us international cooperation agreement paper by 4c0dB5

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									POWELL, GOLDSTEIN, FRAZER & MURPHY LLP




                        U.S. International Cooperation Agreements

                                                Larry Fullerton
                                                 Vienna, Austria
                                                 October 13, 2000


           The application of national antitrust laws to cross-border business activities has increased

   dramatically in recent years, increasing the need for antitrust enforcement authorities in different countries

   to coordinate their enforcement efforts.

           Government-to-government antitrust cooperation may have had a widely diffused or seemingly

   unimportant impact on private sector interests in the past. However, it is beginning to have significant,

   practical impacts on the companies whose mergers, collaborations with competitors, and product

   distribution arrangements are being reviewed by one or more antitrust authorities. Thus, international

   antitrust cooperation now presents both significant risks and significant opportunities for affected

   companies.

           The increase in cross-border antitrust enforcement is the result of four identifiable trends:

           1. The increasing globalization of business;

           2. The increasing proliferation of new antitrust laws around the world;

           3. The increasing acceptance of the principle that foreign conduct may fall within
              the subject matter scope of a nation’s antitrust law and within the jurisdiction of
              that nation’s courts if that conduct has adverse “effects” on consumers in that
              country; and

           4. The increasing liberalization of government-sponsored trade barriers, which has
              had the effect of exposing private sector conduct that frustrates market access
              by foreign-based competitors.

           The expansion of international antitrust enforcement prompted by these trends has created a

   number of problems, both political and practical, which governments have attempted to address primarily

   through a network of limited bilateral antitrust cooperation agreements. As such bilateral cooperation

   agreements have proliferated, organizations such as the OECD have experimented with non-binding
multilateral agreements, and competition-related provisions have found their way into WTO agreements in a

limited way. Calls for stronger multilateral agreements have surfaced, however, including proposals for a

more comprehensive, enforceable WTO Competition Code, and international measures to harmonize merger

control procedures.

         This paper will provide a summary overview of these developments, largely from a U.S. perspective,

and suggest ways that private sector interests may be affected by increasing cooperation among antitrust

enforcement officials internationally. Members of the international business community will wish to monitor

these developments and take relevant risks and opportunities into account in their business planning.


                   I.   TRENDS CONTRIBUTING TO CROSS-BORDER ENFORCEMENT

A.       Increasing Globalization Of Business Activities

         The increasing globalization of business activities has had a direct impact in increasing international

antitrust enforcement. This can be illustrated by the increase in the reviews of international mergers by

antitrust enforcement authorities in both the U.S. and the EU.

         The U.S. Justice Department has reported that the percentage of all matters reviewed by the

Department that has an international dimension has grown from 2 to 3 percent per year in the early 1990s to

almost 40 percent in 1998. The U.S. Federal Trade Commission has reported that at this point,

approximately 50 percent of the mergers it investigates at any given time has an impact on consumers in

more than one country.1 And the number of mergers notified to EU antitrust authorities that involved at least

one U.S. company has shot up, from approximately 10 such mergers in each of 1992 and 1993, to some 125

in 1999.2



1Final Report of the International Competition Policy Advisory Committee (2000) (“ICPAC Report”), p. 47.
During fiscal year 1999, roughly one-fifth of the pre-merger notifications received by U.S. antitrust authorities
involved foreign acquiring persons or foreign acquired persons. Preliminary investigations were opened in
111 such matters, resulting in 21 formal requests for additional information and ultimately five enforcement
actions. ICPAC Report, p. 46.
2 A. Raghavan & B. Mitchener, EU’s Antitrust Czar Isn’t Afraid to Say No; Just Ask Time Warner, The Wall

Street Journal, Oct. 2, 2000, p. A-1.


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B.        Increasing Proliferation Of Antitrust Laws

          In recent decades, more and more nations have come to recognize the value of competition as a tool

for encouraging economic efficiency, increased innovation and lower prices and better products for

consumers.

          A century ago, only the United States had enacted a comprehensive antitrust law. Today, more than

80 countries have antitrust laws, representing some 80 percent of world output. Approximately 60 percent of

these laws were enacted within the last 10 years. Many Eastern European countries adopting competition

laws in recent years have chosen to follow the European model. A number of Latin American countries have

chosen to follow the U.S. model. Reportedly, some 20 additional countries are in the process of drafting

laws.3

          Of the more than 80 jurisdictions that currently have competition laws, it is estimated that 60 require

(or provide for) antitrust merger notification. It is now not unheard of for merging parties to file

notifications with a dozen or more jurisdictions.4 The problems associated with multi-jurisdictional merger

review have been exacerbated by the fact that in many jurisdictions, including the U.S., mergers may be

subject to review by sectoral regulators, as well as by antitrust enforcement agencies, and may be reviewed as

well by sub-national political units.


C.        Increasing Acceptance Of The “Effects” Test For Antitrust Jurisdiction

          The United States has long taken the position that conduct abroad that has adverse effects on U.S.

consumers falls within the subject matter scope of U.S. antitrust laws.5 This principle is the foundation for

the potential application of U.S. antitrust laws to foreign cartel conduct, and to mergers involving foreign-

based companies. If foreign cartel conduct or foreign mergers have an adverse impact on U.S. consumers,

the U.S. has taken the position that U.S. antitrust laws may apply, assuming that the requirements can be met

for obtaining personal jurisdiction over the defendants.


