Outline of Remarks by Commissioner Orson Swindle
United States Federal Trade Commission
Before the 8th World Business Dialogue
"Between Competition and Cooperation -
Changing Business-to-Business Relations"
University of Cologne
4 April 2001(1)
Introduction and Disclaimer
Good morning. I am very pleased to have an opportunity to participate in a discussion of a number of issues of international interest.
Some of the topics I will briefly touch on include the U.S. Federal Trade Commission's international enforcement activities -- especially as to mergers and electronic commerce -- and the growth of transnational antitrust cooperation as a way of dealing with anticompetitive activities that have cross-border effects.
I am speaking only for myself, and my remarks do not necessarily reflect the views of the Federal Trade Commission or of any other Commissioner.
In thinking about the international dimensions of the Federal Trade Commission's work, it is helpful to consider the disappearance of political and economic barriers over the past decade that sometimes comes under the rubric "globalization." This phenomenon has presented both opportunities and challenges to the business community as well as to enforcement authorities. Technological advances (PCs and the internet) have magnified those opportunities and challenges.
Globalization has its limits, however. Considerations of time and distance, cultural differences between countries, and differences in government regulation all have combined to maintain the unique identities of national economies. Despite the trends toward globalization, we do not live in a seamless, homogeneous world economy.
Nor has globalization diminished some of the oldest, most familiar economic impulses that we in the antitrust world recognize -- impulses that lead individuals and firms to fix prices, rig bids, divide markets, or abuse a dominant position. If anything, the spate of international cartel cases that the U.S. Department of Justice and its overseas counterparts have brought in recent years shows that the proclivity to fix prices is alive and well on an international scale.
Likewise, we have seen dishonest people "upgrade" from using telephones to using the Internet to conduct schemes that defraud consumers. The FTC is prosecuting more and more of these kinds of cases -- some of which involve violations of privacy laws and commitments.
Advanced communications technologies, especially the Internet, have given rise to business collaborations, including the so-called B2Bs. Interestingly, despite the use of new technology, these collaborations raise the same old concerns about facilitating anticompetitive conduct. If we are not careful, we will have old wine in new bottles.(2)
International Activities at the FTC
Enforcement in Internet and business collaboration cases more and more brings us into contact with foreign enforcement authorities, mirroring the communication and cooperation that have developed among the U.S. and foreign antitrust authorities over the past several decades.
Most of the FTC's international work -- at least in the field of antitrust enforcement -- has largely revolved around a number of very large mergers and acquisitions with international consequences. Some have dubbed these transactions "mega-mergers."
Globalization certainly gave a boost to the merger wave of the last decade, in terms of both number and size. Recent economic conditions have contributed to slowing down the wave somewhat, but we at the FTC are still seeing a significant number of large, complex mergers that we need to analyze. I know that our European colleagues are just as busy.
The 1999 Kartellkonferenz in Berlin addressed, among other things, two challenges that "mega-mergers" present to the antitrust authorities: to determine whether the transaction threatens consumer welfare, and, if it does, to devise the most effective way to prevent or alleviate that threat.
The antitrust analysis of these huge mergers often requires the enforcement authorities to differentiate between, on the one hand, how to gauge a transaction's effects and, on the other hand, how best to remedy those effects. Although a "mega-merger" may combine companies with vast international operations, often the transaction's effects are measurable only in discrete product and geographic markets. Indeed, very few such cases have involved products that are traded in a world market, such as commercial airliners; most "mega-mergers" have involved goods bought and sold in national, regional, or local markets (e.g., automobiles, pharmaceuticals, and most industrial gases).
The global reach of the combined firm's operations, however, can introduce considerable complexity into the process of fashioning a remedy for the merger's harmful effects. This can occur, for example, where production facilities are used for a variety of purposes and serve several geographic markets (e.g., in the Federal-Mogul/T&N and Ciba-Geigy/Sandoz matters).
From time to time entities undergoing antitrust investigations claim that enforcement agencies like the FTC have "moved the goalposts." Presumably by this they mean that we have changed the fundamental rules of analysis in midstream or otherwise unfairly altered the rules of the road. I suspect that European enforcement authorities hear this criticism occasionally as well.
I do not think that this allegation accurately describes what is going on. The "goalposts" haven't moved: the principles that we apply in antitrust enforcement have remained fundamentally unaltered over the decades. What critics label as "moving the goalposts" in fact simply reflects another well-known characteristic of antitrust: that it is remarkably adaptable to shifts in economic conditions stemming from "globalization," from the increasingly "high-tech" nature of the economy, or from some other source. And while the goalposts have stayed intact, the enforcement agencies have taken care to ensure that the remedies they fashion will achieve their stated goal of maintaining competition in the markets affected by the merger.
