QUESTION
harmonization of the international competition laws: possibilities and obstacles”
SOLUTION
Introduction
Competition has crossed the boundaries of countries and has become global these days. This international character of competition is a good sign because competition acts as a motivator to countries to do their best so that they can excel in the international arena. More than a hundred nations have formulated their own national antitrust laws to address concerns arising out of competition in the market which were just 20 in number in the late 1980s and many more are moving in this direction.
Various small or large firms from different countries are joining hands to achieve their objectives, for example some join together for technological advancement, some for sharing risks and product cost and others just to enter the market of a different territory. These alliances are making the presence of companies global beyond the borders of their own countries.
The present picture of businesses crossing the boundaries of countries has drawn attention towards the international behavior towards competition laws and policies. Different countries have their own different domestic laws to address competition issues with respect to their political, economical and legal growth. As in these types of alliances different countries are involved there is a basic requirement of harmony and cooperation between the competition laws and policies of the involved countries which is a required but daunting task to achieve.
Before we move further to understand the various possibilities and obstacles in the way of harmonization of international competition laws policies, it is better to understand as to what harmonization is and what type of harmonization are we actually looking forward to achieve in the international competition laws and policies.
Secondly, it is also important to understand the existing difference between the competition laws of various countries and also what the world has done so far in this direction.
Harmonization
In order to access the markets of a different country it is a basic requirement that there is some coherence in their competition laws and policies then only it becomes a smooth ride both the foreign entity as well as the welcoming country. By harmonization it does not mean that the competition laws and policies of all the nations of the world to be same but it means that there need to be some uniformity and conformity in the rules of the competition laws and policies all over the world.
It is a right of every country to make its own laws on various aspects including competition and regulate its own business market keeping in mind its legal, economical and political advancements. Harmonization does not take away this basic right of regulating the business market within its territory but tries to bring in consistency and coherence in the international business arena in the context of competition laws and policies which are prevalent in different countries.
Some countries applies extra territorial principle in which national law of a country is applied to the foreign company bringing in laws of different countries face to face mostly leading to confrontation. It can not only ruin the relations of the countries but can also demoralize the companies if they are subjected to too many laws and regulations in the host country. All these factors give rise to the need of harmonization in the competition laws and policies of different countries. The antitrust or competition laws and policies in various countries can be framed differently but their basic structure and framework need to be same so that there is no confusion and discrepancy in conforming to the laws of a different nation like fairness in transaction, transparency in dealings, non discriminatory behavior towards the investor can be part of domestic laws as well and can help in a great way to achieve some degree of coherence in the international competition laws and policies .
Harmonization is an achievable concept because the underlying idea of all competition laws and policies in various countries of the world is same that is to create free market economy and welfare of society in general. Though the underlying idea of all competition laws worldwide are same but their goal and enforcement differs slightly. Healthy competition among different companies provides best product to the consumer at the best reasonable price leading to the welfare of society. Product of different countries when made accessible all over the world leads to consumer satisfaction and all this is possible because of opening of markets to various companies and letting them flourish in a healthy and trouble free environment of a completely stranger country. The economy can truly grow and improve if there is harmonization and cooperation in competition laws and policies of different countries.
Different Countries Different Competition Laws
In order to do justice to this topic it is important that we study competition laws of those countries which represent a completely different ideology. The countries that can be considered for this immensely important topic are China, United States, European Union and Japan.
The competition law of European Union is formulated with competition as its focal point and states that competition in the market should not be distorted[1] whereas in the United States the focal point of all competition laws and policies are consumers[2] . The Chinese competition law protects the rights of the consumers as well as social public interest by restricting monopolistic trends in the economy and develops a socialistic economy[3]. Japanese competition laws promote the development of the economy by promotion of free and fair competition among the companies.
These are such differences which are difficult to be bridged easily as there is a difference in the basic objective itself but still it is the need of hour to find a solution to this problem so that markets can flourish and world becomes an open economy in true sense where firms can do business in any part of any country without being hassled and overburdened with too many rules and regulations.
These differences in competition laws of various countries can be elaborated with the help of some cases like AT&T case in which this monopolistic company was divided into seven bell companies which were regional and one long distance solely for the welfare of consumers and development of economy. In China Coca Cola was denied to take over Huiyuan juice because it was thought that it can act as a threat to existing companies in juice manufacturing.
Global Competition Law
The picture of the world has changed these days with technological progress, open border of nations to let other companies do business with it and in it, investment, and liberalization of foreign policies companies are moving out of their own countries and tying knots and finding roots in other countries of the world.
