Handout 8

Seminar 8 (29 November) Competition Law and WTO Law

 Efforts to insert competition law provisions into the WTO agreement started in the mid 1990s but a decade later efforts were put on hold. Absent a systematic set of provisions, and in light of the global impact of certain anticompetitive practice the question turns to how to manage such activities as well as to why global agreement is difficult. In the seminar we look at two case studies, the TelMex ruling (on which Fox is optimistic, but Mavroidis and Neven are less so) and the case on export cartels (Malorie Schaus, 2nd year researcher has kindly agreed to present on this topic).  And we review some of the literature on the debates on global antitrust.

 Reading

 One from this list (case studies)

Neven and Mavroidis ‘El mess in TELMEX: a comment on Mexico measures affecting telecommunications services’ (2006) 5(2) World trade Review 271

Fox ‘The WTO’s First Antitrust Case’ (2006) 9(2) Journal of International Economic Law 271

Martyniszyn ‘Export Cartels: Is It Legal to target Your Neighbour?’ (2012) 15(1) Journal of International Economic Law 181

 The Telmex Report is available on the WTO website, if you wish to take a look, key passages from page 138, esp after 190.

Report of the Panel on Mexico – Measures affecting Telecommunications Services, 2 April 2004 (WT/DS204/R)

 One from this list (relfections to trade/competition)

Anderson and Holmes Competition Policy and the Future of the MultilateralTrading System University of Sussex Discussion papers in Economics No.84 (2002) (available online)

Drexl ‘International Competition Policy After cancun’27 World Competition 419 (2006)

Gerber ‘Competition Law and the WTO: Rethinking the Relationship’ (2007) 10(3) Journal of International Economic Law 707

3 comments on “Handout 8

  1. Jotte says:

    Who would be in control if competition policy would become part of the WTO? Currently, operational authority for WTO compliance issues is vested with trade policy officials. This is the case for example within the European Commission. Would it then be necessary to transfer competition competences to trade officials if the WTO would be granted competence in this domain? Would the WTO be granted supervisory powers of behaviour of undertakings in the Member States? Or would competition authorities become agents for the enforcement of WTO rules?
    Somehow all these questions seem to provide major objections to the implementation of competition policy at the WTO level. On a fundamental level the WTO and competition policy seem to be incompatible. If we accept that competition policy is not about protecting the interests of competitors but promoting the process of competition, then, from the eyes of competition officials, the WTO trade negotiation process is corrupted. In WTO context, the process of opening up markets is interest driven whereby governments mostly act as advocates of domestic producers. Thus competition officials worry that, in the process, competition policy may be corrupted and used to protect the interests of specific firms (Schott 2000, The WTO after Seattle).
    Perhaps one way to look at the intersection between competition law and WTO is along the lines of the intersection of competition law and regulation. Last week we discussed that a way to align these two fields is by considering whether regulation is doing its job or not. If not, competition law may play a supervisory role in remedying any anticompetitive effects that are insufficiently addressed by the regulatory regime. One relevant test in this respect would be whether the regulatory authority is sufficiently independent and actively and coherently pursuing its objectives. If applying this rationale to the WTO, the WTO would then be provided with supervisory capacities with respect to the independence and effectiveness of competition authorities rather than any substantive and enforcement competence in the field of competition law. If competition authorities are independent and enforcing competition interests to a sufficient degree, there is no role for the WTO. If they are not functioning, WTO rules could kick in and be used to force Member States to introduce effective competition regimes with the threat of trade sanction in case of non-compliance. In addition it would make sense to provide the WTO some supervisory capacities in situations where regulatory measures unnecessarily protect incumbent interests. In these situations competition authorities, outside of the EU, normally have no competence to act. So again, the WTO could act as a complementary and external supervisor to address situations where regulatory processes are captured by domestic incumbents and national competition authorities, even if they are sufficiently independent, cannot address the situation.

  2. Chloé says:

    To start with, competition law and WTO law constitute two different fields of law that are hard to combine. The former aims at protection, in the narrower sense, consumer welfare and, in the broader sense, national/public welfare whereas the latter “operates primarily as a forum for negotiating market access” (Gerber). The two regimes have very different goals and logic and this constitute, inter alia, one reason (if not the main reason) why the inclusion of a competition law regime in the WTO is very difficult and has not been successful in the last years. Other reasons could, nonetheless, be evoked.
    Competition rules and WTO rules do not target the same legal persons. Competition law targets the practices, behavior, and measures distorting competition of private companies. WTO law targets the measures of WTO Members that restrain trade. Having regard to these different targets, the inclusion of competition rules within the WTO legal regime would require important modifications and reforms at the WTO which generally deals only with public bodies. A counterargument or at least a nuance could be introduced here. If WTO does not prohibit per se dumping, it allows WTO Members, under strict conditions, to impose antidumping duties. WTO antidumping rules thus allow a WTO Member to counteract the behavior of a private company of another WTO Member and more particularly to act against the prices set by a private company. The antidumping duties are paid by the importers. Hence, some elements of private companies’ behavior are already taken into consideration under the WTO legal regime.
    Another reason regarding the difficult inclusion of competition rules in WTO law, is the absence of a worldwide concept of competition/antitrust law. As emphasized by Gerber, there are many competition laws across the world with different concepts, different goals and different means of enforcement. Goals of competition law for example can be multi-faceted: the protection of consumer welfare, the integration of national markets, the protection of domestic firms’ development from powerful foreign firms, etc. (Gerber). In this respect, it seems very difficult (if not impossible) to find a compromise satisfying all WTO Members, “aligning” their interests (Gerber). In particular how to find a satisfactory compromise between developed and developing countries? There is indeed a fear that the inclusion of competition rules would predominantly serve the interests of developed countries and would increase access by private companies to developing country markets. Here again, the experience of the WTO antidumping rules could constitute a nuance. While in the mid-1980s the antidumping duties were mainly used by developed countries against developing countries, today anti-dumping measures are more and more taken by developing countries; India has recently been the most frequent used of the antidumping instrument.