3   ICPAC Report, p. 33 & n. 1.
4   ICPAC Report, pp. 89, 92 & n. 13.


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        The U.S. position was controversial for many years. Foreign jurisdictions objected to the “effects

test” adopted in the U.S. and took a variety of steps to frustrate its application. Some nations enacted laws

designed to impede U.S. investigatory efforts, including so-called “blocking statutes”, which were designed to

prevent the U.S. from collecting evidence and testimony on foreign soil, and “clawback statutes”, which

authorized local suits to recover multiple damages already paid in connection with a foreign (i.e., U.S.)

judgment. Other resistance took the form of official protests to legal actions within the United States, the

filing of amicus briefs in court proceedings, and an unwillingness to recognize and enforce decisions of U.S.

courts or extradition requests.

        Application of the effects test by the U.S. has gained increasing acceptance in recent years, however.

Further, foreign jurisdictions, including the EU, have started to adopt their own versions of the effects test,

and to apply their own antitrust laws extraterritorially. The Court of Justice of the European Communities

upheld the extraterritorial application of Article 85 (now Article 81) to foreign cartel conduct in its well-

known Wood Pulp decision in 1988.6 In 1999, in its decision in the Gencor/Lonrho merger matter,7 the

European Court of First Instance upheld in unmistakable terms the authority of the European Commission

to intervene in mergers taking place outside of Europe, holding that the EC may exercise jurisdiction in such

cases whenever the merger produces “direct, substantial and foreseeable” effects within the EU. On the

strength of these and similar cases, the EC Competition Commissioner Mario Monti has made it clear that

the Commission intends to apply an effects test like the one applied by the U.S. in future EU cartel and

merger cases.8




5 See United States v. Aluminum Co. of America, 148 F.2d 416, 443-44 (2d Cir. 1945).
6 In re Wood Pulp Cartel, [1988] E.C.R. 5193.
7 Gencor v. Commission, T-102/96 (1999).
8 Mario Monti, Cooperation between competition authorities—a vision for the future, Remarks before the

Japan Foundation Conference, Washington, D.C. (June 23, 2000)(“Monti on Cooperation between
competition authorities”), p. 3-4. See generally, D.G. Goyder, EC Competition Law 545 (3d ed. 1998)
(Articles 85 and 86 “are interpreted by the Commission as applying to all undertakings whose operations or
agreements … affect trade between Member States of the Community and have as their object or effect
restraint upon competition within the Community.”).


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         Increasing international acceptance of extraterritorial enforcement in the cartel area has permitted the

U.S. to expand its international enforcement program in recent years. By one account, the U.S. has

successfully prosecuted nearly 20 international cartels, charging more than 80 corporate and 60 individual

defendants from more than 20 different countries on 5 continents.9

         Note that the United States also takes the position that conduct abroad that has adverse effects on

U.S exporters falls within the subject matter scope of U.S. antitrust laws. Although this position is

controversial at the international level, there is clear domestic statutory authority for U.S. courts’ subject

matter jurisdiction in such cases. In 1982, U.S. Congress amended the Sherman Act to clarify that the it

extends to foreign conduct that has a “direct, substantial, and reasonably foreseeable effect … on [U.S.]

export trade or export commerce with foreign nations.”10 In its recent report, the U.S. International

Competition Policy Advisory Committee (“ICPAC”) recommended continued exercise of this claimed

jurisdiction, in appropriate cases.11

         In light of the practical problems in using antitrust laws to resolve market access problems,12 the U.S.

has been quite sparing in its resort to this authority, however. The U.S. Justice Department’s Pilkington case


9 ICPAC Report, p. 167.
10 15 U.S.C. § 6a. Notwithstanding this clear and expansive statutory authority, the agencies responsible for
antitrust enforcement exercised a policy of restraint for quite some time. In footnote 159 of the Justice
Department’s 1988 International Antitrust Guidelines, the Department stated that it would voluntarily limit
itself to prosecuting overseas conduct that harmed U.S. consumers. Thus, if the conduct abroad harmed only
U.S. exporters, the Department would not respond. In 1992, however, the Justice Department rescinded
footnote 159, and vowed to use the full scope of its jurisdiction over anticompetitive foreign conduct—
including foreign conduct that hampered access of U.S. exporters to foreign markets. See U.S. Department
of Justice, Statement of Enforcement Policy: Department of Justice Policy Regarding Anticompetitive
Conduct that Restricts U.S. Exports, 62 Antitrust & Trade Reg. Rep. (BNA) No. 1560, at 483 (April 9, 1992).
The rescission of footnote 159 was formalized in 1995, when the Justice Department withdrew the 1988
International Antitrust Guidelines, and replaced them with the 1995 joint DOJ/FTC Antitrust Enforcement
Guidelines for International Operations. The 1995 Guidelines not only omitted any footnote comparable to
the former footnote 159, but also included Illustrative Examples D and E outlining U.S.-export-blocking
foreign conduct against which the agencies would anticipate taking action.
11 ICPAC Report, p. 252.
12If a U.S. court cannot assert personal jurisdiction over the foreign actors, or if the venue cannot survive a

forum non conveniens challenge, it simply may not be feasible to pursue a case such as this in the United
States under U.S. antitrust law. Similarly, without the cooperation of foreign enforcement officials, U.S.
enforcement authorities may encounter difficulties in assembling evidence located in a foreign jurisdiction,
beyond the reach of U.S. compulsory process. And finally, even if a trial is successful, it may not be possible


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remains the only extraterritorial export-oriented enforcement action by U.S. authorities since 1992.13

Although various officials have stated that they remain prepared to use extraterritorial enforcement for this

purpose, if necessary,14 it seems clear that they are hesitant to do so, and that they prefer resorting to other,

more cooperative mechanisms first.