The countries have their own national laws to address issues arising out of competition in their markets but are lacking in laws and policies and a regulatory framework when question come of those foreign companies in its soil, who are willing to do business there. Sometimes competition agencies are not farsighted and vigilant enough and let companies enter into its jurisdiction without passing through any regulatory procedure and any check and balance. These types of activities can lead to wealth transfer from consumers in one nation to producers of another nation thereby putting a burden on the consumers and defeating the overall purpose of consumer welfare which is a basic principle in competition laws of most of the nations.
There can be another situation where a company is overburdened with too many protocols, rules and regulations to be followed to conform to the main criteria under domestic law which are welfare and safeguard of the right of the nation’s own people and economy and not of the foreigners. Such rigid and strict rules and regulations can make the company hostile and the prospect of economic growth slows down. Such situation fails the domestic competition laws and exposes its markets to various threats and hence gives rise to the need of formulation of a global law to address cross border transactions. Internationalism of economy has great impact on competition laws of the countries and it has become very important to formulate one such law and one such agency so that problems arising out of competition can be tackled appropriately keeping in mind welfare of all and promotion of economy.
International Organizations and Competition Laws
Many international organizations like International Competition Network, The United Nations Conference on Trade and Development, the Organization for Economic Cooperation and Development and World Trade Organization tried to bring in uniformity in the competition laws of different countries by introducing some soft laws but still no concrete solution has been found to this problem so far. Some of the steps that these international organizations took to reach to some consistency in competition laws and policies prevalent in various jurisdictions are as follows:
International Competition Network shortly named as ACN deals basically with the enforcement of competition laws through recommendations and best practices and has complete dedication towards competition policy concerns. The best practices evolved by this organization are very impressive and some of those guidelines are on pre merger notification, merger regulation etc. The policies formulated by ICN are non-binding in nature and can be utilized by countries in any way per their own wish and requirement. It was established on the recommendation of US department of justice and had full support of Competition Commissioner of Europe as well as the support of International Bar Association. It initiated with just 14 member countries but now constitutes around a hundred nations and is writing a success story in the field of competition though it is not fully equipped to look into all the concern emerging out of competition becoming international.
The United Nations Conference on Trade and Development (UNCTAD) provides an intergovernmental forum to competition agencies from developing countries so that practical competition issues and policies can be discussed. Through meetings organized annually concerns with respect to competition of member states are discussed and knowledge and experience is shared through informal exchange of ideas. International Competition legislation, the United Nations Set of Principles on Competition and Model Laws [4] are kept with it.
Organization for Economic Cooperation and Development (OECD): through non binding recommendations on competition law and policy, member countries are encouraged for soft convergence. Though OECD could not achieve much in comparison to what other organizations like UNCTAD and ICN have done but its work speaks through anti cartel policies and also in evolving a mechanism to develop international cooperation among the member countries.
World Trade Organization initially played a significant role and seemed promising towards taking the world to a common competition regime but it now has become inactive but still it deserves special reading hence dealt with in a separate topic.
World Trade Organization and Competition Laws
Prior to World Trade Organization two more organization International Trade Organization and General Agreement on Tariffs and Trade were introduced to bring reforms in the international trading market.
International Trade Organization was introduced in 1948 through Havana Charter with an objective to tackle issues of trade practices which were restrictive in nature. Havana Charter failed as it was objected by US Senate because of several reasons and thus International Trade Organization actually never came into existence. General Agreement on Tariffs and Trade was introduced basically with an idea to encourage free trade between member states by regularizing tariffs and also to evolve a methodology to tackle disputes arising out of such trade. Though a strong multilateral trading system came into existence through General Agreement on Tariffs and Trade there was still some need for reform and thus it was superseded by World Trade Organization, which was an outcome of Uruguay Round. World Trade Organization was assigned a threefold task out of which first was promotion of free trade, secondly to facilitate negotiation of trade agreements by various member countries and thirdly to handle international trade disputes. Though it has many obligations to perform but it has been vested with very few rights, liberties and powers.
Working group was formulated in first World Trade Organization conference that was held in Singapore in the year 1996 and this group was assigned to study and dwell further in the issues which are concerns of member states and raised by them and to explore any other area which might add significance to the World Trade Organization and its structuring. These concerns raised by member countries can be anything from the impact that competition has on trade or the impact that trade has on competition. Based on these or any other information that group can receive from member states it was to work on evaluating measures so that to enhance international cooperation among member countries.
