"INTERNATIONAL ASPECTS OF ANTITRUST ENFORCEMENT"
COMMISSIONER ROSCOE B. STAREK, III
FEDERAL TRADE COMMISSION
A CONFERENCE PRESENTED BY
BUSINESS DEVELOPMENT ASSOCIATES, INC.
SEPTEMBER 29, 1995
LOEWS L'ENFANT PLAZA HOTEL
I appreciate very much the opportunity to help give you an "Update on the International Antitrust Climate." I could talk all afternoon on this topic, so I will concentrate on international antitrust cooperation. A number of recent developments have lowered some of the historic barriers to cooperation by enforcers, which I view as an important element in the evolution of free trade on a global scale.
Before I proceed, I should point out that the following remarks are my own and do not necessarily represent the views of the Federal Trade Commission or of any other Commissioner.
It is clear that antitrust is becoming increasingly important to American firms that are more and more involved in international transactions. These firms must be carefully attuned not only to the antitrust laws of the United States but also to the competition policies and antitrust enforcement regimes of the other nations in which they operate. A surprising number of nations are paying heightened attention to the role of antitrust enforcement in keeping their markets free and efficient. Many of the United States' trading partners have either enacted new antitrust laws or strengthened their old antitrust laws and enforcement programs over the last few years -- a trend that shows no sign of abating. Any firm engaged in international transactions ignores these developments at its peril.
As traditional, government-imposed barriers to international trade have fallen or been removed through the GATT, private anticompetitive behavior has come into focus as an appropriate subject for multilateral negotiations and, possibly, a multilateral agreement on rules and procedures.
Meanwhile, we are waiting to see what kind of experience the U.S. will have under the International Antitrust Enforcement Assistance Act, which should spawn antitrust mutual assistance agreements between the U.S. and other nations. This law is expected to foster greater cooperation and procedural harmony between nations that confront antitrust cases of transnational scope. And although the new Act may also generate some convergence in how nations deal with issues such as market definition, entry conditions, and competitive effects, nations are proceeding cautiously -- and therefore wisely -- on any push toward more international uniformity in substantive antitrust law.
II. PROCEDURAL COOPERATION AND CONVERGENCE
What are the important developments in the U.S. and other nations, and what is in store for antitrust cooperation in the future? The answers to this question involve, among other factors, the "revived" EU-U.S. Antitrust Cooperation Agreement, the new U.S.-Canada agreement, the International Antitrust Enforcement Assistance Act of 1994, and the Antitrust Enforcement Guidelines for International Operations published jointly by the Department of Justice and the Federal Trade Commission last April.
- A. The EU-U.S. Antitrust Cooperation Agreement and the New U.S.-Canada Agreement
The EU-U.S. Agreement of 1991 is a model for bilateral cooperation. Some say that the Agreement was "revived" earlier this year when the European Union's Council of Ministers gave its blessing to the Agreement. Council action (as well as advice from the European Parliament) was needed as a result of a decision issued last year by the European Court of Justice.
One issue that received quite a bit of attention during the Council's review of the Agreement was the nature of information that can be shared under the Agreement. Business information obtained in investigations is deemed confidential under both U.S. and EU laws, and those laws do not permit sharing of such information with foreign law enforcement authorities. Article IX of the EU-U.S. Agreement acknowledges those facts.
A slightly different, but no less important, confidentiality issue is whether the antitrust agencies have the authority to maintain the confidentiality of information that we transmit to one another. The answer is "yes." Even on this side of the Atlantic, the U.S. Freedom of Information Act -- despite the promise of transparency contained in its title -- provides ample authority to withhold intergovernmental communications of a law enforcement or deliberative nature from public disclosure.