        The use of national antitrust laws to open foreign markets remains controversial, and less well

accepted abroad. The EC has never claimed jurisdiction over anticompetitive conduct occurring outside of

Europe which produces adverse effects on European export activity alone. Commissioner Monti believes

that the legal basis for such a claim is unclear; in any event it has never been tested in European courts.15


D.      The Impacts Of Trade Liberalization

        The dismantling of formal, government-sponsored trade barriers is obviously a positive development

for companies in all countries that wish to expand into foreign markets. There is a real risk, however, that, as

government-sponsored barriers to foreign competition come down, domestic firms will be tempted to react

by erecting new barriers to entry (or reinforcing old ones) through private conduct. Generally speaking,

private sector restraints such as these must be addressed by antitrust enforcement, rather than enforcement

of the trade laws.

        Risks of anticompetitive practices may be especially high in economies undergoing substantial

privatization. State-owned enterprises long used to legal protection from competition may be tempted to try

to hold onto that dominant position by anticompetitive means, once they are privatized.


to devise in a U.S. court a viable and effective remedy for the foreign anticompetitive conduct; U.S. injunctive
relief (a preferred antitrust remedy) will be of little value if it cannot reach, or cannot be enforced against,
entities outside U.S. borders. While these problems exist when U.S. antitrust law is applied to foreign cartel
conduct and mergers, they are exacerbated when U.S. law is applied to foreign conduct injuring U.S.
exporters.
13 United States v. Pilkington plc, 1994-2 Trade Cas. (CCH) ¶ 70,842 (D. Ariz. 1994) (proposed consent

decree); 59 Fed. Reg. 30604 (June 14, 1994) (competitive impact statement). Allegedly, Pilkington used long-
expired geographic and use restrictions in patent and trade secret licenses with competitors, and threats of
litigation to enforce them, to prevent U.S. firms from competing to build glass plants abroad.
14 See, e.g., Robert Pitofsky, Prepared Statement of the Federal Trade Commission, before the Antitrust,

Business Rights, and Competition Subcommittee of the Senate Judiciary Committee (May 4, 1999).
15 Monti on Cooperation between competition authorities, p. 4.




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     II. PROBLEMS WITH INCREASING EXTRATERRITORIAL APPLICATION OF ANTITRUST LAWS

        The trends outlined above have encouraged expanded extraterritorial application of antitrust laws,

which has in turn has given rise to a number of problems from the points of view of antitrust enforcement

agencies and affected private sector interests:

        1.       Antitrust enforcement authorities have increasingly targeted foreign nationals and

foreign-based companies in their enforcement efforts, and increasingly sought access to evidence

located abroad. This is true primarily in the areas of cartel and merger enforcement, where increasing

globalization and the other trends discussed above have propelled antitrust enforcement officials to look

beyond their borders to protect their consumers from perceived competitive harms. This increasing

international focus has created a variety of pressures:

                Foreign governments have expressed a desire to be notified of investigations and
                 prosecutions affecting their nationals and involving conduct within their borders, so
                 that they will have an adequate opportunity to express any views they might have
                 about those enforcement activities. In the extreme, foreign governments may be
                 concerned that their nationals are being prosecuted for conduct that is lawful, or
                 even mandated by law in their own country.

                Initiating antitrust enforcement agencies have been called upon increasingly to
                 decide whether and how to take any such views into account in their prosecution
                 decisions (in the interests of so called “traditional” or “negative” comity); 16

                Initiating antitrust agencies have increasingly called upon foreign governments to
                 cooperate with them or to assist proactively in their investigations; and

                For this reason, private sector individuals and companies that are the subject of an
                 antitrust investigation or prosecution in another country are finding increasingly that
                 their own governments may be cooperating with those investigations or taking steps
                 that in some way may harm their interests.

        2.       Increasingly, the same course of conduct may be investigated by multiple antirust

enforcement agencies simultaneously, each applying its own substantive laws. Such parallel



16Traditional comity has been defined as the recognition which one nation allows within its territory to the
legislative, executive, or judicial acts of another nation, having due regard both to international duty and
convenience and to the rights of its own citizens or of other persons who are under the protection of its laws.
ICPAC Report, p. 243, n.153.


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enforcement efforts create many of the problems outlined above, but it may create some additional ones, as

well:

                As in the case of a single investigation with an extraterritorial focus, the respective
                 governments must sort how whether and how their national interests may be
                 affected, and the subjects of the investigation may find their own government taking
                 steps that adversely affect their interests;

                In the case of simultaneous parallel investigations, however, there is usually an
                 increased desire on the part of the participating enforcement agencies to coordinate
                 their activities, share evidence and theories, and cooperate in any prosecutions that
                 may result. There is thus an increased risk that evidence collected in one jurisdiction
                 may be shared with law enforcement officials in another, with unpredictable results;
                 and

                In the case of simultaneous parallel investigations, there is also a risk of inconsistent
                 remedies. Enforcement agencies must increasingly coordinate with respect to the
                 remedies they will seek, in order to minimize burdens on the parties and avoid
                 conflict.

        3.       Parallel investigations are becoming particularly prevalent in the merger control

area. With the proliferation of new merger control regimes around the world, many mergers must be

notified to a number of antitrust enforcement bodies. Each of these regimes may have its own notification

thresholds, review processes and substantive approval criteria. Combined with the increasing complexity of

mergers, the limited resources available to the enforcement agencies may create a kind of “iceberg effect,” in

which a small number of larger mergers get disproportionate attention from enforcement officials. For the

merging parties, the current multi-jurisdictional merger review system creates uncertainty about the ultimate

success of the proposed transaction, the necessity for interacting and negotiating with multiple reviewing

authorities, and the prospect of conflicting rulings and remedies.17




17 Consider the proposed merger of Coca-Cola and Cadbury Schweppes, which may have affected consumers
in over 100 countries around the world. Competition authorities in countries as diverse as Mexico, Belgium,
Australia and a host of European countries raised concerns about this transaction, before it was abandoned
by Coke and Cadbury in most geographic areas. The parties to the Halliburton/Dresser transaction estimate
that they spent approximately $3.5 million to comply with notification and investigation requirements in the
six jurisdictions where notification was required (Australia, Brazil, Canada, the EU, Mexico and the United
States.) In addition, company officials spent a great deal of time compiling requested data and responding to
formal and informal questioning. ICPAC Report, p. 93, n.17.


