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International discipline on trade and competition: an update Frederic Jenny Professor of economics ESSEC Business School Chair, OECD Competition Committee.

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Presentation on theme: "International discipline on trade and competition: an update Frederic Jenny Professor of economics ESSEC Business School Chair, OECD Competition Committee."— Presentation transcript:

1 International discipline on trade and competition: an update Frederic Jenny Professor of economics ESSEC Business School Chair, OECD Competition Committee New Delhi, November

2 Issues to be discussed Global cartels are alive and well The Automotive parts cartel The Cathode Ray Tube and and the LCD display cartel The Foreign Exchange cartel The Libor and Euribor cartels Major changes in the Potash and Phosphate cartels? The role of state support for export cartels Recent trends in the develoment of competition law systems in the last decade Proliferation of competition laws: is the end in sight ? The rise of regional cooperation Conclusions

3 Automotive parts cartel A large number of price-fixing investigations have been launched in the past two years by at least six antitrust authorities around the world targeting industries manufacturing mechanical and electrical automotive parts. It appears that roughly 34 separate cartels are under investigation, most of them global in scope. More than 80 companies have been identified so far as targets of these probes, with that number likely to grow as more prosecutions are finalized. As of September 2013, a total of almost $2.0 billion in corporate fines have been imposed. At the rate these cases are evolving, there is a good chance that monetary penalties eventually may climb to $5 billion or more. The DOJ has so far indicted 21 auto-parts executives, of which 17 have agreed to prison sentences totaling 233 months. John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust Institute

4 Automotive parts industry : a global industry John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust Institute The auto industry is the prototypical global industry. That is, its sourcing methods are virtually identical across markets with significant auto assembly: North America, the EU, Japan, China, Brazil, and others. Auto parts are bought through Requests for Proposals (i.e., tenders) issued by the automakers. These RFPs contain tight quality and design specifications. When a proposal (a bid) was submitted, virtually the only consideration was price. The RFPs imposed product homogeneity, thus eliminating one potential factor that tends to frustrate the formation and smooth operation of cartels. In short, bid rigging was made easier. Once a bid was accepted, supply contracts typically lasted for several years (until a car model was totally redesigned), which also prevents entry.

5 Automotive parts cartel: are scructural screen useful? John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust Institute For the products alleged to have been price-rigged, there are few suppliers that tend to be geographically clustered. For example, the four Japanese suppliers of Auto Lighting Products control well over 90% of U.S. national supply. Similarly, the top four wiring harness suppliers control 77% of the global market (Sedgwick 2013). To some extent, automakers policies of running qualification programs for suppliers created barriers to entry and ultimately contributed to a high degree of supplier concentration for assembly plants in most markets.

6 Automotive parts cartel: Role of international cooperation John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust Institute (…) In February 2010 three antitrust authorities conducted coordinated raids worldwide. The DOJ, EC, and JFTC raided manufacturers of three types of auto parts: Wiring Harnesses, Fuel Senders, and Instrument Panel Clusters. Perhaps aided by Amnesty-Plus programs, further cartels were investigated: Aftermarket Sheet Metals in 2010; Aftermarket Auto Lights in July 2010;;Occupant Safety Systems and Auto Refrigerants in February 2011; Auto Bearings, Aftermarket Auto Lights, and Small Electric Motor Components in July 2011; New Auto Lights in March 2012; Thermal Systems in July 2012; and Auto Marine Shipping in September The Canadian Competition Bureau also joined in fairly early. By 2012, the Mexican and South Korean antitrust authorities were cooperating with the first four. And the German Federal Cartel Office unearthed two auto-parts cartels on its own territory. Clearly, close cooperation and coordination among these far-flung antitrust authorities has greatly aided in the rapid dissemination of information needed to begin the multiple investigations.

7 Automotive parts cartel: Are BRICS countries affected ? John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust Institute In March 2013, the Indian Competition Commission began an investigation into whether 17 auto manufacturers were colluding on the sales of car parts to independent dealers (Vyas and Thakkar 2013). In August 2013, speculation began to mount that the new China antitrust authority was soon going to investigate price fixing in the automobile industry. However, this investigation seems to be directed at whole finished imported vehicles, not parts (Telegraph 2013).

