The US and EU competition policies: cooperate or compete?

1. The US and EU competition policies: cooperate or compete? Alix Grassin Christin Fröhlich

2. Agenda • Reasons for cooperation • Scopes • Restraints • Practical examples • Conclusion

3. Reasons for cooperation • Increase of cross-border trade and transnational business activities  doctrine of extraterritorial effect • Necessity of sharing information • Common objectives and similar anititrust law

4. Scopes of cooperation 3 agreements concluded (1991, 1998, 2002): • voluntary exchange of information, coordination of antitrust enforcement and regular bilateral meetings • considering the interests of the other party when enforcing its competition rules • each party may ask the other to take enforcement action • review of individual merger cases in close cooperation, with a similar timetable for investigations, exchange of information and joint interviews with the mergers

5. Scopes of cooperation Anti-competitive agreements • Convergence: Commission followed US example  became more vigorous, setting higher fines • case of heat stabilisers/impact modifiers: prosecution of the cartels involved almost simultaneous surprise visits to companies in the EU and US • Weakening cooperation: risk of discovery of EU corporate leniency statements and its use by US courts for civil litigation

6. Scopes of cooperation Merger control • Divergent results because of different information supplied by merging firms? • Possibility of joint meetings between mergers and authorities • Boeing/McDonnell Douglas: competition authorities played against each other, US lobbied Commission

7. Scopes of cooperation Abuse of market power • Difficulty of distinguishing between exclusionary and pro-competitive behaviour • Article 82 of EC treaty: firm is abusing its dominance even if it does not gain more economic power • Market share indicating dominant position • EU: 50% or more as clear indicator for monopoly power; under 25% safe harbour • US: two-thirds of a market; under 40-50% safe harbour • Commission more vigorous stance than US?

8. Restraints to cooperation Reasons • Sovereignty and national interests: • benefit first their consumers • protect their industries • protect them from foreign take-overs • Different visions of competition policies: • regulatory vs. market-based economy policies • turning point with Commissioner Monti • Institutional divergences

9. Practical examples GE/Honeywell merger with conglomerate effect Different viewpoints about the merger of two American firms • EU ruling: GE  dominant position in the large jet craft engines market Honeywell  large part of the avionics and non-avionics aerospace componentmarket Possible effects: bundling, leverage and vertical effects • US ruling: merger efficiency based on lower prices leads to pro-competitive behaviour

10. Practical examples Microsoft • Significant divergence of interpreting the similar antitrust laws • US ruling: disclosure of source codes, granting of non-discriminatory licensing to independent software vendors and allowing the removal of its software • EU ruling: 497 million fine, changes of server operating system to allow competitor’s access and obliged Microsoft to offer a Windows version without the Windows Media Player

11. Practical examples Reasons for divergence: • Political pressures: at beginning of investigations the DOJ, under Clinton administration, announced heavy fines and a splitting of the company. Final decision made under the rather business-friendly Bush administration • Different nature of sanctions due to authorities analysing different issues (US: licensing and the removal/altering of programs; EU: emphasis on the bundling itself)

12. Conclusion - Weak points: • Domestic reasons (culture and history, economic strategy and theory, political behaviour) constitute obstacles • Particularly diverge when defining abuse of market power or assessing effects of mergers, especially when national champions are involved • Not compulsory +

13. Conclusion - Advantage: • Mechanisms established to better understand each other’s competition policy regimes • Strong convergence  Remarkable degree of cooperation in competition policy,natural tensions exist +