Commissioner Mozelle W. Thompson
U.S. Federal Trade Commission
International Electronics Manufacturers and Consumers of America
Workshop on International Antitrust Policy
February 10, 1999
Thank you for inviting me to address this interesting workshop. I'm very happy to be here today with my colleagues from Japan and the EU. Although I am sure that many of you came expecting to hear about our differences, I'd like to note that we have much in common with our fellow competition agencies. We share many common views about the importance of competition and the benefits it generates for consumers, and our staffs are working very hard to accommodate the influx of merger activity. But there are some areas where the FTC is particularly active, that give us different insights into what is occurring in some industries and markets.
As most of you know, this is an unprecedented time in American economic history. Low interest rates and unemployment, coupled with efficiency gains and job growth have boosted US financial markets and kept our economy strong despite adverse conditions across the globe. This activity is reflected in the agency's activities -- we have never been busier at the Commission. 1998 capped our 5th straight year of increases in merger filings, with mergers exceeding $1 trillion in fiscal 98. In FY 98 the FTC and Antitrust Division processed a record 4,728 Hart-Scott-Rodino filings -- an increase of 28 percent from FY 97 and a threefold increase since 1991.
Some of these transactions have been very visible, and many of the most notable transactions have been cross-border combinations. But, below the surface, thousands of other transactions have taken place including smaller mergers, and the formation of limited liability corporations (LLCs) or joint ventures.
Changing global economic conditions have also been a factor in the continuation of the merger wave, as firms seek to expand their global reach and attempt to achieve greater economic stability by partnering to obtain greater access to foreign markets. It is in today's "real world" market context that we view a history of international antitrust enforcement (the relationship between and among two or more countries) has been marked by stages:
1) Conflict (between enforcers)
3) Convergence (of enforcement and rule of law)
The countries that have competition policies, to a great extent, transition through these stages. And where they stand depends a great deal upon their views of markets and economic policy.
Conflict, cooperation, and convergence are not mutually exclusive relationships in the field of international antitrust enforcement. In fact, recent experience has shown that these three phenomena can occur almost simultaneously in relationships between U.S. and foreign antitrust agencies. And areas of conflict have developed into new forms of convergence over time.
But recent trends toward global markets has led to greater cooperation in the field of international antitrust enforcement, and this cooperation has been instrumental in ensuring that consumers benefit from competition. That being said, in my view we are not yet at a point where there can be broad-based convergence on international antitrust enforcement. It is not the right time for a "one size fits all" approach, and we must instead recognize and respect the need for countries to adapt to market globalization in their own measured way. Otherwise we run the risk of establishing a new global regime that is not flexible enough to change as countries respond to global economic changes.
Although many American lawyers might not believe it, the U.S. was not the first country to enact antitrust laws. But for many years it was perceived as the most aggressive antitrust enforcer. Some have argued, with a bit of justification, that at times America may have overreached -- even to the point of seeking to remedy harmful effects in the US of behavior occurring outside the US--what we commonly call "extraterritoriality"
I won't dwell the problem of "extraterritoriality"other than to suggest that, in the past, these U.S. enforcement efforts were seen by other countries as infringements on their sovereignty and, in some cases, challenges to their economic policies as well. Some countries responded by enacting so-called "blocking" statutes designed to thwart U.S. antitrust investigations and enforcement in their countries (by, for example, prohibiting its citizens from cooperating with U.S. antitrust investigations through the provision of documents or other information).
Fortunately, international antitrust enforcement moved beyond this type of behavior when the Organization for Economic Cooperation and Development (OECD) sought to further the adoption and enforcement of antitrust policies through voluntary cooperation. In 1967, the OECD adopted a "recommendation" that members:
a) timely notify other members when the latter's "important interests" are affected by an investigation or enforcement action;
b) share information (to the extent permitted by domestic law) to permit the member whose interests are affected to comment to, and consult with, the proceeding member;
c) coordinate parallel investigations where appropriate;
d) assist one another (to the extent permitted by domestic law) in locating and obtaining information located in each other's territory; and,
e) addressing anti-competitive conduct affecting its important interests but occurring outside its territory by requesting the authorities in the country where the conduct occurs to take action ("positive comity").
Since then, the US has also entered into separate bilateral cooperation agreements with Australia, and Canada. These agreements emphasize the need for timely notification of antitrust enforcement activities to allow for communication and consideration of the important interests that might be affected by antitrust enforcement. The U.S. has also had a cooperation agreement with Germany since 1976. These actions have also fostered more regular contact among antitrust enforcement agencies, and the relationships have evolved beyond pure conflict avoidance to cooperation in achieving complementary enforcement.
The European Community and the U.S. reached a bilateral agreement in 1991 based on a recognition that, among other antitrust policy concerns, the EC's recent adoption of merger control would result in major mergers being reviewed by both EC and U.S. authorities.
IV. Why Cooperation?
Cooperation among antitrust agencies helps us to successfully enforce our laws -- that is, to remedy harm to U.S. commerce and consumers -- particularly where actors, information and assets are located outside the U.S. or where other enforcers are scrutinizing the same matter. Where our agencies' enforcement reach is limited by US or foreign laws, cooperation with foreign enforcers may help extend our reach.