8 Issues to be discussed Global cartels are alive and well The Automotive parts cartel The Cathode Ray Tube and and the LCD display cartel The Foreign Exchange cartel The Libor and Euribor cartels Major changes in the Potash and Phosphate cartels? The role of state support for export cartels Recent trends in the develoment of competition law systems in the last decade Proliferation of competition laws: is the end in sight ? The rise of regional cooperation Conclusions

9 Cathode Ray Tube cartels December The European Commission fined, on 5 December, seven companies (LG Electronics, Philips, Samsung, Panasonic, MTPD (a subsidiary of Panasonic), Toshiba and Technicolor) that have taken part in two distinct cartels in the cathode ray tube sector, one relating to TV sets and the other to computers. It imposed a total fine of 1.47 billion for breaking the Community's competition rules for a period of ten years, from 1996 to For almost ten years ( from 1996 to 2006) they fixed prices, shared markets, allocated customers between themselves, coordinated output capacity and exchanged commercially sensitive information. They worked out the nature of their concerted action during green meetings', so called because they took place around a game of golf. Preparation and implementation were then carried out through lower-level meetings, often referred to as glass meetings', on a quarterly, monthly or even weekly basis in various locations in Asia (Taiwan, Korea, Japan, Malaysia, Indonesia, Thailand, Hong Kong, etc) and Europe (Amsterdam, Budapest, Glasgow, Paris or Rome). Europolitics, COMPETITION : RECORD FINE FOR CATHODE RAY TUBE CARTEL, 7 décembre 2012,

10 Cathode Ray Tube cartels December The two cartels are among the most organised cartels that the Commission has investigated. The cartelists also monitored the implementation, including auditing compliance with the capacity restrictions by plant visits in the case of the computer monitor tubes cartel. Cathode ray tubes constitute a very important component in the making of television and computer screens, accounting for 50 to 70% of the price.

11 LCD panels cartel case ( US) Executives from AU Optronics Corporation (AUO), a Taiwanese manufacturer of LCD panels participated in a series of meetings in Taiwan with Korean and Taiwanese manufacturers of LCD panels, at which participants were found to have exchanged information on future pricing strategy and discussed ways to stabilize prices for LCD panels incorporated into notebook computers and desktop monitors. After an 8-week trial in San Francisco, AUO, its U.S. subsidiary, and two former senior executives were convicted of participating in an illegal price-fixing conspiracy. The trial judge imposed a fine on AUO of US$500 million and ordered it to implement an effective compliance and ethics program. The trial judge sentenced each of the convicted executives to serve three years in prison and to pay a US$200,000 fine.

12 LCD Panel case, US District Court Issues, July 16, 2013 The Department of Justice (DOJ), prosecuting for the U.S. government, contended that a foreign agreement to fix prices, no matter how reasonable, is an automatic violation of U.S. antitrust law, requiring proof of neither an intent to curb competition nor an anti-competitive effect. AUO disagreed, arguing that the U.S. antitrust law prohibits only foreign conduct that was specifically intended to substantially affect American commerce and did have a substantial effect on U.S. commerce. AUO also argued that it should be entitled to present arguments that its conduct was justified under the rule of reason. The trial court rejected AUOs arguments, which will now be raised in the court of appeals.

13 LCD Panel case, US District Court Issues, July 16, 2013 AUO has argued on appeal that it did not import any products directly; it only produced overseas a component that was incorporated into finished products (the notebooks, flat-panel TVs and monitors), which were imported by others. Under AUOs interpretation, price-fixing activities in foreign markets for components that are used in other countries to manufacture finished products that may be later imported into the U.S. should not be subject to U.S. price-fixing laws. The DOJ disagrees, arguing that the U.S. antitrust law applies to conduct in other countries intended to affect U.S. commerce, and which did have a substantial effect on U.S. commerce. According to the DOJ, the U.S. law applies, not just to the conduct of direct importers of a product, but also to the conduct of overseas manufacturers of components who know that their products will be incorporated into finished goods sold in the U.S. Further, many countries in Asia have similar regulations, ranging from the more established antitrust regulations found in Korea and Japan (which continue to be enforced and interpreted aggressively) to the more recent regulations in China, Singapore and Hong Kong.

14 China sanctions an international cartel for the first time (January ) China's National Development and Reform Commission (NDRC) imposed fines of RM 353 million (approximately USD 56 million) on six international manufacturers of liquid crystal display (LCD) panels for price-fixing in connection with the so-called LCD cartel. The sanctioned LCD panel maker are: Samsung and LG of Korea, and Chimei, AU Optronics, Chunghwa Picture Tubes and Hannstar of Chinese Taipei. They met almost monthly in Taiwan or Korea between 2001 and During 53 so-called "Crystal Meetings," the companies exchanged market information and discussed prices for LCD panels. Over 5 million LCD panels were sold in China during this time period by the cartel. NDRC ordered the six companies to pay a total fine of RMB 144 million (approximately USD 23 million). In addition, it ordered them to pay RMB 172 million (approximately USD 27 million) in restitution to Chinese TV makers, corresponding to the amount such customers overpaid due to higher prices imposed by the cartel Finally, NDRC ordered the confiscation of the cartel's illegal gains of RMB million (approximately USD 5.7 million).

