Sat, Nov 24, 2001 page9

• Europe joins with US in cooperating over competition

  • By Mario Monti
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  As the US government settles its antitrust case with Microsoft, the EU is moving forward with its own investigation of the computer software giant. Is another trans-atlantic battle over competition policy in the offing? Mario Monti, the EU competition commissioner, argues that cooperating over competition is the only way to move ahead.

  Big mergers -- from Boeing and McDonnell Douglas to General Electric and Honeywell -- and antitrust cases -- such as those involving Microsoft, the pharmaceutical firms that "cartelized" the vitamins market, or the recent fines on SAS and Maersk Air -- increasingly capture the public imagination. This interest is global, because the decisions made by competition authorities are often felt well beyond national borders.

  Competition policy has assumed a higher profile for two main reasons. First, this is an age of globalized markets and of business strategies that are ever more international. When the turnover of large multinationals exceeds the GDP of medium-sized countries, corporate decisions can have a decisive influence on the daily life of hundreds of thousands of workers and millions of consumers world-wide.

  This broader interest in competition policy is also due, no doubt, to a renewed awareness that this policy represents one of the best tools available to control the abuses of economic power by powerful industrial and commercial interests. Only through competition policy can the interests of consumers and, more broadly, of citizens be protected.

  major challenge

  But as competition authorities everywhere respond to the global nature of today's businesses, they run up against a major challenge: the extraterritorial nature of some of their rulings. Today competition authorities can, for example, impose conditions on mergers between companies that are domiciled and conduct most of their business outside the jurisdiction of that authority. Such practices can cause resentment in the home country of the businesses involved. This aspect of implementing competition policy highlights the need to ensure a maximum of convergence between the world's competition enforcement systems.

  Here, one important policy response is to establish networks, cooperative instruments, and means of coordinating policies among competition authorities so as to make certain that international markets maintain competition. Only such cooperation can assure that the globalization process remains economically efficient and socially acceptable. Indeed, competition policy -- and specifically international cooperation on competition -- has a key role to play if resentment against globalization and a protectionist backlash are to be muted.

  I believe that today's system to monitor and implement international competition policy can be improved in three complementary and mutually supportive ways:

  -- Bilateral cooperation should be strengthened. The EU has concluded bilateral cooperation agreements with the US and Canada and is finalizing an agreement with Japan. Elsewhere, cooperation is provided for in broader trade-related agreements, such as the Customs Union with Turkey, or the Europe Agreements with the countries of Central and Eastern Europe. The US has concluded even more bilateral cooperation agreements.

  The desirability of interaction is also reflected in the non-binding "OECD Recommendations on Cooperation in Antitrust Matters" in the fight against cartels, to which most OECD members adhere. Over a decade's experience has demonstrated that important benefits are secured through bilateral cooperation in enforcing respective competition rules. Indeed, it is often more beneficial to cooperate than to exercise unilateral extra-territorial jurisdiction. Much has been achieved through bilateral competition, and it is fair to say that an effective arsenal of cooperative instruments is now at our disposal.

  -- Second, we are working together with a number of other competition authorities to create a global network. This should be an inclusive venue where agencies responsible for developing and managing competition policy worldwide could meet and exchange their views and experiences on enforcement policy and practice.

  Such a network should be open to all countries with competition enforcement regimes, that is basic legislative frameworks on competition, an administrative and/or judicial enforcement capacity, and an enforcement track record. Developing countries now creating competition regimes and the institutional capacity to enforce them could be encouraged to join this effort. Non-public bodies, like lawyers, business leaders, and consumer representatives, as well as antitrust academics and other experts -- should also be involved.

  consensus

  Network members should strive to maximize convergence and consensus on both the substance and economics of competition policy, as well as on their priorities for enforcement. Consensus should result from a common understanding about the best approach to solving problems. This project would foster a common worldwide competition culture: and so encourage developed and developing countries to introduce and enforce sound policies. I am pleased that such an initiative was launched at the end of October under the name of International Competition Network (ICN).

  -- Finally, negotiations at the WTO for a multilateral agreement on trade and competition that can attract emerging and developing economies as well as economies in transition should move forward. Until now, the WTO's interests in competition have largely taken the form of responses to specific issues, not the broad picture. We should establish a set of basic systemic guarantees (transparency, non-discrimination, and so on), coupled with certain minimum substantive requirements, principally the prohibition of hard-core cartels.

  These negotiations should be realistic and should initially focus on three ripening issues: core principles on domestic competition law and policy, including a commitment to combat hard-core cartels; basic cooperation modalities; and the possibility for developing countries to obtain technical and capacity building assistance and to apply the rules in a flexible and progressive manner. A Competition Policy Committee should administer any WTO framework agreement.

  This cooperation agenda reflects a growing global consensus about the central features of an ambitious international competition policy. Pursuing it actively will reinforce the existing consensus and extend agreement to other aspects of competition policy.

  Mario Monti is a member of the European Commission responsible for competition policy.

  Copyright: Project Syndicate

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