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         4.       Finally, there is increasing pressure, particularly in the United States to apply

antitrust law extraterritorially to resolve problems of market access. As noted above, the application of

U.S. antitrust law to protect U.S. exporters from exclusionary conduct abroad remains controversial. In

addition, there are practical limitations to the ability of enforcement officials to apply U.S. law unilaterally in

this manner. These limits have encouraged discussion of alternative ways of addressing market access

problems, leading to an expanding interest in the so-called “positive comity” mechanism. Under this

mechanism, the antitrust enforcement authority in one country may ask the enforcement authorities in

another country to investigate conduct within the requested country’s borders that may violate the requested

country’s laws.


                  III.   OVERVIEW OF INTERNATIONAL COOPERATION AGREEMENTS

A.       U.S. Bilateral Antitrust Cooperation Agreements

         The U.S. currently has ten bilateral antitrust cooperation agreements in place with eight different

jurisdictions. Two of these agreements are signed, but not yet in force, while they await completion of formal

procedures.

         The oldest agreements are those with Germany (1976) and Australia (1982). The U.S. reached an

agreement with the EU in 1991 that became the model upon which most subsequent agreements have been

based, including the agreement negotiated with Canada in 1995; the agreements negotiated in 1999 with Israel

(not yet in force), Brazil (not yet in force) and Japan; and the agreement negotiated in 2000 with Mexico.

         All of these agreements provide for notification of any antitrust enforcement actions by one country

that may affect the interests of the other, consultations regarding notified actions, and information-sharing

and mutual assistance within the bounds of each country’s laws, including laws regarding confidentiality.

These provisions are meant to foster communication between antitrust authorities, in the hopes of facilitating

coordination and avoiding conflicts.

         In addition, six of these agreements contain positive comity provisions. That is, the agreements

provide that when one country (“the requesting country”) is concerned that anticompetitive conduct in the



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other country (“the requested country”) is harming its important national interests, and believes that the

conduct may be illegal under the requested country’s laws, the requesting country may request that the

requested country take action against the anticompetitive conduct.

        Although the requested country is not obliged to take any action, it is required to “carefully consider”

the request and inform the requesting country of its decision either way. Similarly, the requesting country

retains the right to pursue its own enforcement efforts. This basic structure is reflected in the 1991

agreement between the U.S. and the EU, and in the more recent agreements between the U.S. and Brazil,

Canada, Israel, Japan and Mexico.18

        In 1998, the U.S. and the EU supplemented their 1991 agreement with an agreement elaborating the

positive comity provisions in the earlier agreement. The U.S. and Canada are discussing a similar, expanded

positive comity agreement. The ICPAC has recommended that the U.S. build on the U.S.-EC positive comity

agreement as a model for future agreements, as well as expand the jurisdictions with which it enters into

bilateral cooperation agreements.19

       Under the 1998 positive comity agreement, the U.S. and the EU may agree that the requesting party

will defer or suspend its own enforcement activities while the requested party is pursuing enforcement.

Indeed, the 1998 agreement establishes a presumption that the requesting party will “bow out” in this fashion

in two circumstances: first, when the alleged violations harm the requesting country’s exporters but not its

consumers, and second, when those violations “occur principally in or are directed principally towards” the

requested country’s territory. In order to trigger the deferral presumption, it must also be the case that the

requested country can and likely will conduct a thorough investigation, and that it agrees to dedicate sufficient

resources, use best efforts, and regularly update the requesting country on its progress.


18 Although not explicitly labeled as such, the basic notion of positive comity was first articulated in a 1973
OECD Recommendation Concerning a Consultation and Conciliation Procedure on Restrictive Business
Practices Affecting International Trade, Document No. C(73)99(Final), and was reiterated in the OECD’s
1979 Recommendation Concerning Cooperation between Member Countries on Restrictive Business
Practices Affecting International Trade, Document No. C(79)154(Final). These provisions have since been
repeated in subsequent OECD recommendations in 1986 and 1995.
19 ICPAC Report, p. 241.




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       Even where these conditions are met, however, the agreement creates only a presumption, not a

binding obligation, in favor of the requesting country’s deferral of its own action. Indeed, in some

circumstances parallel investigations or parallel remedy proceedings may even be desired by both

governments. With the 1998 supplemental agreement, the United States and the EU have signaled that they

trust each other to act diligently in each other’s interests under a positive comity request—enough so that

each can contemplate leaving their companies’ interests in the other’s hands. Note that the 1998 agreement

does not, however, apply to mergers.

        All of these are “soft” agreements—in the sense that they are executive agreements that don’t change

or override the existing laws of either country. Most significantly, they don’t override the existing

confidentiality laws that protect evidence from outside disclosure and that thus restrict the sharing of

information among enforcement officials in different jurisdictions.

        In 1994, at the Justice Department’s urging, the U.S. Congress enacted and the President signed the

International Antitrust Enforcement Assistance Act (“IAEAA”),20 which authorizes the negotiation of

antitrust cooperation agreements under which otherwise confidential information can be shared. The U.S.

signed the first (and so far the only) agreement negotiated under this authority in 1999, with Australia.