15 Interest rate cartel BRUSSELS, Belgium (Reuters EU antitrust regulators will levy a record fine of at least 1.5 billion ($2.02 billion) on six financial institutions, including Barclays and Royal Bank of Scotland, for rigging the yen LIBOR interest rate benchmark, a banking industry source said on Wednesday [Nov ]. The fines, against six banks, are expected to be announced within the next month, one official said, bringing to an end a more than two-year antitrust investigation by Brussels competition authorities into whether banks colluded to manipulate widely used benchmarks, such as the London interbank offered rate, or Libor, and its lesser-known cousin, the euro interbank offered rate, or Euribor. The penalties are likely to be in the hundreds of millions of euros for individual banks, with penalties possibly approaching 1 billion euros ($1.35 billion) for large banks that competition regulators believe were heavily involved in rate rigging, the officials said. That would likely make the penalties among the largest ever imposed by EU regulators

16 Fixing the interest rates (Libor, Euribor etc....) According to the Justice Department, a Rabobank employee trying to manipulate Libor boasted to a colleague in an "Don't worry mate-- there's bigger crooks in the markets than us guys." That assertion may be about to be tested.

17 Interest rate cartel BRUSSELS, Belgium (Reuters) Mr. Almunia called the allegations about banks' behavior "shocking. "Speaking in Brussels last month, Mr. Almunia said the probe of the interest-rate cartels was "very well advanced" and said there would be news soon."This is a case of primary importance," he said. Almunia wants to hand out the fines by the end of the year, reinforcing his emerging legacy as a firm penalizer of banks' wrongdoing since the financial crisis struck five years ago. His investigators say interest rate derivatives' traders colluded to rig the LIBOR and Euribor benchmarks, using advanced knowledge of the cost of borrowing to bolster their profits. Such cartels are illegal. LIBOR is based on a survey of what banks would charge each other for loans. Other regulators have already found that traders colluded on answers that could nudge the reported rates by amounts that were tiny but translated into big profits

18 Rigging the rates on the currencies market (October ) The investigation (of the UK Financial Conduct Authority (FCA)) is said to be focusing on the so-called WM/Reuters" rates that are used by investors as a benchmark to work out what they pay for currencies and the day-to-day value of their portfolios. Due to the size of the foreign exchange market, even tiny changes in the recorded rates could affect the value of investment funds, as well as pensions and savings. The US Department of Justice has already confirmed it is investigating potential currency market manipulation, while the European authorities have launched their own antitrust review.

19 Foreign exchange manipulation Some of the world's biggest banks have suspended more than a dozen of their star traders in New York, London and Tokyo as the investigation into manipulation of the $US5.3 trillion ($5.6 trillion)-a-day global foreign currency market heats up. The investigation has been focusing on electronic chat rooms with names such as The Cartel and The Bandits' Club in which traders appeared to swap market- sensitive information with their competitors while joking about their ability to influence exchange rates. Their banter also reportedly contains frequent references to drug use and sexual acts. A key issue in the probe is whether traders tried to manipulate currency "fixes" by pushing through trades before and during the 60-second windows when currency benchmark rates are set. These benchmark rates – published hourly for 160 currencies and half-hourly for the 21 most-traded currencies – determine what investors and businesses pay for their foreign exchange. 7 november2013, Banks set to pay up for misdeeds, The Australian Financial Review

20 Issues to be discussed Global cartels are alive and well The Automotive parts cartel The Cathode Ray Tube and and the LCD display cartel The Foreign Exchange cartel The Libor and Euribor cartels Major changes in the Potash and Phosphate cartels? The role of state support for export cartels Recent trends in the develoment of competition law systems in the last decade Proliferation of competition laws: is the end in sight ? The rise of regional cooperation Conclusions

21 Issues to be discussed Global cartels are alive and well The Automotive parts cartel The Cathode Ray Tube and and the LCD display cartel The Foreign Exchange cartel The Libor and Euribor cartels Major changes in the Potash and Phosphate cartels The role of state support for export cartels Recent trends in the develoment of competition law systems in the last decade Proliferation of competition laws: is the end in sight ? The rise of regional cooperation Conclusions

22 India cuts phosphate and potash subsidies May : India is cutting subsidies on phosphate and potash fertilizers in fiscal year, which began in April, in an effort to cut fiscal deficit. According to the new rates, the total subsidy for potash and phosphate fertilizers for the financial year would be reduced by around 15%, said finance minister P. Chidambaram... Jul. 25th, 2013: Depreciation of the Indian currency and reduced government subsidies have made imported phosphate and potash fertilizer more expensive for manufacturers and farmers. The unfavourable conditions in India could last up to a year, or until after the next general election, when it may be easier for the government to re-balance fertilizer subsidies, said Mosaic chief executive officer Jim Prokopanko. They know theyve got a deficit that has to be tamed, and theyve chosen, if ham-handedly, to reduce payments for potash and phosphate imports.Mosaic estimated current quarter potash prices at $330 to $360 per tonne, compared with an average of $368 last quarter.

