CLE MATERIALS SPEAKER BIOGRAPHIES - Fordham University · International Antitrust Law and Policy...
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Fordham Competition Law Institute 43rd Annual Conference on International Antitrust Law and Policy “The Future of Antitrust in Asia” DAY 1 22 September 2016 Fordham Law School | New York City CLE MATERIALS & SPEAKER BIOGRAPHIES
Transcript of CLE MATERIALS SPEAKER BIOGRAPHIES - Fordham University · International Antitrust Law and Policy...
Fordham Competition Law Institute
43rd Annual Conference onInternational Antitrust Law and Policy
“The Future of Antitrust in Asia”
DAY 122 September 2016
Fordham Law School | New York City
CLE MATERIALS &
SPEAKER BIOGRAPHIES
CONTENTS
CLE Materials
Panel 1
• Samsung Galaxy Tech Radar Speed Test
• Decline in LOAs
Panel 2
• Statement of Mark A. Cohen before the House Committee on the Judiciary
• Japan Fair Trade Commission Annual Report, FY2014
• Japan Fair Trade Commission Enforcement of the Antimonopoly Act in FY2015
• Administrative Surcharge System in Japan: Present and Future
• An Update On China’s Anti-Monopoly Law Guidelines On IP
• “Excessive Royalty” Prohibitions and the Dangers of Punishing Vigorous Competition and Harming Incentives to Innovate”
• The Troubling Use of Antitrust to Regulte FRAND Licensing
Panel 3
• Draft Paper — Is There Too Much Traffic on the Competition Law Enforcement Autostrada: A Role for Negative Comity?
• Strengthening the Global Trade and Investment System for Sustainable Development
• Draft Paper — European Experience on Convergence of Antitrust Laws
Speaker Biographies
CONFERENCE
Samsung Galaxy / Tech Radar Speed Test Video
View on YouTube: www.youtube.com/watch?v=3wczxzYMT-‐U
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Statement of Mark A. Cohen before theHouse Committee on the Judiciary
STATEMENT OF
MARK A. COHEN
SENIOR COUNSEL, CHINAOFFICE OF POLICY AND INTERNATIONAL AFFAIRSUNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE
SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW
COMMITTEE ON THE JUDICIARYU.S. House of Representatives
“International Antitrust Enforcement: China and Beyond”
JUNE 7, 2016
Introduction
Chairman Marino, Ranking Member Johnson, and Members of the Committee:
Thank you for this opportunity to discuss China’s Anti-Monopoly law from the perspective of the U.S. Patent andTrademark Office (USPTO).
My comments are focused on the intellectual property (IP) aspects of China’s antitrust regime, in particular on therole of the USPTO in IP and China’s anti-monopoly law (AML).
The Role of the USPTO in Anti-Monopoly Matters in China
The USPTO is engaged with China on all IP issues, including those that involve antitrust and licensing. The USPTOhas a statutory mandate to advise the President and all federal agencies, through the Secretary of Commerce, onnational and international IP policy issues, including IP protection in other countries. In addition, the USPTO isauthorized by statute to provide guidance, to conduct programs and studies, and to interact with IP offices worldwideand with international intergovernmental organizations on matters involving IP.
Under Secretary of Commerce for Intellectual Property Michelle Lee and other USPTO officials routinely engage indiscussion with high-ranking Chinese officials related to IP law developments and proposed improvements toChinese IP laws. For example, last year, Under Secretary Lee met with Chinese Vice Premier Wang Yang. And justlast week, Deputy Under Secretary Russell Slifer was in Beijing to advance talks on critical IP issues. Along with theUnited States Trade Representative (USTR), Under Secretary Lee also co-chairs the IPR Working Group of the JointCommission on Commerce and Trade (JCCT) to engage bilaterally on improvements to China’s IP laws.
This past December, the JCCT included several outcomes on the Anti-Monopoly Law, standards, licensing, IP,legitimate sales of IP-intensive goods and services, abusive IP litigation, and judicial cooperation – all of whichdirectly impact IP in China. USPTO experts coordinate with our trade and antitrust colleagues from other agencies inthese bilateral discussions.
The USPTO leads negotiations on behalf of the United States at the World Intellectual Property Organization(WIPO); advises USTR on the negotiation and implementation of the IP provisions of international trade agreements;supports USTR at the World Trade Organization (WTO); advises the Secretary of Commerce and the Administrationon a full range of IP policy matters, including in the areas of patents, copyrights, trademarks, and trade secrets;conducts empirical research on IP; and provides educational programs on the protection, use, and enforcement ofIP.
The USPTO’s “China team,” which I lead, consists of 21 lawyers and support personnel located in the Washingtonarea and three cities in China: Beijing, Guangzhou, and Shanghai. We have negotiated agreements and Memorandaof Understanding to support cooperative activities on IP with several Chinese agencies, which also contain bureauswith authority over Anti-Monopoly Law-related issues, including the State Administration for Industry and Commerce(SAIC) (which handles non-price related abuse of dominance), the Ministry of Commerce (which handles mergerreview), and the State Intellectual Property Office (SIPO) (which is involved in the intersection of IP protection andantitrust). We have also actively engaged in recent years with China’s IP courts and tribunals, which are limitedjurisdiction courts and tribunals that hear IP and non-IP related antitrust-related disputes. We have also activelysupported numerous Congressional and Congressional staff delegation visits to China on IP-related matters.
Through the USPTO’s Office of the Chief Economist, and work my team undertakes, we actively support more data-driven approaches to IP in China Our new China Resource Center collects data on all IP-related matters. The focusof this center is on the protection and enforcement of IP rights, and commercialization and industrial policiesaffecting these rights. As this effort grows, we hope that the USPTO’s China Resource Center will prove to be aninvaluable resource to our stakeholders in the U.S. Government, perhaps including our colleagues in the antitrustenforcement agencies, and the business and academic communities.
The IP Attaché Program is an important asset that supports the USPTO’s efforts. We currently have 13 attachépositions in 10 cities, including three based in China. IP attachés are IP experts who serve as U.S. diplomats inEmbassies and Consulates abroad. IP attachés promote U.S. IP policies to achieve high-quality and balanced IPsystems, including effective protection and enforcement, in their host countries and regions. The IP attachés workclosely with the USPTO and the Office of Intellectual Property Rights (OIPR) in advancing the commercial interestsof U.S. companies in foreign markets where they are experiencing barriers to market access.
The Anti-Monopoly Law/IP Relationship in China
China’s experience in IP-related issues has deeply informed its perspective on antitrust issues generally. Certain ofChina’s highest profile cases in recent years have involved IP. There are also jurisdictional, agency, and legislative
overlaps between IP and antitrust.
To name a few examples: China’s specialized IP tribunals and courts handle antitrust litigation. China’s StateAdministration for Industry and Commerce, which houses a bureau that handles non-price-related abuse-of-dominance cases, in addition to trade secrets and trade dress matters and also has bureaus that administertrademarks, trademark enforcement, trademark agency appeals and company name registrations among otherareas. The former Minister of Commerce Director General, who handled mergers, was in charge of IP matters whenhe was the Director General of Law and Treaties at the Ministry of Commerce. Many of China’s antitrust relatedlaws also build upon pre-existing laws, regulations, and rules, some of which have significant IP components. Theselaws include the Anti-Unfair Competition Law, which contains measures to protect trade secrets and trade dress, andthe Contract Law, which also addresses the “monopolization of technology.”
The paradox China presents, from a USPTO perspective, is the combination of weak and non-deterrent IP protectionwith strong antitrust enforcement with potentially high penalties that has recently focused on IP, including on IP heldby U.S. companies. As USTR noted in its 2015 report on China’s WTO compliance, “inadequacies in China’s IPRprotection and enforcement regime continue to present serious barriers to U.S. exports and investment.” In arecent survey, U.S.-China Business Council respondents listed IP concerns in a number four priority slot in a list ofthe top 10 challenges for members with respect to business performance in China. IP issues have averaged as anumber 4.5 priority over the past ten years. According to AmCham Shanghai’s 2016 China Business Report, 49% ofrespondents believed that lack of IPR protection and enforcement constrains their investment in innovation and R&Din China. Concerns about IP are based on the U.S. perception that these are our competitive advantages in China. When AmCham China respondents in all sectors addressed what they considered their competitive advantageversus Chinese domestic entities, three of their top four perceived advantages were IP-related: Brands (74%),Technology & IP (63%), and Development and Innovation (59%).
IP Challenges in China’s Antitrust Environment
Broadly speaking, the current environment for IP and antitrust in China shows three clear trends: strong antitrustenforcement balanced against weak IP rights for deterring infringement; pursuit of foreigners in antitrust, with littleforeign affirmative use of the IP system; and, a legal and industrial policy environment where it is very difficult tolegitimately license patents to third parties. I will discuss each of these, below:
1. Strong Antitrust Enforcement/Weak IP Enforcement
Chinese patent damages are too low. IP holders who run afoul of Chinese AML authorities, and may potentially paysignificant fines, do not have comfort that their legitimate IP rights have been or will be protected. For example, oneantitrust/IP related administrative penalty for a completed investigation to date is the antitrust fine imposed againstQualcomm for $975 million USD by China’s National Reform and Development Commission (China’s former StatePlanning Commission) (March 2, 2015). By comparison, according to one database, Ciela.cn, the average damagesin a Chinese patent case is as low as CNY 118,266 , or about $18,000 USD. A recent report by a newer databaseservice, IPHouse, determined that the average compensation in a patent infringement matter in Beijing for 2015 was460,418 RMB or about $74,260. By comparison, the Qualcomm fine was over 50,000 times the average patentdamage award as calculated by CIELA, or about 13,000 times the IPHouse report. It is also about 20 times higherthan the highest patent damage award, $45,000,000 USD in a first instance trial against Schneider Electric, whichmany view as an outlier, in terms of the high damages that were awarded.
Of course, antitrust and IP infringement cases seek to remedy different harms, and penalties in these matters arecalculated differently. That said, in the area of IP, there is an international obligation, under the TRIPS Agreement,
for courts to award damages sufficient to deter further infringements (Art. 41.1).
2. IP-related Antitrust Activities Against Foreigners for Asserting IP Rights and Weak Foreign Utilization of the IPSystem
Chinese antitrust authorities have taken pains to indicate that they are enforcing their antitrust laws even-handedly. Nonetheless, many U.S. tech companies have been the subject of antitrust enforcement for their IP-related practicesincluding licensing, such as Qualcomm, InterDigital, Microsoft, Dolby and HDMI. IP issues have also appeared inChinese merger decisions, including Google-Motorola, Microsoft-Nokia, and Coca Cola-Huiyuan. Press reports and survey data suggest that many foreign companies feel targeted. U.S.-China Business Council survey data presents a severe picture for foreigners in antitrust matters: 86 percent of companies surveyed said they wereconcerned about China’s competition enforcement activities, and nearly 30 percent said they were concerned thatthey would be targeted by future investigations. Recently released data from China’s Supreme People’s Court reporting on IP litigation for 2015 reveals that the totalnumber of civil IP cases in China involving foreigners, as calculated by the Court, was only 1.3% of China’s IPdocket, or 1,327 cases in 2015. Foreign IP cases dropped 23% in absolute numbers from last year, despite anoverall increase of 7.2% of total decided IP cases.
Concerns over targeting may also stem in part from the perceived bias within the Chinese system. In the Huawei vsInterDigital case, QIU Yongqing, the chief judge who ruled against U.S. based InterDigital, stated that Huawei’sstrategy of using anti-monopoly laws as a countermeasure is worth learning by other Chinese enterprises: and that“Chinese enterprises should bravely employ anti-monopoly lawsuits to break technology barriers and win space fordevelopment.” James M. Zimmerman, the current Chairman of AmCham China described the environment from aU.S. perspective: “There's the insinuation that foreign company executives will be personally persecuted orprevented from leaving the country…The lack of due process in these investigations is disturbing.” Manyforeigners also have concerns over retaliation of various kinds if they bring IP lawsuits. For example, several yearsbefore the AML was enacted, the State Administration for Industry and Commerce conducted a study whichappeared to point to foreign companies, including Cisco, as abusing its dominant position by refusing to license itstechnology . Cisco had sued one of those companies (Huawei) for illegally copying its IP before the SAIC surveywas completed. There have been several other cases which suggest that there may have been retaliation forbringing Section 337 or other patent litigation matters, or even for seeking settlements of disputes in the U.S. orelsewhere.
Nonetheless, we lack equivalent data sets on both the IP system and antitrust system at this time to drawcomprehensive comparisons. In recent years, Chinese IP adjudication has however benefited from initiativesinvolving publication of all civil and administrative cases, statistical reporting of decisions, annual white papers ondevelopments in agencies and the courts, experiments in developing case law and precedent, experiments inpublicly filed amicus briefs, regulations requiring transparent coordination amongst enforcement authorities, andeven a WTO request to provide copies of IP cases which are providing an increasingly robust basis for assessingChina’s IP system, including, in many cases, its impact on foreigners. This experience in IP, in appropriatecircumstances, may create useful pathways for China’s antitrust development.
3. Licensing Practices
In its 2015 annual member survey , the U.S.-China Business Council reported that 59% of respondents expressedconcern about transferring technology to China. Concerns about technology transfer included protection of IP (75%),enforcing license agreements (51%) and the government dictating or influencing licensing negotiations (32%). The
U.S.-China Business Council noted that the companies impacted by this issue felt it “very acutely.” A more recent,unpublished 2016 survey by the US-China Business Council rated China the most challenging legal and regulatorymarket, ahead of the United States, Europe, developed markets in Asia and other emerging markets.
These consequences can be especially acute for the United States, which is the world’s largest technology exporter. In 2014, the United States exported $130.362 billion dollars of technology. The Chinese market was $6.826 billion,or about 5.2% of that total. Ireland, Switzerland, the United Kingdom, Canada and Japan all exceeded China as anexport market. Importantly, most of the technology exports to China from the U.S. (about 58%) are between relatedparties, e.g., between a parent and subsidiary. In other words, only about 42% of the technology exports to Chinaare between unrelated parties. By comparison, Taiwan which is a slightly smaller technology market, was dominatedby unrelated party transactions with the U.S. (about 93%).
The above data raise concerns whether China is overly focused on IP abuse, and not sufficiently directed toimproving IP use. I believe that much of the problem with commercialization of technology today is due to an over-interventionist Chinese economy. From a legal perspective, one should not lose sight of the fact that the AML, likemany Chinese laws and China’s constitution itself, is intended to promote “the healthy development of the socialistmarket economy” (Art. 1) which includes China’s state planning apparatus. Notwithstanding the internationalconsensus that IP is a “private right” (TRIPS Agreement, preamble), China’s legacy state planning has created awealth of incentives and intervention in IP creation and licensing, from which it is reasonable to assume antitrustpolicy is not excluded. These polices have the potential to make it difficult for foreigners to license their technologyin China.
Amongst two of the notable socialist market economy goals of China, are the 15 year Science and Technology Plan(2006) which has a goal of reducing “dependence on imported technology reduced to 30% or below” and the “ActionPlan for Implementing the National Intellectual Property Strategy (2014—2020)” promulgated by the State Council” which has a goal of increasing technology exports from the $1.3 billion USD in 2013 to $8 billion USD by 2020.
Regarding policy support for different sectors, NDRC, the antitrust regulator which brought the Qualcomm case andwas the former State Planning Commission, drafted a plan in 2014 of “building an innovative platform to promote thedevelopment of strategic emerging industries” which includes the IT sector. SIPO, through its leadership of theNational IP Strategy in 2013, similarly called to “prepare a work plan for intellectual property in China’s Strategic andEmerging Industries.” / The current five year national IP strategy also calls for China to “Strive to Build a Strong IPRCountry” and calls for “strengthening patent pilot projects, joint utilization of patents and collective management ofpatents… to strengthen the competitive advantages of industries.”
Chinese government interventions include a goal of increasing state support for patents through state funded loanssecured by patents to about $30 billion USD by 2020. The Chinese government, through its High and NewTechnology Enterprise tax incentives, also provides tax benefits for companies that locally own IP or conduct R&D. Chinese government interventions in IP creation include national and local quotas for patent creation per 10,000people, subsidies for patent applications or maintenance, national and local incentives to participate in standardssetting bodies, tax preferences for companies which own their own locally-created IP, industry specific plans toobtain additional patents in technologies of concern to China, and talent programs for developing IP talent or talentin industrial sectors.
The Administration has pushed back on these policies as well as procedural aspects of China’s AML regime,including some of the excessive practices and due process concerns, in our various bilateral dialogues.
USPTO’s Role Engaging on These Issues
The UPSTO engages on both sides of the balance between IP enforcement and increased antitrust enforcement inChina. The Agency has a leading role in issues involving patent protection and enforcement and we have longengaged the Chinese government, its courts and the Chinese patent office, on the need for more deterrent andpredictable remedies and better civil enforcement of IP rights. We advocate on behalf of the U.S. Governmentthrough comments on draft laws, in JCCT discussions, and in the context of our direct relationships with China’spatent office and other agencies. We also conduct numerous training programs for U.S. industry to betterunderstand China’s IP environment.
On antitrust matters, we support the efforts of the Department of Commerce and other agencies (including the U.S.antitrust enforcers, USDOJ, FTC, and as well as USTR) in their engagement when such matters implicate IP issues. There have been several commitments by China in recent years to improve procedural fairness on antitrustmatters which USPTO supports.
We have also taken a lead on highlighting challenges involved in licensing IP to China, including testimony beforethe U.S. China Economic and Security Commission , negotiating with our Chinese counterparts, conducting twoseparate programs with China’s patent office and Ministry of Commerce on licensing regulation, and educating U.S.companies on risks of IP protection and licensing in China’s current environment. One such program on China IPissues was held last year in cooperation with the University of California at San Diego. Our next program on theEconomic Contribution of Technology Licensing, in conjunction with George Mason University, is scheduled fortomorrow, June 8 at USPTO.
Conclusion
China’s AML was enacted only eight years ago in 2008. But, Chinese regulators benefit from hundreds of years ofexperience of other governments, and have been engaging in technical dialogues and exchanges with a wide rangeof agencies, companies and universities. Comparisons with intellectual property suggest that arguments regardingChina’s developing world status should have a very short life span.
Although intellectual property appeared a very new concept to China in 1983, by 2011 China had become the mostlitigious society for intellectual property in the world, with the largest trademark office and one of the two largestpatent offices. Moreover, this “foreign concept” has taken deep root in China: over 98% of the IPR litigation in Chinainvolves Chinese suing Chinese, and many of the key rights (85-98%) granted by China’s IP agencies (trademarks,utility model patents, design patents), are granted to Chinese nationals. As with IP, China has now emerged as amajor antitrust venue, which has also elicited considerable concern from the business community, and should beengaged accordingly.
The Administration strongly supports China’s efforts to develop an antitrust regime consistent with the practices ofother market-economy countries. However, we are concerned that there are many aspects of China’s economy thatmay not be fully market driven, in the context of both IP and IP-related antitrust.
Thank You.
Annual Report of FY 2014 (Summary) (Tentative Translation)
Chapter 1: Overview and Activities in Each Area The Japan Fair Trade Commission (JFTC) actively implemented competition policies
during FY2014, with particular focus on the following measures. 1 Revisions of the Antimonopoly Act (AMA) and Other Laws (1) Enforcement of the 2013 revision of the Antimonopoly Act
The Act for the Partial Revision of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No. 100 of 2013) (hereinafter referred to as the 2013 AMA revision) was approved and enacted on December 7, 2013 and promulgated on December 13, 2013, effective from April 1, 2015. This revision is intended, among others, to abolish the JFTC’s hearing procedure for administrative appeals and to develop the procedure for hearings related to cease and desist orders and other dispositions. The enforcement of the 2013 AMA revision was followed by the enactment or revision of other relevant laws and regulations, including the establishment of the Rules on Hearings by the Fair Trade Commission (promulgated on January 21, 2015, effective from April 1, 2015) to specify the procedures for hearings related to cease and desist orders and other dispositions and the procedures for inspection and copying of evidence relied on by the JFTC in its findings.
(2) Revisions of the Act Concerning Special Measures for Pass-on of Consumption Tax and
other laws In the period since the effective date of the increased consumption tax rate was
changed, the Act on Partial Revision, etc. of the Income Tax Act, etc. was approved and enacted on March 31, 2015 and promulgated on the same day (Act No. 9 of 2015). The revisions intended under this act include necessary revisions to the Act Concerning Special Measures for Pass-on of Consumption Tax (e.g., extension of its validity from March 31, 2017 to September 30, 2018). Based on this extension, the Rules on Notification of Concerted Practices for Deciding Methods of Consumption Tax Pass-on and Methods of showing Consumption Tax were revised accordingly.
2 Vigorous and Appropriate Law Enforcement (1) Active prevention of violations of the AMA
A. Under the fundamental policy of prompt and effective law enforcement, the JFTC endeavors to adequately respond to societal needs by addressing various types of violations, including, among others, violations that could have significant impact on the
1
public such as price-fixing cartels, bid rigging, or market allocation, as well as unfair trade practices such as abuse of superior bargaining position and unfair price cutting that places small- and medium-sized enterprises at an unfair disadvantage.
B. In FY2014, the JFTC investigated 128 suspected violations of the AMA and completed
investigations for 117 of these. C. In FY2014, the JFTC implemented legal measures in 10 cases. These cases are
classified as follows: 1 case of private monopolization, 5 cases of price-fixing cartels, 2 cases of market allocation (bid rigging in private sector), and 2 cases of unfair trade practice (Figure 1). In addition, the JFTC issued surcharge payment orders for a total of 17,143.03 million yen (Figure 2).
Under the leniency program to motivate enterprises to report their own violations, the JFTC received 61 reports in total in FY2014.
Cases involving legal measures in FY2014 Private monopolization
• Private monopolization by the JA Fukui Prefectural Economic Federation of Agricultural Cooperatives
Price-fixing cartel
• Price-fixing cartel by manufacturers of corrugated board sheets or cases for consumers having price negotiation staff in eastern Japan and by manufacturers of corrugated board cases for large-lot consumers
• Price-fixing cartel by steel ball manufacturers • Price-fixing cartel by Abashiri Concrete Products Association
Bid rigging in private demand
• Prearranged contractor selection devised among bidders tendering for a project for construction of a low temperature air-conditioning system promoted by agricultural cooperatives in Hokkaido Prefecture
• Prearranged contractor selection devised among bidders tendering for a project for construction of cereal drying, preparation and storage facilities and rice milling facilities promoted by agricultural cooperatives, etc.
Abuse of superior bargaining position
• Abuse of superior bargaining position by a mass-volume discount retailer to vendors
Interference with a competitor’s transactions
• Interference with a competitor’s transactions by North Okayama Fresh Concrete Cooperative
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Figure 1: Number of Cases Involving Legal Measures
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18
10
109
303
126
210
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monopolization
Price-fixing cartel
Bid rigging (in public
demand)
Bid rigging (in private
demand)
Unfair trade practice
Others
Number of entities
covered by the orders
FY2010 FY2011 FY2012 FY2013 FY2014
Private monopolization 0 0 0 0 1
Price-fixing cartel 6 5 1 8 5
Bid rigging (in public demand) 3 7 4 2 0
Bid rigging (in private demand) 1 5 15 7 2
Unfair trade practice 2 5 0 1 2
Others 0 0 0 0 0
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Figure 2: Amount of Surcharges
36.2844.25
23.3930.17
17.14
35.79
1.68
0.07
72.08
44.25
25.0730.24
17.14
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277
113
181
128
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FY2010 FY2011 FY2012 FY2013 FY2014
Number
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Amount
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Decision on surcharge payment order
Surcharge payment order
Number of entities covered by the orders
(Note 1) The amounts indicated above include the amounts covered by the decisions on surcharge payment
orders issued under the 2005 AMA revision (meaning the AMA just before it was revised under the Act for the Partial Revision of the Antimonopoly Act [Act No. 35 of 2005]; the same applies
hereinafter) and exclude the amounts covered by the surcharge payment orders that ceased to be
effective due to the initiation of hearing procedures under the 2005 AMA revision.
(Note 2) With regard to the surcharge payment orders issued under the AMA following the 2005 AMA revision,
the amounts initially ordered are adopted.
D. In addition to the measures taken to address violations, the JFTC’s efforts for prompt and appropriate law enforcement include 1 warning on practices likely to violate the AMA, 102 cautions on practices likely to lead to violations (excluding 982 cautions under the expedited investigation process applicable to cases of predatory pricing).
E. In the course of investigation into violations of the AMA, the JFTC submits demands
and requests to business associations, etc. with regard to matters for which the JFTC considers, in light of competition policies, action is necessary.
In FY2014, the JFTC submitted demands or requests to the Eastern Corrugated Case Association, the Central Union of JA Yamagata and Yamagata Prefectural
Num
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ities
Amou
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Headquarters of the National Federation of Agricultural Cooperative Associations; the JA Fukui-shi and the JA Fukui Prefectural Economic Federation of Agricultural Cooperatives; the HOKUREN Federation of Agricultural Cooperative Associations; and the National Federation of Agricultural Cooperative Associations.
F. 307 cases in total were referred to hearing procedures in FY2014 (151 cases involving
a cease and desist order and 156 cases involving a surcharge payment order). Of these cases, 165 were carried over from the previous fiscal year and 142 were newly initiated in FY2014 (Figure 3). Decisions were rendered in 33 cases within FY2014 under the law prior to the 2013 AMA revision. Of these cases, a cease and desist order was issued in 15 cases and a surcharge payment order was issued in 18 cases, 1 of which was made without a hearing procedure and is not included in the number of pending cases. As a result, 275 cases were awaiting hearing as of the end of FY2014 (to be carried over to FY2015).
Figure 3: Number of Hearings cases
1
50 79 95 99156
26
6075 83
151
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50
100
150
200
250
300
350
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Number
of hearing cases
139170 182
307
77
(Note 1) The number of hearings represents the number of cases identified by the unique case numbers
assigned to hearing requests filed against administrative dispositions.
(Note 2) The number of hearings involving a cease and desist order includes cases recognized under the AMA
prior to the 2005 revision (excluding those involving a surcharge payment order).
(2) Promotion of fair trade practices
A. Efforts against the abuse of superior bargaining position (a) The JFTC has long conducted surveillance to prevent acts of abuse of superior
bargaining position that constitute unfair trade practices under the AMA and has responded vigorously to AMA violations.
In FY2014, the JFTC implemented legal measures in 1 violation case.
Hearing cases involving a
cease and desist order
Hearing cases involving a
surcharge payment order
FY2010 FY2011 FY2012 FY2013 FY2014
5
For the purpose of investigating cases of abuse of superior bargaining position and implementing necessary remedial measures effectively and efficiently, the Abuse of Superior Bargaining Position Case Task Force has been established as a dedicated investigatory organ within the JFTC.
The JFTC issued cautions in 49 cases in FY2014. (b) The JFTC conducts fact-finding surveys in domains where fair trade practices for
small- and medium-sized enterprises must be further promoted and strives for dissemination and awareness-raising in this respect.
In FY2014, the JFTC published the Report on Fact-Finding Survey on Transactions of Private Brand Products in the Food Sector (released on June 20, 2014) and the Report on Fact-Finding Survey on Trading between Merchants and Logistics Operators (released on March 11, 2015).
(c) The JFTC organizes educational training for business operators in specific industry segments where abuse of superior bargaining position has been found, or where other problems have been identified through various fact-finding surveys. This training is offered in the form of an orientation session and is designed based on carefully selected practical examples taken from the respective industry segments, with the aim of further improving business operators’ compliance with laws.
