential for institutions like DGIV to be willing to take a look at themselves from time to time, to take advice from their friends and from those who are affected by their decisions, and to try to see what changes are needed." This is what I have asked the FTC to do. My Commission colleagues agreed. In July, we published a summary of the issues we wished to examine in a set of hearings at the FTC and asked the public to participate in the process.
The hearings commenced earlier this month and I believe it would be useful to review for this gathering what we plan to pursue.
Our hearings will focus on whether there are adjustments that need to be made, in substantive law enforcement and in procedure, to take into account the vast changes that have occurred in commercial markets in the second half of the 20th Century. I should emphasize that these hearings are not designed as a wholesale review of the validity of American competition policy. We adopt as a premise that core provisions of the antitrust and consumer protection laws have served the country well.
Nevertheless we all share a sense that the commercial world has changed radically in the last 40 or 50 years. Exports, imports and cross-border investment have increased enormously so that many firms now compete in truly global markets. Also the pace and importance of technological change has affected the nature of competition in particular industries. Many suggest that there are sectors of our economy where firms compete primarily on the basis of innovation rather than price, and that our antitrust laws have been slow to recognize these changes.
Even assuming the core values of competition policy - hostility to cartels and unjustified dominant market power, determination to protect consumers from fraudulent and overreaching practices - it remains possible that adjustments in these enforcement regimes would make sense to take into account changes in the nature of competition. If our antitrust and consumer protection laws unnecessarily hamper the ability of American firms to compete in international markets, this will be an opportunity for critics of antitrust to offer concrete examples and proposals for reform. If our antitrust and consumer protection laws are inadequate to operate effectively in international markets, this will be an opportunity to examine those claimed inadequacies.
The hearings were designed with the help of a bipartisan group of advisors and will be bipartisan in spirit. Representatives from the business community, consumer groups, government enforcement and academia will participate in three months of hearings on these subjects.
We have no preconceived views with respect to problems or solutions. Rather we look forward to an opportunity to discuss, to analyze and to learn. Ultimately we intend to draft a report to the public and Congress on the status on United States' competition and consumer protection enforcement policies on the eve of the 21st Century.
III. Current -- and Future -- Antitrust Enforcement Cooperation
Beyond certain limits, no nation has or is likely to have the power to secure the advantages of competitive markets beyond its own borders by means of unilateral antitrust enforcement. Even leaving aside the vagaries of international litigation, unilateral approaches are limited both by resource constraints and by special international considerations such as comity. These inherent limitations and the increased globalization of the world's economy has led to much interest in cooperation, convergence, and harmonization.
I am not going to try to offer startling new insights into these broad policy issues. But I am going to discuss some of the kinds of international issues I have encountered in my time at the FTC, and that may give you some idea of my general approach. Both as an academic and as an antitrust enforcer, I have an interest in thinking about what we can do to go beyond the kind of cooperation and convergence that is beginning to develop.
What has been happening? Just last evening, my Canadian and Mexican colleagues joined Anne Bingaman and me for a NAFTA partners dinner at which we followed up on recent staff level discussions that were held in Washington, D.C.
More generally, we and other competition law enforcers have had the chance to get together this year on various occasions, such as meetings of the OECD and APEC and conferences such as this and the Berlin Cartel Conference. Both in person and using our various means of telecommunication, our staffs have consulted with their counterparts in many countries around the world. Those staff contacts have included notifications under our bilateral agreements and the OECD recommendation, conversations about a wide range of antitrust matters, and discussions about the possibility of entering into so-called "second-generation" cooperation agreements under the terms of the IAEAA.
The FTC recently received a contract from A.I.D. under which we and the Department of Justice will be providing competition and consumer protection technical assistance to the Russian Federation, Ukraine, Moldova, Kazakstan, and the Kyrgyz Republic. We are still in the process of determining exactly how we will go about providing that assistance, but I regard it as a very important project and one that contributes to convergence and perhaps even harmonization.
All of these developments reinforce the point that cooperation and convergence are a present-day reality. Most of our cooperation in the last year, however, has been with the EC, and I'll use that cooperation and other US/EC developments as a focus for comments on where we go from here.
The confirmation of the US/EC agreement in April and the adoption of an official Communication by the European Commission in July on improving transatlantic relations are positive steps in furthering enforcement cooperation. The former confirms the basis on which our current cooperation exists; the latter recommends building upon and expanding that cooperation. And although the EC's Communication did not discuss how we might go about expanding cooperation, an "Experts' Report" that the Commission issued for public comment contains specific suggestions -- not only for the U.S. and Europe, but for other countries as well.
In April of this year, when the Council of Ministers gave its approval to the EC/US cooperation agreement, EC Competition Commissioner Karel Van Miert stated that, "the Commission will apply itself to broadening and deepening this cooperation within the limits of the Agreement . . . ." I share that commitment and want to give some examples of what we have been doing.
During the past year, EC and FTC staff consulted on numerous matters, mostly mergers, but also policy and procedure changes. Quite a few of the mergers involved the pharmaceutical industry. Because of the regulatory structures in which that industry operates, the relevant geographic markets are usually national. But our staff has generally found the discussions -- even about the differences between the European and U.S. markets -- to be very useful.