23 The potash trade Canpotex Potash.CorpMosaic Agrium UralkaliSilvinit IPC Belaruskali BPC US Canada Other importers China India Brazil, Malaysia, Indonesia Etc.. World market share 35% World market share 30% Canada Russia Belarus

24 The international potash cartel in difficulties, September 2013 Uralkali announced pulling out of the international cartel named Belarus Potash Company (BPC). BPC used to market potash for Uralkali and Belaruskali and Canpotex for three Canadian producers -- Potash Corporation of Saskatchewan, Mosaic and Agrium. Together, BPC and Canpotex monopolised the potash business.

25 The international potash cartel in difficulties, September 2013 This happened at a time when global potash capacity was increasing against less robust consumption growth ( in particular lower demand due to the falling Indian rupee) As a result, the potash market became more competitive with certain producers acting aggressively to gain a larger market share, which resulted in price decline in all major markets. In December 2012 there appeared a decree by the Belarusian president, which cancelled the exclusive right of BPC to export Belarusian potash. Following the issue of the decree, Belaruskali has made a number of deliveries outside BPC. Sunday 10 November 2013

26 The international potash cartel in difficulties, September 2013 Against such environment and Belaruskali's behaviour, Uralkali had to revise its strategy and maximise output selling it through its own trader, as we believe that Uralkali is most favourably positioned in such conditions being the lowest-cost producer and having the opportunity to launch new capacities at the minimal cost," the spokesman said. "Being the lowest-cost producer with highest potash capacity, having the ability to supply to China by rail, we hope to increase our share in all major markets, above all in China, India and Brazil." Starting from August, Uralkali is going to use 100pc of its mine capacity, which could produce 13m tonnes a year. "Apart from enabling us to increase our share in key markets, high capacity utilisation will result in economy of scale," Uralkali said. Sunday 10 November 2013

27 The international potash cartel in difficulties, September The move was likely to result in global potash prices plunging from the current $400 (£263) a tonne to about $300 in the second half of the year, according to Vladislav Baumgertner, Uralkali's chief executive. Note that in the pre-crisis commodity boom, potash prices hit $1,000 a tonne. "Uralkali used to be the most disciplined potash producer sticking to price over volume strategy'," a spokesperson for Uralkali told The Daily Telegraph. Sunday 10 November 2013

28 India bags good deal in potash as cartel falls apart, September 2013 India contracted potash imports at $375 a tonne for August-January shipments. This translates into a huge discount of $52 a tonne on prices earlier charged by two largest potash suppliers, Uralkali of Russia and Belaruskali of Belarus. Earlier, the contracts were at $427 a tonne for shipments round the year. The cartel then refused to cut prices. By July end Indian had already imported 1.8 million tonnes at the old price out of the total contracted 3.48 million tonnes for The remaining 1.68 million tonnes would come at the discounted price. Taking advantage of the split in the potash cartel, Indian negotiators pushed hard over the past few days to get the discount in the net rate, which includes the cost of potash, insurance, freight and handling. The discount includes a $3 a tonne incentive on importing all the contracted potash. India would also gain from 180-day credit, apart from an additional $3- 5 a tonne discount on incidental charges. Financial Chronicle, 23 septembre 2013

29 The international potash cartel in difficulties, September 2013 "We have discussed Uralkali's new strategy with industry consultants Ferteco," City broker Liberum said. "We expect lower potash prices in the short-term but expect an accelerated path to a tighter supply-demand balance as expansions are delayed and demand is restimulated. We are not changing our long-term potash price assumption of $400 a tonne but are cutting our 2014 and 2015 potash price assumptions to $300 to 350 a tonne. Sunday 10 November 2013

30 Short term gain but for how long ? Lukashenko lambasted Uralkali, saying, "Only an idiot will work against his own interests. Our re-merger with the Russian company will raise prices for potash fertilizers. Separation will definitely bring the prices down. Globes' correspondent, 29 septembre 2013, Israel Business Arena Note: The break-up of the Uralkali-Belaruskali export alliance, which controlled more than 40 percent of the world potash market, is predicted to push global potash prices down 20 percent and result for Belarus in a loss of some $890 million in export proceeds this year (2013). Potash reportedly accounts for about 10 percent of the nations total export earnings and 12 percent of government revenue.

