Internationalization of competition policy observations from a European practitioner's perspective.
The debate on internationalization seems to be influenced by a limited number of very substantial cartel and merger cases that have hit the front pages of the newspapers. Throughout the conference, the same cases (Vitamins; Boeing/McDonnell Douglas; GE-Honeywell) have been consistently referred to. This may detract from the fact that the vast majority of matters handled by antitrust agencies are innocent and often local in nature. Within the European Union (EU), for instance, a very high percentage of merger cases is cleared in the first phase of the investigation. At a recent conference held in Brussels, Commissioner Monti underscored this proposition by referring to the 18 prohibitions since the entry into force of the Merger Control Regulation (Reg. 4064/89) in 1990 and the fact that no more than approximately 6% of all notified cases required remedies in order to be cleared. (1) Hence, well in excess of 90% of all notified merger cases within the EU have been approved without requiring any agency interference. The picture is no different for the restrictive practices cases (i.e., cases governed by provisions such as article 81 or 82 of the EC Treaty and sections 1 and 2 of the Sherman Act). Compared to the number of notifications submitted to and cases investigated by the EC Commission, an absolutely minimal percentage is hit with a prohibition decision.
This is a factor that the internationalization debate cannot ignore. Any assessment of the costs and benefits of antitrust enforcement and the internationalization of this process must take due account of the fact that at present considerable resources are spent by governments and businesses on innocent cases. (2) In order to minimize these (unnecessary) costs, the internationalization process should assist the enforcement agencies in focusing on matters that are relevant (i.e., the kind of matters that are most likely to require agency interference) and should contribute to the reduction of unnecessary costs caused by the enforcement process.
In order to identify the areas where internationalization may assist in this respect, it is useful to distinguish between merger control and restrictive practices. Each of these areas has its own dynamics. Within these two areas, a further distinction can be drawn between substantive and procedural aspects. As will be discussed below, internationalization will be more readily useful with regard to procedure and may have less to offer in respect of the substantive aspects of the law.
RESTRICTIVE PRACTICES Turning to restrictive practices, it is not self-evident in which areas internationalization may truly contribute. Substantive harmonization seems an obvious candidate, but may in practice have little to offer. There exists already a fairly unanimous view on the type of practices that should, as a minimum, be caught by the antitrust prohibition: traditional horizontal collusion (on prices, output, allocation of markets or customers) and the abuse of monopoly power. The numerous countries that already have antitrust legislation in place would typically possess the necessary legal instruments to challenge and combat such practices. Attempts to achieve substantive harmonization in areas other than these hardcore cases would seem to be fruitless. The principles governing such fields as distribution or licensing vary to such an extent between countries that it is illusory to assume that substantive harmonization could be achieved within the foreseeable future by means of internationalization. This could be a longer-term objective at best.
From a practical perspective the reasons for not placing substantive harmonization of restrictive practices high on the internationalization agenda are rather straightforward.
1. Enough countries have antitrust legislation in place rendering it possible to combat hardcore antitrust problems in respect of restrictive practices. Such countries will be able to react even if the antitrust violation is engaged in outside their jurisdiction, but generates anticompetitive effects within their jurisdiction. It would not serve much purpose (3) to go through burdensome World Trade Organization or similar international lawmaking forums to cause the remaining countries to enact similar legislation. Such legislation is strictly speaking only indispensable if the consequences of the restrictive conduct are felt only in the country concerned. Whether a country wishes to combat such a purely internal situation could be left to its own discretion. (4)
2. The available antitrust legislation would typically cover (as a minimum) the hardcore infringements. There would not be much practical merit in attempting to streamline the wording of the relevant legal provisions. Again, the investment required to achieve such streamlining at an international level would seem to outweigh the benefits of more harmonized legal provisions or wording. The primary concern should be that the provisions enable the antitrust enforcers to combat hardcore cases. The fact that the wording of the provisions (and even the legal test) is not identical seems less important.
3. The substantive differences are greater in areas other than the hardcore antitrust cases. One illustration is the predominance of market integration considerations within the EU in comparison with other jurisdictions. Short to medium-term attempts at an international level to harmonize substantively in such areas are bound to fail. In any event, it is difficult to conceive that such substantive harmonization would be sufficiently detailed to have genuine practical relevance.
Internationalization of the procedural aspects pertaining to restrictive practices should logically be confined to the areas where there is a sufficient degree of overlap in terms of the substantive antitrust requirements. On that assumption, procedural internationalization should focus on the hardcore infringements. It cannot be denied that, in hardcore cases with cross-border impact, enforcement can benefit greatly from increased cooperation. The most important theme in this respect is probably the exchange of information between antitrust agencies. From a practitioner's perspective it seems indispensable that any international effort in this respect goes in the direction of a balanced and all-encompassing legal regime, paying due respect to the interests of all parties involved. The obvious and undeniable interest of the antitrust enforcement agencies to obtain relevant information in a flexible and timely manner should be given no greater weight than the interest of businesses to have their business secrets and rights of defense respected. Also the interests of complainants should be addressed. As a minimum, the information exchange procedures should be transparent and the flow of the information traceable. Harmonized procedures to guarantee confidentiality should be set. There should be clear rules governing the use that can be made of the information.
Cooperation in terms of on-the-spot investigations or requests for information addressed to local companies can contribute significantly to the effectiveness of antitrust enforcement. However, also in these areas precise and transparent procedures are an absolute minimum requirement.