In FY2014, the JFTC provided 20 industry-specific educational programs. (d) The JFTC holds regional outreach sessions intended for small- and medium-sized
enterprises, including subcontractors, across the nation. In these sessions, JFTC personnel clearly explain the key points of the Subcontract Act and so on and provide participants with advice.
In FY2014, the JFTC held such consultation sessions at 10 locations throughout Japan, and dispatched personnel to provide instruction at 49 training seminars organized by business associations.
B. Efforts against unjust low price sales (predatory pricing)
The JFTC takes prompt action against unjust low price sales in the retail industry. When repeated unjust low price sales by large-scale retailers is considered to significantly affect other retailers operating in neighboring areas, the JFTC investigates the impacts on their respective business activities. If problems are found, the JFTC implements legal measures or responds vigorously by other means.
In FY2014, the JFTC issued cautions in connection with 982 cases in the retail sector, including in the liquor, petroleum products and home appliance categories, on the grounds of suspected unjust low price sales (635 cases for liquor, 326 for petroleum products, 3 for home appliances, and 18 for products in other categories).
C. Aggressive prevention of violations of the Subcontract Act
(a) Recognizing the circumstances of subcontracting arrangements whereby most
6
subcontractors are unwilling to voluntarily provide information, the JFTC endeavors to detect violations by such means as regularly carrying out written surveys targeted at major business operators and their subcontractors in cooperation with the Small and Medium Enterprise Agency. In addition, the JFTC endeavors to ensure fairness in subcontracting transactions and to protect the interests of subcontractors through timely and effective enforcement of the Subcontract Act, in order that small- and medium-sized enterprises will not be prevented from engaging in business activities, particularly in light of the recent challenging economic conditions.
In FY2014, the JFTC carried out a written survey of 38,982 business operators and 213,690 subcontractors engaging in transactions with those business operators. Based on the results of this survey, the JFTC issued recommendations in 7 cases (Figure 4) and instructions in 5,461 cases in accordance with the Subcontract Act.
Major recommendation cases in FY2014 • Reduction of subcontracting payments by component manufacturers for
“pachinko” (Japanese pinball) gaming machines and reel-type gaming machines • Reduction of subcontracting payments and unreasonable return of products by
retailers of sporting equipment and other goods • Reduction of subcontracting payments by retailers of food products, daily items
and other goods • Unreasonable return of products and unfair price cutting by retailers of daily items
and other goods Figure 4: Number of Cases Subject to Disposition under the Subcontract Act
1315 16
8 7
2
3
2
0
5
10
15
20
22年度 23年度 24年度 25年度 26年度
勧告件数
製造委託等の勧告件数 役務委託等の勧告件数
計7
計15
計18
計10
計16
(件)
(Note 1) While some cases covered by the JFTC recommendations involve violations in relation to both
manufacturing contracts
Num
ber o
f rec
omm
enda
tions
service contracts
FY2010 FY2011 FY2012 FY2013 FY2014
Total 15
Total 18 Total 16
Total 10
Total 7
7
manufacturing and service contracts, each of these cases is classified according to the primary
violation.
(Note 2) “Manufacturing contract” means a contract for a subcontractor to perform certain manufacturing or
repair work. “Service contract” means a service contract for the creation of information-based
products or provision of certain services. These definitions apply in all subsequent paragraphs of this
Annual Report.
(b) The total value of restitution to recover unreasonable losses inflicted on
subcontractors by higher-tier contractors in FY2014 amounted to 871.2 million yen, representing the sum of subcontracting proceeds that had been unreasonably withheld and was subsequently reimbursed by 209 business operators to 4,142 subcontractors (Figure 5). Major cases of such restitution are as follows: (i) a case of withholding payments to a subcontractor in which the prime contractor eventually reimbursed the subcontractor in the sum of 404.99 million yen; (ii) a case of a return of goods in which the prime contractor eventually took back goods valued at 228.3 million yen in total from the subcontractor; (iii) a case of refusal to accept goods in which the prime contractor eventually accepted goods valued at 167.25 million yen in total from the subcontractor; and (iv) a case of tardy payments to a subcontractor in which the prime contractor eventually paid to the subcontractor interest on overdue amounts to the value of 62.99 million yen in total.
8
Figure 5: Restitution of Subcontract Proceeds
8億7120万円
14億9543万円
32億2203万円
57億94万円
6億7087万円
0
10
20
30
40
50
60
22年度 23年度 24年度 25年度 26年度
(c) The JFTC may issue recommendations to relevant enterprises to take measures
to protect the interests of their subcontractors in order to encourage legal compliance. As announced on December 17, 2008, however, the JFTC has determined that it is not necessary to issue such recommendations if those enterprises voluntarily notify the JFTC of their own violations before the start of the JFTC’s investigation and commence remedial action at their own volition. This is because such voluntary action is conducive to eliminating the disadvantages suffered by subcontractors.
In FY2014, the JFTC received 47 voluntary notifications of violations and 26 of them were treated in the manner described above.
(d) With the aim of preventing tardy payments to subcontractors, unreasonable withholding of subcontractor payments, unfair demands for price reductions, and other illegal conduct, the JFTC issued a written demand for full compliance with the Subcontract Act on October 31, 2014, jointly signed by the JFTC Chairperson and the Minister of Economy, Trade and Industry. This demand was addressed to 194,000 business operators potentially acting as prime contractors and 640 business associations.
D. Efforts related to consumption tax pass-on
(a) The JFTC gathers information about practices of rejecting consumption tax pass-on, etc. (hereinafter referred to as “Pass-on Rejection”) through various efforts and conducts investigations, including on-site inspections, based on such information. If, as a result of such investigations, business operators are determined to be in breach of their obligation to pass on consumption tax the JFTC expeditiously provides necessary guidance to those business operators to eliminate disadvantages arising from such
Restitution
6
5
4
3
2
1
(Billion yen)
FY2010 FY2011 FY2012 FY2013 FY2014
1,495.43
3,222.03
5,700.94
670.87 871.2
9
Pass-on Rejection and seeks other improvements. In FY2014, the JFTC carried out a comprehensive written survey of medium- and
small-sized enterprises and small-scale business operators, etc. (about 4 million entities on the seller side) and a written survey of individual business operators (about 3.5 million individuals on the seller side) in cooperation with the Small and Medium Enterprise Agency. Another collaborative effort with the same agency was a written survey of large-sized retailers and other large enterprises, etc. (about 40,000 entities on the buyer side), in which the entities surveyed were obliged to respond. Based on these surveys, the JFTC issued recommendations in 19 cases and provided guidance in 316 cases in accordance with the Act Concerning Special Measures for Pass-on of Consumption Tax.
(b) The JFTC launched enhanced consultation services for business operators, including setting up a one-stop center to respond to queries and gather information about collection failure, etc. from business operators. Also, dedicated hotlines open 7 days a week were established to respond to inquiries as the majority of inquiries was expected to be received around April 1, 2014, the effective date of the consumption tax rate hike. In addition to this, the JFTC organized regional outreach sessions to make consultation more accessible to business operators. In FY2014, the JFTC held 47 consultation sessions all over Japan.
(c) Recognizing that business operators engaging in collection failure may be unwilling to come forward, the JFTC gathered information not only through passive (receiving reports from informants) but also active means, namely, acquiring information through written surveys carried out jointly with the Small and Medium Enterprise Agency. To gather information about collection failure and the actual state of transactions involving collection avoidance in various industries, the JFTC conducted interview surveys of 8,744 business operators and 1,263 business associations in FY2014.
(d) In FY2014, the JFTC received 16 notifications in total, comprised of 13 cases of concerted practices for determining ways of avoiding collection of consumption tax and 3 cases of concerted practices for showing the consumption tax rate. The JFTC also responded to 50 requests for consultation from business operators or business associations as to how to prepare a notification to the JFTC and other issues.
(e) To promote familiarization with the Act Concerning Special Measures for Pass-on of Consumption Tax, the JFTC hosts orientation meetings for business operators and business associations.
In FY2014, the JFTC held 30 orientation meetings of its own and dispatched personnel to serve as instructors at 59 orientation seminars organized by chambers of commerce and industry, commercial and industrial associations, and business associations.
10
(3) Improvement in examination of business combinations A. Appropriate implementation of business combination regulations
The AMA prohibits acquisition of shares, shareholdings, mergers, and other transactions that could substantially restrain competition in particular market segments. The JFTC endeavors to operate business combination regulations in an appropriate manner to ensure a competitive market structure in Japan.
In FY2014, as part of operations relating to business combination regulations under Articles 9 to 16 of the AMA, the JFTC granted approval in 5 cases of the holding of voting interests by banks or insurance companies, received 103 reports concerning holding companies, etc., and received 289 notifications in connection with acquisitions of shares of certain companies, mergers, company splits, joint share transfers, assumption of business, etc., all of which were investigated where necessary.
The business combination projects reported to the JFTC in FY2014 include the following. The JFTC responded to these reports as appropriate and publicly announced the details.
Major business combinations reported in FY2014 • Integration of Zimmer and Biomet • Acquisition of shares of Chuetsu Pulp & Paper Co., Ltd. by Oji Holdings
Corporation
B. Revision of the rules on application for approval, reporting and notification under Articles 9 to 16 of the Antimonopoly Act
In line with the Implementation Plan for Regulatory Reform (under the Cabinet decision dated June 24, 2014), the JFTC reviewed the ongoing system for reporting and notification concerning businesses pursuant to Article 9 of the AMA with a view to switching to a more simplified system. It eventually revised the Rules on Applications for Approval, Reporting, Notification, etc. Pursuant to the Provisions of Articles 9 to 16 of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (promulgated on March 31, 2015, effective from April 1, 2015). The revised rules as aforesaid include some changes to the prescribed forms of business reporting and notification of incorporation, including the following: to limit the scope of companies that must be listed in the reporting or notification form to subsidiaries and entities substantially equivalent to subsidiaries; to limit the scope of companies that must be included for the purpose of calculating the total assets of the corporate group that is to submit a report or notification; and to delete the entry column for the percentage of voting interest held by the company that is to submit a report or notification.
11
3 Surveys for Development of Competitive Environment (1) Surveys and recommendations in the childcare sector
The difficulty of balancing work and childcare is often cited as one of the factors behind Japan’s declining birthrate. In urban areas, among others, a shortage of childcare facilities has resulted in a large number of children on waiting lists, a problem that is only becoming more acute. According to the Japan Revitalization Strategy (adopted under the Cabinet decision dated June 14, 2013), the childcare sector is positioned as having huge growth potential and being able to serve as a driving force for economic expansion, provided effective regimes can be successfully established. Moreover, this sector is also described as having significant potential improvement in many respects with a view to achieving the provision of quality and low-cost services in a more efficient manner. Seen in this light, the childcare sector is not only required to meet an existing need, but is also expected to serve as a growth engine for Japan.
Based on this recognition, the JFTC examined the state of the childcare sector in FY2014 in relation to the policy aim of promotion of fair and free competition and the protection of consumer interests. The findings of this examination were compiled in the Study Report on Childcare Sector released on June 25, 2014, summarizing the key points of competition policy and offering suggestions and recommendations. This report proposes to: (i) promote the entry of diverse business operators into the childcare sector; (ii) secure impartiality in subsidy and taxation systems; (iii) enhance disclosure and third-party evaluation; and (iv) expand additional services.
⑵ Study Group on Competition Policy and Government Support for Revitalization
In Japan, government support for revitalization to achieve various policy objectives is growing. Based on the recognition that it is important to minimize the negative effects of such government support on competition in relevant markets, a task force called the “Study Group on Competition Policy and Public Support for Revitalization” (hereinafter referred to as the “Study Group”), comprised of selected professionals and experts, has been launched in accordance with a decision of Minister of State for Special Missions, a the Cabinet-level minister. Tasked with identifying key issues in relation to Japan’s competition policy, the Study Group held 8 sessions, the first of which was convened on August 13, 2014. It interviewed organizations promoting government support for revitalization, business operators benefiting from such support and their competitors, and relevant experts in order to understand existing regimes and actual conditions for competition among businesses in Japan, the EU, and the US. It then studied specific issues based on the information acquired through such interviews. Following this, the Study Group prepared an interim report on government support for revitalization in view of competition policy and published this report on December 19, 2014.
12
(3) Efforts for competition assessment Since October 2007, the establishment, revision or abolition of regulations by a
competent ministry or governmental agency is allowed, in principle, only after a prior assessment has been conducted. Such prior assessment must contain an analysis of the impacts of the regulations in question on competition (competition assessment). The prior assessment system started in April 2010 on a trial basis. Under the system, the relevant ministry or agency fills out a competition assessment checklist using a prescribed form to indicate and analyze the impacts of the regulations on competition. It then submits the completed checklist together with a competition assessment report to the Ministry of Internal Affairs and Communications (MIC). The MIC then forwards the competition assessment checklist to the JFTC.
In FY 2014, the JFTC received 50 competition assessment checklists from the MIC and conducted a full examination of each.
(4) Partial revision of the Guidelines Concerning Distribution Systems and Business
Practices under the Antimonopoly Act In accordance with the Implementation Plan for Regulatory Reform (under the Cabinet
decision dated June 24, 2014), the JFTC partially revised the Guidelines Concerning Distribution Systems and Business Practices under the Antimonopoly Act (released on July 11, 1991) and published the revised version on March 30, 2015. This revision was intended to clarify the “FY2014 Measures” referred to in the Implementation Plan for Regulatory Reform in the context of Chapters 1 and 2 of Part II of the Guidelines. More specifically, clarification was made with regard to the criteria for judging the legality and illegality of vertical restraints on competition, the concept of “justifiable grounds” for resale price maintenance, and other issues.
(5) Efforts to prevent bid rigging
Since cooperation on the part of purchasers is extremely important in the effort to completely eliminate bid rigging, the JFTC holds training seminars on the AMA and the Act on Elimination and Prevention of Involvement in Bid Rigging, etc. for procurement personnel at local governments, etc. In addition, the JFTC dispatches instructors to procurement personnel training seminars organized by the national or local governments and other organizations, provides them with related documents, and cooperates with those governments and organizations in other ways.
In FY2014, the JFTC held 24 training seminars all over Japan and dispatched lecturers to 294 training seminars hosted by the national government, local governments and specified corporations.
(6) Efforts to improve compliance with the AMA
The JFTC has surveyed activities carried out by enterprises for improving their
13
compliance with the AMA, prepared suggestions for improvement, and published survey reports. The JFTC endeavors to disseminate these suggestions widely among enterprises in order to encourage their efforts to improve compliance with the AMA.
As frequently pointed out in recent years, Japanese enterprises’ regimes to ensure compliance with foreign competition laws (hereinafter referred to as “FCL compliance”) are found to be vulnerable to failure. Such vulnerability can be seen in the many incidents that have occurred recently whereby Japanese enterprises were accused of violating foreign competition laws and punished with huge fines or penalties or officers or employees of Japanese enterprises were sentenced to imprisonment. In FY2014, therefore, the JFTC carried out questionnaire surveys and interview surveys with the aim of helping Japanese enterprises strengthen their FCL compliance regimes. On March 27, 2015, the JFTC summarized recommended measures deemed effective for improving FCL compliance and key points regarding such improvement in a report entitled, “Compliance Efforts of Japanese Companies for Foreign Competition Laws－Aiming at Compliance Efforts as Global Rules.”
4 Reinforcement of Foundations for Operation of Competition Policies (1) Development of theoretical and empirical foundations for competition policies
Since its inception in June 2003, the Competition Policy Research Center (CPRC) has been acting to strengthen theoretical and empirical foundations for enforcement of the AMA and related regulations and for planning, policymaking and evaluation of competition policies. In FY2014, the CPRC worked on 4 research topics, co-hosted an international
symposium with Nikkei Inc., and organized 3 public seminars and 6 workshops. (2) Response to globalizing economy
In recent years, an increasing number of cases have emerged involving violations of competition laws of multiple countries or territories or requiring concurrent investigations by competition regulators of multiple countries or territories. As this trend becomes more pronounced, the reinforcement of cross-border cooperation and coordination among competition regulators is becoming increasingly necessary. In light of these circumstances, the JFTC cooperates closely with foreign competition regulators to conduct joint enforcement activities in accordance with the relevant bilateral antimonopoly cooperation agreement, economic partnership agreement, or the like.
The JFTC is actively involved in multilateral frameworks such as the International Competition Network (ICN), the Organization for Economic Co-operation and Development (OECD), Asia-Pacific Economic Cooperation (APEC), the United Nations Conference on Trade and Development (UNCTAD), and others.
In light of accelerated moves to strengthen existing competition laws and regulations or introduce new competition legislation in developing countries, the JFTC deploys activities
14
for technical assistance for competition regulators or other organizations in those countries such as dispatching JFTC staff and offering personnel training.
In addition, the JFTC aims to strengthen its international presence by disseminating Japan’s competition policies worldwide. To this end, JFTC endeavors to enhance its public relations by providing English-language versions of its press releases and other public announcements on its website and dispatches speakers to seminars organized by overseas bar associations, etc.
Major international efforts in FY2014 • Participation in the ICN’s 13th Annual Conference (April 2014) • Operation of the ICN framework for merger review cooperation • Participation in the East Asia Top Level Officials’ Meeting on Competition Policy
(October 2014) • Bilateral discussions with foreign competition regulators (Korea, US) • Signing inter-agency cooperation memorandums, etc. (Brazil, Korea) • Signing the Japan-Australia Economic Partnership Agreement (July 2014) • Technical assistance for developing competition policies (Vietnam, China,
Philippines, etc.) (3) Raising public awareness of competition policies
The JFTC has solicited opinions, requests and suggestions from members of the Antimonopoly Policy Cooperation Committee for the purpose of utilizing them in policy implementation and promoting better understanding of competition policies.
To ensure a timely response to socioeconomic changes and push ahead with competition policies in an effective and appropriate manner, the JFTC organizes the Council on Antimonopoly Policy with the aim of promoting broad-based opinion exchange with experts and greater public understanding of competition policies. In FY2014, 3 council sessions were called.
Discussions between JFTC commissioners and experts based outside of Tokyo have been held in 8 cities in Japan. The JFTC also arranged meetings between regional directors and other regional JFTC personnel and local experts all over Japan. Furthermore, presentations by JFTC commissioners, etc. were organized in 15 cities in Japan for members of bar associations, local businesspeople, etc.
In addition to the foregoing activities, the JFTC hosted “JFTC in One Day” events in cities with no JFTC presence, aiming to promote familiarization with the Antimonopoly Act and other laws and offer more enhanced consultation services. It also held “Consumer Seminars” to provide an overview of the Antimonopoly Act and the JFTC’s activities to the general public.
The JFTC’s efforts also include activities for raising awareness of competition policies in the context of school-based education. Upon requests from junior high schools, high
15
schools and universities (including junior colleges, etc.), the JFTC sends personnel to teach antimonopoly classes to help students learn about the roles of competition in economic activities (“Class Delivery Service”).
Major public awareness activities in FY2014 • Gathered opinions from 150 members of the Antimonopoly Policy Cooperation
Committee • Held 3 sessions of the Council on Antimonopoly Policy • Held meetings with locally based experts (Sapporo, Akita, Chiba, Gifu, Otsu, Tottori,
Tokushima, Miyazaki) • Held meetings with other experts based outside Tokyo (83 sessions) • Gave presentations to members of bar associations, businesspeople, etc. (29
sessions) • Held JFTC in One Day events in regional cities (Tomakomai, Aomori, Utsunomiya,
Tsu, Otsu, Yamaguchi, Matsuyama, Saga) • Held Consumer Seminars (53 sessions) • Offered Class Delivery Services to provide antimonopoly classes (69 sessions at
junior high schools; 18 at high schools; and 61 at universities, etc.)
16
Enforcement of the AntimonopolyAct in FY2015 (Summary)
May 25, 2016Japan Fair Trade Commission
1
◆ Aggregated market size of 9 cases, which JFTC issued cease and desist orders in FY 2015, amounted to approx. 110 billion yen a year.
Cease and Desist Order etc.
◆ Total surcharges amounted to approx. 8.5 billion yen in FY2015.
(Reference) Surcharge Amount 5 year-average(milion yen)
2
◆ Protect consumer interests by eliminating price fixing cartels, bid riggings, etc. JFTC focuses on sectors closely related to people’s living.
Bid Rigging (in Private/Public Demand) and Price Fixing Cartels ①
Subjects of Violations(examples)
Nexuses with People’s Living(examples)
Aluminum/tantalum electrolytic capacitor manufacturers
・Electronic parts which are used for various kinds of products, such as the telecommunication equipment (PCs, smart-phones, cellular phones, etc.), home appliances, automobiles, etc.・Worldwide price fixing cartel case, which other foreign authorities are also investigating
Snow-melting equipment works for Hokuriku Shinkansen
・Works for installment of equipment which melts snow on the tracks of Hokuriku Shinkansen・Works for providing the social infrastructure highly publicly
Poly aluminum chloride ・Chemical agent to purify tap water indispensable to daily lives
Country elevator works ordered by the agricultural cooperatives, etc.
・Works of country elevator for rice, wheat, bean and buckwheat・Bid rigging in the works subsidized by the nation or local authorities
3
◆ Bid Rigging Concerning the Disaster Restoration Paving Works for the Great East Japan Earthquake Ordered by the Tohoku Branch of East Nippon Expressway Company Ltd.
① This bid rigging was conducted by the nation-wide enterprises including listed companies.
② This bid rigging was related to construction works whose most budget consisted of government expense, so taxpayers incurred loss by this bid rigging.
③ The total of successful bid price related to this bid rigging amounted to no less than about 17.7 billion yen including tax.
④ Some of these violation companies were subject to administrative disposition of JFTC in the past.
⇒ JFTC filed a criminal accusation with the Public Prosecutor-General against 10 companies and 11 individuals （February, 2016）.
Bid Rigging (in Private/Public Demand) and Price Fixing Cartels ②
4
Trade Associations
◆ Cease and Desist Orders to Tokyo Bay Licensed Pilots’ Association and Ise-Mikawa Wan Licensed Pilots’ Association Restraining the members from making a contract with the users in
their own discretion, and pooling and distributing the pilotage fees to the members
Unjustly restricting the functions or activities of the constituent enterprises
⇒ JFTC dealt with the trades between users and pilots in the field of pilotage, which is regulated by the government.
◆ Warning to 4 Private Elementary School Federations Restraining school children’s transfer among the member schools This conduct was likely to substantially restrain the competition in the
field of trade related to education services provided by private elementary schools
⇒ This is the first case that JFTC takes actions stronger than warning toward the trade Associations organized by the private elementary schools.
5
Requests to trade association or government agencies
◆ JFTC requested trade associations etc. for necessary measures considered to be taken from competition policy viewpoint in some investigation cases. JFTC requested as below in the case of “unjustly restricting the functions or
activities of the constituent enterprises” conducted by Tokyo Bay Licensed Pilots’ Association and Ise-Mikawa Wan Licensed Pilots’ Association.
Trade Association etc. Contents of Requests
Japan Federation of Pilots’ Associations
Ministry of Land, Infrastructure, Transport and Tourism
JFTC requested Ministry of Land, Infrastructure, Transport and Tourism, which has the responsibility to Pilots’ Associations, to provide guidance not to piots’ association in the whole country to prevent the infrengements.
In a model of contracts regarding undertaking pilotage, stipulating the condition which causes restriction of selection
Inducing infringements of TokyoBay Licensed Pilots’ Association and Ise-Mikawa Wan Licensed Pilots’
JFTC requested Japan Federation of Pilots’ Associations to reconsider model of contracts and also provide guidance to piots’ association in the whole country to prevent the infrengements.
6
◆ JFTC strictly deals with abuse of superior bargaining position and, from the viewpoint for preventing it, conducts investigations in an efficient and effective manner.
JFTC established “Task Force for Abuse of Superior Bargaining Position”.
⇒ JFTC issued cautions to such enterprises as retailers, wholesalers, hotels, etc. whose practices may lead to infringements.
Elimination of Abuse of Superior Bargaining Position
FY 2011 2012 2013 2014 2015
Number of Cautions 52 57 58 49 51
7
◆ JFTC strictly deal with unjust low price sales Warning to the 2 petroleum products retailers that operate gas
stations in Tokoname City, Aichi Prefecture (on the grounds of suspected unjust low price sales of regular gasoline).
◆ Swift responses from preventive perspectives Regarding alleged cases in retail sectors such as liquors,
petroleum products and home appliances, JFTC sets a goal to complete its investigations within two months in principle.
Warning are issued to those which may lead to unjust low price. sales.
Unjust Low Price Sales
FY 2011 2012 2013 2014 2015
Liquor 1,138 1,123 847 635 490Petroleum product 444 426 452 326 341Home Appliances 142 121 29 3 3
Others 48 66 38 18 7Total 1,772 1736 1,366 982 841 8
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1
Administra*ve Surcharge System in Japan
～Present and Future～
1
Hideo Nakajima Secretary General
Japan Fair Trade Commission
43rd Annnual Conference on Interna5onal An5trust Law and Policy Sep 22, 2016
Outline of Japanese Surcharge System
2
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2
3
Legal Measures against Viola*ons of AMA etc.
Conducts Legal Measures
Private Monopoliza5on Cease and Desist Order Surcharge Payment Order Criminal Accusa5on
Unreasonable Restraint of Trade (Price fixing cartel /Bid-‐rigging, etc.)
Cease and Desist Order Surcharge Payment Order Criminal Accusa5on
Unfair Trade Prac5ces Cease and Desist Order Surcharge Payment Order*
An5compe55ve Merger Cease and Desist Order
Viola5on of Subcontract Act Recommenda5on
*Only certain types of Unfair Trade Practices
Surcharge Calcula*on Rates Cartels and Bid-riggings
Normal Repeated viola5on/
Leading entrepreneur
Early termina5on
Manufacturing 10% (4%) 15%(6%) 8%(3.2%)
Retail 3% (1.2%) 4.5% (1.8%) 2.4%(1%)
Wholesale 2% (1%) 3% (1.5%) 1.6%(.8%)
Sum of surcharges
Sales amounts of products in question during the period of violation
(3 years at a maximum)
Surcharge calculation
rates =×
*Rates in case of medium and small enterprises in parenthesis
l “Early termination” means that the period of illegal acts is less than 2 years, and such acts are discontinued
not later than one month before the commencement of investigations. l “Repeated violation” means cases where surcharge payment orders have been given during the period of
10 years before the commencement date of investigation. l “Leading entrepreneur” means entrepreneur who plays a leading role, such as “organizer” in bid-rigging,
cartel, etc. 4
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3
Framework of Leniency Program in Japan
5
Overview of Leniency Program in Japan
100% immunity
30% reduc5on
50% reduc5on
2nd Applicant
30% reduc5on
Before
Up to 3 Applicants
Ini*a*on of JFTC inves*ga*on
Up to 5 applicants
30% reduc5on
3rd to 5th Applicant
Criminal accusa5on NOT filed by JFTC (Applicant firm and its individuals)
After 1st Applicant
6
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4
Successful leniency (granted at the 5me of surcharge order)
Leniency Steps in Japan
Prior Consulta5on
• Upon the applicant’s request, Leniency Officer let the applicant know the prospec5ve order
Applica5on • Applicant applies for leniency with Form 1 (simple)
Marker given
• Marker is granted • Due date for Form 2 and materials is set (usually 2 weeks)
Form 2 and materials
• Applicant submits Form 2 (with detailed informa5on of cartels) and relevant materials by the due date
Confirma5on • JFTC confirms the submission of forms and materials
7
Prior Consulta5on
• Upon the applicant’s request, Leniency Officer advises the applicant whether leniency is available
Applica5on
• Applicant applies for leniency with detailed Form 3 and relevant materials • Due date: 20 business days ader the Inves5ga5on Start Date
Confirma5on
• JFTC confirms the submission of forms and materials
<Application made BEFORE the Investigation Start Date>
<Application made AFTER the Investigation Start Date>
Salient Features of Leniency Program in Japan (1)
p Applicants have to submit JFTC reports and materials regarding their cartels by due date
p Subsequent applicants* are required to provide JFTC with something new to JFTC * 4th/5th applicant, as well as those who applied ader the Inves5ga5on Start Date
p Non-‐compliance/false reports will revoke the leniency 8
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5
Salient Features of Leniency Program in Japan (2)
p Transparency and certainty highly secured • The amount of surcharge to be reduced is
s5pulated and decided only by the 5ming/order of applica5on, irrespec5ve of – the degree of coopera5on – the value of informa5on
9
Transparency and certainty secured
No room for JFTC’s discre5on
10 Years Experience of Leniency Program in Japan
10
9/22/16
6
11
Number of Leniency Applica*ons
(Note) Fiscal year is from April to March, except FY2005 which is between Jan. 4 and Mar. 31, 2006.