31 Investors react positively to the restoration of the Russian potash cartel In the stock market, Israel Chemicals Ltd. (TASE: ICL) rose 5.8%, for the biggest gain among Tel Aviv 25 shares, and on the day's biggest turnover of NIS 89.4 million, after Belarus President Alexander Lukashenko basically said that the Russian potash cartel would be restored. Parent company Israel Corporation (TASE: ILCO) rose 4.4%. Aviv Levy and Globes' correspondent, 29 septembrer2013, Israel Business Arena

32 Chinas strategy: vertical integration China has acquired a 12.5 percent stake in Russian potash producer Uralkali in a deal that could help Beijing secure stable supplies of the soil nutrient, put new pressure on prices and reduce the chances of a Russia- Belarus cartel being revived. The investment by Chinas US$575 billion sovereign wealth fund, China Investment Corp, is the latest twist in a saga that began when the worlds leading potash producer quit the lucrative sales partnership with Belarus in July and led to the companys chief executive being jailed. * The deal is a rare example of China, the worlds largest consumer of potash, acquiring direct ownership of Russian natural resource assets, although it is only the latest of several commodity-related investments by CIC. September

33 Issues to be discussed Global cartels are alive and well The Automotive parts cartel The Cathode Ray Tube and and the LCD display cartel The Foreign Exchange cartel The Libor and Euribor cartels Major changes in the Potash and Phosphate cartels The role of state support for export cartels Recent trends in the develoment of competition law systems in the last decade Proliferation of competition laws: is the end in sight ? The rise of regional cooperation Conclusions

34 Issues to be discussed Global cartels are alive and well The Automotive parts cartel The Cathode Ray Tube and and the LCD display cartel The Foreign Exchange cartel The Libor and Euribor cartels Major changes in the Potash and Phosphate cartels The role of state support for export cartels Recent trends in the develoment of competition law systems in the last decade Proliferation of competition laws: is the end in sight ? The rise of regional cooperation Conclusions

35 The world market for phosphate World Phosphate Rock Production and Demand Rock Reserves Are Geographically Concentrated The basis for success in the phosphate business is access to lower-cost phosphate rock, a resource that is geographically concentrated. China, the US and Morocco together account for approximately two-thirds of world rock production and Morocco alone typically supplies more than one-third of global exports.

36 Phosphate Product Export Distribution With access to large, high-quality reserves, Morocco is the largest exporter of phosphate rock and phosphoric acid. Office Chérifien des Phosphates (OCP) has announced plans to increase its capability to produce and export fertilizer products such as DAP and MAP. Industry consultants forecast that this increased processing capability could result in reduced exports of phosphate rock and phosphoric acid, tightening supply of these products for non-integrated phosphate producers. The U.S. is a net exporter of phosphorus, accounting for 35 percent of world exports

37 Indias phosphate imports India is the second largest global consumer of phosphates. With very limited indigenous rock supplies, it must import phosphate rock and phosphoric acid to produce DAP domestically. As a result, it is the top importer of these raw materials, accounting for approximately one quarter of world rock imports and almost half of phosphoric acid trade. On May 2, 2013 India cut its subsidies on phosphate fertilizers in an effort to cut fiscal deficit. According to the new rates, the total subsidy for potash and phosphate fertilizers for the financial year would be reduced by around 15%, said finance minister P. Chidambaram... India's phosphate imports look to fall to between 4 million and 5 million tonnes in 2013, from last year's level around 6 million tonnes.

38 The demise of the phosphate fertilizer cartel (October 2013) The end of the Phosphate Chemicals Export Association, or PhosChem, which has had a dominant position in North American exports of the $30bn global phosphates market, comes after Uralkali, the leading potash group, broke up the Belarusian Potash Company cartel in July. PhosChem - which exports phosphates produced by PotashCorp of Saskatchewan and Mosaic – operates under the Webb-Pomerene Act of 1918, which relieves some US industries from antitrust laws, allowing them to negotiate prices together to promote exports. The break-up of Phos -Chem and BPC highlights the diverging interests of various fertiliser groups. Mosaic formed a phosphate joint venture with Saudi Arabian mining and metals company Ma'aden and petrochemical company Saudi Basic Industries Corp, putting itself and its partners in competition with PhosChem, said industry executives. The end of PhosChem signalled the end of the North American industry's influence in the phosphates market, said analysts. End of cartel brings further shake-up in fertiliser market; COMMODITIES, Emiko Terazono, 3 october 2013

39 History of the Webb-Pomerene Act The Webb-Pomerene Act was passed "to aid and encourage our manufacturers and producers to extend our foreign trade." H.R.Rep. No. 1118, 64th Cong., 1st Sess., 1 (1916). Congress felt that American firms needed the power to form joint export associations in order to compete with foreign cartels. But while Congress was willing to create an exemption from the antitrust laws to serve this narrow purpose, the exemption created was carefully hedged in to avoid substantial injury to domestic interests. Congress evidently made the economic judgment that joint export associations could increase American foreign trade without depriving American consumers of the main advantages of competition. United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States v. Phosphate Export Assn U.S. 199 (1968)