        In addition to the agreements discussed above, there are now 36 Mutual Legal Assistance

Agreements (“MLATs”) in effect between the United States and other countries, and 15 others signed but

awaiting approvals or ratification. These MLATs provide generally for mutual assistance in criminal law

enforcement, including the obtaining of evidence and sharing of information. Most of these MLATs

potentially provide for assistance in criminal antitrust enforcement matters. The use of these MLATs to

obtain documents through subpoenas or searches-and-seizures, or to question witnesses in connection with



2015 U.S.C. §§ 6201-6212. The IAEAA permits U.S. antitrust authorities to share antitrust evidence about
U.S. businesses with foreign antitrust authorities, and to conduct investigations to obtain such evidence for
the foreign authorities, provided that an antitrust mutual assistance agreement is in place that provides
reciprocal assistance for U.S. authorities looking abroad, and that assures that the foreign antitrust authorities
have in place confidentiality protections comparable to those under U.S. law. However, certain classes of
information (such as pre-merger notification information or grand jury evidence) are still protected from


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criminal cartel investigations is growing rapidly.21 Use and disclosure of such information is strictly limited to

the specific enforcement matter for which information is requested, however.

        The operation of these bilateral antitrust agreements may be illustrated by reference to the U.S.

agreements with Canada and the EU.


        1.       U.S.-Canadian Cooperation

        Not surprisingly, in view of their geographic proximity, the U.S. has consulted on antitrust matters

longer with Canada than with any other country. In the early years, the U.S.-Canada antitrust relationship

was largely a contentious one. In the late 1940s, U.S. antitrust investigations into the Canadian paper industry

led to the enactment of the first blocking laws in Canada. Conflicts between these two countries reached

their peak in the uranium controversy of the late 1970s and early 1980s. Out of these conflicts, however,

came the world’s first antitrust notification and consultation mechanism, beginning in 1959, which has

become the prototype for similar regimes in subsequent U.S. bilateral antitrust agreements.22

        A change in the U.S.-Canada bilateral relationship toward greater, and more successful antirust

cooperation occurred in 1986, with enactment in Canada of a new Competition Act, which established a far

more effective Canadian antitrust regime.

        The current environment of cooperation has been facilitated by the U.S.-Canadian MLAT, which

came into effect in 1990. Both the U.S. and Canada prosecute hardcore cartels as criminal offenses.

Beginning in 1990, the U.S. and Canada embarked upon an aggressive program of cooperation in cross-

border cartel cases. Up to this point, there had never been an instance of one country’s seizing or compelling

the production of antirust evidence for the benefit of a foreign antitrust authority. Today, the U.S. and


disclosure to foreign authorities. The United States’ other cooperation agreements (including the general
1982 US/Australia cooperation agreement) do not meet the exacting IAEAA criteria.
21 See Charles Stark, Chief, Foreign Commerce Section, Antitrust Division, U.S. Department of Justice,

Improving Bilateral Antitrust Cooperation, Remarks before Conference on Competition Policy in the Global
Trading System, Washington, D.C. (June 23, 2000)(“Stark on Improving Bilateral Antitrust Cooperation”), p.
3. In addition, in limited circumstances, U.S antitrust agencies may obtain evidence through traditional
international law means, such as diplomatic channels or court-to-court letters rogatory requests.
22 Stark on Improving Bilateral Antitrust Cooperation, pp. 1-4.




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Canada conduct coordinated searches on both sides of the border, as well as other searches by one side on

behalf of the other, joint interviews of potential witnesses and sharing of databases of documents and

information.23

        U.S.-Canadian cooperation in cross border criminal antitrust investigations has been remarkably

successful. There has been some cooperation in the areas of mergers and civil non-merger enforcement, as

well, although that has been less significant.


        2.       U.S.-EU Cooperation

        While there was sporadic contact between the U.S. and the EU concerning antitrust enforcement

prior to 1991, the European Court’s decision confirming the extraterritorial reach of European competition

law in the Wood Pulp case, the adoption of the European Merger Control Regulation, and the growth and

development generally of EU competition law enforcement all contributed to the negotiation of a formal

cooperation agreement in that year.24

        In contrast to the U.S. experience with Canada, cooperation between the U.S. and EU has focused

primarily on merger enforcement.25 Virtually any sizable transaction involving international businesses is

likely to be subject to review in both the U.S. and Europe. The effort to coordinate such reviews, as to facts,

analysis and especially as to remedies, has succeeded very well, as illustrated by the MCI/WorldCom,

Halliburton Dresser and Alcoa/Reynolds merger matters.26

        One factor contributing to this success is the increasing tendency for the parties to such mergers to

give their formal permission to the U.S. and European agencies to share with one another the information


23 ICPAC Report, p. 182. Three significant international cartel prosecutions have come to public light in
which the U.S. and Canada cooperated under the MLAT, although U.S. officials say that there are more
examples that have not been made public. ICPAC Report, p. 182.
24 Stark on Improving Bilateral Antitrust Cooperation, pp. 4-5.
25 In 1998, the U.S. Justice Department and the FTC notified the EC of 39 merger investigations under their

bilateral agreement; the EC notified the U.S. agencies of 43 merger investigations. ICPAC Report, p. 47 n.17.
26 See Robert Pitofsky, EU and U.S. Approaches to International Mergers, Remarks before the EC Merger

Control 10th Anniversary Conference, Brussels, Belgium (Sept. 14-15, 2000), p. 1 (“In my view, it is hard to
imagine how day-to-day cooperation and coordination between enforcement officials in Europe and the
United States could be much improved.”).


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they have supplied to one or the other agency. Parties giving such consent have decided that the risks

associated with such an information sharing between the jurisdictions is outweighed by the benefits of

quicker and more consistent antitrust enforcement.27

        One by-product of this cooperation has been a substantial convergence in substantive merger law.