In the second World Trade Organization Conference at Doha the working group was instructed to look for answers to address certain important principles like transparency in transactions, fairness in dealings and procedures, measures to achieve cooperation among the member countries etc. The beginning was good but in the next conference at Cancun in the year 2003 there was no consensus of minds in the group and it failed miserably. It was mostly because of the opposition of small nations who feared the law which was created by developed nations of the world. The working group has become inactive and initial work of World Trade Organization has also failed in the current situation.
Possibilities of Harmonization
We have so far realized that some coherence is required in the competition laws and policies of various countries and several steps have been taken at the global level in order to achieve this objective but so far noticeable success has not been achieved. Under this head we will try to elaborate as to how far the harmonization of competition laws is possible and what are the recommended ways to achieve it.
Harmonization of competition laws has not been possible so far because the whole world has been divided into two views the European Union viewpoint and the viewpoint of United States. Countries which are in support of European Union are of the view that there need to be an international antitrust law and it can be enforced through World Trade Organization whereas supporters of United States believe in slow harmonization and has raised its voice against an international antitrust law to be enforced by World Trade Organization.
A common way between the two thoughts can be derived to achieve harmonization of competition laws which is an indispensible need of time. First of all we need to dwell into the international law and see what it has in store with respect to competition laws.
International conventions, customs, general principles of law followed by most countries, judicial decisions and views of eminent scholars’ have given birth to international law. Following the footprints of international law a competition law which is global in character can also be realized.
There are already several treaties and agreements as part of World Trade Organization which deals with competition rules though not a unified law as such has been formulated. There are explicit rules and these are available in TRIPS (Trade Related Aspects of Intellectual Property Rights), GATT (General Agreement on Tariff and Trade), GATS (General Agreement on Trade and Services. TBT (Agreement on Technical Barriers to Trade), TRIMS (Agreement on Trade Related Investment Measure).
Competition laws of the following areas have been derived from several treaties only:
(i) Competition Enforcement and Rules of European Union;
(ii) Rules applicable within the North American free Trade Area;
(iii) Rules of enforcement for trans-border competition in the Australian New Zealand Free Trade Area;
(iv) Free trade area between Canada and Chile; and
(v) Marcosur agreement
Other than these there are other treaties which can be included in this discussion and those are treaties governing multinational companies; United Nations soft law on restrictive business practices; treaty on technology transfer; cooperation treaties for antitrust enforcement agencies; bilateral investment treaties and several more dispute resolution treaties.
Countries are moving towards adopting competition laws in whatever stages of development they are, irrespective of their geographic location and whatever be their political circumstances. It is thought that firstly there is a need to develop domestic competition law with the help available at international level and then slowly moving towards taking it a global level. The basic principles like fairness, transparency, welfare etc need to be enshrined in the competition laws at the domestic level which are also the values required for an international competition law. If international organization provides support and help in the formulation of domestic completion laws then slowly it will be realized that all countries have come to a common platform making the harmonization and coherence of international competition laws a possibility.
It is also of significance to evaluate the principles which can be agreed to by all countries; it is a difficult area as every country has its own culture and development history and ideology. There need not be any rigidity but countries should be given a freedom to have their own law per their own requirement. Whatever competition rule a country has these should be applied in a non discriminatory fashion.
Non discrimination can be measured by two methods i.e. National Treatment (NT) and Most Favoured Nation (MFN) treatment. NT rule states that foreign producers, products, and services should not be treated differently from the domestic producers, products and services. MFN rule provides that one trading entity should not be treated differently from another entity which is enjoying MFN treatment. These are very common principles and can be part of competition laws and policies of all countries and these two concepts can help in bringing in some uniformity in the international competition laws and policies.
There are rules, policies, and protocols already available with international organizations and in the international laws which if implemented in their true sense can bring harmonization in the global competition laws. Countries need to come together and join hands while keeping in mind the bigger goal of achieving a world where consumers and producers as well as economic growth of all the countries of the world is feasible. The following points and many more, if addressed properly can lead to possibility of having an international law on competition:
(i) Consensus of the countries;
(ii) Objective of international competition law to be focussed and welfare of all countries;
(iii) dynamic competition law; and
(iv) regulatory circumvention to be avoided
Obstacles in the Harmonization Process
The major obstacles in the harmonization of Competition laws are because of several factors as discussed below elaborately:
(A) Developing Nations
(i) All countries in the world are not at the same economic level, some are developed, some are developing and still some other are in the transient stage. It is the biggest concern of those countries which are still on their way to development that formulation of one uniform law on competition might come in their way of policy making and their will not remain any power in their hands to pursue their own economic development to suit their economic, political and legal atmosphere. These countries do not have a fully established industrialization policy which is a rather more important issue than competition in context of these developing nations to achieve desired economic growth. World Trade Organization has been established with the main idea of making the world markets accessible to one and all which might act as a detriment to one of the basic fundamentals of competition and that is of welfare.