The FTC's Divestiture Study of several years ago examined the efficacy of remedies in merger cases during the years 1990 through 1994. The FTC significantly refined its approach to merger remedies as a result of this study -- primarily to increase the odds that the remedies will succeed. In my judgment, another such study should be undertaken in the near future, to look at the successes and failures of our merger remedies in more recent years.
One aspect of our merger relief that might bear scrutiny is the FTC's insistence in most of its divestiture orders that the merging firm locate an "up-front buyer" for the divested assets. I believe that this requirement has been warranted in a number of the orders that I've reviewed in more than three years at the FTC, but I would be concerned if the agency became too rigid and unflinching in its insistence on this element of an order.
International Enforcement Cooperation
Just as the U.S. cooperates militarily with its allies in NATO, U.S. antitrust enforcers cooperate with their counterparts in other nations to carry out effective and efficient control of mergers and other potential anticompetitive activities.
Twenty-five years ago this June, the United States and Germany entered into a formal, written agreement committing both nations to cooperate in the enforcement of their antitrust laws.(3)
A highly visible example of cooperation under that 1976 agreement was the recent antitrust review of the "Covisint" B2B venture in the auto industry. The FTC communicated frequently with Germany's Federal Cartel Office, helping the two nations' enforcement agencies to reach a convergence of views and consistency in the two agencies' decisions. Ten years ago this coming September 23rd, the United States and the European Community entered into an enforcement cooperation agreement. As they have in their dealings with the Federal Cartel Office, U.S. enforcers have worked effectively with the EC in numerous merger and non-merger matters over the past ten years.
The America Online/Time Warner merger is a very recent example of effective cooperation between U.S. and European Community antitrust enforcers. This case also illustrates a point I made earlier -- that these firms may be global players, but the markets in which they participate are not necessarily global in scope.
Despite the differences in our respective laws, there is demonstrable convergence in the approaches that we and our foreign enforcement counterparts follow in analyzing mergers and other competition issues. The divergence that occurred in the Boeing/McDonnell Douglas case reflected substantive differences between U.S. and EU laws. In general, however, our laws substantially overlap, as reflected in the large number of cases over the years in which U.S. and foreign enforcement authorities have agreed on the enforcement action needed.
A World Regime?
The convergence that I just mentioned has led some to speculate that an array of national enforcement regimes -- each with its own idiosyncratic qualities, despite convergence over time -- is too burdensome and confusing. Some have suggested that growing economic "globalization" demands a unitary antitrust approach.
I do not share that view. As Joel Klein, the former Assistant Attorney General in charge of the Justice Department's Antitrust Division, said at the 1999 Kartellkonferenz in Berlin, "If it ain't broke, don't fix it." I agree with my predecessor at the FTC, Ross Starek, who frequently expressed strong doubts about the notion of developing a "one-size-fits-all" world antitrust code. The long-term convergence and harmonization of views among diverse nations' antitrust authorities is no doubt beneficial, but I cannot begin to imagine how the world's nations might adapt to a single body of competition law (and, in some proposals, a single world enforcement authority).
The Future of International Antitrust Cooperation and the Challenges We Face
I am glad to note that the international antitrust cooperation that we have seen in recent years seems destined to continue and flourish -- a trend that I encourage.
Although we should see increasing convergence, I do not believe a single set of global antitrust rules will (or should) emerge.
Technological development is likely to have a profound effect on many facets of our lives and on the economic problems we face in coming years. Despite these changes, however, I expect the underlying antitrust principles and concepts that we apply to retain their vitality and to remain a sound basis for policy development.
As they always have, business models will evolve -- sometimes quite rapidly -- in response to technological shifts, as businesses try to remain efficient, profitable, and responsive to consumer preferences. As antitrust enforcers, we will confront the challenge of applying time-tested competition principles to this world of rapidly changing business models -- and of reaching wise enforcement decisions quickly and efficiently. Our primary objective should be to maintain the competitive vigor of markets while not impeding that vigor through our own actions. I am confident that we will be up to the task.
1. These are background notes for Commissioner Swindle's panel presentation, which did not include all of the topics covered by the notes.
On 6 April 2001, Commissioner Swindle delivered similar remarks -- on "Competition Policy and the Transatlantic Agenda" -- at a conference on "Playing Monopoly in the New Economy: Do We Need to Adjust Competition Policy Rules to New Realities?," sponsored by the United States Consulate, Amerika Haus Frankfurt, Frankfurt am Main, Germany.
2. The former head of Germany's Federal Cartel Office, Wolfgang Kartte, made a similar reference about ten years ago to refer to the then-new form of collaboration called the "strategic alliance" -- "alte Hüte mit neuem Etikett."
3. This was the first bilateral antitrust cooperation agreement between the U.S. and another nation.