The National Policy Forum Trade Megaconference on Trade and the Economy: Reasserting America's Competitive Edge
I appreciate very much the opportunity to speak to this distinguished audience. I plan to focus my brief remarks on the area of international antitrust cooperation. A number of recent developments have lowered some of the historic barriers to this cooperation, 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. President Clinton has called for the inclusion of trade and competition policy on the agenda for the next GATT round.
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.
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. It is those practices that diverse nations' antitrust laws condemn with virtual unanimity. Proponents of convergence conclude that 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 such acts, their antitrust enforcement agencies could continue to encounter impediments to coordination and cooperation in the conduct of transnational investigations.
So, clearly some observers feel that anticompetitive conduct has sanctuaries that need to be brought under some kind of international discipline -- as with other matters under the GATT. Just as clearly, others feel that antitrust enforcement has gotten too pervasive and complex and can lead to international conflicts.
As to the former perspective, much depends upon what kind of rules can be developed and agreed upon to form the necessary discipline. As to the latter concern -- that antitrust enforcement and compliance obligations have gotten too pervasive and complex -- there are really 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 authorities will say "no," which would have the effect of prohibiting the deal regardless of clearances by the other authorities.
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 United States 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.
In my view, 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 someday a consensus on an international agreement might be reached.
As far as procedural convergence is concerned, there have been some important developments in recent months, including last month's unveiling of the joint Department of Justice/FTC Antitrust Guidelines for International Operations, moves in the European Union to complete ratification of the antitrust agreement between the U.S. and the EU, and last November's passage of the International Antitrust Enforcement Assistance Act of 1994.
The new law 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.
It has often been said that one of the main shortcoming 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. The new law provides a solution by authorizing the FTC and the Justice Department to negotiate and conclude bilateral agreements for sharing confidential information with other governments. 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 information shared can be assured.
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 this fall 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 some adjustments in how antitrust law is implemented may be appropriate in light of changes in competitive circumstances, especially the increasing international competition that U.S. companies face. The hearings will address whether antitrust should be more open to arguments that it would be better to allow a particular merger than to wait and see which firms survive in the face of foreign competition or domestic overcapacity. The FTC's hearings will provide a forum in which to discuss whether traditional merger policy and other aspects of antitrust should be revisited.