(ii) Another obstacle in the way of achieving harmonization is that developing countries cannot strictly adhere to the National treatment obligation of non discrimination under the World Trade Organization as in certain situation its violation is more beneficial for the economic growth of the nation than obliging to it. For example certain domestic entities might be allowed to merge so that they are in a position to compete with bigger international entities. Bigger multinationals cannot be allowed the same merger as it can monopolize the market and can be a threat to smaller domestic companies.
(iii) Another fear of developing countries is with respect to the transparency principle as stated in the International agreements because an obligation to transparency can put developing nations under unnecessary burden and these countries can also be pressurized to totally change their domestic laws and policies on competition.
(B) United States is in favour of slow harmonization and the reasons of such a viewpoint are as below:
(i) It is of the opinion that as there is no consensus on the framework of international competition law so far so any negotiation in that direction is an unnecessary effort and cost. It suggests that rather than negotiating on a new law it is better that already existing rules and policies on competition law be enforced properly;
(ii) A uniform law on competition can have no significance as it might be very strict and may not be able to tackle the problems of world arising out of competition as scenarios are changing very frequently and it may not be able to keep pace with the fast moving world and international market; and
(iii) Consumer welfare is one of the basic fundamental of competition laws but it can be disturbed by an international competition law as that law might be more market friendly and not so much consumer friendly.
(C) Competition matters are very complex in nature and an organization of World Trade Organization stature is not fully equipped to dissolve the matters of this much complexity as it lacks both legitimacy and experience.
(D) The implementation cost of such an international competition law could be too high as countries might have to change their own laws in order to conform to the newly formulated law if in case countries reach to one such law.
All the countries in the world have grown differently some are moving slow and some really fast and have their own concerns and goals to achieve and to reach to a common consensus in order to realize a common competition law prevalent all over the world is an extremely difficult task. Nobody is wrong here but target to be achieved are different. The fear of developing nation can also not be denied as the developed world is totally different from developing world.
Conclusion
The process of harmonization of competition law to address arising concerns out of the fast growing economy has become an important consideration. This need was realized and several steps were taken in that direction, policies were formulated, organizations were established but nothing concrete has come out so far. Harmonization is indeed a daunting task to be achieved but there is some possibility that this dream can be turned into reality. There are already enough policies available with international organizations which may not be fully capable to address the global competition concerns but to some extent help in resolving them. If all countries understand the need of the time and enshrine principles of these international policies in their domestic laws some coherence can be established in the competition laws. Non Discriminatory treatment to global companies being one of them, transparency in regulations and fairness in procedures could be another. But to achieve this harmonization and coherence in the international competition laws and policies the whole world has to reach to a consensus which is the biggest challenge in this direction as different countries are in different legal, political and economical level of growth and thus have different goals to achieve. One straight jacket formula cannot be applied everywhere. Moreover there is no such international organization which has enough teeth to tackle economic situations which are numerous and are growing everyday not only in numbers but also in form. Possibility of harmonization of international competition laws cannot be denied but genuine obstacles are many.
Bibliography
- Budzinski, O (2008) The Governance of Global Competition, 142;
- Berkeley Business Law Journal(2007), Monopolists without Borders: The Institutional Challenge of International Antitrust in a Global Gilded Age’, 437
- Malinauskaite, J (2008) presented during the workshop at IALS, International Competition Law Harmonization and the WTO: Past, Present and Future
- Wagenführer,T Limitations of International Competition Laws
- Waller,W An International Common Law of Antitrust
- Rosenthal, D and Nicolaides, P Harmonizing Antitrust: The less effective way to promote International Competition
- Addy,G (1994) International Harmonization and Enforcement Cooperation: the Canadian Experience
- Wood, D.P. (2005), Antitrust at the Global Level, The University of Chicago Law Review, Vol. 72, No. 1,
- www.internationalcompetitionnetwork.org
- www.oecd.org
- www.wto.org
- www.unctad.org
[1] Section 3(g) Treaty of Rome 1957
[2] OECD Forum (2003:2)
[3] Section 1 of Anti Monopoly Law
[4] (td/rbp/conf/10/rev.2) 01/01/01
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