Given these confidentiality restrictions, some have questioned whether any useful cooperation is possible under the EU-U.S. Cooperation Agreement. Again, the answer is clearly "yes." The notifications, provided for under the Agreement, alert us to each other's interests in particular matters. And although we are prohibited from discussing the confidential business information obtained in our investigations, in appropriate instances we share our views on matters such as jurisdiction, market definition, competitive effects, and remedies. This has helped both sides recognize any potential for conflict in enforcement. Remarkably, there have been few differences in analysis that could have led to such a conflict; in fact, it is fair to say that our approaches to market definition and competitive effects are quite similar.
While I'm on the subject of international agreements, I want to digress for a moment to say a few words about an important step that the U.S. antitrust agencies announced last month -- the conclusion of a new cooperation agreement between the U.S. and Canada that covers not only antitrust enforcement but also deceptive marketing practices. Language and concepts found in the EU-U.S. Agreement of 1991 formed the foundation for much of the new agreement with Canada, which provides (among other things) that U.S. and Canadian enforcement authorities will provide various kinds of notification and investigative assistance to each other, will share information that is not confidential, and will cooperate in seeking relief against deceptive marketing practices.
A significant feature of both the EU-U.S. and U.S.-Canada agreements is the commitment to adhere to principles of international comity in our enforcement work. The FTC and the Justice Department have recently restated and clarified our commitment to comity, not only within the context of the United States' relationships with the EU and Canada, but more widely. That restatement is found in the joint Department of Justice/Federal Trade Commission Antitrust Enforcement Guidelines for International Operations, to which I will now turn.
- B. The Antitrust Enforcement Guidelines for International Operations
These new Guidelines -- which superseded the International Guidelines that the Justice Department issued in 1988 -- spell out principles that will guide the U.S. antitrust agencies' decisions regarding the exercise of jurisdiction over transactions with international characteristics. They discuss subject matter and personal jurisdiction, comity, issues stemming from the relationship between antitrust law and international trade, the Act of State doctrine, the Foreign Sovereign Immunities Act, and other related topics. As one commentator put it, the Guidelines declare that "the agencies are prepared to consider enforcement action whenever the jurisdictional and substantive requirements of the law are met. At the same time, they stress that considerations of international comity play an important role in the agencies' decisions, as well as the priority the agencies give to cooperating where possible with foreign counterparts."
The application of comity balancing factors requires at least some evidence of the relevant market and the effects of the transaction. Focusing on remedy, particularly in a world market case, seems a particularly appropriate place to apply the balancing, because implementation of an effective remedy may be harder for one jurisdiction to achieve than for another, or effective remedies might be found in either reviewing jurisdiction. The comity balancing principles provide a basis for resolving differences among enforcement authorities as to the needed remedy in a case. The consideration of comity factors, even if they revolve around the question of remedy, may come into play at an early stage of a case -- for example, when the agency is deciding whether to even begin an enforcement action.
The International Guidelines appropriately balance a commitment to prudent antitrust enforcement against considerations of comity and other principles of international cooperation. In response to those who have characterized the approach taken by the Guidelines as "overreaching," remember that the government is equally committed to building bilateral and multilateral cooperation with its trading partners. We have done so not only via the Guidelines but also through the enactment of statutes such as the International Antitrust Enforcement Assistance Act.
- C. Expanding the Limits of Cooperation: The International Antitrust Enforcement Assistance Act of 1994
The United States' existing bilateral cooperation agreements establish a respect for the sovereignty of nations and, more important, a commitment to work cooperatively to avoid conflicts of national interest in antitrust enforcement. When conflicts cannot be avoided, those agreements set out the procedures to try to resolve them constructively.
One of the main shortcomings of bilateral agreements was that they could not empower U.S. antitrust agencies to share with a foreign authority confidential information that they obtained in the course of their work. Parties to transactions subject to antitrust review in more than one cooperating country could waive confidentiality, but that was rare. Cartels operating in several countries had the comfort of knowing that the several agencies that might be investigating their activities could not share with each other the fruits of their separate investigations.