Number of applica5on
TOTAL: 938
• Many applica5ons • Variable sources of informa5on Leniency applica5ons are u5lized in at least 80% of cartel
cases in which JFTC issued cease and desist orders since 2006.
• Increases of surcharge imposed • Effec5ve compliance program • Enhanced Inter-‐agency coopera5on Recent large/interna5onal cartel cases were uncovered
by leniency applica5ons. – Auto parts (2012～） – Interna5onal ocean shipping (2014)
Implementa*on of Leniency Program in Japan
12
9/22/16
7
Type of Auto Parts Violators Surcharge Amounts* (million yen)
Wire harness Yazaki Corpora5on 9,607
Sumitomo Electric Industries Ltd. 2,102
Fujikura Ltd. 1,182
Furukawa Electric Co., Ltd. Immunity
Generators and starters Mitsubishi Electric Corpora5on 1,410
Starters, windshield and wiper systems
Mitsuba Corpora5on 1,108
Radiators and electrical fans
T.RAD Co., Ltd. 672
Radiators and electrical fans
Calsonic Kansei Corpora5on 198
Headlamps and rear combina5on lamps
KOITO MANUFACTURING CO., LTD. 3,428
ICHIKOH INDUSTRIES, LTD. 1,250
Stanley Electric Co., Ltd. Immunity
Recent Interna*onal Cartel Enforcement by JFTC
*Amounts less than 100 thousand yen are omitted.
1. Auto parts Total surcharge amount: Approx. 34.3 billion yen**
**It includes surcharge for cartel of industrial machinery bearings. 13
Type of Auto Parts Violators Surcharge Amounts* (million yen)
Bearing (automo5ve and industrial machinery)
NTN Corpora5on 7,231
NSK Ltd. 5,625
NACHI-‐FU-‐JIKOSHI CORP. 509
JTEKT Corpora5on Immunity
1. Auto parts (con5nued) Total surcharge amount: Approx. 34.3 billion
yen**
Violators Surcharge Amounts* (million yen)
Nippon Yusen Kabushiki Kaisha 13,101
Kawasaki Kisen Kaisha, Ltd. 5,698
Wallenius Wilhelmsen Logis5cs, AS 3,495
Nissan Motor Car Carrier Co., Ltd. 423
Mitsui O.S.K. Lines, Ltd. Immunity
2. Interna5onal ocean shipping services for cars Total surcharge amount: Approx. 22.7 billion yen
*Amounts less than 100 thousand yen are omitted.
**It includes surcharge for cartel of industrial machinery bearings.
14
9/22/16
8
Current Review of Administra*ve Surcharge System
in Japan
15
p Reasons for reviewing the current administra*ve surcharge system
1. Rigid calcula5on and imposi5on of surcharge 2. Lack of incen5ves to cooperate with the JFTC’s inves5ga5on 3. Devia5on from relevant interna5onal standards p Possible points of issues for review by the Expert Study Group (selected examples)
1. Basis for surcharge calcula5on 2. Aggrava5ng and mi5ga5ng factors for surcharge calcula5on 3. System for encouraging par5es under inves5ga5on to cooperate
with the JFTC 4. Rela5onship between the new surcharge system and criminal
penal5es 5. Enhancement of the rights of defense corresponding to the new
surcharge system 6. Transparent and predictable implementa5on of the new surcharge
system
Review of Administra*ve Surcharge System in Japan By Expert Study Group formulated by the JFTC last February
16
9/22/16
9
Thank you very much for your aTen*on
Please Visit Our Website hTp://www.jYc.go.jp/en/index.html
17
9/8/16, 3:38 PMAn Update On China’s Anti-Monopoly Law Guidelines On IP - Law360
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Koren W. Wong-Ervin
Portfolio Media. Inc. | 111 West 19th Street, 5th floor | New York, NY 10011 | www.law360.comPhone: +1 646 783 7100 | Fax: +1 646 783 7161 | [email protected]
An Update On China’s Anti-Monopoly LawGuidelines On IPLaw360, New York (December 15, 2015, 10:58 AM ET) -- This fall, twoof China’s three Anti-Monopoly Law (AML) agencies, the NationalDevelopment and Reform Commission and the State Administration forIndustry and Commerce, issued draft guidelines on the application ofthe AML to matters involving intellectual property rights.[1] Accordingto a press release issued by the SAIC, all three AML agencies areexpected to submit separate (and reportedly competing) versions ofthe draft guidelines to China’s State Council by the end of January2016. The final guidelines will purportedly bind all three agencies,although there is some dispute over whether they would preempt theAML-IP rules that the SAIC released earlier this year. The outcome ofthis process is particularly important given the critical role of IP rightsto innovation and the demonstrated propensity of the Chinese agenciesto apply the AML to foreign rights holders.
The SAIC’s AML-IP Rules and Draft Guidelines
The SAIC released its final rules in spring of this year after issuing nine drafts, many of whichwere open to public comment. In its final rules, the SAIC incorporated a number ofrecommendations on prior drafts, including eliminating presumptions that certain conduct is anti-competitive, and instead applying a rule of reason or effects-based approach to most types oflicensing restraints. However, a number of troubling provisions remain, including the application ofthe essential facilities doctrine to IP rights and AML liability for failure to license patents found tobe essential to a standard even in the absence of a voluntary commitment to license on fair,reasonable and nondiscriminatory terms.
Last week, the SAIC released a draft of its AML-IP guidelines, which are substantially similar to itsAML-IP rules with the addition of several provisions, including on merger analysis and price-related conduct, both areas over which SAIC has no enforcement authority. The draft guidelinesalso add a provision that would subject a standard-essential patent holder to possible AML liabilityfor seeking injunctive relief:
(1) without first providing notice to the alleged infringer, including specifying the allegedinfringement;
(2) without considering the expressed intention of the accused infringer to negotiate aFRAND license, or without extending a written offer of license;
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(3) when the accused infringer “expressly states its willingness” to be bound by a neutralthird-party FRAND adjudication (namely a court or, if agreed upon by both parties, anarbitrator); or
(4) “other events decided by the antitrust law enforcement agency of the State Council.”
The SAIC’s draft guidelines further provide that an SEP holder “shall” be permitted to seekinjunctive relief when it provides evidence that the accused infringer:
(1) “clearly lacks good faith to negotiate,”
(2) “fails to actively engage in the negotiation in accordance with commercial practice or ingood faith,”
(3) “deliberately protracts the negotiation process,”
(4) “refuses to pay royalties,” or
(5) “is unable to pay royalties and damages.”
The NDRC’s Draft Guidelines
In fall of this year, the NDRC released a questionnaire on the abuse of IP rights, followed by adraft of its guidelines. Similar to the SAIC’s rules, the NDRC’s draft guidelines apply a rule ofreason or effects-based approach to most types of licensing restraints, yet contain a number oftroubling omissions and provisions, including:
Failing throughout to recognize an IP rights holder’s core right to exclude or to incorporatethe analytical approach taken by the U.S. antitrust agencies of measuring the potentialconcerns against the “but for” world; that is, what would have occurred in the absence of alicense.
Applying an exceptionally broad essential facilities doctrine to IP rights.
Applying the AML’s “unfairly high” pricing prohibition to IP rights, both SEPs and non-SEPs.
With respect to SEPs in particular, among other things, seeming to prohibit an SEP holderfrom seeking injunctive relief without:
requiring proof that that the SEP holder has engaged in patent holdup, i.e., that thepatent holder used the threat of injunctive relief to demand supracompetitiveroyalties;taking into account whether the accused infringer has engaged in reverse holdup orholdout, which refer to implementers using their leverage to obtain rates and termsbelow FRAND, refusing to take a FRAND license, and/or delaying doing so; orspecifying that the prohibition applies only to FRAND-assured SEPs, i.e., when an SEPholder has voluntarily made a commitment to license its patent(s) on FRAND terms.
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Several U.S. organizations and companies submitted comments to the NDRC (and are currentlyawaiting the opportunity to submit comments to the SAIC), including the Global Antitrust Institute(GAI) at George Mason University School of Law.[2]
With respect to excessive pricing, the NDRC’s draft guidelines contain two separate provisions —one governing SEPs and the other governing non-SEPs. Section IV(i) provides that, in analyzingwhether an SEP holder has charged “unfairly highly royalties,” the following factors can beconsidered:
(1) the technological value of the SEP;
(2) the technical characteristics of related industries;
(3) the cumulative royalty paid by implementers of the relevant standard;
(4) the licensing commitment taken by the SEP holder;
(5) the licensing history of or comparable royalty for the SEP; and
(6) the reasonable profit margin of the implementers, both upstream and downstream, inthe relevant product market.
As the GAI explained in its comment to the NDRC, one problem with applying an excessive pricingprohibition to IP rights is that it is particularly difficult to assess the “fairness” of prices associatedwith licensing IP rights both because there is no marginal cost to which the price may becompared and because IP rights are highly differentiated products making price comparisonsdifficult, if not impossible. In addition, in order to determine whether a particular price isexcessive, the NDRC would need to calculate a reasonable royalty as a baseline against which tocompare the allegedly excessive price. Competition agencies are generally ill-equipped to calculateroyalty rates, a task that is best left to the market or, as a last resort, to the courts.
Should the NDRC retain this provision and calculate a reasonable royalty as a baseline, it couldemploy the hypothetical negotiation framework from U.S. patent damages law, the goal of whichis to replicate the market reward for the invention in the absence of infringement. However, this isa complex methodology intended for use by the courts upon development of a full record, whichusually includes detailed expert reports and opportunities for direct and cross-examination. Inaddition, it is essential to keep in mind that a reasonable royalty calculation using the hypotheticalnegotiation framework sets a minimum royalty; the patentee should have the opportunity toprove, in addition, its lost profits as part of its damages.
With respect to royalty stacking, as the Federal Circuit explained in Ericsson v. D-Link, the burdenshould be on the implementer to provide evidence establishing the actual cumulative royalty, andthat royalty must be assessed to determine whether it is excessive. In addition, it is important todistinguish between an aggregate royalty burden that accurately reflects the cumulative value ofthe various SEPs included in a given standard from an aggregate royalty burden that includes atleast some supra-FRAND rates, i.e., individual holdups. The former is simply the cost of makingproducts that benefit from valuable IP, analogous to any other cost of doing business.
With respect to charging for expired patents, the GAI strongly urged the NDRC not to base an AMLviolation on the existence of expired patents in a portfolio, explaining that it would be impractical,if not impossible, for portfolio owners to constantly renegotiate licenses (or provide updatedpatent lists) every time an IP right in a licensed portfolio expires or, conversely, every time new IPright is added to the portfolio, both of which occur commonly. Portfolios include patents with a
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variety of expiration dates and the parties to the license take the variety of expiration dates intoaccount when negotiating a price.
With respect to SEPs and injunctive relief, Section IV(iii) of the NDRC’s draft guidelines providesthat, in determining whether an SEP holder’s application for injunctive relief excludes or restrictscompetition, the following factors may be considered:
(1) the real intention for negotiation revealed by the parties during the negotiation; (2) theinjunctive relief related commitment taken by the SEP holder; (3) the licensing conditionsand its rationality raised by the parties during the negotiation; and (4) the influence ofapplying the injunctive relief to the negotiating positions of two parties, the competition inrelevant market and downstream market, and the consumers’ benefit.
As the GAI explained in its comment, this provision is troublesome for a number of reasons.
First, there is no empirical evidence to support the concerns that injunctive relief results in harmto innovation or to consumers, and the burden of establishing any harm from an SEP holder’shaving sought an injunction should rightly be on those advocating this fundamental policy shift.[3]
Second, reverse holdup and holdout are equally likely to occur and therefore there are likely to bedetrimental consequences to disrupting the carefully balanced FRAND ecosystem by creating anAML sanction for the seeking of injunctive relief. Indeed, if the worst penalty an SEP infringerfaces is not an injunction but merely paying, after adjudication, the FRAND royalty that it shouldhave agreed to pay when first asked, then reverse holdup and holdout give implementers aprofitable way to defer payment.
Third, injunctions issue only upon a court order. This critical gatekeeper minimizes the risk of anypotential harm. As such, the mere seeking of injunctive relief alone does not monopolize themarket because courts independently assess whether an injunction is warranted, taking intoconsideration whether the public interest would be disserved by an injunction. As for the notionthat the mere threat of an injunction may cause harm, the in terrorem effect of filing for aninjunction depends on the likelihood of it being granted.
Lastly, should the NDRC decide to adopt an AML sanction for seeking injunctive relief, at the veryleast, it should limit liability to situations in which there is proof that a FRAND-assured SEP holderhas engaged in patent holdup. This is necessary to avoid the presumption that an SEP holder whoseeks injunctive relief will necessarily use that relief (or the threat of it) to demandsupracompetitive royalties. That presumption would be unwarranted because, among other things,market mechanisms such as reputational and business costs impose a number of constraints thatmilitate against acting upon the opportunity for holdup.
Conclusion
A central theme of the GAI’s comment to the NDRC is the critical importance of adopting anapproach that incorporates the economics of innovation. This approach recognizes that, whilestatic efficiency may increase consumer welfare in the short run, dynamic efficiency, includingsocietal gains from innovation, are an even greater driver of consumer welfare. Another essentialprinciple is that if the government is too willing to step in and appropriate the gains frominnovation and dynamic competition, then potential innovators anticipating such interventions willhave weak incentives to risk investment in new inventions. Adopting an approach thatincorporates these principles is likely to best serve competition and consumers, as well as China’sgoal of becoming an innovation society.
9/8/16, 3:38 PMAn Update On China’s Anti-Monopoly Law Guidelines On IP - Law360
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—By Koren W. Wong-Ervin, Global Antitrust Institute at George Mason University School of Law
Koren Wong-Ervin is the director of the Global Antitrust Institute at George Mason UniversitySchool of Law and former counsel for intellectual property and international antitrust at theFederal Trade Commission.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of thefirm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is forgeneral information purposes and is not intended to be and should not be taken as legal advice.
[1] The third AML agency is the Ministry of Commerce (or MOFCOM), which is responsible formerger review. The NDRC is responsible for price-related conduct (agreements and abuse ofdominance) and the SAIC is responsible for non-price related conduct.
[2] For the GAI’s Comment to the NDRC, seehttp://masonlec.org/site/rte_uploads/files/GAI%20NDRC%20Comment_11-12-15_FINAL.pdf; forthe GAI’s response to the NDRC’s Questionnaire, seehttp://masonlec.org/site/rte_uploads/files/GAI%20NDRC%20Comment_9-30-15_FINAL.pdf.
[3] See, e.g., Douglas H. Ginsburg et al., The Troubling Use of Antitrust to Regulate FRANDLicensing, CPI Antitrust Chronicle Vol. 10, No. 1 at 2-8 (Oct. 15, 2015),http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2674759.
All Content © 2003-2016, Portfolio Media, Inc.
This paper is available on the Social Science Research Network at http://ssrn.com/abstract=2748252
“EXCESSIVE ROYALTY” PROHIBITIONS AND THE
DANGERS OF PUNISHING VIGOROUS COMPETITION AND
HARMING INCENTIVES TO INNOVATE
Douglas H. Ginsburg, Bruce H. Kobayashi,
Koren W. Wong-Ervin, & Joshua D. Wright,
George Mason University School of Law
George Mason University Law and Economics Research Paper Series
16-10
CPI Antitrust Chronicle March 2016 (1)
By Douglas H. Ginsburg, Bruce H. Kobayashi, Koren W. Wong-Ervin, and Joshua D. Wright1
In the last several years, competition agencies across Asia, including those in China, Korea, and India,
have issued decisions and draft guidelines that prohibit the holder of an intellectual property right (“IPR”)
from charging “unfairly high” or “excessive” royalties. In addition to the inherent problems with price
regulation (such as harming incentives to compete and to innovate and the difficulties of determining whether
a particular price is “excessive”), these decisions and guidelines are highly problematic in that they provide
little to no guidance on how the agencies determine whether a particular royalty is too high. Indeed, they
would allow the agencies to find an excessive pricing violation based on such vague or impractical standards
as:
whether the royalty “obviously does not match the value” of the IPR, which provides no
concrete guidance at all;
whether an IPR holder charges for expired or invalid patents, which ignores practical and
commercial realities, including the impracticality of renegotiating licenses every time a patent expires and the
reality that parties assess generally the value of the licensed portfolio and determine a royalty that accounts for
the possibility that some of the portfolio’s patents may be invalid or expired; and,
in the case of standard-essential patents (SEPs), concerns about royalty stacking, which should
not be a concern unless there is evidence that royalty stacking would have a severely adverse effect on the
product market or, at a minimum, would substantially restrict output.
This article discusses the dangers of regulating royalties, including the difficult — if not impossible —
task of determining whether a particular royalty is “excessive,” and suggest that agencies not apply to IPRs,
1 Professor of Law Douglas H. Ginsburg is a Senior Judge, United States Court of Appeals for the District of Columbia Circuit, Chairman of the International Board of Advisors of the Global Antitrust Institute (GAI) at George Mason University School of Law, and a former Assistant Attorney General in charge of the Antitrust Division of the U.S. Department of Justice. Professor of Law Bruce H. Kobayashi, Ph.D. (economics), is a GAI Senior Scholar and Founding Director. Koren W. Wong-Ervin is the Director of the GAI and former Counsel for Intellectual Property and International Antitrust at the U.S. Federal Trade Commission. Professor of Law Joshua D. Wright, Ph.D. (economics), is the Executive Director of the GAI and a former U.S. Federal Trade Commissioner. The authors thank Elena Kamenir for research assistance.
“Excessive Royalty” Prohibitions and the Dangers of Punishing Vigorous Competition and Harming Incentives to Innovate
CPI Antitrust Chronicle March 2016 (1)
including SEPs, their laws prohibiting excessive pricing. Should an agency be required by law to apply the
prohibition to IPRs, then at the very least it should focus primarily upon the prices of comparable licenses,
which are the best available evidence of the market value of a patent.
I. RECENT DECISIONS AND DRAFT GUIDELINES PROHIBITING CHARGING
“EXCESSIVE ROYALTIES”
In February 2015, China’s National Development and Reform Commission issued a $975 million fine
against Qualcomm based, in large part, upon findings that the company charged “excessive” royalties because
it charged for expired patents, required royalty-free grantbacks, bundled SEPs and non-SEPs, and based its
royalties on the wholesale net sales price of the end product as opposed to a percentage of the price of a
smaller component part.2 Similarly, the Competition Commission of India recently issued investigation orders
against Ericsson alleging the company charged “excessive and unfair royalty rates” because it based royalties
on sales of the end-user device as opposed to sales of a component part.3 Most recently, the Chinese and
Korean competition agencies issued draft guidelines that would apply excessive pricing prohibitions to IPRs,
focusing upon factors such as charging for expired or invalid patents.4 One favorable development (at least in
the draft IP guidelines) is the apparent shift away from basing an excessive royalty violation on the common
industry practice of using the end-user device as the royalty base. This is a favorable development because
there are numerous legitimate business reasons for selecting the end-user device as the royalty base, including
the reduction of administrative costs and the relative ease of monitoring or verifying the number of units sold.
And, of course, mathematically and in terms of the royalty actually charged, the selection of the royalty base
is irrelevant as it is the simultaneous relationship between the royalty base and the royalty rate that matters.5
II. THE U.S. APPROACH AND THE DANGERS OF REGULATING PRICE
The U.S. antitrust agencies do not regulate price. 6 Rather, in the United States, firms are free
unilaterally to set or privately to negotiate their prices; it follows that a IPR holder is free to charge a
*Professor of Law Douglas H. Ginsburg is a Senior Judge, United States Court of Appeals for the District of Columbia Circuit,
Chairman of the International Board of Advisors of the Global Antitrust Institute (GAI) at George Mason University School of
Law, and a former Assistant Attorney General in charge of the Antitrust Division of the U.S. Department of Justice. Professor
of Law Bruce H. Kobayashi, Ph.D. (economics), is a GAI Senior Scholar and Founding Director. Koren W. Wong-Ervin is the
Director of the GAI and former Counsel for Intellectual Property and International Antitrust at the U.S. Federal Trade
Commission. Professor of Law Joshua D. Wright, Ph.D. (economics), is the Executive Director of the GAI and a former U.S.
Federal Trade Commissioner. The authors thank Elena Kamenir for research assistance. 2 See Koren W. Wong-Ervin, Antitrust and IP in China: Quo Vadis? 5-6 (Apr. 16, 2015),
https://www.ftc.gov/system/files/attachments/key-speeches-presentations/wong-ervin_-_2015_aba_spring_meeting_4-16-
15.pdf. 3 See Koren W. Wong-Ervin, Standard-Essential Patents: The International Landscape, Am. Bar Ass’n Intellectual Prop. Comm.
Newsletter, Spring 2014, at 13-14, https://www.ftc.gov/system/files/attachments/key-speeches-presentations/standard-
essential_patents_the_intl_landscape.pdf. 4 For a summary of China’s draft guidelines, see Koren W. Wong-Ervin, An Update On China’s Anti-Monopoly Law Guidelines On
IP, LAW360 (Dec. 15, 2015), http://www.law360.com/competition/articles/737570/an-update-on-china-s-anti-monopoly-law-
guidelines-on-ip. For the GAI’s comments to China and Korea on their draft IPR guidelines, see GLOBAL ANTITRUST INSTITUTE
COMPETITION ADVOCACY PROGRAM, http://masonlec.org/programs/692. 5 See, e.g., Ericsson v. D-Link, 773 F.3d 1201, 1226 (Fed. Cir. 2014). 6 See, e.g., Bill Baer, Assistant Att’y Gen., Antitrust Division, Prepared Remarks at the 19th Annual International Bar Association
Competition Conference (Sept. 11, 2015), http://www.justice.gov/opa/speech/assistant-attorney-general-bill-baer-delivers-
remarks-19th-annual-international-bar (“We don’t use antitrust enforcement to regulate royalties. That notion of price controls
CPI Antitrust Chronicle March 2016 (1)
monopoly price, which rewards the very risk-taking and entrepreneurial behavior that lead to innovation and
economic growth.7 This hands-off approach applies to all IPRs, including SEPs.
Requiring by law that prices be “fair” or “reasonable,” or prohibiting a firm from charging “unfairly
high” prices risks punishing vigorous competition. In general, competition policy should not prohibit a
monopolist from charging whatever price for its products, including its IPRs, it believes will maximize its
profits. It is axiomatic in economics and in antitrust law that the “charging of monopoly prices … is … what
attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic
growth.”8 This is particularly important in the case of IPRs; the very purpose for which nations create and
protect IPRs is to induce investment in risky and costly research and development. To achieve a balance
between innovation and the protection of competition, monopoly prices should be unlawful only if they are
the result of conduct that is unlawful on other grounds.
Moreover, economics teaches that, absent information about the prices of unconstrained market
transactions, it can be particularly difficult to identify a “fair” price. Indeed, it is even more difficult to assess
the “fairness” of prices associated with licensing IPRs both because the fixed costs of innovation require
prices well above marginal cost in order to secure an adequate return on investments in innovation, and
because IPRs themselves are highly differentiated products, which makes reliable price comparisons difficult,
if not impossible. The risk of placing overly strict limitations upon IPR prices is that the return to innovative
behavior is reduced, which means firms will reduce their investment in further innovations, to the detriment of
consumers. Compounding the problem, with such limits in place, IPR holders will face significant uncertainty
in determining whether their licensing practices violate competition laws, and legal uncertainty is the enemy
of financial investment.
In addition, in order to determine whether a particular price is excessive, the competition agency would
need to calculate a reasonable royalty range as a baseline against which to compare the allegedly excessive
price. In our experience, competition agencies will not posses the requisite information necessary to determine
market prices generally, and royalty rates for inventions in particular. This is a task that is best left to the
market or, as a last resort, to the courts in those limited cases when the parties cannot reach agreement.9
III. POSSIBLE METHODOLOGIES FOR CALCULATING A REASONABLE ROYALTY RANGE
interferes with free market competition and blunts incentives to innovate. For this reason, U.S. antitrust law does not bar
‘excessive pricing’ in and of itself. Rather, lawful monopolists are perfectly free to charge monopoly prices if they choose to do
so. This approach promotes innovation from rivals or new entrants drawn by the lure of large rewards.”); Edith Ramirez,
Chairwoman, Fed. Trade Comm’n, Address at 8th Annual Global Antitrust Enforcement Symposium: Standard-Essential
Patents and Licensing: An Antitrust Enforcement Perspective 8 (Sept. 10, 2014),
https://www.ftc.gov/system/files/documents/public_statements/582451/140915georgetownlaw.pdf (“In contrast to the FTC’s
and EC’s approach, media reports indicate that China’s antitrust authorities may be willing to impose liability solely on the
royalty terms that a patent owner demands for a license to its FRAND-encumbered SEPs, as well as royalty demands for
licenses for other patents that may not be subject to a voluntary FRAND commitment.”); Keith N. Hylton, Antitrust Snoops on
the Loose, WALL ST. J., Apr. 3, 2015, at A9. 7 See, e.g., Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004). 8 Id.; see also JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM, AND DEMOCRACY 89-90 (George Allen & Unwin 1976). 9 For a discussion of the difficulties of court-determined rate setting, see Anne Layne-Farrar & Koren W. Wong-Ervin,
Methodologies For Calculating FRAND Damages, LAW360 (Oct. 8-10, 2014),
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2668623.
CPI Antitrust Chronicle March 2016 (1)
Should an agency insist upon applying an excessive pricing prohibition to IPRs, it could use the
hypothetical negotiation framework developed under U.S. patent law to determine the minimum reasonable
royalty. This, however, is a complex methodology intended for use by the courts upon development of a full
record, which usually includes detailed expert reports and opportunities for witnesses to testify and be
subjected to cross-examination. In addition, it is essential to keep in mind that a reasonable royalty calculation
using the hypothetical negotiation framework sets a minimum royalty; the patentee should have the
opportunity to prove its lost-profits as part of its damages. In an excessive pricing case, these lost profits equal
the profits denied by the “unfairly high” pricing provision.10 As such, when used in an “unfairly high” pricing
investigation, a reasonable royalty calculation should likewise be treated as a minimum starting point to avoid
imposing a royalty that undercompensates the patentee—a result that would significantly reduce the patentee’s
incentives to innovate.
