Bilateral and Plurilateral Cooperation in Competition Cases Russell W. Damtoft United States Federal Trade Commission Sao Paulo, Brazil April, 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
1995 OECD Recommendation Concerning Cooperation between Member Countries on Anticompetitive Practices Affecting International Trade Provisions are similar to bilateral antitrust cooperation agreements Multilateral 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 Agreement 1999 Agreement 1995 Agreement
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?