I had always thought that state of affairs was unfortunate, particularly with regard to a transaction or course of conduct for which the relevant markets affected are multinational. If anticompetitive concerns arise from the transaction or the conduct, the affected nations' enforcement agencies are increasingly -- if by no means invariably -- likely to view the matter similarly. Of course, even when there is basic agreement on anticompetitive effects, potential conflicts and problems among nations can arise around the fashioning of a remedy. It may be in the parties' interest to waive confidentiality and confer with representatives of the reviewing agencies to discuss the possibility of a "global" remedy.
But it should no longer be necessary merely to rely on the parties to waive confidentiality, because last November we saw the enactment of the International Antitrust Enforcement Assistance Act, which we hope will foster the reciprocal sharing of investigative information among enforcement agencies under certain strict terms. The effectiveness of the new statute will require the building of confidence among all the participants, but I think the time may be ripe for such relationships.
The Act authorizes the FTC and the Justice Department to negotiate and conclude bilateral agreements with other governments through which confidential information could be shared. Those agreements could also provide for the parties to use compulsory process to obtain information for each other. Finally, the agreements must stipulate that the confidentiality of shared information can be assured.
There are three general principles to keep in mind with respect to this Act. The first is confidentiality: much of the difficulty one encounters in reading the Act stems from efforts by the Congress to make sure that the confidentiality of competitively sensitive information is maintained. The second principle is reciprocity, by which I do not mean strict score- keeping in the sense that there must be absolute parity in the honoring of requests for assistance. Rather, reciprocity means the sense that the partners to an agreement are being comparably responsive to each other's requests. Finally, there is the principle of the public interest, which means that neither party to an agreement is obligated to respond favorably to a request for assistance; in fact, the law recognizes there may be some circumstances in which it would be contrary to the public interest to fulfill a request.
Some other points worth noting about the Act include the authority granted to the Justice Department and the FTC to use their compulsory process tools to obtain evidence for a foreign enforcement authority even where the matter in question would not violate U.S. law. Another is that information obtained by criminal grand juries may be made available to foreign enforcement authorities. Finally, although information obtained through the U.S. premerger notification program may not be shared, the Act does allow the FTC and the Justice Department to use their compulsory processes to obtain information in merger cases that then can be shared with foreign authorities.
We have had some preliminary discussions with a number of countries already. Many nations are in the same position the U.S. was in a year ago: in order to enter into agreements to share confidential information, some of their laws may need to be amended, and the business community will need to be persuaded that this is a good idea. We do not underestimate those tasks, having just experienced them ourselves. But our Congress has enacted a good law that fosters enforcement and assures confidentiality consistent with the goals of enforcement.
III. PROSPECTS FOR BROADER INTERNATIONAL AGREEMENT: SUBSTANCE AND PROCEDURE
In recent years, practitioners, scholarly observers, and international organizations have examined the concepts of substantive and procedural convergence among multiple nations' antitrust policies. Over nearly five decades, there have been proposals to take the ultimate step toward convergence -- namely, to develop an antitrust code of uniform global application, perhaps fashioned after the GATT.
Those who favor the process of convergence among the world's antitrust enforcement schemes point out that there is undoubtedly a core group of practices undertaken by direct competitors -- most notably naked price-fixing, output restraints, customer allocation, and market division -- that antitrust authorities recognize as posing the direst threat to consumer welfare and condemn with virtual unanimity.
According to the proponents of convergence, consumers in all nations will benefit if there is harmonization among the world's competition laws, at least concerning the need to detect and eradicate such plainly anticompetitive behavior. But even if nations were to agree on the substantive legal treatment of these acts, their antitrust enforcement agencies could continue to encounter impediments to coordination and cooperation in the conduct of transnational investigations. Much would depend on what rules can be developed and agreed upon to form the necessary discipline.
The anti-convergence viewpoint is represented by those who feel that antitrust enforcement and compliance obligations have gotten too pervasive and complex, leading to international conflicts. Proponents of this position point to two kinds of problems. One is simply the burden of complying with all of the authorities who claim jurisdiction over a transaction. The other involves the possibility that one of those multiple authorities will say "no" while the others say "yes," which would have the effect of prohibiting a transaction regardless of clearances by all but one of the authorities.