    However, despite those nuances, the inclusion of a competition law regime at the WTO seems very questionable. Moreover, given the recent difficulties to negotiate at the WTO level and the ‘failure’ of the Doha round, it appears to me impossible that an agreement on general competition rules could be reached.
    Nonetheless, it must be pointed out that there has been in the recent years, significant efforts to develop a form of international competition law. In addition, if WTO targets public bodies’ restraints of trade and of market access and competition law aims at eliminating obstacles and restraints “to the effective functioning of markets” (Gerber), then could WTO law and competition law be considered as two different parts of the same thread? In particular, should competition law be regarded as an instrument to protect consumers in general (not only domestic consumers) and to eliminate harm (again not only domestic harm) to competition, then they would be some areas of competition where competition law and WTO law would truly overlap, such as export cartels. Certainly, as acknowledged by Neven and Mavroidis, “Cartelizing export markets is not much of a concern since they involve higher profits for domestic firms (at the expense of foreign buyers) and cannot be expected to hurt domestic consumers”. Nevertheless, should competition law be dealt with at a more global level than the domestic sphere, then export cartels could be regarded as both restraining trade between WTO Members and causing harm to competition. As a result, the main issue and difficulty remain, according to me, in finding a satisfying worldwide concept of competition law.

  3. Emma says:

    I read the articles by Fox and Drexl. In them, I see a parallel with last week on regulation. Trade law is there to oversee MS interfering with markets in an attempt to regulate them as they see fit, whereas competition law is directed towards removing private restraints created by individual firms interfering with the competitive structure of the marketplace

    From Fox’s article, I see that creating a framework for competition law as part of the WTO regime would close the gap between trade and competition that has been missing. Fox highlights that there is indeed such a gap– for example, if we take the Kodak /Fuji Film case the Japanese government failed to apply its national antitrust law to the conduct of Fuji Film, which allowed the firm to maintain its position as de facto exclusive distributor. This prevented other firms entering the market, in this case the US firm Kodak. However, when the Japanese FTC found no violation of competition law, it fell to the trade rules alone to catch the conduct. These can only catch state conduct, not that of private firms, and without the conduct of the firms the Japanese legislation that restrained trade was not enough on its own to breach the GATT rules. Without being able to look at the private side of the picture, the panel were forced to conclude that the Japanese statutes were ‘above board’, since the only valid question was whether the Japanese rules were in breach of the GATT – the panel could not remedy any barriers to entry caused by the firm (or the failure of Japanese law to catch these behaviours)

    Fox submits that market access is the point at which trade and competition law meet, and that the Mexican Telecom case helped to complete what was previously a patchwork picture with trade law prohibiting public restraints while competition law shielded against private ones. What she calls ‘hybrid restraints’, having both a public and private element, were notoriously difficult to challenge, but as she sees it the Mexican Telecom case allowed for an inclusive remedy to a mixed public-private restraint because ‘neither trade nor competition law is copious or flexible enough to address the problem’.

    However, after reading Drexl’s article, I am still not totally convinced that a structured framework for WTO competition law is feasible. I think I disagree with Jotte insofar as he says that WTO rules could be used to force States to introduce effective competition regimes. I find this problematic since, as Drexl points out, not all signatory states have competition regimes in place. He submits that there would be no obligation under a WTO competition law for states without competition law to adopt such laws; ‘the proposed agreement would impose obligations only on those members which have a domestic competition law’ (p.447). Further, Drexl looks in detail at the reasons for developing countries to oppose a WTO Multilateral Framework on competition policy and finds that extrinsic reasons as well as intrinsic reasons lead to this reluctance to merge competition and trade. The heavy burdens for introducting a new competition regime (especially if they have just set up their own one) are of course one element, but there are also political reasons why the WTO framework does not work for them; not least the fact that a lot of the negotiations depends on the level of bargaining power a State has. Last, there is a clear advantage to States keeping their own competition regime outside the WTO rules; as we saw in Kodak/Fuji film, their authorities can protect their own firms. As Drexl points out, the fact that the proposed WTO competition framework would apply the principle of non-discrimination would bring a disadvantage to developing states (at least from their point of view). He uses the example of India which sees this as protection for multi-national firms; if a company set up in India, applying non-discrimination would mean the Indian competition rules could not be applied to protect the Indian market. It thus seems that national competition law forms an important part of national industrial policy and for such countries is a key mechanism for protecting and favouring home firms. Thus, I don’t think WTO competition law regime would actually solve the problems of countries without a competition regime in force. Where countries do have competition regimes, Drexl is also of the opinion that the laws do not need to be harmonised to be part of the WTO framework. However he then goes on to say that WTO principles would be applied; for some countries (take the India example with the principle of non-discrimination) this would appear to force a change in the law and a certain level of harmonisation. I am therefore left wondering what the real benefit of a WTO competition law regime would be, if there are still signatory states where gaps exist.

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