Indeed, a working group has been established that includes staff from the EC, U.S. Department of Justice

and the U.S. Federal Trade Commission, designed in part to explore the “scope for further convergence of

analysis/methodology in merger cases being treated in both jurisdictions.”28 Commissioner Monti actively

supports such substantive convergence.29

        While important to the U.S./EU relationship, the 1998 positive comity agreement has not generated

the same stream of coordinated matters that flows from merger review responsibilities. To date, there has

been only one full-fledged positive comity request by which one might measure the device’s efficacy: a

January 1997 request from the U.S. Justice Department asking the EC to investigate the alleged

anticompetitive practices identified by SABRE, the computer airline reservation system.30


27 To date, the DOJ has obtained waivers in roughly 13 merger investigations and the FTC received waivers
in approximately 11. ICPAC Report, p. 65 n.74. One indication of the trust and level of cooperation
achieved is the Administrative Arrangement worked out in 1999 in which the U.S. agencies and the
Commission agreed, in cases in which both sides are examining the same matter to let the U.S. officials attend
the Commission’s hearing, and Commission officials attend the U.S. agencies’ final meetings with the parties-
-subject to the parties’ consent and appropriate safeguards. Stark on Improving Bilateral Antitrust
Cooperation, p. 6.
28 Monti on Cooperation between competition authorities, p. 13. A good summary of the extent of

substantive and procedural convergence between the U.S. and the EC in the merger area is available in
Robert Pitofsky, EU and U.S. Approaches to International Mergers, Remarks before the EC Merger Control
10th Anniversary Conference, Brussels, Belgium (Sept. 14-15, 2000).
29 Monti on Cooperation between competition authorities, p. 12.
30 U.S. authorities have made informal requests for assistance, however. For example, the FTC informally

encouraged Italian antitrust authorities to take action against a consortium of ham producers who maintained
a production quota agreement. The Italian authorities conducted an investigation, found that the quota
violated Italian competition law, and required the consortium to end the quota. See Robert Pitofsky,
Prepared Statement of the Federal Trade Commission, before the Antitrust, Business Rights, and
Competition Subcommittee of the Senate Judiciary Committee (Oct. 2, 1998). Informal positive comity was
also at work in the case of A.C. Nielsen, a firm the United States was investigating for market power
leveraging offenses. Although Nielsen’s offending contracting practices occurred largely in Europe, they
were thought to be harming competing U.S. exporters. The EC and the US decided that the EC should take
the lead in investigating Nielsen’s European activities, and the U.S. closed its investigation in late 1996 upon
the EC’s settlement with the company. See Joel I. Klein, Anticipating the Millennium: International Antitrust


                                                       14
         Specifically, SABRE, a U.S. reservation system, complained that it was the victim of anticompetitive

practices in Europe designed to protect the market dominance of a European reservation system jointly

owned by the national airlines of Germany, France, Spain, and the Scandinavian countries.31 SABRE’s

principal complaint was that the European airlines were refusing to provide SABRE with data comparable to

that supplied to their own reservation system, in order to encourage travel agents to use that system instead

of SABRE.

         The U.S. request for assistance under the positive comity agreement resulted in the EC’s issuance

some two years later of a complaint against Air France, which was followed by negotiated settlements

between SABRE and the German and Scandinavian airlines. Just this February, SABRE announced that it

had reached a negotiated settlement with Air France as well, thereby bringing the matter to a close.32

         While there has been no instance in which the EC has formally requested U.S. assistance under the

1998, Commissioner Monti has said that he is “firmly convinced” of the “value of positive comity as an

instrument for enhancing the effectiveness of bilateral cooperation” and the EC is “on the look-out for

potential referrals!”33

         One area where U.S.-EU cooperation has not developed as fully as yet is the area of cartel

enforcement. While the EU, like the U.S., has condemned cartel agreements, there is no MLAT and no

agreement under the IAEAA between the U.S. and the EU that provides enforcement officials with the

ability to share the evidence they obtain in their respective cartel investigations. As a result, it is not possible

for the U.S. and the Commission to coordinate searches in international cartel cases and pool their evidence,

as the U.S. and Canadian authorities are able to do.




Enforcement at the End of the Twentieth Century, Speech before the Fordham Corporate Law Institute 24th
Annual Conference on International Law and Policy (Oct. 16, 1997).
31 See Andrew B. Steinberg, The SABRE Group, Prepared Testimony, before the Antitrust, Business Rights

and Competition Subcommittee of the Senate Judiciary Committee (Oct. 2, 1998).
32 See News Release, Sabre and Air France Announce New Cooperation Agreement and Settlement (Feb. 23,

2000).
33 Monti on Cooperation between competition authorities, p. 12 (emphasis in original).




                                                         15
         While officials in both the U.S. and EU have lamented the lack of such a mechanism, so far the

critical mass of Member State support required on the EU side has not been forthcoming—despite the fact

that many European countries have themselves provided this kind of support under their national laws in

connection with U.S. cartel investigations.34 This could change, as EC Competition Commissioner Monti has

made clear he is “personally convinced of the merits of going down the road to concluding such an

agreement … [and] will consider putting the case to the Commission and to our Member States at some stage

in the future.”35


B.       Multilateral Agreements To Which U.S. Is A Party

         Existing multilateral agreements with competition-related provisions to which the U.S. is a party are

either limited in scope, or they are non-binding in nature.

         An early, unsuccessful attempt to address restrictive business practices on a multilateral level was the

1948 Havana Charter, which sought to establish an International Trade Organization (ITO), including a

chapter on restrictive business practices. In 1973, at the instance of developing nations, negotiations on a

restrictive business practices code were initiated in the United Nations Conference on Trade and

Development (UNCTAD). In 1980, the UN General Assembly adopted UNCTAD’s Set of Multilaterally

Agreed Principles and Rules for the Control of Restrictive Business Practices, which condemned a variety of

anticompetitive activities. However, the Set is non-binding, and it has not become a source of international

law.

