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Bilateral and Plurilateral Cooperation in
Competition Cases
Russell W. Damtoft
United States Federal Trade Commission
Sao Paulo, BrazilApril, 2003
The views reflected herein are those of the speakers and do not necessarily reflect the views of the United States, the US Federal Trade Commission, or any official thereof.
The Need for Cooperation Markets are increasingly
cross-border, regional, and global.
Local or national markets can have cross-border implications as well.
Anticompetitive practices and mergers more often affect more than one country.
General Principles of Effective Cooperation Respect national sovereignty
Respect the jurisdictional rules of the countries involved
Respect important interests
Protection of confidentiality
Confidentiality A key to successful cooperation
Enforcement is more effective when businesses cooperate
Businesses won’t cooperate if they fear that confidential information will be compromised
Successful cooperation requires knowing that confidences will be maintained
Requires high degree of trust between authorities
Foundation of Competition Cooperation Relationships
Formal Instruments Bilateral Agreements Multilateral Agreements Trade Agreements
Informal Relationships
Bilateral Agreements United States has bilateral
cooperation agreements with eight jurisdictions
Multilateral Agreements 1995 OECD
Recommendation Concerning Cooperation between Member Countries on Anticompetitive Practices Affecting International Trade
Provisions are similar to bilateral antitrust cooperation agreements
Cooperation in Trade Agreements
Cooperation encouraged by: NAFTA U.S./Chile agreement Other bilateral agreements FTAA draft agreement
But day to day cooperation usually takes place between authorities under bilateral or informal mechanisms, not trade agreement
Cooperation Among NAFTA Partners Principle of cooperation in Article 1501(2):
“Each Party recognizes the importance of cooperation and coordination among their authorities to further effective competition law enforcement in the free trade area. The Parties shall 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 and policies in the free trade area.”
A Trio of Bilateral Agreements
2003 Agreement1999 Agreem
ent19
95 A
gree
men
t
Informal Cooperation Where there is good will, trust,
and a desire to work together, most cooperation does not require formal instruments or the exchange of confidential information
The most important instruments are the telephone and e-mail!
“Getting to know each other” matters
What really matters A relationship
based on mutual trust is what makes cooperation work.
Typical Contents of Formal Cooperation Agreements
Notification Enforcement Cooperation Coordination Referral of Cases Involving Both
Countries (Positive Comity) Avoidance of Conflicts Confidentiality Consultations
Notification Originally a defensive measure in
case one Party's enforcement was perceived to infringe the other’s national sovereignty
Today its purpose is more as an instrument of cooperation to make sure other Party knows what it needs to know
Formal Notification Typically Required When: Relevant to other country’s important
interests Investigation of:
anticompetitive practices carried out in the other country
Merger involving firm from the other country Conduct thought to be approved by the other
country Remedies may be directed at conduct or
assets in the other country’s territory Information sought from other country
Notification Does Not Replace Informal Contacts Not all cases of interest will be subject to
formal notification For example, multinational merger between
two firms from third (or fourth) countries with impacts in both countries
Investigating country may be unaware of impacts in other country
Regular informal contacts keep everyone “in the loop.”
Notification and Confidentiality Notification of identity of firms being
investigated is sensitive Harm to reputation of those later found to have
been acting legally Misuse of information for personal gain (stock
market manipulation?) Potential to compromise notifying country's
investigation
Confidentiality must be assured if notification is to serve its purpose
Enforcement Cooperation In principle, effective enforcement
cooperation would benefit from common interest in sharing of information about: Investigative facts Theories about markets Remedies
But cooperation is subject to national confidentiality laws
Therefore, there are practical limits on cooperation.
Cooperation Within the Limits of Confidentiality Confidential information usually can be
shared when: firms agree to waive protection of
confidentiality laws, or Information is confidential only as a matter of
agency practice, not legal requirement Theories and conclusions about market
definition, competitive effects, and possible remedies can be shared if it does not reveal protected information
Enforcement Assistance Agreements Separate from normal bilateral
cooperation agreements Competition Legal Enforcement
Assistance Agreements Criminal Mutual Legal Assistance
Treaties (MLATs)
Competition Legal Assistance Agreements U.S. International Antitrust
Enforcement Assistance Act authorizes reciprocal agreements for authorities to share information (including confidential information) and gather evidence for each other
Stringent conditions on confidentiality and usage
Only One Agreement Has Been Reached Thus Far U.S./Australia
Agreement (1999) Other agreements
may be reached in the future
Coordination Can apply when both countries are investigating
related or the same matters Formal factors to consider:
whether both parties will achieve objectives abilities to obtain required information possible reduction of cost potential advantages of coordinated remedies
Main issue in practice is whether providers of confidential information will consent to the sharing of such information
Positive Comity Conduct affecting both countries One country can effect a remedy
that serves all One country requests the other to
take enforcement action against conduct that is affecting its important interests
Rarely invoked formally
Positive Comity Example Alleged exclusionary
conduct by airline computer reservation system with impact on both U.S. airlines and European consumers
U.S. referred to E.C. E.C. took action; U.S.
deferred to E.C.
Enhanced Positive Comity Agreement U.S. - E.U. agreement Adds to positive comity provision in
bilateral cooperation agreement Referring party presumptively defers
to the other when certain conditions are met
Party receiving reference keeps referring Party informed
Avoidance of Conflicts If other elements are observed, this
usually takes care of itself "Be a good neighbor” Consider how law enforcement actions
may be implemented so as to avoid harming other Party’s important interests
Central issue is usually remedies that have cross border effect
Other features of cooperation agreements Confidentiality Consultations Direct communications between
competition authorities No binding dispute settlement
mechanisms
Cooperation In Practice: the U.S. Experience Common markets
make U.S./Canada relationship the most active in the hemisphere
Cooperation in both merger and non-merger cases (including cartels)
Cooperation With Other Nations is Increasing Active
U.S./Mexico cooperation
U.S./Brazil cooperation is strong; formal agreement took effect last month
Cooperation in Merger Review Notification Early and frequent contacts between staff Discussions about relevant market, theory
of anticompetitive harm, potential remedies
Extensive use of waivers to facilitate the exchange of confidential information
Attend meetings with merging parties Coordination of remedies
Challenges Sharing information while respecting
confidentiality obligations
Different timelines and stages of Investigation
Dealing with strategic behavior by firms
Lessons Learned Cooperation important and necessary Requires high degree of trust Regular and frequent contacts Earlier the better Respect for each other's interests Information sharing at all stages when possible Informal as important as formal Confidence in safeguards to protect confidential
information Can help stretch resources
Issues for Cooperation in the Multilateral Context Doha Ministerial provides that WTO WG to look at,
among other things: “modalities for voluntary cooperation”
How can mutual trust and close working relationships be realistically built and sustained with all countries?
What kinds of cooperation lend themselves to a multilateral context?
What if fundamental changes occur in one country? Need to distinguish between enforcement
cooperation and technical assistance?