Harmonization of International Competition Laws: Pros and Cons

Since the failure of the Havana Charter in 1947 till the success of the combined efforts of leading antitrust authorities against mighty Microsoft, the antitrust regime has witnessed several ups and downs. Auf jeden Fall the journey was not an easy one. Moreover now antitrust regime is standing at international crossroads and is wondering about its future direction. Today, at this crucial juncture the antitrust world is confronted with several dilemmas simultaneously. Choices are to be made between national welfare or global welfare, national autonomy or global regulations, the efficiency factor or the fairness view, national champions or global champions, collective efficiency or collective inefficiency, WTO or ICN, the US model or the EU model and so on.

It is widely believed among experts that to overcome these dilemmas, the world needs some truly unified international antitrust framework, which would enable the international community to achieve optimal product mix incorporating the best from all options and through such optimal product mix the global community can enjoy to a large extent advantages that competition policy has to offer. In this direction I have examined the feasibility and viability of unifying international competition policy in this work. Additionally, as the title suggests I have listed out advantages and disadvantages of such moves.

Efforts for harmonization of competition laws began as early as in 1948. Till date there are several binding and non-binding arrangements made in the direction of harmonization. The WTO and the EU for effective coordination in antitrust area have launched recently new initiatives. International Competition Network, a forum for active interaction among antitrust officials, even though non-binding in nature is doing considerably good work. I believe such confidence building initiatives among nations would help in arriving at some amicable solutions, agreeable to all nations. Chapter 8 focuses on various such initiatives taken in the direction of harmonization.

In the concluding chapter, I elaborate further on need of having a unified antitrust regime under a contemporary scenario. Recommendations and views of experts are also presented. At the end I discuss my views about feasibility of having a truly unified antitrust regime in foreseeable future and other possible alternative measures that might help in achieving harmonization in future.



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Chapter 2.3, Enforcement Dilemma: Domestic Policies and Global Market:

‘As markets integrate across national borders, the logic of purely national antitrust policy breaks down.” ‘ Mit dem Übergang von einer außenhandelsfokussierten (Fokus auf nationale Märkte) zu einer wettbewerbsfokussierten Perspektive (Fokus auf supranationale Märkte) bedarf auch die internationale Wettbewerbsordnung einer wettbewerbspolitischen Dimension.” Simultaneous existence of domestic policies with national jurisdiction and global markets with global reach calls for urgent creation of some mechanism to cover cross border competition problems. National competition can effectively deal with cross border disputes only when foreign entities have de facto presence and substantial stake within its jurisdiction and that too only when national law apply. Antitrust pundits call for some form of international mechanism because they believe national laws suffer form inherent deficiency in dealing with cross border disputes, ‘when foreign supplier does not have a commercial presence.”.

Existing framework of national laws with some collaborative international agreements very often fails to check inter country anti-competitive behavior and to be precise, cross border spillovers. Additionally, rules and procedures available under existing arrangements i.e. cooperation agreements are cumbersome and very often pose administrative problems. Compliance of such rules necessitates additional transaction costs.

Global Marketplace has led to emergence of international cartels. Actions against such offenders may take place in more than one jurisdiction. Big firms may enjoy dominant position in markets of more than one country and circumstances may require thorough simultaneous investigation by antitrust authorities from various countries. Merger between domestic company and foreign entity might need approval from different authorities individually. Such situations pose additional administrative burden on authorities and needless to say additional financial burden for both authorities as well as firms. Creation of any globally valid antitrust mechanism will definitely lead to large financial savings. Taxpayers’ precious money could be used for other constructive purposes.

2.4, Need for Unifying Global Competition Policy:

Justus Haucap et al list out various reasons for harmonization of competition policy.

In the absence of a globally valid antitrust regime, companies having presence in various countries have to deal with antitrust authorities of each country individually. Such additional administrative task reduces benefits that could be realized through international presence. One of the prime aims of competition policy is maximization of consumer welfare. Nowadays consumers in almost all countries are badly affected irrespective of their country of presence due to existence of hard-core cartels worldwide. Moreover consumers in developing countries are more prone to such exploitation due to absence of an effective mechanism to deal with such eventualities. (see Appendix V ) As mentioned in earlier discussion, national competition authorities are entrusted with the prime task of ensuring national welfare. Some policies may enhance domestic welfare to the detriment of global welfare. ‘Allowing national firms to form an export cartel may permit the domestic industry to raise prices on export markets and improve the country’s term of trade.” Such behavior of national antitrust authorities are harmful to international of global consumers, as they end up paying high prices for goods and services.

In addition to the above-discussed reasons there are numerous benefits of unifying international competition policy. I have discussed them in detail in forthcoming chapter.

2.5, Need for International Dispute Settlement Mechanism:

‘It can be said that competition law is national, while markets are increasingly becoming global. Yet there is no international antitrust code. The key question is how to deal with transnational competition issues in a global economy. How can competition authorities manage marketplace conduct that takes place in one nation, but has a harmful effect in another?”

-Konrad von Finckenstein (2001).

These words of Canada’s top competition law official, elaborate on tension between national competition laws and global anticompetitive actions. On the one hand authorities are entrusted with task to ensure enforcement of national competition laws within national territory. On the other hand, simultaneously there are incidences of cross border anticompetitive actions such as exploitation from international hard core cartels occurring within national territory but which are beyond purview of their national laws. As European Commission’s report describes,”(…) there are more and more competition problems which transcend national boundaries: international cartels, export cartels, restrictive practices in fields which are international by nature (…) abuse of a dominant position on several major markets (e.g. the Microsoft case).”.

Such incidents call for urgent formation of an international dispute settlement mechanism. Only an effective dispute settlement mechanism can curb such incidents and also work as a deterrent factor. Justus Haucap et al examine need and also viability of setting up an institutional framework namely an International Competition Court to deal with inter country disputes. They further argue that before such an arrangement is made, it is imperative to have substantial harmonization of competition laws if not essentially a unified international competition policy.

Some experts are against dispute settlement mechanism per se. Massimiliano Montini says, ‘ (…) neither the DSU nor a similar dispute settlement regime, empowered to render binding judgments on the Parties, should be used to resolve trade and competition controversies. This is because most countries normally find the typical trade and competition issues as being closely linked to their national industrial policies, and are therefore normally not willing to relinquish their sovereign rights in this area.”

Looking at differences in aims and objectives of competition policies around the world, it seems impossible to have a globally valid international competition policy in the near future. ‘ the scope for conflict over international antitrust measures can also be reduced without full harmonization and centralization of competition policy.”There are other modalities of cooperation among antitrust authorities, which require less harmonization and can also reduce conflicts to some extent, such as unilateral, bilateral and multilateral solutions. In chapter seven I have dealt with these modalities in detail.