There is a perception that some countries do not enforce antitrust policy at a level that recognizes the importance of international trade. A World Trade Organization code on competition policy could provide the mechanism for resolving disputes that arise out of a perceived failure to enforce national antitrust laws. The sticking point is whether agreement can be reached on a sufficiently stringent set of antitrust policies. It is the fear of a "lowest-common-denominator" antitrust code that has made many American policymakers skeptical about pursuing a world code.
Despite what I expect to be continued resistance to any type of global substantive antitrust code, I hope to see a growing consensus -- both within the U. S. government and internationally -- that the overall objectives of trade policy and competition policy should be the same. I also hope to see a lessening of the historic tensions between trade policy and competition policy. And, finally, I hope to see a recognition around the world that one nation's imposition of trade sanctions against another may benefit a domestic industry but will rarely benefit consumers.
Trade policy and competition policy should both aspire to remove obstacles to efficient markets. Of course, the ultimate goal should be to provide consumers with access to an array of competitively priced goods and services. Many have suggested supplanting the system of trade remedies with a more pro- consumer, antitrust-based system -- for instance, replacing antidumping proceedings with antitrust actions under more stringent predatory pricing standards. These fairly sweeping proposals reach far beyond the current consensus on competition policy and its enforcement. A more practical -- and more reachable -- goal may be fostering convergence in competition policy through bilateral and multilateral cooperation in the enforcement of national antitrust laws.
But how far and fast the convergence process should go, and whether a single antitrust code should ultimately reign in most or all of the world's nations, are issues deservedly undergoing intense debate. A report prepared in 1991 by a special committee of the American Bar Association made a number of recommendations for the revision of national laws in order to achieve a number of goals, including deterrence of cartelization, repeal of the immunity granted to export cartels, "harmonization regarding the timing and content of . . . [sovereign states'] various premerger reporting requirements," and an appropriate accommodation between antitrust laws and intellectual property laws. As to whether a global antitrust code should be developed, however, the committee concluded that "[n]o world [antitrust] code initiative should be undertaken at the present time." Has the world changed so much in the last four years that the ABA's recommendation is now obsolete? I don't think so.
The differences in nations' economic development and culture continue to dictate differences among their antitrust systems. Even if a nation with a sophisticated, open-market-based economy and a long-standing tradition of antitrust enforcement shares with a nation lacking those attributes the bedrock goal of maximizing consumer welfare and allocative efficiency, politics and national policy objectives may dictate marked differences between the enforcement priorities of the two countries' antitrust systems.
It may seem obvious to the casual observer that worldwide convergence among national competition policies holds out the long-run promise of making the law easier for multinational firms to understand and obey, which would mean less work for the antitrust enforcement authorities. Nevertheless, my inclination is to agree with the note of caution sounded by the ABA report and others. The great variety among nations' stages of economic development, and the numerous political and policy considerations that make up some nations' competition policies, counsel in favor of gradualism. I believe that the way to build a consensus on antitrust policy and its enforcement is through expanded bilateral and multilateral cooperation in the enforcement of existing laws. Through cooperation, mutual trust and understanding can be built, and thus someday we may have sufficient procedural and substantive harmonization to begin considering whether a consensus on an international agreement can be reached.
What is the U.S. government's response to the interplay between antitrust enforcement and the growing globalization of the economy? The FTC's response is to hold hearings -- starting in just two weeks -- to address the new challenges to antitrust that are posed by the changing face of business, including the movement toward a global economy. The proposed hearings will ask whether adjustments in the implementation of antitrust law may be appropriate in light of changes in competitive circumstances, especially the increasing international competition that U.S. companies face. We hope that the FTC's hearings will provide a forum where we can discuss whether traditional merger policy and other aspects of antitrust should be revisited.