40 History of the Webb-Pomerene Act It is clear what Congress was doing; it thought it could increase American exports by depriving foreigners of the benefits of competition among American firms, without in any significant way injuring American consumers.. United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States v. Phosphate Export Assn U.S. 199 (1968)

41 History of the Webb-Pomerene Act During the hearings on the bill, one Congressman, Charles C. Carlin of Virginia, stated clearly what was later to be one of the dominant themes of the floor debate. In a question addressed to the Chairman of the Federal Trade Commission, who was testifying in support of the bill, he said: "I am frank to say that, personally, I have no sympathy with what a foreigner pays for our products; I would like to see the American manufacturers get the largest price possible, but if, by indirection, we are going to set up a system which is going to fix a higher price eventually at home, through a combination as suggested in this bill, I think you can very well see that such a system is a very dangerous one. United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States v. Phosphate Export Assn U.S. 199 (1968)

42 History of the Webb-Pomerene Act Hearings before the House Committee on the Judiciary on H.R , 64th Cong., 1st Sess., 7 (1916).. Senator Pomerene said bluntly, "[W]e have not reached that high plane of business morals which will permit us to extend the same privileges to the peoples of the earth outside of the United States that we extend to those within the United States. 55 Cong.Rec (1917) Congressman Webb declared, "I would be willing that there should be a combination between anybody or anything for the purpose of capturing the trade of the world, if they do not punish the people of the United States in doing it." 55 Cong.Rec (1917). United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States v. Phosphate Export Assn U.S. 199 (1968)

43 Waning support for Webb Pomerene Associations Economic research demonstrates that the adverse economic effects of anticompetitive practices by Webb-Pomerene export associations generally far outweigh any benefits. The American Bar Association proposed in the 1990s that all countries agree to repeal statutes granting immunity to export cartels. A consensus has therefore developed among the legal-economic community that export associations are generally undesirable. To date, the FTC has issued automatic annual approvals to export associations. A lack of enforcement action by the agency is troubling, particularly in light of its authority to oversee xport associations under Webb-Pomerene and the pressing competitive questions raised by PhosChem. For example, have PhosChems members PotashCorp and Mosaic harmed the competitive position of smaller phosphorus firms in the domestic market? Moreover, must small non-integrated fertilizer blenders in the domestic market for wholesale and retail sales refrain from domestic or foreign competition in order to obtain phosphorus inputs? Finally, can two globally dominant firms achieve any meaningful efficiency gains or countervailing power that is in the public interest, foreign or domestic? These questions deserve further scrutiny and should not be restricted to members of PhosChem, or even phosphorus. Rather, antitrust scrutiny should also extend to all producers and potash, nitrogen, and even sulfur. AAI

44 Issues to be discussed Global cartels are alive and well The Automotive parts cartel The Cathode Ray Tube and and the LCD display cartel The Foreign Exchange cartel The Libor and Euribor cartels Major changes in the Potash and Phosphate cartels The role of state support for export cartels Recent trends in the develoment of competition law systems in the last decade Proliferation of competition laws: is the end in sight ? The rise of regional cooperation Conclusions

45 52 new competition regimes since ArmeniaIndonesiaGhana 2001JerseyMaltaSlovakiaKazakhstanAntigua Berbuda 2002LatviaMacedoniaPapua New Guinea 2003EthiopiaNamibiaTanzaniaBarbados 2004Bosnia Herzegovina LithuaniaJordanLao RDPSaudi Arabia VietnamEl Salvador 2005MontenegroSingaporeEgyptMadagascarHonduras 2006RussiaQatarNicaruagaHondurasGuyana 2007ChinaNepalGambiaMauritiusSwazilandUruguayDominican Republic 2008Faroe IslandsSyriaDominican Republic EcuadorBolivia 2009BotswanaSeychellesColumbia 2010Burundi 2011Malaysia MozambiqueParaguay

46 Issues to be discussed New developments with respect to international cartels The Automotive parts cartel The Cathode Ray Tube and and the LCD Display cartel The Foreign Exchange cartel The Libor and Euribor cartels Significance of the new developments regarding the Potash and Phosphate cartels State support for export cartels Trends in the develoment of competition law systems in the last decade At the national level At the regional level Conclusions