MERGER CONTROL As to merger control, the position is somewhat different. With the recent EU Commission proposal (5) it is clear that substantive harmonization is bound to become increasingly more difficult. While there were early suggestions to switch from a dominance-based test to the substantial lessening of competition (SLC)-test (U.S. style), (6) this idea has now been abandonned. Efficiencies present another obvious example. The recent EU proposals (7) do not categorically exclude efficiencies from merger control review, but the concept is defined in a manner that is different from that in the U.S. If the present EU proposals are adopted, it is fair to assume that far-reaching substantive harmonization in the field of merger control will not be achievable within the short to medium term. This does not mean that convergence in terms of end results is necessarily excluded. (8)
The consequences of the lack of substantive harmonization should not be dramatized. While practitioners undoubtedly prefer to work with a unique standard of review, they experience more practical problems with certain procedural aspects of merger review. There are a number of recurrent procedural problems, such as:
the possibility to notify when only a letter of intent or heads of agreement have been signed; (9) the scope (both substantively and geographically) of the prohibition to implement a merger pending its review (the so-called jumping-the-gun problem); (10) the timing of the review and decision-making process; (11) the procedure governing remedies. (12)
These are areas where the absence of internationalization of merger control is causing unnecessary costs and delays.
An issue requiring specific focus in the context of any internationalization efforts in the procedural area is that of due process and checks and balances. European merger control has attracted some criticism as the Commission has sometimes been perceived as investigator, jury and judge. The Commission has seized the occasion of the ongoing review to address this criticism. It is important to draw appropriate lessons from the European experience. Any procedural harmonization should therefore provide for identifiable built-in checks and balances.
If there is a consensus that internationalization efforts in the procedural area are bound to be more effective in the short to medium term than attempts to harmonize substantive standards and wording, the next issue is the selection of an appropriate forum. Given the nature and complexity of these procedural issues, one may wonder whether a heavy multigovernmental forum is truly appropriate. Much is to be said for an approach whereby a limited number of antitrust jurisdictions with considerable experience attempt to elaborate and implement a balanced proposal. (13) Any practitioner will admit that efficiency in antitrust enforcement would be greatly enhanced if on the procedural issues described above (both in relation to restrictive practices and merger control) a considerable degree of procedural cooperation/harmonization could be achieved between such jurisdictions as the U.S., the EU, (14) Japan, Australia and Canada. This limited group shares similar experiences and faces similar enforcement problems so that the chances of arriving at a balanced and sufficiently precise common approach should be fair. The outcome of this process could then potentially serve as a springboard for discussions in a broader setting.
(1) Mario Monti, Merger Control in the European Union: a Radical Reform, European Commission/IBA Conference on EU Merger Control (Brussels, November 7, 2002).
(2) To my knowledge these costs have never been quantified. As competition law tends to become more complex, these costs (in terms of, e.g., salaries of antitrust enforcement agents, management time, legal fees, fees of economists and other consultants) are bound to increase.
(3) In this respect, the enactment of antitrust legislation would not make much difference in the absence of credible antitrust enforcement. Hence, the mere exportation of the existing antitrust concepts to countries that have not enacted this type of legislation does not serve much purpose in and of itself.
(4) Given this feature, the dynamics governing internationalization in the area of antitrust can be distinguished from the dynamics in areas such as human rights or arms reduction.
(5) Proposal for a Council Regulation on the Control of Concentrations Between Undertakings, COM (2002) 711 final.
(6) Green Paper on the Revision of Council Regulation (EEC) No. 4064/89, COM (2001) 745/6, no. 160.
(7) See, e.g., draft Commission Notice on the appraisal of horizontal mergers under the Council Regulation on the Control of Concentrations Between Undertakings, part VI (not yet officially published).
(8) The Explanatory Memorandum to the proposed amendments to the EC Merger Control Regulation (COM (2002) 711 final) states, for instance, that "the dominance test and SLC have produced broadly convergent outcomes"
(9) The advantages offered by such a possibility in one jurisdiction are reduced significantly if the transaction is also notifiable in other jurisdictions that require definitive and signed agreements and that impose a suspension requirement not strictly confined to the jurisdiction concerned.
(10) Practical experience shows that this is an area where there continues to exist considerable legal uncertainty. In particular in jurisdictions with more recent antitrust legislation, it proves often difficult to obtain clear guidance on the precise scope of the mandatory suspension requirement. This is particularly problematic if the suspension requirement is given a broad geographic scope.
(11) The significance of this issue is acknowledged in the Best Practices on Cooperation in Merger Investigations recently issued by the U.S.-EU Merger Working Group (see, nos. 4-5).
(12) The Best Practices on Cooperation in Merger Investigations (no. 14) issued by the U.S.-EU Merger Working Group underscores the importance of international cooperation in respect of remedies and contains some first proposals to avoid inconsistencies in the remedies accepted by different reviewing agencies.
(13) This suggestion does not amount to old-fashioned North Atlantic thinking (observation made by one of the commentators during the conference). One has to be pragmatic and realistic. Procedural cooperation/harmonization not involving one of the key antitrust jurisdictions reduces its benefits. Adding jurisdictions to the discussion that lack the same experience is bound to prolong the negotiation process and to produce a less-effective and less-focused end result. In order to avoid unnecessary enforcement and transaction costs, short to medium-term procedural harmonization by a limited number of key jurisdictions (notably those most frequently involved in global or substantial cross-border cases) is to be preferred over a longer-term process that may include a wider range of smaller jurisdictions and/or produces less detailed harmonization results.
(14) With the enlargement of the EU, such a limited group would cover soon a great number of the jurisdictions that are typically involved in the important cross-border cases concerning restrictive practices or mergers.
FRANK M. K. WIJCKMANS, Attorney, Brussels.
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|Author:||Wijckmans, Frank M.K.|
|Date:||Dec 22, 2003|
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