         Several WTO agreements do contain competition policy concepts or elements, although these are

fragmentary, at best. For example, the Basic Telecommunications Agreement contains important

“competitive safeguard” provisions designed to facilitate pro-competitive interconnection of


34 Stark on Improving Bilateral Antitrust Cooperation, p. 8. In the 1994 Industrial Diamonds criminal price-
fixing case against General Electric and DeBeers, the Belgian Judicial Police agreed to carry out a search and
conduct a witness interview in Brussels, although the putative witness moved to France just before the
interview, and agreed to travel to the U.S. to testify at the trial of defendant General Electric. ICPAC Report,
p. 183.
35 Monti on Cooperation between competition authorities, p. 11.




                                                       16
telecommunications carriers to public switched telephone networks, and objective, neutral regulation of

telecommunications monopolies, as well as the maintenance of appropriate measures to prevent certain

anticompetitive practices.36

        The TRIPS agreement contains provisions that preserve WTO Members’ rights to specify “in their

legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual

property rights having an adverse effect on competition in the relevant market.”37 The GATS agreement

goes further, requiring Members to ensure that any monopoly supplier of services in their territories that

competes outside the scope of its monopoly rights “does not abuse its monopoly position” in violation of its

GATS commitments.38 Both agreements provide for consultations for such practices.

        There is some coverage of competition policy matters under the North American Free Trade

Agreement (NAFTA) among the U.S., Canada, and Mexico, as well. Specifically, among other provisions,

Article 1501 requires each party to “adopt or maintain measures to proscribe anti-competitive business

conduct and take appropriate action with respect thereto” and requires the parties to cooperate on “issues of

competition law enforcement policy, including mutual legal assistance, notification, consultation and

exchange of information relating to the enforcement of competition laws in the free trade area.”

        Other existing multilateral agreements are non-binding. For example, in its Recommendation

Concerning Hard Core Cartels,39 the OECD concluded that hard core cartels “are the most egregious

violations of competition law.” The OECD recommended that member countries “ensure that their

competition laws effectively halt and deter hard core cartels,” particularly through “sanctions of a kind and at

a level adequate to deter both firms and individuals from participating in such cartels.” The OECD also has

instruments calling upon member nations to cooperate in their antitrust enforcement activities.40


36 See Section 1.1 of the Fourth Protocol to the General Agreement on Trade in Services.
37 TRIPS Agreement, Art. 40 (2).
38 GATS Agreement, Art. 8 (2).
39 Recommendation of the Council Concerning Effective Action against Hard Core Cartels, OECD

Document No. C(98)35/Final.
40 Recommendation of the Council Concerning Cooperation between Member Countries on Restrictive

Business Practices Affecting International Trade, OECD Document No. C(79)154(Final).


                                                        17
C.      Proliferation Of Bilateral Agreements

        There is now a bilateral antitrust cooperation agreement between the EU and Canada (1999), and the

EU and Mexico (2000) The EU/Canada agreement is almost identical to the 1991 U.S./EU agreement. On

June 9, 2000, Commissioner Monti received a mandate from the Member States to negotiate such an

agreement with Japan.

        For the reasons discussed above, it may be expected that the U.S. and the EU will move towards

negotiation of an MLAT or an IAEAA agreement that would permit these countries to call upon one another

for assistance in obtaining evidence relevant to an antitrust enforcement matter, and share evidence with one

another. Given the growing EU focus on cartel enforcement, the negotiation of any such agreement would

have major implications for private companies based or doing business in the U.S. and Europe.


D.      Increasing Calls For Multilateral Solutions

        While stressing the value of continued bilateral cooperation, former External Affairs Commissioner

Sir Leon Brittan and former Competition Commissioner Van Miert have been forceful advocates of a new

round of multilateral negotiations to develop a set of substantive competition rules and a procedure to hold

governments responsible for the implementation of those rules. The EU position appears to have some

support from the governments of Australia, Canada, and Japan. The reaction to this proposal in the U.S. has

been cool.

        The WTO is the multilateral organization most often mentioned in connection with such an effort to

develop international competition rules. The inclusion of competition policy into the Singapore Work

Program in December 1996 and the formation of the WTO Working Group on the Interaction between

Trade and Competition Policy were important developments in advancing this cause. The Working Group

has held 10 formal meetings since it was established and received a total of 129 written contributions, about

60 of which have come from developing or transition countries.




                                                      18
         At the time that the Seattle negotiation broke down, the language contained in the Seattle Draft

Declaration suggested a continuation of the discussions on the interaction between trade and competition

policy at the WTO, but without any commitment to engage in negotiations.41

         Commissioner Monti has made clear that he shares his predecessors’ belief in the desirability, “even

the necessity,” of creating a multilateral framework to govern the application of competition laws

internationally:

         “In my view, it is now time to go beyond [the study of this issue within the WTO
         Working Group]. I am convinced that the time is ripe to commence negotiations
         on the development of a multilateral framework of competition rules, as part of the
         next Round of trade talks.”42

As a pragmatic means of building the necessary support for such a step, Commissioner Monti has proposed

to confine the scope of such negotiations to three issues:

         “Firstly, agreement on core principles of domestic competition law and policy
         (transparency of rules and regulations; the removal of … discrimination between
         firms based on their nationality; provision of due process and recourse to judicial
         procedures; prohibition of hard core cartels, bid rigging, etc...);

         “secondly, basic cooperation modalities should be put in place; and

         “thirdly, close attention should be paid to ensuring that a development dimension is
         an integral part of any multilateral framework on competition. …

         “Beyond this ‘first track’, we would continue our efforts to further educational and
         analytical work on more complex competition issues, in a longer term
         perspective.”43

In an effort to assuage historical U.S. objections to the development of a WTO Competition Code,

Commissioner Monti has stressed that “there is no hidden European agenda” here:

         “the end-objective which we have in mind is not the establishment of an
         international competition authority, with its own powers of investigation and



41 For a good summary of the arguments for and against a multilateral competition code under the auspices
of the WTO, see Frederic Jenny, Globalization, Competition and Trade Policy, Remarks before the
Conference on Competition Policy in the Global Trading System, Washington, D.C. (June 23, 2000), p. 17-
24.
42 Monti on Cooperation between competition authorities, p. 14.
43 Id., pp. 14-15.