The Shell/Montedison case offers several examples of how EC and US enforcement authorities can help each other. For one thing, this case presented some questions for which it was important to have an understanding of intellectual property and contract law in the US and in European countries; each side was able to explain the general legal framework on its side of the Atlantic. Moreover, FTC and Merger Task Force staffs were able to share their respective views on market definition, potential anticompetitive effects, and potential remedies. Of course, all such conversations are conducted with care that information obtained subject to the confidentiality strictures of our laws is not disclosed. The conversations can nonetheless be useful, though only at a fairly general level.
Cooperative discussions can also be useful on questions of remedy. The procedural differences between US and EC merger review laws
- particularly the timetables for decisions
- usually results in the EC reaching a final decision in a matter before we do on the US side.
That was the case in Shell/Montedison, which meant that while our staff was seeking a settlement that would satisfy our competitive concerns, it was trying to do so in ways that would not conflict with the provisions of the EC's decision. Of course, the parties to the transaction could usually be expected to tell us if any of the settlement terms suggested by our staff would conflict with their European undertakings. But we wanted, and obtained, a clarification of the EC's interpretation and intended application of its decision. With that knowledge, we were able to reach a consent agreement with the parties that built upon the EC's decision and satisfied both the EC's and our law enforcement goals in the matter.
At this point, I pause to speculate on how much easier it might have been for all concerned if the EC and US investigations could have been coordinated. Given current confidentiality constraints, that would have first required the consent of the parties. As I look at the outcome and the procedural history of this matter, it seems to me that we should be asking what would need to be done to enable "and embolden" all of us, enforcers and parties alike, to enter into such a coordinated effort.
As I said, we consulted with the EC on a number of other cases over the past year. In many of those instances, we found separate European and American markets and different market effects. What is most interesting, however, is the consistency of analysis and conclusions that were reached by our respective staff members. Although there are procedural and substantive differences between our laws, the market analysis brought to bear is quite similar.
The Experts' Report that the EC issued for public comment concludes that there is a need to focus on short- to medium-term steps to improve international antitrust enforcement. Although two of the experts were members of the Munich Group that offered a proposal two years ago for a world antitrust code within the WTO, the Experts' Report concludes that it is unrealistic to consider the drafting of an international competition code until
- there is more convergence in enforcement of existing national laws and
- more experience is gained in cooperative enforcement efforts between national authorities.
I am not an expert on the many nuances involved in the debate about a world competition code, but the conclusion of the Experts' Report seems correct to me. It is easy to understand why the idea of a world competition code has been around for a long time. On the one hand, such a code could increase international competitiveness by forbidding anticompetitive agreements, eliminating bans on legitimate, procompetitive agreements, and clarifying the rules of the game. On the other hand, achieving international consensus on the rules of the game would be a daunting task, and even accomplishing that task would leave profoundly difficult questions concerning enforcement mechanisms.
In any event, the Experts' Report recommends a number of steps, starting with the strengthening of bilateral enforcement cooperation based upon principles of international comity and leading to the gradual construction of a plurilateral agreement that would contain a set of common substantive rules and a dispute resolution procedure.
I will focus today on just the first step--the matter of bilateral enforcement. First, I believe that the concern expressed that the U.S. "avoid an unduly restrictive interpretation of the concept of comity" was satisfactorily addressed in the final version of the DOJ-FTC International Guidelines. In response to comments we received, we clarified the Guidelines to make clear that conflict of laws is not the only or the deciding factor in a comity analysis.
Second, the Experts' Report recommends that the EU enter into an IAEAA-type agreement with the US. As I noted earlier, the European Commission has not endorsed this report, but for my part I would welcome the opportunity to discuss with the EC a so-called "second-generation" agreement.
The Report's recommendation has already drawn fire. The International Chamber of Commerce issued a statement that cooperation in competition policy enforcement would "endanger the confidentiality of corporate information." I disagree with the implication that an IAEAA-type agreement is a threat to confidentiality. Confidentiality concerns are legitimate, and in response to those concerns our Congress included numerous provisions to make sure that our enforcement partners are ready, willing, and able to satisfy our confidentiality demands in each and every instance of information sharing. We expect that our enforcement partners will be no less demanding of us.
A further concern of the ICC is "the additional danger that information might be misinterpreted or misunderstood in the jurisdiction to which it is transferred. Companies might well present information differently to accommodate major divergences in competition law and policy in different countries. Criteria to determine market share provide just one example." This "danger" is exaggerated at best. The existence of an IAEAA-type agreement would not in any way prevent a company from presenting data to us in any way it wants; the agreement would merely permit antitrust enforcers on both sides of the Atlantic to see and discuss both sets of data. The only "danger" I see is that it would be more difficult for companies to make inconsistent presentations to us and to the EC.
I know that companies sometimes disagree with our assessment of the competitive effects of their proposed transactions. That disagreement should not be construed to mean that we do not fulfill our confidentiality obligations or are not sophisticated enough to recognize and account for the international aspects of a transaction. I think that we have passed those tests and are ready to move on to the next level of cooperation.
In so doing, we can move closer to further steps that will make international antitrust enforcement both more effective and more efficient.