In an action for damages resulting from patent infringement, the goal of a reasonable royalty
calculation is to determine the market price the infringer would have paid if it had licensed rather than
infringed the patent. Accordingly, that amount should depend upon what a willing licensee and a willing
licensor would have agreed to in a hypothetical negotiation. The seminal case in the United States, Georgia-
Pacific Corp. v. United States Plywood Corp., describes the proper measure of damages as “[t]he amount that
a licensor (such as the patentee) and the licensee (such as the infringer) would have agreed upon (at the time
the infringement began) if both had been trying in good faith to reach an agreement.”11 The central tenet of
this framework is the willing licensor/willing licensee model, under which the amount awarded must be
acceptable to both parties.
U.S. district courts have recent adopted modified versions of the Georgia Pacific framework in
determining prospective royalties in cases involving FRAND encumbered standard essential patents. The U.S.
Court of Appeals for the Federal Circuit in Ericsson, Inc. v. D-Link Systems, Inc. held that “[t]here is no
Georgia-Pacific-like list of factors that district courts can parrot for every case involving [F]RAND-
encumbered patents.”12 Instead, courts must instruct the jury only on factors that are relevant to the record
developed at trial, and must instruct the jury on the actual FRAND commitment at issue. Because each
technology and market is different, the evidence considered and the weight placed on each factor will vary
based upon the circumstances.
In constructing the hypothetical negotiation, U.S. courts consider evidence of market factors that the
negotiating parties would consider in determining the royalty rate. Often comparable licenses are the best
available evidence of the market value of the patent. Accordingly, the Federal Circuit recently held in
Ericsson v. D-Link that evidence about comparable licenses based upon the end product should properly be
considered by the jury in determining patent damages. The court reasoned that “[m]aking real world, relevant
licenses inadmissible … would often make it impossible for a patentee to resort to license-based evidence.”13
Indeed, as a practical matter, most licenses in many high-tech markets, including smartphones, are negotiated
on a patent portfolio basis using the end-user device as the royalty base. A number of considerations may
dictate private parties’ selection of a royalty base in a freely negotiated license agreement. Industry practice
10 Specifically, U.S. patent law provides that “[u]pon finding for the claimant the court shall award the claimant damages adequate
to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the
infringer, together with interest and costs as fixed by the court.” 35 U.S.C. §284 (2014). 11 Georgia-Pacific Corp., v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), modified and aff’d, 446 F.2d 295 (2d
Cir. 1971). 12 773 F.3d 1201, 1235 (Fed. Cir. 2014). 13 Id. at 1228.
CPI Antitrust Chronicle March 2016 (1)
and the convenience of the parties is one such consideration; other commercial dealings between the parties is
another.
The Federal Circuit also explained that, while prior licenses “are almost never perfectly analogous to
the [licenses at issue in a later] infringement action,” that “generally goes to the weight of the evidence, not its
admissibility.”14 For example, allegedly comparable licenses may cover more patents than are at issue in the
current action, or include cross-licensing terms, or cover foreign intellectual property rights, or be calculated
as some percentage of the value of a multi-component product. “Testimony relying on comparable licenses
must account for such distinguishing facts when invoking them to value the patented invention.”15 When
considering comparable licenses, it is also important to consider factors such as the circumstances, timing, and
relative bargaining position of the parties to those licenses. For example, a license entered when the
commercial viability of the technology is still uncertain will, in general, result in a lower royalty than a license
entered into when the commercial viability of the technology is established or has increased.
Excessive pricing violations should not, however, turn upon there being expired or invalid patents in a
portfolio. Not only is this not an antitrust issue, but it would be impractical, if not impossible, for portfolio
owners to renegotiate licenses every time an IPR in a licensed portfolio expires or, conversely, every time a
new IPR is added to the portfolio, both of which occur frequently. Indeed, the common industry practice of
portfolio “rebalancing” (i.e., periodically removing expired or invalid patents and adding new patents) further
reduces the risk that the presence of a few invalid or expired patents would impose any significant cost upon
the licensee.16 In our experience, we have found that portfolio licenses in which individual patents have a
variety of expiration dates are common industry practice that reduces transactions costs and facilitates
licensing.17
Similarly, with respect to invalid patents, when a licensor and a licensee negotiate a license for a large
portfolio, both parties understand that some of the hundreds or thousands of patents in the portfolio may be
invalid. The parties do not invest resources in identifying those invalid patents, which would make the
transaction prohibitively costly. Instead, they assess generally the value of the licensed portfolio and
determine a royalty that accounts for the possibility that some of the portfolio’s patents may be invalid.18
Likewise, excessive pricing violations should not turn upon a concern about royalty stacking. The
aggregate royalty should be considered, if at all, only when there is evidence that it would have a severely
adverse effect upon the product market, or at a minimum substantially restrict output. Some claim that devices
like mobile phones, which implement thousands of patents, are subject to royalty stacking concerns. The
evidence, however, is not consistent with these theoretical claims. For example, a recent empirical study
shows that, contrary to the predictions of the royalty stacking theory, between 1994 and 2013, the non-quality
adjusted average selling price of a mobile device fell 8.1 percent per year on average; the number of devices
sold each year rose 62 times or 20.1 percent per year on average; the number of device manufactures grew
14 Id. at 1227. 15 Id. 16 See J. Gregory Sidak, Evading Portfolio Royalties For Standard-Essential Patents Through Validity Challenges, 39 WORLD
COMPETITION (forthcoming 2016) [hereinafter Sidak], https://www.criterioneconomics.com/docs/evading-portfolio-royalties-
for-seps.pdf. 17 In Kimble v. Marvel Entm’t, LLC, a recent patent misuse case, the U.S. Supreme Court seemed to endorse package or portfolio
licenses without requiring a step-down, stating that, with respect to “licensing agreements [that cover] either multiple
patents or additional non-patent rights, . . . royalties may run until the latest-running patent covered in the parties’
agreement expires.” 135 S. Ct. 2401, 2408 (2015), http://www.supremecourt.gov/opinions/14pdf/13-720_jiel.pdf. 18 See Sidak, supra note 16.
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from one in 1994 to 43 in 2003; and since 2001, concentration fell consistently and the average gross margin
of SEP holders remained constant.19
As the U.S. Court of Appeals for the Federal Circuit explained in Ericsson v. D-Link, the burden is on
the implementer (or, in an excessive pricing enforcement action, the agency) to provide evidence establishing
the actual cumulative royalty, and that royalty must be assessed to determine whether it is excessive.20 The
court of appeals rejected the approach taken by some U.S. district courts of considering the aggregate royalties
that would apply if one assumed that all SEP holders charged the same or similar rates. The problem with that
approach is that not all patents are created equal and FRAND rates should reflect the value of the particular
SEPs at issue. In addition, many licensees do not pay cash royalties for every SEP. Instead, there may be
cross-licenses or other business relationships that allow for royalty-free exploitation of some SEPs.
There are several other important principles to keep in mind. First, it is important to distinguish
between, on the one hand, an aggregate royalty that reflects the cumulative value of the various SEPs included
in a given standard and, on the other hand, an aggregate royalty burden that includes at least some supra-
FRAND rates, i.e., individual hold-up rates. The former is simply the cost of making products that benefit
from valuable IP, analogous to any other cost of doing business. For example, automakers face an aggregate
input cost covering all of the many components needed to produce a car. There is nothing inherently
anticompetitive in needing multiple inputs to produce a particular good, nor in each of those input suppliers
charging the market price for its contribution.21
Second, proper apportionment can eliminate the risks of both hold-up and royalty stacking. As long as
the inputs for multi-component products are priced according to the value of each patent’s contribution to the
end product, no SEP holder can be faulted for either hold-up or stacking. Proper apportionment is a reasonable
means to accomplish this goal.22
Third, it is critical to distinguish between the number of SEPs and the number of SEP holders. Given
the prevalence of portfolio licensing, it is the number of SEP holders and not the number of SEPs that is
relevant. Even if a license to 1,000 SEPs were required to implement a given standard, if all of those SEPs
were held by a single entity that licensed on a portfolio basis, there would be no stack at all.23
Fourth, for a variety of reasons, not all SEP holders seek license payments. As the Federal Circuit
pointed out in Ericsson v. D-Link, “[t]he mere fact that thousands of patents are declared to be essential to a
standard does not mean that a standard-compliant company will necessarily have to pay a royalty to each SEP
holder.”24
Lastly, one of the assumptions underlying the Cournot complements problem (the theory upon which
the concern with royalty stacking is based) is that each input supplier will price its inputs without regard to the
19 Alexander Galetovic & Kirti Gupta, Royalty Stacking and Standard Essential Patents: Theory and Evidence from the World
Mobile Wireless Industry (Stanford Univ. Hoover Institution Working Grp. on Intellectual Property, Innovation, and Prosperity,
Working Paper Series No. 15012, 2015), http://hooverip2.org/wp-content/uploads/ip2-wp15012-paper.pdf. 20 Ericsson, 773 F.3d at 1234. 21 Anne Layne-Farrar & Koren W. Wong-Ervin, An Analysis of the Federal Circuit’s Decision in Ericsson v. D-Link, CPI
ANTITRUST CHRONICLE, Mar. 2015, at 4-5 [hereinafter Layne-Farrar & Wong-Ervin],
http://www.crai.com/sites/default/files/publications/An-Analysis-of-the-Federal-Circuits-Decision-in-Ericsson-v-D-Link.pdf. 22 Id. at 5. 23 Id. at 6. 24 773 F.3d at 1234.
CPI Antitrust Chronicle March 2016 (1)
prices charged for other needed inputs.25 But there is no reason to assume that will necessarily be the case in a
standard-setting context. For example, SEP holders will be cooperating with one another (and with all other
standard-setting organization members) in the development of the standard, and are therefore likely to know
what patents are expected to be asserted and by whom. As a result, there is no reason to presume that SEP
holders will set rates without regard to the full complement of known SEPs.26
IV. CONCLUSION
Given the dangers and difficulties of regulating prices, agencies should exercise their prosecutorial
discretion to refrain from applying excessive pricing prohibitions to IPRs in order to avoid punishing rigorous
competition and diminishing the incentive to innovate. If an agency is required by law to apply an excessive
pricing prohibition to IPRs, then it should focus upon comparable licenses, which will often be the best
available evidence of the market value of the IPR at issue. Whether a portfolio includes expired or invalid
patents should not be considered as proxies for “excessive pricing,” particularly given the commercial reality
that parties generally determine a royalty that accounts for the possibility that some of the IPRs in a portfolio
may be invalid or expired.
25 AUGUSTIN COURNOT, RESEARCHES INTO THE MATHEMATICAL PRINCIPLES OF THE THEORY OF WEALTH 99-116 (Nathaniel T.
Bacon trans., MacMillan Co. 1897) (1838); see also Bruce H. Kobayashi, Does Economics Provide a Reliable Guide to
Regulating Commodity Bundling by Firms? A Survey of the Economic Literature, 1 J. COMP. L. & ECON 707, 714 (2005). 26 Layne-Farrar & Wong-Ervin, supra note 21, at 5.
THE TROUBLING USE OF ANTITRUST TO REGULATE
FRAND LICENSING
Douglas H. Ginsburg, George Mason University School of Law
Koren W. Wong-Ervin, Federal Trade Commission
Joshua D. Wright, George Mason University School of Law
CPI Antitrust Chronicle, Vol. 10, No. 1, pp. 2-8, 2015
George Mason University Legal Studies Research Paper Series
LS 15-37 This paper is available on the Social Science Research Network
at ssrn.com/abstract=2674759
THE TROUBLING USE OF ANTITRUST TO REGULATE
FRAND LICENSING
Douglas H. Ginsburg, George Mason University School of Law
Koren W. Wong-Ervin, Federal Trade Commission
Joshua D. Wright, George Mason University School of Law
CPI Antitrust Chronicle, Vol. 10, No. 1, pp. 2-8, 2015
George Mason University Law and Economics Research Paper Series
15-46 This paper is available on the Social Science Research Network
at ssrn.com/abstract=2674759
www.competitionpolicyinternational.com Competition Policy International, Inc. 2015© Copying, reprinting, or distributing this article is forbidden by anyone
other than the publisher or author.
CPI Antitrust Chronicle October 2015 (1)
Douglas H. Ginsburg, Koren W. Wong-Ervin, & Joshua D. Wright George Mason University School of Law
The Troubling Use of Antitrust to Regulate FRAND Licensing
CPIAntitrustChronicle October2015(1)
2
The Troubling Use of Antitrust to Regulate FRAND Licensing
Judge Douglas H. Ginsburg, Koren W. Wong-Ervin, & Joshua D. Wright1
I. INTRODUCTION
In the last year, we have seen a growing—and troubling—trend as courts and competition agencies around the globe propose and impose antitrust sanctions on holders of standard-essential patents (“SEPs”) for seeking injunctive relief against alleged infringers and for reneging on their commitment to license their patents on fair, reasonable, and non-discriminatory (“FRAND”) terms. These new rules, recently adopted in the European Union and in Korea, proposed in Canada and Japan, and favored by some government officials in the United States, are premised upon the erroneous beliefs that (1) patent “holdup” is a widespread problem that results in significantly adverse consequences for competition and innovation and (2) whatever the magnitude of the problem, it requires an antitrust remedy.
Patent holdup occurs when an SEP holder that has made a commitment to license its patents on FRAND terms instead uses the essential nature of its patent (“standard-lock-in”) to charge an unjustifiably higher royalty than would have been possible before its patent was included in the standard. Proponents of the new rules suggest the risk that ex post royalty rates will be higher than the ex ante rate was or would have been reflects a market failure requiring an antitrust response rather than a problem that could be resolved readily by standard-setting organizations (“SSOs”) themselves or by ordinary remedies for breach of contract. In other words, the underlying assumption is that the SSO process in general, and FRAND licensing in particular, is broken and in need of fixing. The assumption is wrong and the proposed antitrust remedy is likely to do more harm than good.
First, as to the assumption, there simply is no empirical evidence to substantiate the claim that patent holdup is a systemic problem for competition and consumers. In fact, evidence from the smartphone market, which may be the most patent- and standard-intensive market, shows no signs of diminished competition or adverse effects upon consumers. In fact, it shows wireless service prices declining, output growing exponentially, innovation continuing at a rapid pace, vigorous dynamic competition among mobile device manufacturers with meaningful entry over time, and diminishing market concentration. In other words, the empirical evidence does not support the notion that FRAND licensing is somehow broken and in need of fixing. Instead, the thriving nature of the wireless market suggests caution prior to disrupting the carefully balanced
1 Judge Douglas H. Ginsburg is a Judge on the U.S. Court of Appeals for the District of Columbia, Professor of
Law at George Mason University School of Law, and Chairman of the International Advisory Committee of the Global Antitrust Institute. At the time this article was written, Koren W. Wong-Ervin was an Attorney Advisor to then-Federal Trade Commissioner Joshua D. Wright. Joshua D. Wright is a Professor of Law at George Mason University School of Law and the Director of the Global Antitrust Institute. The views expressed here are those of the authors alone and do not necessarily represent the views of the U.S. Federal Trade Commission or any of its Commissioners.
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FRAND ecosystem.
Second, as for the remedy, imposing antitrust liability for patent holdup and a patent holder’s refusals to issue a license on FRAND terms is not only unnecessary, given that the law of contracts is sufficient to provide optimal deterrence, it is likely to be harmful to both competition and consumers by diminishing the value of patents and hence reducing incentives to innovate and to participate in standard setting.2
II. THE NEW ANTITRUST RULES FOR SEP HOLDERS
Within the last year, several jurisdictions have issued final or draft guidelines on SEP issues. For example, in December 2014, the Korea Fair Trade Commission (without providing an opportunity for public comment) issued final guidelines, which are scheduled to be revised in late 2015 or early 2016. In June 2015, the Canadian Bureau of Competition released its revised intellectual property (“IP”) guidelines for public comment and the next month the Japan Fair Trade Commission released its draft IP guidelines for public comment. These new antitrust rules would impose an antitrust sanction on SEP holders who either (1) seek an injunction to stop an infringing manufacturer from selling their standardized product, or (2) engage in ex-post contractual opportunism by attempting to renegotiate or deviate from the original FRAND commitment in order to obtain higher royalty rates.
Also in July 2015, the European Court of Justice (“ECJ”) held that seeking injunctive relief with respect to a FRAND-encumbered SEP may constitute a violation of the European Union’s competition law, specifically Article 102 of the Treaty on the Functioning of the European Union .3 The court created a safe harbor from Article 102 liability, however, for a SEP holder that (1) prior to initiating an infringement action, alerts the alleged infringer of the claimed infringement and specifies the way in which the patent has been infringed; and (2) after the alleged infringer has expressed its willingness to conclude a license agreement on FRAND terms, presents to the alleged infringer a specific, written offer for a license, specifying the royalty and calculation methodology. The ECJ then put the burden on the alleged infringer to “diligently respond” to that offer “in accordance with recognised commercial practices in the field and in good faith,” by promptly providing a specific written counter-offer that corresponds to FRAND terms, and by providing appropriate security (e.g., a bond or funds in escrow) from the time at which the counter-offer is rejected and prior to using the teachings of the SEP.4
These new rules are premised upon the mistaken belief that holdup is both frequent and results in significant consumer harm. For example, Japan’s Draft Amendment to its IP Guidelines concludes that a SEP’s holder seeking injunctive relief “generally makes it difficult to research & develop . . . products adopting the standards,” which in turn deters widespread adoption of
2 See, e.g., Bruce H. Kobayashi & Joshua D. Wright, The Limits of Antitrust and Patent Holdup: A Reply to Cary,
et al., 78 ANTITRUST L.J. 505 (2012). 3 Case C-170/13, Huawei Technologies Co. v. ZTE Corp. (July 16, 2015), available at
http://curia.europa.eu/juris/document/document.jsf?text=&docid=165911&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=603775.
4 Id. ¶¶ 65-67.
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standards.5 This assertion notwithstanding, the empirical evidence does not suggest patent holdup is a frequent or systemic problem and, even if it were, there are substantial weaknesses in the argument that antitrust is the right tool to fine-tune any problems with SEP licensing negotiations or SSOs.
III. NO EMPIRICAL EVIDENCE SUGGESTS A SYSTEMIC PROBLEM WITH HOLDUP
Although there is serious and important scholarly work exploring the theoretical conditions under which patent holdup might occur, this literature merely demonstrates the possibility that an injunction (or the threat of an injunction) against infringement of a patent can in certain circumstances be profitable for the licensor and potentially harmful to consumers. This same theoretical literature has also recognized, with respect both to intellectual and to tangible property, the threat of both reverse holdup and holdout. Holdup requires lock-in, and standard-implementing companies with asset-specific investments can be locked in to the technologies defining the standard. On the other hand, innovators that are contributing to an SSO can also be locked-in, and hence susceptible to holdup, if their technologies have a market only within the standard. Thus, incentives to engage in holdup run in both directions.
There is also the possibility of holdout by an implementer. While reverse holdup refers to the situation in which a licensee uses its leverage to obtain rates and terms below FRAND, holdout refers to a licensee either refusing to take a FRAND license or delaying doing so.
It is important to distinguish the hypotheses generated in the theoretical literature on patent holdup from such empirical evidence as would substantiate those hypotheses. The existing empirical evidence is not consistent with the view that holdup is a prevalent or systemic problem and is causing harm to consumers.6 The evidence required to support the new antitrust rules requires that there be a probability, not a mere possibility, of higher prices, reduced output, and lower rates of innovation.
In fact, as mentioned above, evidence from the smartphone market is to the contrary: Output has grown exponentially, while market concentration has fallen, and wireless service prices have dropped relative to the overall consumer price index (“CPI”).7 More generally, prices
5 Guidelines for the Use of Intellectual Property Under the Antimonopoly Act, Draft Amendment Parts 3(1)(e)
and 4(2)(iv), available at http://www.jftc.go.jp/en/pressreleases/yearly-2015/July/150708.files/Attachment1.pdf. 6 See, e.g., J. Gregory Sidak, The Antitrust Division’s Devaluation of Standard-Essential Patents, 104 GEO. L.J.
ONLINE 48, 61 (2015) (collecting studies at n.49) (“By early 2015, more than two dozen economists and lawyers had disapproved or disputed the numerous assumptions and predictions of the patent-holdup and royalty-stacking conjectures.”), available at https://www.criterioneconomics.com/docs/antitrust-divisions-devaluation-of-standard-essential-patents.pdf; ANNE LAYNE-FARRAR, PATENT HOLDUP AND ROYALTY STACKING THEORY AND EVIDENCE: WHERE DO WE STAND AFTER 15 YEARS OF HISTORY? (Dec. 2014), available at http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD%282014%2984&doclanguage=en (surveying the economic literature and concluding that the empirical studies conducted thus far have not shown holdup is a common problem).
7 According to data from Gartner, worldwide smartphone sales to end-users have increased over 900 percent between 2007 to 2014, and 320 percent between 2010 to 2014. Market concentration in smartphones, as measured by HHIs, went from “highly concentrated” in 2007, as defined by the U.S. Antitrust Agencies’ Horizontal Merger Guidelines, to “unconcentrated” by the end of 2012. See Keith Mallinson, Theories of Harm with SEP Licensing Do Not Stack Up, IP FIN. BLOG (May 24, 2013), available at http://ipfinance.blogspot.com/2013/05/theories-of-harm-
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in SEP-reliant industries in the United States have declined faster than prices in non-SEP intensive industries.8 A recent study by the Boston Consulting Group found that globally the cost per megabyte of data declined 99 percent from 2005 to 2013 (reflecting both innovation making data transmission cheaper as well as the healthy state of competition); the cost per megabyte fell 95 percent in the transition from 2G to 3G, and 67 percent in the transition from 3G to 4G; and the global average selling price for smartphones decreased 23% from 2007 through 2014, while prices for the lowest-end phones fell 63 percent over the same period.9 All of this indicates a thriving mobile market as opposed to a market in need of fixing.
Economic analysis provides the basis upon which to understand the apparent disconnect between holdup theory and the available evidence. As economic theory would predict, patent holders and those seeking to license and implement patented technologies write their contracts so as to minimize the probability of holdup.
In addition, several market mechanisms are available to transactors to mitigate the incidence and likelihood of patent holdup. For example, reputational and business costs may deter repeat players from engaging in holdup and “patent holders that have broad cross-licensing agreements with the SEP-owner may be protected from hold-up.”10 Also, patent holders often enjoy a first-mover advantage if their technology is adopted as the standard. “As a result, patent holders who manufacture products using the standardized technology ‘may find it more profitable to offer attractive licensing terms in order to promote the adoption of the product using the standard, increasing demand for its product rather than extracting high royalties’” per unit.11 This is not surprising. The original economic literature upon which the patent holdup theories are based was focused upon the various ways that market actors use reputation, contracts, and other institutions to mitigate the inefficiencies associated with opportunism in transactions involving tangible property.12
with-sep-licensing-do.html. According to the U.S. Bureau of Labor Statistics, the ratio of the CPI for wireless telephone services to the overall CPI has dropped 34% from 2007 to 2014.
8 Alexander Galetovic, Stephen Haber, & Ross Levine, An Empirical Examination of Patent Hold-Up (Nat’l Bureau of Econ. Research, Working Paper No. 21090, Apr. 2015), available at http://www.nber.org/papers/w21090.pdf.
9 JULIO BEZERRA ET AL., THE MOBILE REVOLUTION: HOW MOBILE TECHNOLOGIES DRIVE A TRILLION DOLLAR IMPACT 3, 9 (The Boston Consulting Group Jan. 15, 2015), available at https://www.bcgperspectives.com/content/articles/telecommunications_technology_business_transformation_mobile_revolution/#chapter1.
10 See, e.g., Prepared Statement of the Federal Trade Commission Before the U.S. Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights Concerning “Standard Essential Patent Disputes and Antitrust Law” at 6 (July 30, 2013), available at https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-statement-federal-trade-commission-concerning-standard-essential-patent-disputes-and/130730standardessentialpatents.pdf.
11 Id. (citation omitted). 12 Benjamin Klein, Why Hold-Ups Occur: The Self-Enforcing Range of Contractual Relationships, 34 ECON.
INQUIRY 444, 449-50 (1996); Benjamin Klein, Robert G. Crawford & Armen A. Alchian, Vertical Integration, Appropriate Rents, and Competitive Contracting Process, 21 J.L. & ECON. 297, 303-07 (1978); OLIVER E. WILLIAMSON, MARKETS AND HIERARCHIES: ANALYSIS AND ANTITRUST IMPLICATIONS 26-30 (New York: Free Press 1975); see also Joshua D. Wright, Comm’r, Fed. Trade Comm’n, remarks before George Mason University School of Law: SSOs, FRAND, and Antitrust: Lessons Learned from the Economics of Incomplete Contracts at 2-3 (Sept. 12, 2013)
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Recognizing the theoretical nature of holdup concerns, the United States Court of Appeals for the Federal Circuit has held that a claim of holdup must be substantiated with “actual evidence,” and that the burden is on the accused infringer to show the patent holder used injunctive relief to gain undue leverage and demand supra-FRAND royalties.13
IV. AN ANTITRUST SANCTION FOR BREACH OF CONTRACT IS UNNECESSARY AND IS LIKELY TO REDUCE INCENTIVES TO INNOVATE AND DETER PARTICIPATION IN STANDARD SETTING
A FRAND commitment is a contractual commitment.14 Economists have long understood that a contractual relationship involving asset-specific investments creates the potential for opportunism. Similarly, a patentee participating in the standard-setting process can, once the standard is adopted by an SSO, “holdup” potential licensees by exploiting asset-specific investments to demand a higher royalty rate than would have prevailed in a competitive setting. The view that contractual opportunism alone gives rise to an antitrust problem rather than a contract problem is in tension with substantial economic literature on the subject.15 Consistent with this view, no United States court has held that seeking injunctive relief on a FRAND-encumbered SEP violates the antitrust laws. Instead, every United States court that has addressed the issue has done so under contract law principles.
With respect to reneging on a FRAND commitment, as the Supreme Court explained in NYNEX Corp. v. Discon, Inc., while the evasion of a pricing constraint may hurt consumers, it
(explaining that “the economics of hold-up began not as an effort to explain contract failure, but as an effort to explain real world contract terms, performance, and the enforcement decisions starting with the fundamental premise that contracts are necessarily incomplete”), available at https://www.ftc.gov/sites/default/files/documents/public_statements/ssos-frand-and-antitrust-lessons-economics-incomplete-contracts/130912cpip.pdf. There is empirical evidence that SSO contract terms vary both across organizations and over time in response to changes in the perceived risk of patent holdup and other factors. See Joanna Tsai & Joshua D. Wright, Standard Setting, Intellectual Property Rights, and the Role of Antitrust in Regulating Incomplete Contracts, 80 ANTITRUST L.J. 157 (2015).