To the extent that most of our major trading partners now enforce competition policies similar to our own, we can turn to them (through the doctrine of positive comity) to seek remedies for foreign anti-competitive actions affecting U.S. commerce. Also, mutual legal assistance treaties (MLATs) and mutual assistance agreements under the International Antitrust Enforcement Assistance Act will also further our enforcement goals with the assistance of foreign agencies.
It also helps all of us to avoid or minimize conflict between the U.S. and other countries in the enforcement of antitrust laws; conflict that results in duplication of effort, wasted resources and unclear guidance to the market. For example, some have observed that the Boeing/McDonnell Douglas case could have resulted in greater US/EU conflict, if not for the communication and cooperation that took place between EC and US antitrust agencies. It is rare that U.S. and foreign authorities differ in the analysis of a case. In other words, the parties under scrutiny hear the same story from the authorities. And, in some cases, it encourages common approaches to antitrust analysis ("convergence")
V. What does all this mean for where we are now?
Despite the massive increase in workload, I think the Commission staff does a remarkably thorough job of evaluating merger activity, and working with the parties to craft solutions when we must take action to remedy anti-competitive behavior. I am sure my colleagues here today would agree, for example, that many mergers, including mega-mergers, can actually benefit consumers and the economy by making those companies more efficient and effective global competitors. As a result, in 1998, we reviewed nearly 5,000 filings; 46 went to 2nd request and only 26 resulted in commission action by a lawsuit or consent order.
What's more important, however, is that the changing marketplace has caused us to adapt the way we do business at the FTC. We have increased our understanding of what is driving markets, including the fundamentals like price, equity, earning potential, return to shareholders and market/industry health. The Agency has also increased the sophistication of antitrust analysis to adapt to changing business environment. For example, we have issued guidance on the formation of LLCs and we are in the process of developing joint venture guidelines with the help of the Antitrust Division.
VI. High-Tech Competition Policy
Nowhere is this challenge clearer than in the area of great interest to many people here--high-tech industry. This industry is often viewed as difficult to understand because the products are complicated and because they exhibit market characteristics less prominent in other industries. Characteristics such as:
1) Emphasis on Innovation
2) Importance of Intellectual Property 3) Network Effects & Standards
4) Information Effects
As we get closer to blending computer technologies with entertainment, competition authorities must be not only concerned about market concentration and cross border transactions, but also vertical competition issues as companies expand across traditional industry lines..ie the same companies which produce equipment begin to develop and distribute content.
VII. Is Convergence the Answer?
So given the fact that even our agency is changing so rapidly, does it make sense for the US and its global partners to come to terms on all aspects of competition policy? Not at this stage. The examples of cooperation I have cited demonstrate that despite the fact that there are some threshold and other differences among the antitrust laws of the world, it is possible to launch complementary enforcement actions. And, in some areas, we have seen significant convergence in the analysis of markets, competitive effects, entry and entry barriers -- the "stuff" of antitrust analysis. In other words, antitrust enforcers around the world increasingly speak the same language.
A good example of analytical convergence is the European Commission's issuance of market definition guidelines in 1997 which are very similar to the market definition provisions of the 1992 Horizontal Merger Guidelines followed by FTC and DOJ.
There is also more that can be done through cooperation. For example:
1) Information Sharing: Countries should consider enacting laws like our International Antitrust Enforcement Assistance Act of 1994 and engage us in negotiations to enter into mutual enforcement assistance agreements that will let us gather and share confidential information with one another.
2) Using Positive Comity: In limited circumstances it may be useful to apply the doctrine of positive comity whereby one country refers a complaint of anti-competitive conduct to the authorities of the country in which that conduct takes place and those authorities investigate and take whatever enforcement action is appropriate. Positive comity is an element of the OECD Recommendation and contained in our agreements with the EC and Canada. Last year, the US and EC entered into a separate agreement that elaborates on the circumstances when positive comity will be deemed appropriate.
3) Implementation of Existing Agreements: OECD Member Countries should also do what is necessary to implement a new OECD Recommendation adopted just last year to cooperate in attacking hard core cartels. This will go a long way toward freeing markets to competition that benefits consumers and business alike.
But, I don't believe that the policymakers of our respective governments have yet reached the point where they could agree on how to resolve all the differences among our antitrust laws. Current laws defining abuse of dominant position, anti-competitive vertical arrangements, and illegal boycotts, for example, vary considerably from country to country. I also don't believe that there is a sufficient commonality of views on competition policy to support multilateral rules through, for example, the World Trade Organization. Nor do I think dispute resolution by the WTO is a promising means to address conflicts over the proper implementation of antitrust rules.
I sense that we are at a starting point for a continuing dialogue on convergence - but not with the goal of achieving a uniform rule of law. An international code, once adopted, may be more difficult to change after common principles are adopted - if indeed we could ever reach common principles in a world with such a variety of competition approaches.
So, I believe we can continue to learn a good deal from each other by understanding not just our differences in approach and in levels of enforcement, but also why the differences occur. Indeed we may even find that certain core types of conduct by single firms or collections of firms, denying market access, violate the law of many if not most jurisdictions.
But although there has been remarkable progress in recent years in the area of procedural coordination and cooperation, we are not yet ready for a comprehensive, internationally negotiated competition code. The important thing is to continue to take small but practical steps to learn more about each other, while minimizing the extent to which divergence of antitrust rules from country to country impair the orderly development of international commerce.