47 Caricom Competition Commission 2001 inaugurated 2008 The CARICOM Competition Commission was established under Article 171 of the Revised Treaty of Chaguaramas; and was inaugurated on January 18, 2008.CARICOM Competition Commission The following are among the main functions to be performed by the Commission: - to apply the rules of competition in respect of anti-competitive cross-border business conduct - to promote and protect competition in the Community - to monitor anti-competitive practices of enterprises operating in the CSME - to investigate and arbitrate cross-border disputes - to keep the Community Competition Policy under review and advise and make recommendations to COTED to enhance its effectiveness - to provide support to Member States in promoting and protecting consumer welfare - to develop and disseminate information about Competition Policy and Consumer Protection Policy By virtue of Article 174 (6) Member States are required to enact legislation to ensure that determinations of the Commission are enforceable in their jurisdictions. F

48 2002 Southern African Customs Union (SACU ) The process of considering competition issues within SACU is driven by the Article 40 and Article 41 of the 2002 SACU Agreement. Article 40 deals with competition policy and the requirement for Member States to all have competition policies as a pre-requisite for a SACU wide cooperation mechanism. The cooperation mechanism should also point out the process with respect to the enforcement of competition policies and regulations within SACU. Article 41 requires that policies and instruments be developed to address unfair trade practices between Member States and for these to be annexed to the SACU Agreement. When the new SACU Agreement came into effect in 2004, the process of developing annexes to these articles started with an initiative by the Trade and Industry Liaison Committee work on the development of an Annex on Unfair Trade Practices as contained in Article. The draft annexes to the 2002 SACU Agreement on unfair trade practices and cooperating mechanisms on competition policy, competition law and regulations are currently being finalized on in terms of Article 40 and Article 41.

49 WAEMU Competition law and policy 2002 The UEMOA Communitys competition law is based on three Regulations and two Directives that were introduced in 2002, and that came into effect on 1 January The three Regulations cover concerted anti-competitive practices, abuses of a dominant market position, and state aid respectively. The two Directives apply to (1) transparency in nfinancial relations between Member States and public enterprises, and between Member States and foreign or international organisations; and (2) cooperation between the UEOMA Commission and national competition authorities. In the UEMOA competition scheme, jurisdictional reach is limited only to anticompetitive practices capable of distorting competition within the Union market as a whole or within a substantial part thereof. Substantively, the scheme follows a familiar pattern found in most competition laws in the developed worldi.e., its chief focus is aimed at: (1) agreements and concerted practices in restraint of trade; (2) mergers and acquisitions; and (3) monopolization-i.e., abuse of dominant market position. The UEMOA competition framework also regulates government-induced market distortions such as state aid and anticompetitive market conduct of state-owned enterprises.

50 Comesa Regional Competition Law, Dec 2004 In 2004, the Common Market of Eastern and Southern Africa (COMESA) has adopted a regional competition law, the COMESA Competition Regulations, under Article 55 of the treaty establishing the organization. The regional law is implemented by the COMESA Competition Commission, a corporate body with a legal framework. The law addresses competition issues of a regional nature – involving or having an impact in more than one COMESA member State. The COMESA Competition Regulations provide for mergers and acquisitions and their notification and control, control of anticompetitive business practices, and have strong consumer protection provisions. The COMESA Competition Regulations also encourage cooperatioon between COMESA member states in the form of notification, exchange of information, coordination of action and consultation among member states.30

51 Andean Community 2005 The Commission of the Andean Community approved in March 2005 Decision 608 on Rules for the protection and promotion of competition in the Andean Community. The decision introduced a regional law on competition applicable to anticompetitive practices and abuse of dominant positions. All sectors of the economic activity are covered except if the CAN Commission decides to exclude a specific sector following a supported request from a member State. Furthermore, Decision 616 (July 2005) enables Ecuador to apply Decision 608 when anticompetitive practices are originated in an Ecuadorian territory or practices originated in a third country affecting the Ecuadorian territory. Both Bolivia and Ecuador may temporarily apply Decision 608 while they adopt a national competition law

52 Asean Competition Policy 2007 Institutions and laws related to competition policy have recently been established in some (Indonesia, Malaysia, Singapore, Thailand and Viet Nam) ASEAN Member Countries. There is currently no official ASEAN body for cooperative work on CPL to serve as a network for competition agencies or relevant bodies to exchange policy experiences and institutional norms on CPL. Actions: i. Endeavour to introduce competition policy in all ASEAN Member Countries by 2015; ii. Establish a network of authorities or agencies responsible for competition policy to serve as a forum for discussing and coordinating competition policies; iii. Encourage capacity building programmes/activities for ASEAN Member Countries in developing national competition policy; and iv. Develop a regional guideline on competition policy by 2010, based on country experiences and international best practices with the view to creating a fair competition environment.