13 See, e.g., Ericsson, Inc. v. D-Link Sys., 773 F.3d 1201, 1234 (Fed. Cir. 2014) (“In deciding whether to instruct the jury on patent hold-up and royalty stacking, again, we emphasize that the district court must consider the evidence on the record before it. The district court need not instruct the jury on hold-up or stacking unless the accused infringer presents actual evidence of hold-up or stacking. Certainly something more than a general argument that these phenomena are possibilities is necessary.”); see also Anne Layne-Farrar & Koren W. Wong-Ervin, An Analysis of the Federal Circuit’s Decision in Ericsson v. D-Link, CPI ANTITRUST CHRONICLE, Mar. 2015, at 5-7, available at http://www.crai.com/sites/default/files/publications/An-Analysis-of-the-Federal-Circuits-Decision-in-Ericsson-v-D-Link.pdf.
14 See, e.g., Innovatio IP Ventures, LLC Patent Litig., No. 11 C 9308, 2013 WL 5593609, at *4 (N.D. Ill. Oct. 3, 2013); Microsoft Corp. v. Motorola, Inc., No. C10–1823JLR, 2013 WL 2111217, at *1 (W.D. Wash. Apr. 25, 2013), aff’d 795 F.3d 1024 (9th Cir. 2015); Apple, Inc. v. Motorola Mobility, Inc., 886 F. Supp. 2d 1061, 1083-84 (W.D. Wis. 2012); Microsoft Corp. v. Motorola, Inc., 854 F. Supp. 2d 993, 999-1001 (W.D. Wash. 2012), reaffirmed, 864 F. Supp. 2d 1023, 1030-33 (W.D. Wash. 2012), aff’d in relevant part, 696 F.3d 872, 884 (9th Cir. 2012).
15 See, e.g., Joshua D. Wright & Douglas H. Ginsburg, Patent Assertion Entities and Antitrust: A Competition Cure for a Litigation Disease, 79 ANTITRUST L.J. 501, 509 (2014); see also Benjamin Klein, Market Power in Antitrust: Economic Analysis After Kodak, 3 SUP. CT. ECON. REV. 43, 62-63 (1993) (“Antitrust law should not be used to prevent transactors from voluntarily making specific investments and writing contracts by which they knowingly put themselves in a position where they may face a ‘hold-up’ in the future . . . . [C]ontract law inherently recognizes the pervasiveness of transactor-specific investments and generally deals with ‘hold-up’ problems in a subtle way, not by attempting to eliminate every perceived ‘hold-up’ that may arise.”).
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does not harm the competitive process.16 The Court distinguished the mere breach of a pricing commitment from the unlawful exercise of monopoly power by pointing out that, with the breach, the “consumer injury naturally flowed not so much from a less competitive market as . . . from the exercise of market power lawfully in the hands of a monopolist.”17
Moreover, an antitrust sanction is not only unnecessary to protect consumer welfare given that the law of contracts is sufficient to provide optimal deterrence,18 but is likely to be harmful.19 First, significant monetary sanctions are likely to over-deter procompetitive participation in SSOs; FRAND-encumbered SEP holders need the credible threat of an injunction if they are to recoup the value added by their patents and have no other adequate remedy against an infringing user. Indeed, excessive deterrence is particularly likely because, with liability turning upon whether the infringing user was truly a “willing licensee”20—a factual determination that may be far from clear in many cases—the outcome of an antitrust case will necessarily be uncertain. The prospect of penalizing a FRAND-encumbered SEP holder for seeking injunctive relief diminishes the value of its patents and hence reduces its incentive to innovate.
Second, the prospect of antitrust liability for a patentee seeking injunctive relief would enable an infringing user to negotiate in bad faith, knowing its exposure is capped at the FRAND royalty rate; in this way, an unscrupulous or a judgment-proof infringing user can force the SEP holder to take a below-FRAND rate. Indeed, when the worst penalty an SEP infringer faces is not an injunction but merely paying, after a neutral adjudication, the FRAND royalty that it should have agreed to pay when first asked, then reverse holdup and holdout give implementers a profitable way to defer payment—or if they are judgment proof, to avoid payment altogether—and puts SEP holders at a disadvantage that reduces the rewards from, and can only discourage innovation and participation in, standard setting.21
Third, antitrust liability is likely to deter patent holders from contributing their technology to an SSO under FRAND terms if doing so will require them to forfeit their right to protect their intellectual property by seeking an injunction against infringing users. These possibilities, far from protecting the public interest in competition and innovation, actually threaten to reduce the gains from innovation and standardization.
16 NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135-37 (1998). See also Kobayashi & Wright at 519-20, supra
note 2. 17 NYNEX Corp., 525 U.S. at 129. 18 Douglas H. Ginsburg, Taylor M. Owings & Joshua D. Wright, Enjoining Injunctions: The Case Against
Antitrust Liability for Standard Essential Patent Holders Who Seek Injunctions, ANTITRUST SOURCEat 5-6 (Oct. 2014). 19 Id.; see also Kobayashi & Wright, supra note 2. 20 See, e.g., Case C-170/13, Huawei Technologies Co. v. ZTE Corp., ¶ 77 (July 16, 2015), available at
http://curia.europa.eu/juris/document/document.jsf?text=&docid=165911&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=603775; Analysis of Proposed Consent Order to Aid Public Comment, In the Matter of Motorola Mobility LLC and Google, Inc., File No. 121-0120, at 2, 6 (F.T.C. Jan. 3, 2013), available at http://www.ftc.gov/sites/default/files/documents/cases/2013/01/130103googlemotorolaanalysis.pdf.
21 The effect of such delaying tactics is magnified when the patent owner has a large worldwide portfolio of SEPs requiring it to file lawsuits around the world in order to adjudicate a FRAND royalty on a patent-by-patent basis. In that circumstance, international arbitration on a portfolio basis would appear to be the most efficient and realistic means of resolving a FRAND dispute.
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V. CONCLUSION
The new antitrust rules are troubling not only because they are wholly unsupported by empirical evidence, but also because they threaten to deter participation in standard setting and reduce the incentive to innovate. Antitrust enforcers around the globe should be wary of upsetting the carefully balanced FRAND-ecosystem, and should consider the unintended consequences of their proposed solution to the largely theoretical problem of patent holdup.
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Rights reserved – Fordham Competition Law Institute’s 43rd Annual Conference on International Antitrust Law and Policy and Authors
1
IS THERE TOO MUCH TRAFFIC ON THE COMPETITION LAW ENFORCEMENT AUTOSTRADA: A ROLE FOR NEGATIVE COMITY?
Terry Calvani*
&
Justin Stewart-‐Teitelbaum**
In 1990 when one of the authors departed from the United States Federal Trade Commission
(“USFTC”), American competition enforcement agencies investigated matters that were almost
entirely domestic. The same was true of foreign competition enforcement agencies. The
Americans investigated American matters; the Germans investigated German matters. There
were few, if any, multijurisdictional pre-‐merger notification filings; there were no international
cartel investigations. Moreover, there was little professional contact among enforcement
officials except for the annual Fordham Conference, periodic UNCTAD competition meetings
and the Organization for Economic Cooperation and Development (“OECD”) Paris meetings (the
last for those few countries that were members). While a good number of countries had
competition laws and agencies to enforce them, antitrust was largely an American enterprise.
The antitrust enforcement autostrada was a relatively open road with room to cruise.
* Of Counsel, Freshfields Bruckhaus Deringer US LLP; Lecturer in Law, Columbia University School of Law;
formerly Commissioner of the United States Federal Trade Commission and Member (of the Board) of the Irish Competition Authority (holding criminal cartel portfolio).
** Senior Associate, Freshfields Bruckhaus Deringer US LLP. The authors would like to thank Sarah Melanson for her devoted assistance on this paper. The authors would also like to sincerely thank our colleagues at the Federal Trade Commission (Don Clark, Randy Tritell, and Russ Damtoft); the Australian Competition Commission (Marcus Bezzi, Nicholas Heys, Shannan Harrigan, Rami Greiss, and Suzie Copley), the Canada Competition Bureau (Dan Wilcock; Sultana Bennett; Dave Harding; David Wolinsky; Leila Wright); and Margaux Dastugue and Charles Ramsay for their time and input into this paper.
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Illustration of Jurisdictions with Competition Laws in 1990
When the second author departed from the USFTC in 2013, many more countries had antitrust
laws and agencies to enforce them. It was no longer an American game. The work had
changed too. A very large number of mergers and acquisitions involved review by multiple
competition law enforcement agencies and most significant cartel investigations were
transnational. The world of competition law had changed and done so dramatically.
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Illustration of Jurisdictions with Competition Laws in 2013
Today it is not unusual to have a single merger reviewed by some 20 or more agencies.
Similarly, the same cartel is often investigated by a large number of competition authorities.
Using the analogy of the article’s title, today there is a high volume of enforcement vehicles on
the competition autostrada. With that increase in traffic, the opportunities for accidents, pile-‐
ups, and other mishaps has increased. While the traffic is not yet to the point of crisis, is it now
time for the international enforcement community to re-‐consider voluntary norms to assist
enforcement agencies in deciding whether it is appropriate to investigate a particular matter?
Are there cases where jurisdiction ought not to be exercised? Cases where another agency is
best placed to investigate and where the interests of the other jurisdiction are nonetheless
protected? We seek to explore these and related issues here.
Consider the following cartel matter:
The United States Department of Justice (“USDOJ”) is investigating a cartel where the undertaking made sales of the cartelized product from its plants in the United Kingdom to both Brazil and Libya. Assessing the volume of commerce for purposes of determining the penalty, the USDOJ includes sales made by the British Company to its customers in Brazil and Libya. When questioned about the interest of the United States in those foreign sales, the USDOJ attorneys
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respond that invoices for those sales were mailed to an address inside the United States, and that is sufficient to vest the United States with jurisdiction. Indeed, they assert that the United States could properly exercise jurisdiction if the only nexus to the United States were the use of a United States financial intermediary to make payment.1
Assuming arguendo that the United States could properly assert jurisdiction, the question we
seek to address is whether it ought to do so. This question becomes ever more important as
additional enforcement agencies investigate the very same matters on the very same
autostrada.
Background
These issues are not new. Although competition law convergence and agency cooperation
were first mentioned in the negotiation of the restrictive trade practices provisions of the ill-‐
fated Havana Charter in 1948,2 real interest surfaced when the late Lord Leon Brittan, then
Commissioner of the European Union for competition, called for an effort to secure more
convergence and cooperation at the Cartel Conference Reception hosted by the
Bundeskartellamt at Sans Souci Palace in Berlin in 1990.3 Although the United States was
initially unenthusiastic,4 the Attorney General’s International Competition Policy Advisory
1 The matter is not hypothetical. The same issues arise in a merger context as the following non-‐hypothetical
demonstrates.
Country X asserts jurisdiction to review the sale by the Boston-‐based newspaper parent company of a Nevada radio station to the parent company of a Chicago newspaper despite the fact that the radio station in question broadcasts only in the U.S. state of Nevada. Again assuming jurisdiction predicated on the sale of Chicago and Boston newspapers in Country X, should the competition authority of Country X exercise that jurisdiction in this case?
2 Final Act of the UN Conference on Trade & Employment, Havana Charter for an International Trade Organization (1948). See The Havana Charter for an International Trade Organization: An Informal Summary, WORLD TRADE ORG. (Jan. 1, 1953), https://docs.wto.org/gattdocs/q/.%5CGG%5CSEC%5C53-‐41.PDF.
3 See generally Calvani, Devolution & Convergence, [2003] E.C.L.R. 415. 4 See remarks of then Assistant Attorney General Joel Klein, [If it Ain’t Broke Don’t Fix Speech in Berlin]. Address
of Assistant Attorney General Joel Klein, Cartel Conference, Berlin, May 9, 1999. The United States consistently opposed recommendations for greater convergence, fearing that it risked producing a “race to the bottom” for competition law enforcement regimes. See also Address of Assistant Attorney General Joel Klein, “A Reality Check on Antitrust Rules in the World Trade Organization, and A Practical Way Forward on International Antitrust,” OECD Conf. on Trade & Competition, Paris, June 30, 1999. Others within the U.S. enforcement community echoed these sentiments. See, e.g., Address of USFTC Commissioner Orson Swindle
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Committee took up the issue and made a similar recommendation.5 The International
Competition Network (“ICN”) was born on October 25, 2001.6 It has been spectacularly
successful.7
With the growth of the international enforcement community, serious discussion of negative
comity8 soon followed. The United State Antitrust Modernization Commission (“AMC”) took up
the issue in its 2007 Report.9 Early in its deliberations, a group of four distinguished
competition lawyers, James Atwood10, Calvin Goldman,11 Illene Gotts,12 and Robert Pitofsky13
before the 8th World Business Dialogue, “Between Competition & Cooperation—Changing Business-‐to-‐Business Relations,” Cologne, April 4, 2001.
5 International Competition Policy Advisory Committee, Final Report, Ch. 6 (2000), “...the Advisory Committee recommends that the United States explore the scope for collaborations among interested governments and international organizations to create a new venue where government officials, as well as private firms, nongovernmental organizations (NGOs), and others can consult on matters of competition law and policy. The Advisory Committee calls this the “‘Global Competition Initiative.’”
6 Founded in 2001, the International Competition Network, founded in October 2001, provides opportunities for national and multinational antitrust authorities to cooperate through working groups and conferences, seek consensus on best practices, and advance toward policy convergence. The ICN does not exercise any rule making function, but allows representatives of established and newcomer agencies to learn from each other. See http://www.internationalcompetitionnetwork.org; see also generally, Coppola, One Network’s Effect: The Rise and Future of the ICN, 3 Concurrences 222-‐229 (2011); Coppola & Lagdameo, Taking Stock and Taking Root: A Closer Implementation of the ICN Recommended Practices For Merger Notifications & Review Procedures, The International Competition Network at Ten, Origins, Accomplishments and Aspirations 297-‐319
7 Coppola, One Network’s Effect: The Rise and Future of the ICN, 3 Concurrences 222-‐229 (2011); Coppola & Lagdameo, Taking Stock and Taking Root: A Closer Implementation of the ICN Recommended Practices For Merger Notifications & Review Procedures, The International Competition Network at Ten, Origins, Accomplishments and Aspirations 297-‐319
8 The United States Supreme Court has defined comity as: “the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.” Hilton v. Guyot, 159 U.S. 113, 164 (1895). So called “negative comity” applies this same principle, but rather utilizes a deferral of enforcement based on action taken outside a particular jurisdiction, which ultimately can have the same or similar result and efficacy without the necessity of further legal recourse.
9 The Antitrust Modernization Commission was formed in 2002 to study and report to the President and to Congress on the state of American antitrust law and enforcement – with a particular focus on whether existing policies required modernization. Commissioners were appointed by the President and Congress and were required to consider the views of relevant third parties for the final Report, which was issued in April 2007. http://govinfo.library.unt.edu/amc/index.html
10 Atwood is a distinguished American competition law practitioner and co-‐author of the international antitrust law treatise, “Antitrust and American Business Abroad.”
11 Goldman is a distinguished Canadian competition law practitioner and previously served as the Director of the Canadian Competition Bureau.
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submitted recommendations to the Commission on this subject (among others) on behalf of a
group of companies.14 They recommended:
Agree to a presumptive deferral of a remedy where the deferring party’s interest is slight relative to that of the other party. The U.S. could agree with its trading partners that when a competition authority in a jurisdiction with a more substantial nexus to the transaction or conduct at issue orders a remedy, there will be a strong presumption that the other jurisdiction’s competition authority will defer to its counterparts.
Additional sponsors joined in what came to be known as the “Bertelsmann Letter” and the
letter itself was augmented by a position paper, “Strengthening the Application of Comity
Principles Relevant to Global Competition,” which, unlike the previous submission, focused
exclusively on the comity issue. This paper amplified the argument for greater comity, but the
essence was the same. The country with the greatest interest ought to “rule” on the case.
Quoting former U.S. Assistant Attorney General R. Hewett Pate, the paper observed:
Comity – a certain degree of trust in each other's systems – is a realistic goal, however, and one that will become even more important as antitrust enforcement regimes spread around our shrinking world. . . . When a competent authority in a jurisdiction with which the parties have a particularly strong connection rules in a case, especially in situations where the relevant market conditions in other jurisdictions are similar to those that prevail in the jurisdiction that has acted on the deal, the global antitrust community should be willing to take "No" – or "Yes," for that matter– for an answer. . . . [W]hen a jurisdiction is trying to determine what action to take, it surely must count for something under basic principles of comity that a competent system with a clear nexus to a matter has already made a full effort to address it and has already come to a result.15
12 Gotts is a distinguished American competition law practitioner and previously served as the Chair of the ABA
Antitrust Section. 13 Pitofsky is a distinguished American competition law scholar and practitioner who previously served as Chair
and Commissioner of the United States Federal Trade Commission and Dean of the Georgetown University Law Center, where his research and teaching focused on competition law.
14 Letter of James Atwood, Calvin Goldman, Ilene Gotts and Robert Pitofsky to the U.S. Modernization Commission, April 12, 2005 on behalf of Bertelsmann AG, Microsoft Corp., Pfizer Inc., Royal Philips Electronics, and Time Warner, Inc.
15 R. Hewitt Pate, Current Issues in International Antitrust Enforcement, before Fordham Institute, October 7, 2004, at 4, available at http://www.usdoj.gov/atr/public/speeches/206479.htm [emphasis added],
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We suspect that the former Assistant Attorney General was viewing the landscape through U.S.
rose-‐colored glasses when making this assessment, and one pauses to ask what would happen
if Turkey and the United States had interests at stake, would the U.S. stand-‐down and defer to
the Turkish assessment? The case being purely hypothetical, there is no complete answer. But
one suspects that smaller countries might well fear that they would play “second fiddle” to the
interests of the United States, the European Union, and perhaps a few others.
Comity was to become the touchstone in the effort to convince the larger competition law
community of the need for norms that would suggest opportunities for competition agencies to
stand aside in appropriate cases where other authorities were better placed to take charge of
the matter and where interests of the deferring authority would otherwise be protected.
Although the OECD years earlier had encouraged its member states to employ principles of
comity in the discharge of their enforcement responsibilities,16 the idea had not been embraced.
The AMC report made seven specific recommendations that in its view would foster comity in
the global competition enforcement context.
1. Revise existing comity agreements to recognize explicitly the importance of facilitating
global trade, investment and consumer welfare.
2. Review the application of “comity” in other regulatory and transnational settings.17
3. Agreements to presumptively defer creation of remedy where the deferring party’s
interest is slight relative to the others.18
4. Agreement to avoid inconsistent remedies.19
16 OECD, Recommendations of the Council of 5 October 1967 [C(567)53] Final, 2. 17 Supra. The report, for example, notes that comity has emerged as a much used tool in considering whether
to grant relief to a foreign debtor and in fashioning a remedy for the most equitable and orderly distribution of the debtor’s transnational assets. Doubtless there are other examples and lessons to be learned.
18 Supra. The report then notes that:
“The EU and U.S. could agree that when a competition authority in a jurisdiction with a more substantial nexus to the transaction or conduct at issue orders a remedy, there will be a strong presumption that the other jurisdiction’s competition authority will defer to its counterpart.”
Supra. Of course, they “could”; but would they?
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5. Agreement to jointly fashion remedies.20
6. Consultation at the request of the effected entities.
7. Benchmarking review in instances where both jurisdictions impose inconsistent
remedies.21
The Modernization Commission took up the group’s challenge. Although the Commission
recognized the positive contributions of greater convergence and cooperation to international
competition law enforcement,22 it recommended greater attention be given to the employment
of comity principles.
Convergence and cooperation are a significant, but not the sole, method of reducing conflicting approaches and outcomes that may result from having more than one country seek to apply its antitrust or competition laws to conduct. Regular application of principles of comity is a second critical component that calls for one enforcer to defer to another’s decisions, and not take parallel, potentially inconsistent decisions. Comity has been described as “a concept of reciprocal deference . . . [that] holds that one nation should defer to the law and rules . . . of another because . . . the other has a greater interest.” Principles of comity in the antitrust arena encourage “competition agencies to presumptively defer their own enforcement authority to that of jurisdictions with the greatest interest or center of gravity.23
Essentially the Commission called for “prosecutorial or investigatorial restraint”24 by placing
“primary responsibility for enforcement ‘in the hands of the jurisdiction most closely associated
with the alleged anticompetitive conduct.’”25 The Commission noted that while comity
19 Supra. Perhaps recognizing the difficulty, the report also proposes a variation under which the parties would
agree that when investigating a transaction or conduct previously examined by the other party’s competition authority, a competition authority should not impose divergent remedies without prior consultations with its Trans-‐Atlantic counterpart. Supra.
20 Supra. 21 It might be noteworthy that the first two and last recommendations focus on comity generally while others
are made with reference to the United States and the European Union. 22 Supra at Chap. II, p. 88. 23 Supra at 94. 24 Supra. 25 Supra at 95 (citations omitted).
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provisions had been incorporated into bilateral competition law agreements26 with several
countries they had not been regularly invoked.27 It was time to get more serious.
Developing this theme, the Commission made several recommendations that at their core
sought “to assign principal enforcement authority to the country with the greatest connection
to the transaction or conduct at issue, but seek to ensure that other countries that have an
interest in the merger or conduct also are assured that their interests will be taken into
account.”28 Specifically, it made two recommendations relevant to this issue.
• First, it called on jurisdictions to stand down unless the anticompetitive conduct under
investigation “has a direct, substantial, and reasonably foreseeable effect” within that
country.29 Rather those jurisdictions ought to “defer to the enforcement efforts of other
countries in which there was such an effect.”30
• Second, the Commission recommended that “when a competition authority in one country
with a substantial nexus to a transaction or conduct has taken enforcement action, other
countries with a lesser nexus should presumptively defer to that action.”31 Bottom line:
“the country with a lesser ‘nexus‘ to the conduct or transaction should defer to the other
country with a greater nexus.”32
The first ought to be uncontroversial. Similar guidance is today reflected in the ICN Best
Practices for merger notification where an appropriate nexus to the transaction plays a key
26 In addition to bilateral agreements, competition authorities had also utilized other instruments to foster comity
principles. See, e.g., Agreement between the Government of Canada and the Government of the United States of America on the Application of Positive Comity Principles to the Enforcement of their Competition Laws (2004) http://www.competitionbureau.gc.ca/eic/site/cb-‐bc.nsf/eng/01269.html
27 Supra. 28 Supra at 96. 29 Supra at 97. 30 Supra. 31 Supra. 32 Supra at 98.
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role.33 The Commission reasoned that if “only a negligible effect exists, a country’s consumers
are unlikely to be meaningfully affected.”34 Accordingly, “there is little reason for that country’s
antitrust enforcer to seek relief against the conduct or transaction.”35 We agree. The only
reasons a competition agency might investigate conduct absent this nexus are either to: (i)
obtain monetary benefit, such as a filing fee or a fine; or (ii) to participate in an international
investigation as a means of raising its profile. We regard both as insufficient – and, indeed,
poor justifications for asserting jurisdiction.
The second recommendation is more difficult as it involves the relative importance of the
interests of different countries. The Commission states that this measurement can be made on
the basis of generally accepted choice of law principles.36 Perhaps appreciating the sensitivity
of the recommendation, the Commission recommends that the country with the greater
interests consult with countries with lesser interests to insure that their interests are
appropriately considered.
The recommendations of the Commission in this regard have gathered dust. We suspect that
the Report’s candid observation that “in many instances, larger jurisdictions, such as the
European Union and the United States, are likely to have the most substantial nexus to the
conduct or transaction”37 is one important reason that these recommendations never obtained
significant traction in the international enforcement community.38
33 International Competition Network, Recommended Practices for Merger Notification (2002) (recommending
that “[j]urisdiction should be asserted only over those transactions that have an appropriate nexus with the jurisdiction concerned” and that “[m]erger notification thresholds should incorporate appropriate standards of materiality as to the level of ‘local nexus’ required for merger notification”).
34 Supra. 35 Supra. 36 Supra at 98. 37 Supra. 38 Others besides the authors of the Bertelsmann letter and the later reports contributed to the Modernization
Commission’s consideration of this issue and included the UK government, the Association for Competitive Technology, the International Chamber of Commerce, and the Business and Industry Advisory Committee to the OECD. See International, ANTITRUST MODERNIZATION COMMISSION, http://govinfo.library.unt.edu/amc/public_studies_fr28902/international.htm (last visited July 21, 2016).
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The record of serious discussion of negative comity, while not a null set, is sparse. At this
conference nine years ago, then Federal Trade Commission Chairman Deborah Majoras briefly
touched on this subject during her remarks and highlighted a few cases that merit mention.39
The FTC’s 1996 investigation of the “Parma Ham Case” provides an interesting example of
where a U.S. enforcement agency deferred to the Italian competition authority. The USFTC had
opened an investigation of possible anticompetitive practices, e.g., output restrictions, of the
Italian Parma ham market that may have adversely affected U.S. buyers of the Italian produced
products. Learning that the Italian authority had opened a similar investigation, the USFTC
stepped aside. Important in the FTC’s decision to defer to the Italian authority were the facts
that: (i) the Italian investigation was on a fast-‐track; (ii) the relevant conduct had occurred in
Italy; and (iii) that it was anticipated that the Italian remedy would protect the interests of the
American buyers of the product.40 The case is a prime example of the appropriate employment
of comity: the best-‐placed authority took the case and the interests of the deferring state were
protected while its resources were conserved to be deployed most appropriately. Moreover,
the case is also interesting because the deferring jurisdiction was both large and important
while the leading jurisdiction smaller.
As a comparative, Chairman Majoras also noted cases where comity principles may have been
ignored, using In re Institut Merieux S.A. as an excellent example. The parties to the
transaction were both foreign – French and Canadian. Their sales into the U.S. generated an
obligation for a HSR pre-‐merger notification. The USFTC conducted a full-‐phase investigation
and ordered the divestiture of a vaccine manufacturing facility located in Canada without so
much as notifying the Canadian authority of its intention to take action, much less order the
divestiture of the Canadian facility – a prime example of lack of coordination and comity
considerations. 41 The problems associated with Institut Merieux are not simply a function of
39 Remarks of Deborah Majoras, Convergence, Conflicts & Comity: The Search for Coherence on Competition
Enforcement Policy, Fordham Corporate Law Institute, Sept. 27, 2007, New York. 40 Supra at 30. 41 In re Institut Merieux S.A., 113 F.T.C. 742 (1990). The FTC’s failure to notify the Canadian authority reflects the
reality that comity was not even on the Commission’s radar at time of the USFTC investigation. This failure
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hindsight, but an issue identified in situ. In voting on the original Institut Merieux consent
order, Commissioner Deborah K. Owen identified the issue and discussed the importance of
considering the appropriate use of negative comity. In her dissenting opinion, Commissioner
Owen explored the small nexus of the matter to the United States, in particular when
compared to the nexus in Canada.42 Commissioner Owen questioned the USFTC’s decision to
pursue an enforcement action, specifically stating that one of her concerns was “[w]hether, as a
matter of prosecutorial discretion, in the interests of comity and other factors, the Commission
should have taken any enforcement action in this matter.”43 Commissioner Owen not only
viewed appropriate application of deference as important but also believed that the USFTC was
“well poised to take comity considerations into account in the exercise of its prosecutorial
discretion” given its relationships with other U.S. and foreign agencies.44 Majoras’s speech
concluded that the topic of negative comity is important, such that it merits further study.45
Parma Ham is an example of the most committed use of negative comity, a case where a
competition authority fully stepped aside to permit another, arguably better placed, authority
to manage an investigation. Nonetheless, it is not the only encouraging instance of negative
comity being utilized by competition enforcement agencies. Both the EC and several European
national competition authorities have observed negative comity principles in certain matters.