                                                       19
        enforcement. Nor do we wish to create a framework which could interfere directly
        with enforcement actions in individual jurisdictions.”44

        The ICPAC recommended that while the WTO Working Group should continue its study of the

relationships between trade and competition policies and the effects on international markets of private and

public restraints, the WTO should not become a forum for review of private restraints, and the WTO should

not seek to encompass new competition rules. Rather, the ICPAC recommended a broader, and softer

“Global Competition Initiative” designed merely to foster dialogue directed toward greater convergence of

competition law and analysis, common understandings, and common culture.45 In one of his last public

statements before resigning his post, former Assistant Attorney General Joel Klein endorsed the ICPAC

recommendations.46

        Meanwhile, a number of other proposals for binding and non-binding multilateral competition

agreements have surfaced.47 In 1993 a private group of 12 scholars and other experts meeting in Munich

proposed an International Antitrust Code which would set out minimum competition law standards to be

incorporated into the WTO. Those standards would be enforceable in domestic courts by national

enforcement agencies, with disputes adjudicated by a permanent international antitrust panel. Another

approach would be for the WTO to establish a set of rules, subject to dispute settlement, that requires

countries to enact their own national laws which they would then enforce.

        Yet another approach would be for the WTO to set up a neutral system for private dispute

resolution, to which firms could take their cases if they were dissatisfied with the way a nation’s courts or

administrative agencies were enforcing its own competition laws. This is the approach under NAFTA,

although it would be controversial if proposed seriously for the WTO. Such a system could defuse national

sovereignty concerns because the law applied would be that of the defendant’s country, but neutral



44 Id., p. 15.
45 ICPAC Report, pp. 273-74.
46 Joel I. Klein, Time for a Global Competition Initiative?, Remarks at the EU Merger Control 10th

Anniversary Conference, Brussels, Belgium (Sept. 14, 2000), p. 7.
47 See ICPAC Report, p. 268-69.




                                                       20
adjudication under WTO auspices might provide the plaintiff firm with greater confidence that its concerns

would be addressed.

        Less ambitious proposals have focused on harmonizing merger control procedures or substantive

rules. For example, the ICPAC recommended that nations develop what it called “disciplines” that would

govern the review of mergers with significant transnational or spillover effects. These disciplines would be

designed to promote “best practices” under any system of merger control, as opposed to creating rules that

would bring about convergence. The ICPAC recommended, for example, that nations agree to apply their

laws in a nondiscriminatory manner and without reference to firms’ nationalities; avoid applying non-

competition factors in merger reviews; recognize that the interests of complaining competitors are not

necessarily aligned with consumer interests; apply traditional comity principles in the exercise of prosecutorial

discretion in appropriate cases; and tailor remedies so that they focus narrowly on curing only domestic

competitive problems.48


                                              IV. CONCLUSIONS

        Companies based in Europe should understand that any cartel conduct in which they may be

involved, and any merger transactions, may be subject to review by antitrust enforcement authorities in

multiple jurisdictions, including the United States, to the extent that those activities may injure or threaten

injury to consumers in those jurisdictions. In addition, conduct that has the effect of excluding U.S. firms

from a European market may be subject to challenge by U.S. authorities.

        Further, European companies should understand that the European Commission and their own

national governments may chose to cooperate with foreign antitrust agencies seeking to investigate and

remedy such competition problems, and even assist them proactively, rather than resist them, as they have

historically. Indeed, European companies may well find themselves under investigation by their own

governments for such conduct, along with one or more foreign authorities, simultaneously. In settings such

as this, it is critical for target companies to ensure that they understand the “rules of the road”, including the




                                                        21
rules governing when and how their own governments may cooperate with foreign officials, and the

circumstances under which information or documents given to one government may be shared with another.

          It is also critical for such companies to become familiar, at least in general terms, with the substantive

and procedural competition laws of all of the jurisdictions in which they do business. It is important to know

where pre-merger notifications must be filed, for example, and what jurisdictions have amnesty programs that

may result in reduced criminal fines in the event that companies uncover criminal cartel conduct that they

want to self-report. Companies may chose to retain counsel in a variety of jurisdictions to help ensure that

they meet such reporting obligations, to assist in evaluating and mitigating antitrust exposure and to interface

with government officials in the event that is necessary.

          Multi-jurisdictional merger reviews present particular challenges in this regard. In general, companies

should have counsel in each jurisdiction that may be expected to have an interest in their merger. Companies

should select one law firm to coordinate this multinational effort, to ensure quality control and consistency of

approach.

          Finally, companies should consider the use of bilateral cooperation agreements as an affirmative tool

to open foreign markets. In particular, as discussed above, companies based in the EU should consider

approaching the EC for assistance in the event that they are victimized by anticompetitive conduct in the

U.S., or in other countries with which the EU has bilateral antitrust cooperation agreements.




48   ICPAC Report, p. 63.


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