53 Ecowas: Establishemlent of the Regional Competition Authority 2008 THIRTY-FIFTH ORDINARY SESSION OF THE AUTHORITY OF HEADS OF STATE AND GOVERNMENT Abuja 19 December 2008 SUPPLEMENTARY ACT A/SA.2/06/08 ON THE ESTABLISHMENT, FUNCTION OF THE REGIONAL COMPETITION AUTHORITY FOR ECOWAS

54 2009 Southern African Development Community (SADC) The SADC Declaration on regional cooperation in competition and consumer policies (was adopted in It was based on article 25 of the SADC Protocol which calls for member states to implement measures within the Community that prohibit unfair business practices and promote competition. The purpose of the SADC Declaration was premised on the recognition that: – competition and consumer protection laws are national but the relevant markets can extend beyond national boundaries; – there is a need for increased regional cooperation in addressing cross-border anti-competitive practices. – there is a need to formalise a system of cooperation between national regimes that can harness the collective efforts of relevant national authorities and add value to national enforcement efforts in the face of problems affecting more than one country.

55 2009 Southern African Development Community (SADC) The SADC Declaration deals specifically with the issue of effective cooperation and provides, amongst others, for the establishment of: – a system for effective cooperation; – a transparent framework that contains appropriate safeguards to protect the confidential information (own emphasis) of the parties. The SADC Secretariat has embarked on a project to implement the SADC Declaration through the development of a harmonization framework of national competition laws and policies in the SADC Region.

56 Eurasian Model Competition Law 2013 On 10 October 2000, the Treaty on the establishment of the Eurasian Economic Community (EurAsEC) was signed by five CIS countries: Russia, Belorussia, Kazakhstan, Kyrgyzstan and Tajikistan (Uzbekistan joined the Community in 2006 but suspended its membership in 2008). Russia, Belorussia and Kazakhstan signed the Treaty on Eurasian Economic Commission on 18 November These acts (the Treaties) outlined the legal skeleton of so called Eurasian integration which became the key factor in the member states economic and political development. The period of is the breakthrough in the Eurasian law. The main development areas in the EurAsEC legal framework were: (i) institutions; (ii) tariff and non-tariff regulation of the external trade; (iii) technical regulation; (iv) competition; (v) external competence; and (vi) case law. Institutions:

57 Eurasian Model Competition Law 2013 Protection of competition has been recognised as a vitally important instrument. For this purpose the Agreement on unified principles and rules of competition took effect in December 2012 together with the Rules on procedures for investigation and examination of cases regarding violation of competition and the Rules for calculation and imposition of penalties for violation of the EurAsEC competition rules. Hence, the Commission has become the supranational regulating authority in the field of competition and merger control. In May 2013, the Commission formed a Department for antitrust regulation which is now responsible for carrying out antimonopoly investigations. Further, the Commission has launched the process to elaborate a member states Model Law on Competition. It is still under discussion.

58 TTIP European proposal 2013 The TTIP (…) provides the parties with a unique opportunity to jointly articulate the shared values and affirm the existing practices and procedures which they adhere to. In light of the global context and the objectives set out above, the TTIP should include provisions with anti-trust & merger disciplines. These provisions should reflect the shared global interests and concerns and thereby constitute a platform for further development of competition disciplines and cooperation of interest also for other economies and markets. In this context, the EU and the US may wish to address anti-competitive behaviour that should be disciplined, the legislative and institutional framework for the enforcement of these disciplines that contain provisions on cooperation and exchange of information. The TTIP could also address rules and principles aiming at ensuring competitive neutrality by envisaging enforcement of competition laws on all enterprises.

59 TTIP European proposal 2013 the provisions on antitrust and mergers could address the following issues: - Recognition of the benefits of free and undistorted competition in the trade and investment relations; - Consideration of best practices and of the possibility to consolidate some of them; - A commitment to maintain an active enforcement of antitrust and merger laws, with a generally worded description of the types of anti-competitive behaviour it should cover; - A commitment to ensure that competition policy is implemented in a transparent and nondiscriminatory manner, in the respect of the principle of procedural fairness, irrespective of the ownership status or nationality of the companies concerned; -

60 TTIP European proposal 2013 The provisions on antitrust and mergers could address the following issues: -Provisions regarding the application of antitrust and merger rules to state owned enterprises (SOEs) and enterprises granted special or exclusive rights or privileges (SERs), save for narrowly defined legitimate exceptions (e.g. Services of General Economic Interest in the EU); - Moreover, to address specifically the bilateral cooperation aspects between the EU and the US, the TTIP could include provisions on cooperation between the competition agencies of the parties, reflecting and building on the current practice under the existing EU-US cooperation agreements. -In addition, it could be explored whether the parties could address the possibility for a further deepening of the cooperation arrangements in case related work in the future, such as creating a framework allowing for the exchange of confidential information in the absence of confidentiality waivers between competition authorities when they are investigating the same or related cases (while barring the use of this information for criminal sanctions). - A commitment to cooperate in multilateral forums with the aim of promoting convergence of antitrust and merger rules at a global level.

61 Conclusions


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