For example, in the Halliburton/Dresser merger (1998), the EC coordinated its investigation
with that of the USDOJ. After reviewing the impact of the transaction, the Commission
ultimately concluded that the divestitures and remedy commitments made to the USDOJ in the
global market for drilling fluids, were also sufficient to alleviate any competitive concerns in
can be fairly laid at the feet of the first author. Majoras notes that the Canadian authority ultimately protested and the order was amended to better protect Canadian interests. Supra note ___, at 33.
42 In re Institut Merieux S.A., 113 F.T.C. 742, 755 (1990) (“In particular, this agreement constrains an acquisition that involves two foreign entities, who, between them, maintain minimal relevant assets in the United States; yet the effects of the agreement may bear substantially more upon our neighbor to the north, Canada.”).
43 Id. 44 Id. at 756. 45 Supra at 34-‐35. She also laments that the topic was raised at the OECD in 2006 but failed to garner sufficient
interest to warrant further study and discussion. Supra.
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Europe.46 While not as stark as the deference employed by the USFTC in Parma Ham, in
Halliburton/Dresser the EC relied on the USDOJ’s enforcement act as a means of protecting
interests within its jurisdiction and did not feel obliged to “pile-‐on” with further remedial
action. Furthermore, in other areas of competitive overlap among the merging parties, the EC
retained its ability, and indeed exercised its power, to investigate fully – i.e., the Commission’s
reliance on the USDOJ’s remedy in drilling fluids did not limit its authority to ensure other areas
of the transaction did not result in competitive harm within the community.47 In Cisco Systems
Inc./Tandberg ASA (2010), the EC and USDOJ inverted this approach, helpfully demonstrating a
negative comity two-‐way-‐street, so to speak. After conducting its investigation, the USDOJ
concluded that the proposed deal was not likely to harm competition due to “the evolving
nature of the videoconferencing market” and the commitments made to the European
Commission to facilitate interoperability.48
Outside of the European Commission itself, National Competition Authorities (“NCAs”) have
also demonstrated a willingness to observe negative comity principles in merger matters
involving multi-‐jurisdictional review and competition remedies. In Federal Mogul/T&N (1998),
the USFTC, and the NCAs of the UK, Germany, France, and Italy, all agreed that the combination
could cause competitive harm in the markets for wall bearings used in automotive
46 Case No IV/M.1140 -‐HALLIBURTON /DRESSER. The Commission ultimately concluded that the divestiture of
Halliburton’s 36% interest in a drilling fluids company in competition with Dresser obviated the need to consider drilling fluids an “affected market” within the definition of the Merger Regulation. U.S. v. Halliburton Co. and Dresser Industries https://www.justice.gov/atr/case/us-‐v-‐halliburton-‐co-‐and-‐dresser-‐industries
47 Indeed, the Commission examined whether the proposed transaction would raise competition concerns in the market for the provision of cementing services to oil rigs in the North Sea, ultimately determining the concentration would not raise any serious concerns (while noting the Commission would continue to monitor the segment).
48 In the press release announcing the closing of the investigation, the USDOJ provided additional informative context explaining that “[t]he EC also announced today that it has cleared the transaction. Cisco has made commitments to facilitate interoperability between its telepresence products and those of other companies as part of the EC’s merger clearance process. The commitments are designed to foster the development of open operating standards. The department views those commitments as a positive development that likely will enhance competition among producers of telepresence systems. Open standards lower barriers to entry, and can be especially procompetitive in rapidly evolving high technology markets. The department has taken the commitments into account, along with various market factors, such as the evolving nature of the telepresence business, in reaching its decision to close its investigation.” See https://www.justice.gov/opa/pr/justice-‐department-‐will-‐not-‐challenge-‐cisco-‐s-‐acquisition-‐tandberg (2010).
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applications.49 In a coordinated investigation, the authorities mutually obtained a remedy –
i.e., the divestiture of T&N’s thin wall bearing business – via the USFTC’s consent Order.
Furthermore, the USFTC was able to address the German NCA’s unique concerns – in the
market for dry bearings – by including in its consent Order, an obligation to divest certain dry
bearings units. The coordinated results obviated the need for the parties to submit to separate
divestiture procedures and legal undertakings in the UK, Germany, France, and Italy, a useful
and efficient outcome (the authors presume) for both the NCAs, and the merging parties.
These cases demonstrate reassuring examples of an application of softer negative comity.
However, the principles applies did not rise to the level of Parma Ham deference, where a
competition agency stepped aside fully, permitting another authority to manage the case.
While encouraging as examples, the Parma Ham, Halliburton/Dresser, and Federal Mogul/T&N
matters are now dated, and in the interim 18 years, there remains a dearth of examples (at
least those released publicly) of the application of negative comity, even – as noted at the
outset – in the midst of the ever-‐more-‐crowded competition autostrada, where a growing
number of transactions/investigations have multi-‐jurisdictional touchpoints. Rather than
converging further in the application of negative comity, is it possible competition authorities
have instead diverged?
Promising Initiatives
Despite the lack of publicly available examples of competition regimes observing negative
comity principles, certain authorities provide policies and initiatives that are encouraging for
the future potential of negative comity.
49 See, e.g., FTC Matter No. 9810011, Federal-‐Mogul Corporation and T&N; Federal Mogul Corporation, OFF. OF
FAIR TRADING, http://webarchive.nationalarchives.gov.uk/20090127112201/http://www.oft.gov.uk/advice_and_resources/resource_base/register-‐orders-‐undertakings/lieu/federal-‐mogul (last visited July 12, 2016); France, ORG. FOR ECON. CO-‐OPERATION AND DEV. 21 (1997), https://www.oecd.org/france/1822673.pdf; see also Org. for Econ. Co-‐operation & Dev. [OECD], OECD Global Forum on Competition: Merger Enforcement and International Co-‐operation, at 4, (Sep. 18, 2001), http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=CCNM/GF/COMP/WD(2001)1&docLanguage=En.
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The Australian Competition and Consumer Commission (“ACCC”) and the Canadian Competition
(“CCB”) seem to be the leading jurisdictions in the application of negative comity. For example,
the ACCC has chosen to observe negative comity in various instances where the Commission
concluded that the: (i) the nexus to Australia of the competitive harm being investigated was
not sufficient (including considerations of the level of involvement of Australian businesses);
and (ii) possible enforcement actions by sister agencies would nevertheless result in the
termination of the offending conduct and protection for Australian consumers. The ACCC has
applied negative comity principles across its entire competition portfolio including cartels, civil
conduct, and merger control.
One of the reasons attributed to the failure of negative comity to gain traction in some
competition authorities is that it is perceived by some to be “anti-‐enforcement.” Interestingly,
a principal rationale for its implementation by the ACCC is their view that it aids enforcement
by more effective management and deployment of agency resources. Essentially, the ACCC
assesses the merits of a matter and its nexus to Australia and then chooses whether to
selectively step aside as a means of ensuring its core mission is not overlooked in the pursuit of
matters with minimal nexus. For example, the ACCC has established an internal benchmark
that seeks to limit its participation in international cartel matters to roughly 50% of its total
cartel caseload, and therefore defers to other authorities to investigate the balance.
Additionally, the ACCC thinks similarly about the costs and benefits of pursuing merger control
matters before determining whether to launch an in-‐depth investigation. The underlying policy
rationale is simple: to ensure the ACCC devotes sufficient resources to investigation and
enforcement of domestic competition matters where it is not only best placed, but the only
authority capable of enforcement.50 The ACCC has thoroughly considered these policies and
evolved its thinking based on reflection as to how best to achieve its core goals on behalf of its
constituency – i.e., to protect Australian consumers.
50 See Remarks of Rod Sims, ICN Plenary Session: Cartel Detection and Deterrence, Singapore, April 27, 2016; see
also, 2016 ACCC COMPLIANCE AND ENFORCEMENT POLICY (Feb., 2016).
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The global Autoparts investigations provide a prime example of the ACCC’s reasoned use of
negative comity in cartel enforcement – a massive investigation covering numerous
manufacturers and components at various levels of the global auto supply chain in which at
least 11 competition enforcement authorities have participated.51 Assessing the scope of the
investigation, the nexus to Australia, and likelihood of sufficient enforcement by sister agencies
(including the USDOJ and the EC), the ACCC concluded that its finite resources were best spent
elsewhere and elected not to participate in every facet of the matter. However, when alerted
by its sister agencies (specifically the USDOJ) to a sub-‐set of Autoparts cartel activity (i.e.,
bearings used in aftermarket applications) with a substantial Australian nexus, the ACCC
pursued that conduct successfully, levying fines on multiple defendants.52
In the mergers context the ACCC has increased its focus on assessing – at an early stage – the
appropriateness of conducting an in-‐depth inquiry into multi-‐jurisdictional transactions. For
example, the ACCC has demonstrated a willingness to allow sister agencies to take the lead53 in
global merger control analysis, saving resources from burdensome parallel investigations where
Australia’s interests are likely to be protected by any enforcement actions – in particular with
respect to remedial action – taken by other jurisdictions. The ACCC’s procedural rules (i.e.,
merger filings are non-‐mandatory) has further enabled this approach, allowing the agency
flexibility to assess which mergers are most salient to Australian interests and which others are
likely to have the same result globally regardless of the intensity of ACCC involvement. The
51 2015 Mid-‐Year Criminal Antitrust and Competition Law Update, GIBSON DUNN (July 13, 2015),
http://www.gibsondunn.com/publications/pages/2015-‐Mid-‐Year-‐Criminal-‐Antitrust-‐and-‐Competition-‐Law-‐Update.aspx.
52 http://www.accc.gov.au/media-‐release/3-‐million-‐penalty-‐for-‐bearings-‐cartel-‐conduct (May 14, 2014) (“The case was brought to the ACCC’s attention following other investigations arising out of the U.S. Department of Justice’s investigation into auto-‐parts cartels. The ACCC thanks other international competition agencies, and in particular the U.S. Department of Justice, for their assistance during this investigation.”).
53 For example, in the 2013 OECD Policy Roundtable paper “Remedies in Cross-‐Border Merger Cases”, the ACCC explains its stance regarding the importance of identifying lead authorities: “The ACCC is conscious that the effectiveness of the remedies it obtains from merger parties is often dependent on remedies obtained by the lead regulator. A lead regulator is generally the regulator in the jurisdiction in which the relevant key merger and divestiture assets are based, or in which the transaction will have the greatest competitive impact . . . In a global merger matter where a remedy is offered, it is crucial that the ACCC identify the lead regulator and work closely with them, in order to obtain a remedy that addresses competition concerns in both jurisdictions.”
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ACCC has demonstrated it flexibility in the global merger matters choosing to step aside during
the Hard Disk Drive cases54 – in which the Australian interests were smaller and likely to be
protected by foreign enforcement – while vehemently pursuing an investigation into the Rio
Tinto/BHP Billiton merger – in which Australia’s interests were core and the ACCC was uniquely
positioned to act.55 The ACCC’s approach to negative comity can also be observed in the
remedies arena, in particular in the three simultaneous transactions between GSK and Novartis.
The ACCC investigated the matter and concluded the following: (i) the Consumer Health
transaction had local impact and thus a full Australian remedy was required; (ii) the Vaccines
transaction resulted in sufficient EC action that the ACCC required only an acknowledgement by
the parties to abide by the EC commitments; and (iii) the competitive issues present in the
Oncology transaction were sufficiently remedied by sister agencies so as to require no
Australia-‐specific commitments.
These examples demonstrate that the appropriate application of negative comity coupled with
competition authority cooperation can result in the optimal outcomes while avoiding under-‐
enforcement. The authors understand that the ACCC’s experience with its negative comity-‐
policies has been hugely successful. The ACCC has observed an ability to leverage negative
comity to deploy resources most effectively, focusing expenditure on matters with the most
significant nexus to Australia, while still enjoying the protection of multi-‐jurisdictional
enforcement in instances where its sister authorities are best-‐placed to act.
54 Western Digital Corporation – Proposed Acquisition of Hitachi Global Storage Technologies Holdings Ltd, AUSTL.
COMPETITION & CONSUMER COMMISSION (Dec. 13, 2011), http://registers.accc.gov.au/content/index.phtml/itemId/1022166/fromItemId/751043 (stating that the ACCC would not challenge Western Digital Corporation’s acquisition of Hitachi Global Storage Technologies given the European Commission’s decision to allow the transaction after a divestiture); Seagate Technology PLC – Proposed Acquisition of the Hard Disk Drive Business of Samsung Electronics Co Ltd, AUSTL. COMPETITION & CONSUMER COMMISSION (Dec. 13, 2011), http://registers.accc.gov.au/content/index.phtml/itemId/1022164/fromItemId/751043 (outlining the ACCC’s finding to not challenge Seagate’s acquisition of Samsung’s hard disk drive operations).
55 BHP Billiton Ltd and Rio Tinto Ltd – Joint Venture in Western Australian Iron Ore Production, AUSTL. COMPETITION & CONSUMER COMMISSION (Oct. 18, 2010), http://registers.accc.gov.au/content/index.phtml/itemId/952207/fromItemId/751043 (showing that the parties abandoned the proposed transaction several months after the ACCC opened an investigation and required additional information from the parties).
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The Canadian Competition Bureau (“CCB”) is also a leader in the area of international
cooperation, often observing negative comity principles. In the cartels arena, the CCB has very
recently demonstrated its sophisticated (and perhaps evolving) approach to negative comity. In
the Nishikawa Rubber Co. matter, the CCB relied on “unprecedented cooperation” with the
USDOJ in deferring enforcement action in a bid-‐rigging conspiracy involving body-‐sealing parts
for automotive use.56 According to the CCB, “[a]fter discussions between the agencies, it was
agreed that the matter would be addressed by the Antitrust Division as the conduct primarily
targeted US consumers.” In the mergers context, while the CCB is obligated by law to
investigate mergers triggering technical filings in Canada, if the CCB’s competition concerns are
effectively remedied by another jurisdiction’s action, the CCB may choose not to act in the
appropriate circumstances. For example, in multi-‐jurisdictional merger control investigations,
the CCB has deferred to remedies mandated by sister agencies, enhancing efficiency and
avoiding unnecessarily “piling-‐on” to sufficient enforcement actions. In several recent merger
control investigations — including GSK/Novartis, Continental/Veyance, and Thermo Fisher/Life
Technologies57 – the CCB has intentionally deferred on remedy actions, allowing a sister
jurisdiction’s divestitures and attendant consent agreements to protect competition in
Canada.58
The considered approaches of both the ACCC and the CCB in the areas of negative comity and
competition enforcement cooperation are promising exemplars of the best practices
recommended by the authors – namely, authorities should think critically about deference in
56 See http://www.competitionbureau.gc.ca/eic/site/cb-‐bc.nsf/eng/04122.html 57 See FTC, Novartis AG, In the Matter of (GlaxoSmithKline) available at https://www.ftc.gov/enforcement/cases-‐
proceedings/141-‐0141-‐c-‐4510-‐c-‐4498/novartis-‐ag-‐matter-‐glaxosmithkline (April 8, 2015); DOJ, U.S. v. Continental AG and Veyance Technologies, Inc. (March 30, 2015). FTC, In the Matter of Thermo Fisher Scientific Inc., https://www.ftc.gov/enforcement/cases-‐proceedings/131-‐0134/thermo-‐fisher-‐scientific-‐inc-‐matter (April 2, 2014).
58 For additional examples of CCB remedial deference, see generally Wakil, Canada’s Approach to Remedies in International Mergers, Mondaq (Dec. 17, 2007) available at http://www.mondaq.com/canada/x/55432/Trade+Regulation+Practices/Canadas+Approach+To+Remedies+In+International+Mergers. See also Scott, A Canadian Perspective on the Role of Comity in Competition Law Enforcement in a Globalised World, Bennett Jones Competition Law International (April 2011) available at http://www.bennettjones.com/uploadedFiles/Publications/Articles/scott_article.pdf.
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the appropriate circumstances, enhancing efficacy and ensuring efficient allocation of global
investigatory and enforcement resources.
In addition to the ACCC and CCB approach, the imposition of individual sanctions in cartel cases
poses another example of the application of negative comity in competition law enforcement.
Illustrative is the decision of the USDOJ to abandon its prosecution of three British cartelists
when the U.K.’s Office of Fair Trading (“OFT”) prosecuted the same individuals in the Marine
Hose Cases.59 The Marine Hoses cases are a weaker example of negative comity than the
Parma Ham investigation, as the U.S. authority did not abandon its investigation or its
prosecution of other non-‐UK individuals.60 Moreover, the U.S. authority conditioned its
deferred action on the imposition of certain sanctions by the UK courts.61 Nonetheless the
criminal prosecutions in the Marine Hose Cases are an example, albeit more limited, of one
national competition authority stepping aside and permitting a sister agency to take up the
59 Press Release, U.S. Dep’t of Justice, Italian Marine Hose Manufacturer and Marine Hose Executives Agree to
Plead Guilty to Participating in Worldwide Big-‐rigging Conspiracy (July 28, 2008), https://www.justice.gov/archive/opa/pr/2008/July/08-‐at-‐663.html. This was a transnational investigation and subsequent prosecution on an international cartel in the marine hose industry by the European Union and the national competition authorities of Australia, Brazil, Japan, Korea, the United Kingdom and the United States. 2014 Year-‐End Criminal Antitrust and Competition Law Update, Gibson Dunn (2015), http://www.gibsondunn.com/publications/Pages/2014-‐Year-‐End-‐Criminal-‐Antitrust-‐and-‐Competition-‐Law-‐Update.aspx. For the results of the UK prosecution, see Regina v. Whittle, Brammer & Allison at https://www.gov.uk/cma-‐cases/marine-‐hose-‐criminal-‐cartel-‐investigation. See also Erin Marie Daly, Dunlop to Pay $4.54M for Role in Marine Hose Cartel, LAW360 (Dec. 1, 2008, 12:00 AM), http://www.law360.com/articles/78572/dunlop-‐to-‐pay-‐4-‐54m-‐for-‐role-‐in-‐marine-‐hose-‐cartel.
60 The Antitrust Division brought criminal proceedings against 5 companies and 13 individuals. Christopher Hockett et al., United States: Anti-‐cartel Enforcement, GLOBAL COMPETITION REVIEW, THE ANTITRUST REVIEW OF THE AMERICAS 2015 9, 11 (2015). See, e.g., United States v. Dunlop Oil & Marine Ltd., No. 0:08-‐CR-‐60338 (S.D. Fla. 2009).
61 Under the terms of a plea agreement entered into between the three UK individuals and the Antitrust Division, the U.S. agreement to dismiss its proceedings was conditioned on the defendants pleading guilty to the UK charges and the imposition by the British court of sentences at least as severe as those the Division was prepared to recommend to the U.S. court if the matter were to proceed in the US.
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case.62 This case could provide a useful model for the application of negative comity among
those jurisdictions that now impose custodial sanctions for cartel conduct.63
With the increasing number of jurisdictions that impose criminal sanctions, cartel cases are
particularly important. John Terzaken, formerly a senior official at the US Department of
Justice, has recognized the issues that now arise.
The increasingly crowded enforcement environment is causing growing pains for authorities, as the seemingly boundless extraterritorial reach of national laws continue to complicate coordination efforts and create risks of duplicative penalties. Recent investigations into auto parts and LIBOR highlight the problems—namely, multiple agencies in scores of countries more frequently pursuing and punishing the same basic conduct, but under different laws and with no regard to concepts like successive prosecutions and double jeopardy.64
The problem is not hypothetical and will doubtless become more serious. In the recent Air
Cargo Cases authorities considered for purposes of calculating the appropriate fine, whether to
include both in-‐bound and out-‐bound commerce. This could effectively penalize the company
twice for the same sales.65 Terzaken observes that “[m]oving forward, authorities will face
questions on whether there is a better way to coordinate global enforcement matters to
achieve appropriate deterrence without tipping the balance toward over-‐punishment.”66
62 The decision of the Antitrust Division to step aside in the prosecution of the three individuals was probably
motivated in part by a desire to assist the OFT in commencing criminal enforcement of the Enterprise Act. This case permitted the OFT to bring its first case assured of a victory—sending a dramatic signal to the UK business community of its intention to enforce the new law.
63 Some 27 jurisdictions have criminalized cartel conduct generally; a few have criminalized cartel conduct in special circumstances. For example, Germany criminalizes only conduct that amounts to bid-‐rigging. .
64 Remarks of John Terzaken, International Cartel Enforcement: Growing Pains of Globalization ABA Antitrust Section, Antitrust Masters Course VII, Williamsburg, Oct. 9. 2014, at 1.
65 “The risk of overlapping punishment is equally present in cases involving semi-‐finished products…. In such cases, revenue based on resale or end product sales in one country may overlap with import revenues already taken into account for the fine calculation in another jurisdiction.” Terzaken, supra note___, at 4.
66 Terzaken, supra note ___, at 1. Later in his paper Terzaken presents the question more starkly: “Simply put, the question for enforcers has become ‘how much is too much?’ when it comes to multiple jurisdictions seeking to punish corporations and individuals for the effects of the same cartel offense.” Tarzaken, supra note ___, at 3.
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The interactions of the European Commission with its Member States and the U.S. federal
antitrust authorities with their counterparts in the offices of the state attorneys general also
present aspects of negative comity, but in the context of “federal” jurisdictions.67 The EU
situation, while presenting a case where authorities “step aside” deferring to a better-‐placed
authority to proceed, does not present a case of voluntary comity. Rather it is compelled by a
binding Regulation that has optimal case assignment between and among the Member States
and the Commission as an important objective. Nevertheless, it is an important case study
because it stands as a clear recognition of the problems associated with too many disparate
authorities chasing the same cases and mandates. Instead, the EC has devised a rational
method for allocating cases among the European competition authorities.68 In contrast, the
experience of the U.S. federal authorities and the state attorneys general presents true issues
of negative comity, albeit in the context of the confines of one nation state. Generally, state
attorneys general in the United States have the power to investigate the very same matters as
67 We use the term “federal” to include both the European Union, where many would quarrel with our use of the
term, and those jurisdictions that are more truly federal where the national competition authority and those of the states or provinces must interact such as Germany, Spain, and the United States. Federal jurisdictions have handled these issues in various ways. For example, in Germany, Spain and, the United States, national competition authority and those of the constituent parts must interact. In Canada, competition law is the province of the federal government. In Australia competition law is the province of both the states and federal government but where the states have ceded their power to the federal government in return for a say in federal competition policy, e.g., appointments to the ACCC.
68 Regulation 01/2003 (often referred to as “Modernisation”). Central to this initiative was the desire to vest more authority to enforce European competition law in the national competition authorities of the Member States and to provide a rational method of allocating cases among the Member States and between the Member States and the Commission. It has other objectives as well, e.g., better allocation of Commission resources. In determining which authority is best placed to investigate, the European Competition Network composed of the Commission and the Member States provides a forum for consultation. There is a presumption that the first authority to take action is well placed to handle the case. However, first-‐mover action is only a presumption, and consultation may produce different outcomes. The Regulation also provides that in appropriate cases, multiple authorities may jointly undertake an investigation, often with one authority as the lead. However, when four or more jurisdictions are impacted by the investigation there is the presumption that the Commission is well placed to take the matter, and when it does so the Member States lose their jurisdiction to proceed. Similarly when the matter poses a significant issue of European-‐wide competition policy, the Commission may be best placed to handle the case. Importantly the Commission is empowered to seize a case if it deems that appropriate, e.g., the investigating authority is making insufficient progress. Although this power has never [seldom?] been invoked, its existence provides an important case management discipline on the Member States.
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do the U.S. federal authorities.69 The cartel area has largely remained free from conflict. State
authorities have not been particularly active in the cartel area, and when they have usually it
has been as a partner of the USDOJ. That said there are cases recently closed by the USDOJ
that remain open within the state attorneys’ general offices, and it remains to be seen whether
this signals any change in direction. The merger experience has been mixed, with state
authorities at times taking issue with transactions that were dismissed by the investigating
federal agency,70 or by imposition of remedies by state attorneys general that were rejected
out-‐of-‐hand by the federal agency.71 Unlike Modernisation in Europe, there is no mechanism
for case allocation between the national and state authorities in the United States and
inconsistent results have occurred. That said, in recent years cooperation among the U.S.
federal and state authorities has improved. Where there have been multiple investigations,
remedies have been more consistent although one must still ask why it is necessary to have
fifteen different jurisdictions investigating the same matter. Clearly while improving, the U.S.
federal-‐state experience is not the “poster child” for the effective use of negative comity.72
A Proposal
69 In mergers and acquisitions the U.S. Supreme Court has held that state attorneys general may also investigate
the same matters that are being, or have been, investigated by the federal authorities. Indeed they may bring actions to enjoin such transactions notwithstanding a decision that the transaction does not present competition law issues. See California v. American Stores Co., 495 U.S. 271 (1990).
70 See id.. 71 Compare In the matter of Chevron Corp., and Texaco Inc., 133_ F.T.C. 1_ (2002) (FTC consent order) with Final
Judgment, California v. Chevron Corp., No. 01-‐07746 (C.D. Cal. Sep. 13, 2001) (California consent order). 72 This poses the important question of why states investigate the same matters that are under investigation by
the federal authorities. During the Reagan Administration the states argued that state merger enforcement was necessary because of the abrogation of merger enforcement by the federal authorities. One wonders whether this was the rationale employed by state attorneys general for their enforcement agenda during the Clinton and Obama Administrations. More cynical observers have thought that state enforcement was more motivated by political considerations. Sufficient numbers of state attorneys general have used their offices as stepping stones for high political office that their national association NAAG was referred to as the “National Association of Aspiring Governors” rather than the National Association of Attorneys General. State antitrust enforcement garners headlines in the local press and may present opportunities to reward important local constituents or constituencies [Terry: I think this minor addition covers HRA’s point regarding local interests without being overly-‐specific]. In addition many state attorneys general seek the payment of fees by the merging parties that are used to fund the state antitrust enforcement effort.
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The dramatic increase in the number of competition authorities investigating the same merger
and conduct cases today makes consideration of negative comity an increasingly important
topic.
Cartel Case Example
The cartel case example outlined at the beginning of this article posed a real opportunity for
the U.S. authority to forsake sales made from the U.K. to Libya and Brazil from its consideration
of U.S. harm. Indeed, given the environmental restrictions that severely limited the use of
marine hoses in U.S. waters, the entire case may have posed an opportunity to step-‐aside. One
could have argued when the Marine Hose Cases first arose that it was important for the U.S.
authority to take a lead role. How likely was it that Libya or Brazil would initiate investigations?
Perhaps given its jurisdictions it was important for the U.S. authority to assume the mantle of
global cartel enforcement police officer?73 Whatever the merits of that argument at the time, it
has less merit today.
The USDOJ of the may be ahead of the curve. In addressing the issue, Terzaken, while Director
of Criminal Enforcement at the Antitrust Division, observed that the Division has articulated a
four-‐step analysis it will employ in assessing whether to employ negative comity in
transnational cartel investigations.
1. Is there a single, overarching international conspiracy?
2. Is the harm to U.S. business and consumers similar to the harm caused abroad?
3. Does the sanction imposed abroad take into account the harm caused in U.S. businesses
and consumers?
73 Brazil opened an investigation one year later in 2007. Libya does not have either a competition law or
enforcement agency. However, Libya is member of the Common Market for Eastern and Southern Africa (“COMESA,”) which has had a law since 2004. However the law did not take effect until November 2012 when the enforcement agency became operational.
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4. Will the sentence imposed abroad satisfy the deterrent interests of the U.S.?74
This thought leadership by the U.S. is most welcome. However, since the U.S. is often the first
jurisdiction to take action in cartel cases it is unlikely that Question 3 will be posed by U.S.
authorities in a large number of cases. Therefore it is important that the Antitrust Division
exercise its leadership to make other jurisdictions equally sensitive to these issues.
Merger Case Example
The merger case posed at the beginning of the article presents an even stronger case for the
authority to step aside. This exercise of authority has already been addressed by the
international competition community in the context of ICN “Best Practices” which encourage
competition enforcement authorities to require a showing of nexus between the transaction
and the investigating authority.75 But what if instead of the sale of a Nevada radio-‐station,
where there was precious little if any nexus, it was the sale of one of the papers to the other,
where the transaction does have some connection as both papers were sold within the
jurisdiction? This poses what is likely an excellent case for the authority to step aside and to
defer to sister authorities with more at stake.
It is now timely for the international competition enforcement community to seriously consider
the issue – a small but potentially powerful step to help alleviate the congestion on the
competition law autostrada. In particular, the experience of the ACCC illustrates that stepping
aside from an investigation where jurisdiction is present is not necessarily “anti-‐enforcement”
but may be an exercise in sound case selection. Enforcement requires resources, and few
competition authorities have an abundance of unused capacity. Sound case selection and
management should be important objectives.
74 Remarks of John Terzaken, Judicial Activism in Cartel Cases: Trend or Aberration, ABA Antitrust Section Spring
Meeting, Washington, ____ 2012. 75 The ICN “Best Practices” recommend that competition authorities make a jurisdictional claim only if a nexus
exists and outline the “local nexus” that must exist in their jurisdiction before the notification threshold is met. International Competition Network, Recommended Practices for Merger Notification (2002).
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This is particularly true in light of the contemporary enforcement costs. Investigatory and
enforcement costs have increased dramatically both due to the scale of global commercial
conduct and the size and complexity of transactions, and most notably evidentiary discovery in
the modern era. In the age of eDiscovery, it is not uncommon for competition authorities to
receive hundreds of thousands, if not millions of records to review and evaluate in order to
make an informed assessment of a matter and establish evidentiary thresholds required for
successful enforcement. While empirical data regarding costs per investigation/enforcement
action of competition authorities are lacking in the public sphere, it is not uncommon for
private parties in a cartel investigation to expend over $[ million] on their private defense;
similarly in mergers, the number is often greater than $[ million]. While governmental
authorities may not have the same costs as those incurred by private parties, the costs
associated with complying with investigations and defending enforcement actions provide a
useful, if loose, proxy for the resource dedication necessary to properly assess multi-‐
jurisdictional competition issues.
A generation ago, when investigatory and enforcement costs were exponentially lower, most
competition authorities’ case selection was governed by their “in box.” In the intervening
years, the work of Professor William Kovacic and others have focused on issues of institutional
design and management.76 Optimal allocation of enforcement resources has garnered
attention, as we have seen in the ACCC case selection process.77 Proper utilization of negative
comity can optimize enforcement—not curtail it.
We propose that the international competition enforcement community consider a “best
practice” that competition enforcement authorities ought to consider with reference to
selection of cases with an international dimension. To be very clear, we do not propose or
suggest that authorities ought to step aside in deference to a sister agency or agencies when
particular criteria are met. Authorities must be free to initiate investigations and bring cases
when consistent with their jurisdiction and international law. We do propose that competition
76 See, e.g., Kovacic 77 See notes ___ and accompanying text, infra.
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enforcement authorities seriously consider whether they ought to exercise their jurisdiction in
their selection of transnational cases where it is apparent that other competition authorities
will be investigating the same matter.
Some cases present separate and distinct issues for different jurisdictions. For example, a
merger may present very different markets in different jurisdictions or applicable law may
differ sufficiently to result in one jurisdiction pursuing an enforcement action while others
conclude no action is warranted.78 What is potentially harmful in one may be benign or even
procompetitive in another. A remedy in one may be ill suited for another. Stepping aside in
such cases may result in a failure to protect national consumers. On the other hand, there are
cases where the markets are the same and where a necessary remedy is the same. Such cases
may present opportunities for comity considerations, but even here there may be limitations
on the ability to completely defer to another jurisdiction. For example in many cases, a
determination about the relevant competition issues cannot be made until the investigation is
well underway. Therefore it may be irresponsible to step aside too early. Similarly, an
authority may be concerned that its sister agency or agencies may be either unwilling or
incapable of enforcing a remedy that is necessary to the protection of the deferring jurisdiction.
These considerations may require some level of participation at various stages of an
investigation. But this does not make the consideration of negative comity unwise. Rather it
suggests that application may need to be tailored to fit the facts of specific cases. In some
cases as in Parma Ham, it may make sense to step aside early in an investigation and defer to a
sister agency. In others, it may be necessary to investigate for some time before one can truly
assess whether deferral to another authority is sensible. And yet in others, it may be necessary
78 For example, the CCB and FTC recently collaborated on a review of a cross-‐jurisdictional merger but reached
different conclusions as to the ultimate competitive effect of the proposed transaction. See Canexus/Superior Plus http://www.competitionbureau.gc.ca/eic/site/cb-‐bc.nsf/eng/04110.html (“The Competition Bureau has determined that the proposed acquisition of Canexus Corporation by Superior Plus Corp. will likely result in a substantial lessening of competition for the supply of various industrial chemical products in Canada. However, the Commissioner will not be opposing the acquisition due to the efficiency exception in Canada’s Competition Act. In conducting its review, the Competition Bureau cooperated closely with the United States Federal Trade Commission (FTC). Each authority reviewed the effects of the transaction under its distinct legal framework. On June 27, 2016, the FTC filed an administrative complaint challenging the transaction.”)
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to step back, but not aside, in order to ultimately obtain legally enforceable remedies in the
authority’s home jurisdiction.
We do not seek to diminish or otherwise cabin the jurisdiction or its exercise of any
competition authority – quite the opposite. We seek to establish a “best practice” that
authorities will seriously consider both the costs and benefits to their participation in particular
transnational merger and conduct cases.
The adoption of custodial and other sanctions against individuals presents a special case for
negative comity. The Marine Hose Cases provide a model for the application of negative comity
among those jurisdictions that impose custodial sentences for cartel conduct. While we believe
that the criminalization of cartel offences is necessary to adequately deter such conduct,79
imposition of consecutive custodial sentences by multiple jurisdictions is generally unnecessary.
The marginal deterrent benefit of additional years of imprisonment doubtless decreases in a
cartel context since it is the fact of imprisonment for a non-‐trivial term that matters most.80
Moreover, the costs to the exchequer are not insignificant.81 As more jurisdictions impose
custodial sentences for cartel conduct, we would hope to see widespread application of
negative comity with reference to prosecution of individual cartel participants.82 Such cases
present compelling opportunities.
79 See Calvani & Calvani, Cartel Sanctions & Deterrence, 56 Antitrust Bull. 185 (2011); cf. Combe & Monnier,
Fines Against Hard Core Cartels in Europe: The Myth of Over Enforcement, 56 Antirust Bull.235 (2011). 80 See John Collins Coffee, Jr., Corporate Crime and Punishment: A Non-‐Chicago View of the Economics of
Criminal Sanctions, 17 AM. CRIM. L. REV. 419, 431 (1980) (stating that imprisonment has decreasing marginal utility in that a defendant views every additional year of prison time as less of a punishment than the previous year). See also Douglas H. Ginsburg & Joshua D. Wright, Deterrence and Punishment in Antitrust: Antitrust Sanctions, 8 COMPETITION POL’Y INT’L 46, 70 n.63 (2012) (“We think it unlikely that the reputational effect of a jail sentence continues to increase when the sentence exceeds some modest threshold–perhaps the one year that denotes a felony.”).
81 The U.S. Bureau Prisons estimates the average cost to incarcerate a prisoner in a federal prison is approximately $ 31,000 per year. See Federal Register (March 9, 2015) at https://www.federalregister.gov/articles/2015/03/09/2015-‐05437/annual-‐determination-‐of-‐average-‐cost-‐of-‐incarceration
82 Some jurisdictions may be precluded by restrictive interpretations of double jeopardy protections or ne bis in idem from subsequent individual prosecutions such that the exercise of negative comity is not only unnecessary but precluded by law, e.g., EU member states cannot bring multiple enforcement actions of
USBS192261/12 BDC-000170
28
Although there is no record why the recommendations of the U.S. AMC never gained traction,
one suspects that the question of which country’s interest is sufficiently important to warrant
the mantle of leader is much more difficult than some would have liked to believe. Several
problems are apparent. First, calculation of respective interests may not be straightforward. It
may even be more difficult when an investigation is in its early phases, and the issues and
potential areas of affect are not as yet patent. Second, the proposals seem to convey a benefit
on the first competition authority to open an investigation. We know of no reason why the
quickest to open a file is necessarily the best placed agency to take the leadership role – in fact,
as additional facts come to light, the initiating authority may discover it has a comparatively
lesser nexus to the conduct in question. Third, the suggestion that consultation will ameliorate
the interests of the deferring jurisdictions strikes us as overly optimistic. And, lastly, one
suspects that smaller countries may view the proposal – coming as it did from the United States
– as a unilateral power grab by the larger more established countries that may not have the
best interests of the deferring jurisdictions at heart.
Does this suggest that the idea today will fail to gain support as it did a bit over ten years ago?
We think not. We recognize the difficulties, but as the number of active enforcement agencies
increase it is important that individual competition authorities consider the costs and benefits
associated with their participation in international competition investigations. This appears to
be part and parcel of both the Australian and Canadian competition enforcement agenda with
no discernible adverse consequences to balance against the apparent husbandry of
enforcement resources.
A “softer” approach—
The authors acknowledge the difficulties associated with fully deferring one’s legally valid
jurisdiction to investigate, and if necessary enforce a nation’s competition laws. When national
completed criminal prosecutions. Nicolas Bourtin et al., Double Jeopardy: Coordinating Cross-‐Border Corruption Investigations, 248 N.Y.L.J. 4 (2012). In many other jurisdictions, e.g., the US, the principles do not preclude separate sovereigns for subsequent prosecutions of the same persons for the same offenses. Michele N. Morosin, Double Jeopardy and International Law: Obstacles to Formulating a General Principle, 64 NORDIC J. OF INT’L L. 261, 262-‐63 (1995).
USBS192261/12 BDC-000170
29
sovereignty and potential domestic economic impact are at stake, relinquishing – or even the
appearance of relinquishing – self-‐protection can be exceptionally difficult substantively and
politically. Additionally, the idea of a sudden shift from limited application of negative comity
to an explicit global norm for applying the concept to real-‐life matters can be a daunting leap of
faith. To the extent the international competition community is not yet ready to fully-‐embrace
“best practices” to be applied in multi-‐jurisdictional competition investigations that might
include Parma Ham-‐style deference, softer uses of negative comity may be appropriate. In
particular, jurisdictions should consider utilizing the remedies approach often employed by the
CCB. Conducting a full investigation and deferring only the remedial portion to a sister
authority already taking action can hardly be described as weak enforcement. Rather,
cooperating to ensure one’s interests are protected without forcing additional expenditure of
agency or party resources is ideal. Additional and repetitive remedial action is unnecessary and
the CCB has demonstrated that relying on a sister authority’s remedy in the appropriate
circumstances can result in positive sum outcomes for all interested parties; a “me too” consent
is a reasonable and achievable middle ground without authorities truly “standing down.”
Conclusion
With the competition law autostrada growing ever more crowded, and the need for
competition authorities to pursue investigations and remedial actions as efficiently as possible,
the international competition enforcement community ought to consider methods to alleviate
the congestion. Use of negative comity principles long-‐discussed but never effectively
implemented provide a practical solution to inefficient and divergent results all while enhancing
the efficiency and efficacy of competition enforcement for all authorities who choose to apply
the concept. The international competition community has an opportunity to align on this
common goal and seriously consider “best practices” in this area.
EThe 15Initiative
STRENGTHENING THE GLOBAL TRADE AND INVESTMENT SYSTEM
FOR SUSTAINABLE DEVELOPMENT
E15 Expert Group onCompetition Policy and the Trade System
Think Piece
Antitrust Without Borders: From Roots to Codes to Networks
Eleanor M. Fox
November 2015
Co-convened with
ii
ACKNOWLEDGMENTS
Published by
International Centre for Trade and Sustainable Development (ICTSD)7 Chemin de Balexert, 1219 Geneva, SwitzerlandTel: +41 22 917 8492 – E-mail: [email protected] – Website: www.ictsd.orgPublisher and Chief Executive: Ricardo Meléndez-Ortiz
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Acknowledgments
This paper has been produced under the E15Initiative (E15). Implemented jointly by the International Centre for Trade and Sustainable Development (ICTSD) and the World Economic Forum, the E15 convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business, and civil society geared towards strengthening the global trade and investment system for sustainable development.
For more information on the E15, please visit www.e15initiative.org
The Expert Group on Competition Policy and the Trade System is co-convened with Bruegel. http://www.bruegel.org/
Eleanor Fox is Walter J. Derenberg Professor of Trade Regulation at New York University School of Law. The author is grateful for the support of the Filomen D’Agostino Research Fund for research assistance. She thanks Pradeep Mehta for his helpful comments. This paper is an edited version of her chapter, Chapter 13, COOPERATION, COMITY, AND COMPETITION POLICY (A. Guzman ed. OUP 2011), substantially reproduced by permission of Oxford University Press, USA.
With the support of:
Citation: Fox, Eleanor M. Antitrust Without Borders: From Roots to Codes to Networks. E15Initiative. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum, 2015. www.e15initiative.org/
The views expressed in this publication are those of the author and do not necessarily reflect the views of ICTSD, World Economic Forum, or the funding institutions.
Copyright ©Eleanor Fox, ICTSD, World Economic Forum, and Bruegel, 2015. Readers are encouraged to quote this material for educational and non-profit purposes, provided the source is acknowledged. This work is licensed under the Creative Commons Attribution-Non-commercial-No-Derivative Works 3.0 License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.ISSN 2313-3805
And ICTSD’s Core and Thematic Donors:
i
Antitrust law has moved from a national enterprise to an international enterprise. Markets transcend national boundaries, and many problems appear to require supranational or cooperative solutions. The 1990s triggered visions of a multilateral framework under the aegis of the World Trade Organization (WTO). As the new millennium proceeds, multilateral agreement seems more remote, and networking solutions seem more practical and attractive. International antitrust today is less “world antitrust” and more “antitrust without borders.” This essay describes the intellectual journey from hierarchy to networking. Using the subsidiarity principle (what can be done as well or better at a lower level should be done at a lower level), it identifies the problems that can be tackled horizontally, and how and in what forum; it identifies the problems that still need a solution from the top, and suggests how to move forward.
ABSTRACT
CONTENTS
A Perspective: Where We Have Come From
Substantive Convergence
Comity
Extraterritoriality and the Bounds of Jurisdiction
A World Regime?
Where to Go From Here
The Problem of Gaps
The Problem of Overlaps
The Problem of Myopic or Bounded Concern, or Disregard
The Problem of Parochialism: “Happy to Hurt you and Aggrandise Me”
The Problem of Lack of “Vision From the Top”
The Problem of “Antitrust as an island,” Isolated From the Mainland of Political Economy
The Problem of Inventing 130 Wheels When One Will Do (Better)
The Special Problems of Developing and Transitional Countries
The Problem of Differential Law
Conclusion
Appendix A
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1
United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945).
See, for the European Union, Ahlström Osakeyhtio v. Commission (Wood Pulp), [1988] ECR 5193.
Report of the International Competition Policy Advisory Committee to the Attorney General and Assistant Attorney General for Antitrust (ICPAC Report) (2000), p. 66.
An international competition network (then named The Global Competition Initiative) was one of the principal recommendations of the ICPAC Report (2000). See ICPAC Report, Chapter 6, Preparing for the Future, pp. 281-287, 300-301.
See generally Fox, Eleanor. “Linked-In: Antitrust and the Virtues of a Virtual Network,” 43 International Lawyer 151 (2009).
1
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5
Half a century ago, only a handful of nations had adopted antitrust law. Many preferred dirigisme or cooperation to competition. The biggest challenge to the American competition system was acceptance of cartels, not competition, as the rule of trade. When the United States (US) sought to protect itself from off-shore cartels, its trading partners invoked international law and comity, arguing that if cartels were legal where formed, they were insulated wherever their cinders landed.
Famously, in Alcoa,1 the US adopted the effects doctrine. Just as famously, in late 1989, there came a dramatic change. Most of the rest of the world embraced markets and antitrust, and many antitrust jurisdictions adopted some form of the effects test, validating jurisdiction over off-shore actors and their acts that produced a significant effect in the regulating nation.2 The nations adopted an effects test to protect themselves. If there were no effects jurisdiction, the world would surely need, and would already have, an international antitrust regime.
From the time of the fall of the Berlin wall in late 1989, the US antitrust agencies, the European competition authorities, and others, extolled the importance of antitrust law in free-market economies. Today, approximately 130 nations have antitrust (or “competition”) laws. This is, by some measure, success.
There are some costs of success; small in the scheme of things, but palpable. In a globalising world with national-level law, there would be differences in procedure and substance, overlaps and gaps of jurisdiction, lack of coherence, and conflicts. Some of the differences would be a matter of principle, related to capacities of antitrust authorities, stages of economic development, and values or preferences of peoples. Some differences in outcomes would be related to different impacts of the same transaction or conduct in different markets; thus, different facts. Some differences would derive simply from lack of knowledge or perspective of less-experienced agencies, or would stem from divergences on unimportant details, such as the earliest allowable date of premerger notification. Differences are a fact of life in a world in which scores of nations are reinventing and refining the antitrust wheel.
Antitrust agencies of the world have risen admirably to the challenges. Authorities, particularly of the US and Europe, collaborate intensely when vetting the same mergers and pursuing the same cartels. Collaborations provide transparency and cross-fertilisation. The US and the European
Union (EU) authorities have particularly close relations, backed up by a working group on mergers and documents detailing best practices.
Merger collaborations have had many successes. One well-known example is the cooperation between the US Department of Justice and the European Commission in the case of the merger of WorldCom and MCI. Enabled by confidentiality waivers, the agencies coordinated requests for information, jointly met with the parties, and concluded settlements that met the concerns on both sides.3
In this new era of cooperation, the Organisation for Economic Co-Operation and Development (OECD) (especially for the developed countries), the United Nations Conference on Trade and Development (UNCTAD) (especially for developing countries), and the International Competition Network (ICN) play important roles. For many years, the OECD in particular has advanced the state of knowledge and cooperation. The ICN is a different construct; it is much younger and much less formal. Founded in 2001 as a network of the world’s competition agencies to explore avenues for convergence and assistance,4 the ICN is a ground-up network of all antitrust authorities of the world intended, at its inception, to discuss and solve practical problems; to pursue tasks capable of achievement. Initial efforts were devoted to harmonising details of practice and process where divergent rules and practices imposed significant, unnecessary costs; for example, agreement on the earliest date on which pre-merger notification filings can be submitted and on the required nexus between merging parties and jurisdictions seeking to regulate the merger. Later projects approach more controversial issues, such as standards for identifying abuse of dominance.5
In terms of cooperation and the formation of shared norms, there is more to be done. I shall return to this subject. First, I reflect on substantive convergence and then comity; I comment on extraterritoriality and the bounds of jurisdiction; and I comment on notions for world antitrust. Finally, I ask: what problems remain? What is the lowest level at which they can be solved; and what is left for international antitrust?
A PERSPECTIVE: WHERE
WE HAVE COME FROM
2
See Klein, Joel I. “No Monopoly on Antitrust,” Financial Times, Feb. 13, 1998, p. 20; Klein, Joel I. Anticipating the Millennium: International Antitrust Enforcement at the End of the Twentieth Century, in 1997 Fordham Corp. Law Institute 9 (Barry Hawk ed., 1999).
Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993).
Long tail policies allow recovery whenever the harm occurs if the covered act occurs within the period of the policy.
The UK law affirmatively recognised the autonomy of the re-insurers by handing over the reins of (self) regulation to the industry. See Eleanor Fox, “National Law, Global Markets, and Hartford: Eyes Wide Shut,” 68 Antitrust L.J. 73 (2000).
See Laker Airways v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984) (rejecting the claim that the US courts should refuse to take jurisdiction over Laker’s bankruptcy trustee’s antitrust conspiracy suit against British and Belgian airlines).Thus, invocation of “comity” does not answer the following questions: Should the US have deferred to the European Community when it examined conduct by IBM-Europe that (the Europeans thought) was anticompetitive and harmed Europeans? Or, should the European Commission have deferred to the US when it withdrew its similar complaint against IBM-US at an advanced stage in the litigation? In Microsoft, should Europe and Korea have deferred to the US even though they determined that conduct subsequent to the subject of the US Microsoft case was anticompetitive and harmful to their citizens? Or should the US defer to the decisions by other jurisdictions when they were the first to examine certain conduct?
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10
7
Substantive convergence of law is often extolled as a worthy and pressing goal in this world of national law and multitudinous jurisdictions. The value of convergence as a goal may be exaggerated. Convergence is good when it happens through the enlightened choices of the jurisdictions, for convergent law can produce more business certainty, save transactions costs, and increase trade. But, nations in the antitrust family are at different stages of economic development and have different capabilities, perceptions, and priorities. Moreover, diversity has benefits, and openness of the channels for experimentation and adjustment has its own dynamic, pro-competitive rewards. Even within the US, antitrust diversity thrives. The case law of the Third Circuit and the District of Columbia (DC) Circuit courts of appeals are not entirely congruent. The Clinton Administration’s view of efficient and appropriate relief in the Microsoft monopoly case and the Bush II Administration’s view of efficient and appropriate relief in the same case differed widely. The Bush II Administration’s perspective on the importance of dominant firms’ freedom to act and the Clinton and later Obama Administrations’ appreciation of the importance of freedom from the clutches of abusive power put two different world views in relief. Acknowledgment of diversity is a concession to reality.
For transactions that are cross border and especially global, there is a case to be made for a single rule of law or framework for the law, adopted multilaterally, all other things being equal. There is a credible argument that one substantive standard should govern global mergers. The US has strongly opposed this idea when proposed in the context of multilateral agreement. Its officials have argued that nations have different standards; there is not one standard fit for or accepted by all.6 If there is not an appropriate single standard achievable through a multilateral regime, then can there be an appropriate single standard to be achieved through cajoled convergence?
Sunlight and engaged discussion are invaluable. They tend to produce convergence in some respects, but not in others. They are likely to lead to better understanding of differences and more respect for them.
Comity is a concept of discretionary reciprocal deference. It holds that one nation should defer to the law and rules (or dispute disposition) of another because, and where, the other has a greater interest; a greater claim of right. Comity is a concept founded on process and relationship, not outcome. The outcome in the nation that is accorded the deference may not be the preferred outcome of the nation that defers.
Comity is an amorphous concept. Invoking the word does not reveal its practical meaning. Whether one nation has a greater claim of right than another is usually not obvious in the cases in which duties of deference are likely to be asserted.7
Comity is a horizontal, nation-to-nation concept, seeking — by reciprocal deference — to maximise the joint interests of the affected nations by splitting their differences or otherwise dissipating conflict in view of repeated interactions expected to occur. It could play into the hands of nationalistic detente and the nurturing of national champions. A case in point is the Hartford Fire8 case, in which Lloyds of London underwriters agreed not to supply reinsurance and retrocessionaire coverage to US primary insurers for sudden pollution claims and long tail policies.9 The United Kingdom (UK) parliament had legislated the Lloyds’ members’ right of self-regulation,10 and the Lloyds’ members pled that what
SUBSTANTIVE
CONVERGENCE
COMITY
3
they had done was lawful where they did it and that the UK legislation filled the field. They and their government asked the US court to refrain from exercising jurisdiction on grounds of comity. The court declined. Dismissal would have meant: go ahead and boycott our firms, and we will expect similar treatment from you when our ox is goring.11
“Comity” sounds good and does little work. Through all the years, from the famous Timberlane case12 to the present,13
not one US court has ever found that the interest of another nation outweighed the interest of the US in cases in which the US had an antitrust interest at stake.14
In view of the enormous naturally occurring convergence of the law and policy of nations toward common competition norms, the important question is not: when should one country defer to the (inconsistent) interests of other nations? The important question is: how can the antitrust jurisdictions of the world work together to maximise a shared interest in competitive markets, to the benefit of consumers and robust business?15 In the absence of law that is as broad as the affected market, a wise regime would stretch its law, conceptually, to embrace the whole affected market; thus, approximating world welfare.16 Methodologies would allow authorities and courts to take account of antitrust harms beyond the nation’s borders. Authorities would be empowered to share sufficient data so that less well-situated nations could effectively protect themselves from antitrust harms. The national law governing jurisdiction and remedies would be broadened so that, for example, national authorities in a jurisdiction with the largest consumer market would provide a forum in which smaller affected nations could be heard and their legitimate concerns satisfied, as proposed below.17 In sum, the comity concept is horizontal — nation-to-nation. The more fitting paradigm for the new century is overarching, global, and spiral. National antitrust would operate in the shadow of the true market.
There was a quite different articulation of the story by the defendants, but the case was decided on the face of the complaint.
Timberlane Lumber Co. v. Bank of America, 549 F.2d 597 (9th Cir. 1976). Timberlane was the parent of the US antitrust comity “doctrine.” In Timberlane, as it turned out after years of litigation on jurisdiction and comity, plaintiffs were at most deprived of a trickle of exports to the US and the conspiracy in Honduras could not have harmed US competition. 574 F. Supp. 1453 (N.D. Cal. 1983), aff’d, 749 F. 2d 1378 (9th Cir. 1984), cert. denied, 472 U.S. 1032 (1985). This is one of the very few cases dismissed for lack of jurisdiction.
Hartford Fire, supra note 8, hinted at the unhelpfulness if not irrelevance of comity where offshore action is intended to affect and significantly affects the regulating nation. But see Empagran S.A. v. F. Hoffmann-LaRoche, Ltd. (Empagran), 542 U.S. 155 (2004), using principles of comity in the interpretation of a statute.
See Eleanor Fox, Extraterritoriality, Antitrust, and the New Restatement: Is Reasonableness the Answer?, 19 NYU J. Int’l L. & Pol. 565 (1987). The antitrust agencies are better placed than courts to take account of (non-nationalistic) interests of other nations, as well as to take account of other agencies’ or courts’ analyses of the same issues, and they try to do so. See Fox, Eleanor. “The European Court’s Judgment in GE/Honeywell – Not a Poster Child for Comity or Convergence,” ANTITRUST, Spring 2006.
This effort includes protecting against over regulatory outcomes, while giving room to competing perspectives. Over regulation also harms efficiency and consumers.
See Fox, Eleanor and Janusz Ordover, “The Harmonization of Competition and Trade Law: The Case for Modest Linkages of Law and Limits to Parochial State Action,” 19 World Competition L. & Econ. Rev. 5 (December 1995).
Supra note 1.
See Gencor Ltd. v. Commission Case IV/M 619, Commission Decision of 24 April 1996, O.J. L 11/30 (1997) and Institut Mérieux S.A., Docket No. C-3301, 1990 FTC LEXIS 291 (FTC consent order, Aug. 23, 1990).
See note 36 infra.
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Consistent with international law, nations have broad jurisdiction to prescribe regulatory rules. In essence, according to the US Restatement (Third) of the Foreign Relations Law
of the United States, nations may write rules that catch transactions and actors beyond their borders as long as the regulating nation’s goal is to protect its own non-parochial interests, such as domestic consumer interests, and does so in a proportional way. Jurisdiction is then limited in two respects, according to the Restatement: (1) where a command of the actor’s nation directly conflicts with the requirements of the regulating nation; and (2) where assertion of jurisdiction is unreasonable, in view of all the interests, contacts, and regulations. In the realm of antitrust, these limits put very little constraint on a nation’s permissible jurisdiction to prescribe, and properly so. The same transaction or conduct frequently has effects in many nations of a sort that antitrust law typically condemns. Indeed, in contrast to the 1940s at the time of the Alcoa case,18 it is now well recognised among antitrust authorities worldwide that no nation “owns” a merger, and that it is fair game for any jurisdiction whose consumers are likely to be significantly adversely affected to examine an off-shore merger and to enjoin or condition it.19 A fortiori, antitrust authorities of the world recognise the legitimacy and even the imperative of pursuing off-shore and world cartels that hurt their citizens.
EXTRATERRITORIALITY
AND THE BOUNDS OF
JURISDICTION
4
Note 13 supra. See Fox, Eleanor. “Extraterritoriality in the Age of Globalization; Conflict and Comity in the Age of Empagran (“Empagran”),” Antitrust Report 3, Issue 4, 2005.
This is a tortured reading of the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA). See Fox, Eleanor. “Extraterritoriality and Input Cartels: Life in the Global Value Lane—The Collision Course with Empagran and How to Avert It,” CPI Antitrust Chronicle, Jan. 2015. Moreover, courts have taken a narrow view of jurisdiction in a private damage action against foreign producers of an input that is sold abroad and assembled into a complete product that is sold into the US. Id., regarding the liquid crystal display cartel. See Motorola Mobility LLC v. AU Optronics Corp., 746 F.3d 842 (7th Cir. 2014), amended by 775 F.3d 816 (7th Cir. 2015), cert. denied, - U.S. – (2015).
Ironically, freeing American businesses from legal constraints on their acts that hurt foreigners was the prime reason US Congress enacted the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA), which was interpreted to limit foreigners’ rights under US law.
For the principal European case, see Åhlström Osakeyhtiö v. Commission (Wood pulp), Joined Cases C-89/85, 104/85, 114/85, 116-117/85 & 125-129/85, 1988 ECR 5193.
See Slaughter, Anne-Marie. A New World Order, Princeton, 2004
See The Treaty of Rome Establishing the Economic Community, Article 5.
In the longer term, export cartels hurt the exporting country. See Fox & Ordover, supra note 16.
Group of Experts’ Report (“Van Miert Report”) (1995). See European Commission, XXVIth Report on Competition Policy (1996), p. 95.
See Stiglitz, Joseph and Andrew Charlton, Fair Trade For All: How Trade Can Promote Development, Oxford, 2005. Chapter 1.
See, e.g., Trachtman, Joel. “Legal Aspects of a Poverty Agenda at the WTO: Trade Law and ‘Global Apartheid,’” 6 JIEL 3 (2003); Reichman, Jerome. From Free Riders to Fair Followers: Global Competition Under the Trips Agreement, 29 N.Y.U. J. Int’l L. & Pol. 11 (1997).
See Klein, supra note 6. For a different explanation of the failure of an antitrust regime in the WTO, see Guzman, Andrew T. “Global Governance and the WTO,” 45 Harv. Int’l L.J. 303 (2004), and Bradford, Anu. International Antitrust Negotiations and the False Hope of the WTO, 48 Harv. Int’l L.J. 383 (2007) (arguing that agreement has been frustrated by lack of flexibility and vision in pursuing cross-issue regulatory bargains and by other collective action problems).
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Thus far, we have spoken of contemporary times. Few fora are devoted to “world antitrust” in contemporary times. But, not long ago, the subject held centre stage in conversation on the future of antitrust.
The 1990s was the decade of reflection and debate about a world competition regime. The idea was generated principally by the EU, whose officials understand, probably more than others, the cosmopolitan virtues of “community,” including the juncture of free movement and free competition. In 1995, a European committee of Wise Men proposed an international competition system, with a home in the WTO.25 The system would have started with building blocks of transparency, non-discrimination, and due process; cooperation; and assistance to developing economies. It would eventually have included a framework for substantive rules – against cartels, abuse of dominance, and the other commonly condemned restraints, as applied to cross-borders effects. It would have offered dispute resolution. The committee’s concept was adopted in substantial part by the EU. After criticism especially from the US, the EU watered down its recommendations and proposed a modest form of international competition law that would have encompassed the first-stage building blocks of non-discrimination, due process, cooperation, and assistance. It would have incorporated only one substantive rule — a rule against hard-core cartels. It would have eliminated dispute resolution except for failure to fulfil clear obligations; e.g., failure to adopt a law against cartels. This more modest proposal was provisionally placed on the agenda of the WTO Doha Development trade round. The antitrust programme was, however, jettisoned from the trade agenda after failure of initial trade negotiations (on agricultural subsidies) at the Cancun meeting in 2003.26 Developing countries were not
Of course, nations need not exercise their prescriptive powers to the full. In the famous Empagran case (vitamins cartel),20 the US Supreme Court determined that Congress meant to exclude from the Sherman Act private damage suits by victims who bought the price-fixed good abroad from a world cartel unless plaintiffs were harmed by the cartel’s anticompetitive effect in the US.21 If nations choose, they can require their nationals not to harm foreigners abroad by conduct that is illegal at home. They generally do not choose to do so.22
For the major nations,23 legal limits on jurisdiction to prescribe are not a hindrance to an effective antitrust world order. National legislators, however, predictably limit their countries’ laws to what they see as good for them (in the short term). 24 Thus, national antitrust laws normally exclude export cartels from their laws’ reach.
convinced that international competition rules would be good for them; WTO antitrust might be another Trojan horse, as many regarded the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).27 The US was not convinced that international competition rules would hold any benefit that it could not achieve on its own, and feared that antitrust at the bargaining table would produce a watering down of good law and create an unaccountable bureaucracy.28
Meanwhile, international cooperation was steadily improving, in part through the new, grass-roots-up ICN; and the threat of serious case-specific conflicts was alleviated by the organically occurring soft convergence. If there was a movement for a comprehensive higher-up law of competition in the 1990s and early 2000s, it seemed to have receded in the face of the networking wave of the “new world order”29 informed as it has been by the spirit of the rule of subsidiarity: What can be done just as well or better at a lower level should be done at the lower level.30
A WORLD REGIME?
5
The norm against protectionism and parochialism is deeply engrained in competition policy and advocacy by antitrust enforcers, even if not embraced by politicians. For the point of view of the European Competition Directorate, see Kroes, Neelie. Industrial Policy and Competition Law and Policy, chapter 10 in 2006 Fordham Competition Law Institute (B. Hawk ed. 2009).
The concept of the Westphalian state reverts to the Peace of Westphalia of 1648, signifying the tight and strong notion of the sovereignty of the state. This has sometimes been referred to as the “billiard ball” theory of the state. I use the concept here in contrast with the porous state, involving pooled and shared competencies to solve problems that transcend borders.
Agreement on Safeguards, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, 1869 U.N.T.S. 154, 159.
Otherwise, effects jurisdiction tends to fill the gap.
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It seems clear that cooperation has worked to lessen tensions and to produce more coherence, and it should be continued and deepened. Cooperation, along with intensive cross-fertilization, has alleviated conflicts and has helped to construct a more nearly seamless world. Merger enforcement has improved. Cartel enforcement has improved. For developing countries, cooperation has helped to transfer useful knowledge, and, anchoring agencies in the culture of competition, it has helped agencies stave off protectionism, parochialism, and excessive regulation.31
Still, big tasks remain. Cooperation and soft convergence solve only some of the major antitrust problems of the world.
In contemplating problems and solutions, we have been enlightened by the conversations of the last three decades: the contemplation of the need for international antitrust; the debate regarding models; the failure to embrace the antitrust measures on the Doha agenda; the birth and blossoming of the ICN, which itself has spurred heightened performance of the OECD and the UNCTAD; the surge and appreciation of networking; and the imprint of the subsidiary principle.
I have listed below nine problems, some overlapping, and I ask in each case what can be solved on a horizontal (national or nation-to-nation) level, and what remains to be resolved through higher law or modalities.
THE PROBLEM OF GAPS
In important respects, the laws stop at the nations’ shores, and they are riddled with exemptions and non-coverage, often in response to vested interests. The biggest, most obvious gap involves export cartels and world cartels particularly impacting outsiders. In part, this gap persists because of the practical disenfranchisement of victim jurisdictions that lack resources and information and are vulnerable.32 The second biggest, most obvious gap is anticompetitive state action or involvement, including state blessing of cartels and monopolistic abuses that predominantly or significantly hurt foreigners. This gap persists because of the still Westphalian deference to the state as sovereign.33
Solutions may need to come at a higher level, for the same reason that nations fail to muster the constituencies
WHERE TO GO FROM
HERE
necessary to eliminate quotas and reduce tariffs without reciprocal agreements with trading partners. The agreement called for is a “flanking” agreement to perfect nations’ promises, already in the WTO, not to sponsor or encourage import or export cartels.34
Other efforts can come at a grass-roots level. The OECD Hard Core cartel recommendation35 urges signatory nations to re-examine periodically their exemptions from a “no cartel” rule and to eliminate unnecessary exemptions. This process is vital to world competition in matters affecting trade and investment. The beginnings of a framework for a multinational agreement can be built ground up, starting with guidelines, principles or best practices; possibly in the OECD or the ICN if the ICN should expand its purview from “antitrust all the time.”
THE PROBLEM OF OVERLAPS
A number of jurisdictions’ antitrust laws may apply to the same conduct or transactions, and treatment may be inconsistent, conflicting, or over regulatory; remedies may be pile-up remedies.
In addressing overlap problems, the antitrust authorities of the world have made much progress through informal cooperation, with and without bi-lateral agreements. A very high level of cooperation and coordination has been attained, within limits of confidentiality obligations that prevent the sharing of information. The high levels of cooperation are visible in vetting transnational mergers and investigating cartels. Still, occasionally, outcomes in jurisdictions differ, because of differences in legal principles, different appreciation of the appropriate application of the same legal principles, or different factual contexts.
A higher level solution is generally not needed. An intensified level of cross-border communications by officials engaging with the particular facts of the particular case is normally the best solution. Over-regulatory pile-
6
See ICPAC Report 76-78.
Boeing/McDonnell Douglas, Case IV 877, 1997 O.J. (L336) 16 (8 Dec. 1997).
General Electric Co v. Commission, Case T-210/01, [2005] ECR II-5575.
See www.internationalcompetitionnetwork.org. Go to Working Groups, Mergers, Recommended Practices.
ICPAC Report, supra note 3, 76-78.
China’s merger enforcement is particularly aggressive when it sees national or strategic interests at stake. See, e.g., Martina, Michael. “Insight: Flexing antitrust muscle, China is a new merger hurdle,” Reuters, 2 May 2013.
36
37
38
39
40
41
on remedies can be avoided by a second jurisdiction’s seriously regarding the remedies ordered by a first jurisdiction and attempting to make its remedies consistent and not duplicative.36 Such an obligation of sympathetic consideration could be written into cooperation agreements and could also be developed as an international best practice in the context of the ICN.
There remains to be developed a principle for bridging ad hoc conflicts, such as those that occurred in the merger cases of Boeing/McDonnell Douglas37 and GE/Honeywell.38 The ICN is an ideal forum for working out a recommended or best practice. For example, where a second jurisdiction anticipates taking a course of action that conflicts with a first jurisdiction, a consensus principle might require that the second jurisdiction sympathetically consider the analysis, reasoning, and remedies of the first jurisdiction and exercise restraint in condemning an approved transaction or unduly burdening a conditioned transaction, with a view to enhancing the economic welfare in the world.
THE PROBLEM OF MYOPIC OR BOUNDED
CONCERN, OR DISREGARD
Nations deal with their problems. They are normally indifferent to harms abroad launched by their firms. They feel free to ignore negative externalities abroad. This is the “not my problem” problem: Let the victim nation protect itself, and if it does not have the resources or practical power to induce outsiders to obey the law, so be it.
This problem is integral with the problem of gaps, treated above. Indeed, it provides one explanation for gaps. The cartel externality problem has a natural home in the WTO, as discussed above. As for mergers and monopolies — to the extent they have effects at home as well as abroad — the problems are more likely to evidence themselves as overlaps, and to this extent, are amenable to a horizontal solution. But, this is not always the case. The big cement merger now being consummated (Holcim/Lafarge) principally hurts small developing economies; and mergers, agreements, and conduct may create buying power that hurts poor commodity producers (e.g. of cocoa beans), while the developed world is oblivious.
THE PROBLEM OF PAROCHIALISM: “HAPPY TO
HURT YOU AND AGGRANDISE ME”
Parochialism and vested interest lobbies provide another reason for gaps and selfish concern. Parochialism, when it exists, adds invidiousness to the restraint and underscores the importance of a common solution. Parochialism could, for example, be identified and condemned by an ICN principle. Indeed, discrimination based on nationality is already condemned by ICN merger principles.39
THE PROBLEM OF LACK OF “VISION FROM THE
TOP”
In many cases, problems are truly global and integral. This is the case, for example, for transnational mergers where markets transcend borders. Productive efficiencies at home may not enure to consumers or the market at large.
A make-do solution could come at a horizontal level. The solution requires flexibility of law and remedies beyond state bounds. For example, as suggested by the US advisory committee, the IGAD Climate Prediction and Applications Centre (ICPAC), the forum having the most contacts might take on the project of analysing the whole merger, its benefits, and its harms, wherever they fall. It might host interventions by other complaining jurisdictions and grant relief copious enough to cure problems worldwide as if the world were in its nation.40 Best or recommended practices could be worked out in the ICN. The necessary flexible extension of law and process would need to be legislated by national legislators — not an easy task under today’s norms; but, norms might change if one is forced to confront the fact that the alternative is either disarray or centralized international antitrust.
THE PROBLEM OF “ANTITRUST AS AN
ISLAND,” ISOLATED FROM THE MAINLAND OF
POLITICAL ECONOMY
Antitrust is not an island unto itself. It is deeply interrelated with trade; foreign investment; the free movement of goods, services, and capital; the law of intellectual property; sectoral regulation; and the wide variety of proposed and actual industrial policies.
This is a problem in search of articulation, as witnessed by the coming of age of antitrust in China;41 the pressures on antitrust in the wake of the financial crisis;42 the voices of
See Lewis, David. Chilling Competition, in International Antitrust Law & Policy, 2008 FORDHAM COMP. L. INST. (B.Hawk ed. 2009)42
7
the developing countries in the negotiations at the Doha trade round (distribution and equity matter); and the United Nations (UN) project to alleviate poverty and promote inclusive sustainable development.43
There is room for constructive work and debate on appropriate and inappropriate industrial policy. Because the debate sits on charged territory, serious debate is often suppressed. Work should be done at the WTO to narrow the bounds of permissible antidumping laws and subsidies in view of their distortion of international trade and particular harm to developing countries. Work should also be done at a horizontal networking level, perhaps at the ICN. To begin, a working group can ask, in the context of financial crisis: what general principles define protective measures that may be helpful to a nation and those measures unlikely to be helpful? What national measures are likely to be helpful to world welfare, and how can they be coordinated to that end; which are harmful to world welfare and how could and should they be discouraged?
THE PROBLEM OF INVENTING 130 WHEELS
WHEN ONE WILL DO (BETTER)
This is the problem of unnecessary and costly duplication. An example is premerger notification. Some 80 jurisdictions require premerger notification, filing and waiting to complete covered mergers. Large multinational mergers must normally comply with the rules and processes of each.
The ICN has addressed this problem. It has adopted recommended practices concerning, for example, the earliest date on which filing is permitted, so that firms can coordinate their filings and the required nexus with the jurisdiction, so that nations do not reach out unduly to grasp and tax mergers that threaten them no harm. More work needs to be done. There is a need for a common clearing house option for merger filings, so that one document filed in one place can provide all the necessary preliminary information.44 This can be done horizontally — by agreement among the jurisdictions. The ICN can be the forum for working out the details.
THE SPECIAL PROBLEMS OF DEVELOPING AND
TRANSITIONAL COUNTRIES
The special problems are three fold. First, developing countries and emerging regimes are often unable to protect themselves from offshore acts and transactions that harm them. They do not have the resources, information, and practical power. Therefore, they are especially vulnerable; even though many are on a fast upward learning curve and deserve to be commended and admired Second, the substantive rules of law most suitable for them are often
different from the rules of law most suitable for developed economies with well-functioning markets, little statism, qualitatively less corruption, mature antitrust systems, and large expert staffs; yet, when international standards are formulated, they commonly replicate those of the developed countries.45 Third, and related to both points above, the developing countries and emerging antitrust jurisdictions need help; they need a transfer of knowledge and knowhow useful to their own contexts.
The third problem identified above is best handled on a horizontal level and is under control, although still in need of more thinking and action. Technical assistance is delivered generally by more developed countries to less developed ones. The EU, Germany, South Africa, Italy, the US, other nations, and groups working with donors, such as International Development Research Centre, have been generous providers of technical assistance. Peer reviews by the OECD and the UNCTAD have been extremely helpful. A working group of the ICN arranges for informal exchange of advice, pairing givers and receivers, who conduct their work through telephone and the Internet.46 All these projects and arrangements can be deepened. On-the-ground technical assistance can be better coordinated. The problem of home-country bias in advice-giving can be addressed through awareness and consciousness raising, but not through higher law.
The first problem — vulnerability — has been treated in part above. If altruism will not move national policy, a better appreciation of the local good as a function of the common good might help.47 The better situated nations could use their national legislative powers to require their nationals to account for all harms they cause by consensus violations (e.g., hard-core cartels),48 and at least to expand their rules
Progress has been made in other fields. An example is the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. March 22, 1989, 1673 U.N.T.S. 125. The Basel Convention provides that any state that is party to the convention may prohibit import of hazardous wastes. The other parties to the agreement are then required to prohibit the export of hazardous wastes to the prohibiting country. Export cartels are the hazardous wastes of exporting countries.
See The Growth Report, Strategies for Sustained Growth and Inclusive Development, Michael Spence, chair (2008), available at http://www.growthcommission.org; United Nations Summit to adopt the post-2015 development agenda, 25 Sept. 2015, https://sustainabledevelopment.un.org/?page=view&nr=1064&type=13&menu=1634.
See ICPAC Report, page 97, note 24, for a proposal by Eleanor Fox as well as an explanation of the hurdles to achieving such a system.
See Fox, Eleanor, “Linked-In: Antitrust and the Virtues of a Virtual Network,” supra note 5; Sokol, Daniel. “Monopolists Without Borders: The Institutional Challenge of International Antitrust in a Global Gilded Age,” 4 Berkeley Bus. L.J. 37 (2007).
In matters of world cartels, for example, the international good is the local good. See E. Fox and J. Ordover, The Harmonization of Competition and Trade Law: The Case for Modest Linkages of Law and Limits to Parochial State Action, 19 World Competition L. & Econ. Rev. 5 (December 1995).
See www.internationalcompetitionnetwork.org. Go to Working Groups, Advocacy & Implementation, Network Support Program.
48
43
44
45
47
46
8
of discovery, so that violators within their borders and the evidentiary trails they leave can be explored at the scene of the wrongful acts. The vulnerability problem means that developing countries with poor legal systems are not only unlikely to deter incoming cartels, but also are unlikely to provide a system that will compensate their citizens, even while victims abroad get considerable recoveries. This is both unfair and inefficient. The US has stepped back from the plate by its holding in Empagran,49 and other countries are not likely to come to their aid.50 This means either the developing countries must accelerate their economic and institutional progress and capability in some substantial way to help themselves — perhaps through regional free-trade groupings, which can give them critical mass (but this is a slow and uncertain process), or a world or transnational system or resource must be developed, or the problem will remain unattended. For example, a specialised group might be charged with analysing data on proven cartels, such as the vitamins, lysine, or air fuel; with identifying who was over charged by how much; and with administering a fund for pay-outs.51
THE PROBLEM OF DIFFERENTIAL LAW
The remaining problem is the problem of differential law and the likelihood that developed countries’ law will be the international standard even when it is not the best standard for developing countries, both because developed countries have the expertise and power to “sell” their standard and because developing countries may not have the expert staffs and advisors to develop and successfully advocate the standards that are best for them, even as a dual-track alternative.52 This problem can be partially addressed by regional groupings, by more learning, and by greater awareness. In any event, it is a problem suitable for horizontal solution. It cannot be solved, and indeed could be undermined, by a detailed version of top-down antitrust. See supra n. 13.
See, however, Case No. 3622 (C2227), Fiatimpresit-Mannesmann Demag-Techint/Italimpianti, Bolletino della Autorita Garante della Concorrenza e del Mercado, Mar. 4, 1996 (Italian Antitrust Auth. Feb 15, 1996), granting relief likely to help the country (China) that would suffer the anticompetitive effect of the merger.
This idea was suggested to me by my student, Laura Collins, N.Y.U. Law, J.D. class of 2010.
See note 5 supra. Differential “best practices” may be indicated in connection with state restraints, exclusionary conduct, and buyer power restraints. They may be reflected in laws of jurisdictions that need less highly technical and more administrable rules of law.
A number of horizontal solutions were proposed by the ICPAC Report. Some of these have been referred to herein. For a more complete account, see Appendix A.
See Fox, Eleanor. “International Antitrust and the Doha Dome,” 43 Va. J. Int’l 911 (2003). The “Doha Dome” was the skeletal framework suggested by the Doha trade agenda: non-discrimination, due process, cooperation, assistance, and an obligation of nations to adopt and maintain a rule against cartels. See text at notes 25-26 supra.
49
50
51
52
53
54
The lack of traction thus far of world antitrust in the WTO, the rise of networking, and the common sense attraction of subsidiarity have focused our thinking on lower-level solutions to world problems. Today, we are searching for horizontal solutions.53 We are less hopeful and less trustful that comprehensive higher law will solve real problems. At the same time, our intellectual travels over the past two decades have helped to identify the situations in which only higher-level solutions will do. Problems that may be fully resistant to lower-level solutions are outward-oriented harm (export/world cartels) and the trade-restrictive state action that supports it. For this problem, we need flanking principles in the WTO. Other desirable multilateral solutions, such as a common clearing house option for merger filings, multilateralisation of cooperation agreements, and a centre for data analysis of identified world cartels, can be addressed at the networking level. At least, the development of models can begin at the grass-roots level. The idea of a Doha Dome over a roots-up garden54 was a good idea in 2003 and is a good idea today (despite the virtual failure of the Doha trade round). The roots and their offshoots could grow under a common canopy of open and free competition not distorted by cronyism, parochialism, and artificial borders. The dome is sure to be no more concrete than a virtual roof over our heads. It can guide us toward a coherent framework. It cannot protect us from the rain and sleet; but it probably never would have done so, even in the headier days of the vision of one-world antitrust in the WTO.
CONCLUSION
9
ICPAC Report, p. 200.
Id., pp. 78, 80 (footnote omitted). The Report continues: Under this advanced work-sharing arrangement, the coordinating agency would perform a centralized information gathering function following initial notification by the merging parties to all reviewing agencies. The coordinating agency would then assess the competitive effects of the proposed transaction in all relevant product and geographic markets. Each interested jurisdiction would be invited to submit comments to the coordinating jurisdiction regarding its particular concerns. The assessment of the coordinating agency would be binding on the coordinating agency but could either serve as a recommendation to other interested jurisdictions (with a presumption in favor of accepting the recommendation) or be binding on those jurisdictions as well.
Id., p. 77, noting use of this approach also in Federal Mogul/T&N.
Id., p. 76.
Id., p. 284.
55
59
58
57
56
Selected recommendations of the International Competition Advisory Committee to the Attorney General and Assistant Attorney General for Antitrust (2000)
Excerpt from Testimony of ELEANOR M. FOX before the Antitrust Modernization Commission Hearing on International Issues Washington, D.C. February 15, 2006
available at http://govinfo.library.unt.edu/amc/commission_hearings/pdf/Statement_Fox_final.pdf
The ICPAC Report makes many recommendations on methodologies to enhance cooperation and eliminate unnecessary conflict in the case of international mergers and international cartels. I refer the Commission in particular to Chapter 2 (Mergers: Facilitating substantive convergence and minimizing conflict), Chapter 4 (Cartels: Interagency cooperation), and Chapter 5, third subsection (Positive comity).
ICPAC took a cosmopolitan approach. It recommended, among other things, expanding bilateral cooperation, including cooperation with newer competition systems55 and it recommended including on a discussion agenda multilateralization of inter-jurisdictional cooperation.56
ICPAC emphasized multi-jurisdictional work-sharing in merger review:
“The Advisory Committee views the creation of a nearly seamless multijurisdictional merger review system as the ultimate goal of all of these efforts toward expanded cooperation and coordination.”57
Cooperation at the merger remedy stage was singled out for its importance. ICPAC suggested:
In some cases it may be feasible to have only one jurisdiction negotiate remedies with the merging parties that will address the concerns of both that jurisdiction and other interested jurisdictions. In other words, the reviewing jurisdictions would identify the remedies necessary to address their competitive concerns, and the jurisdiction best positioned to negotiate and obtain the desired remedies would do so. An approach of this kind, for example, was successfully employed by the United States and the EU in the Halliburton/Dresser transaction. There, rather than negotiating separate undertakings with the merging parties, the EC relied on the provisions of a U.S. consent decree to satisfy its concerns regarding a perceived global problem in drilling fluids.58
APPENDIX: AICPAC also underlined the importance of work-sharing at the review stage. It said:
In appropriate cases, it may be beneficial to limit the number of jurisdictions conducting independent second-stage reviews of a proposed transaction. Where the concerns of one country are likely to be the same as and subsumed by the concerns of a more distinctly affected investigating jurisdiction, it may be appropriate for the first country to refrain from independent investigation.
* * *
One way to safeguard against the possibility that the proceeding agency may reach a different result on the merits or a remedy different from the one the other jurisdictions might have reached, while at the same time gaining efficiency in the process and other potential benefits is to ensure sufficient participation in the process by the other jurisdictions. One jurisdiction could coordinate the investigation of a proposed transaction, take into account the views of each interested jurisdiction, and recommend remedies to address the concerns of all interested jurisdictions.59
ICPAC considered yet more advanced work-sharing as a vision for the future. It described this as follows:
The Advisory Committee also considered whether an even higher level of work sharing might be possible after more procedural and substantive convergence among merger review regimes has occurred. At this advanced level of work sharing, the coordinating agency would be required to accept the mantle of parens patriae for world competition. Accordingly, it would endeavor to evaluate procompetitive and anticompetitive effects of a proposed transaction on a global scale, taking into account all of the merger’s costs and benefits to competition, not only the net effects
10
Id., p. 81.
Separate Statement of Eleanor M. Fox, ICPAC Report, Annex 1-A.
I spelled out my proposal for an opt-in clearing house system as follows at ICPAC Report, p. 97, Chap. 3, footnote 24: Advisory Committee Member Eleanor M. Fox suggests another approach to facilitate efficient coordination of filings and reduce the burden on parties of multiple notifications. She proposes a common clearinghouse for premerger notification by firms that elect to opt into such a system. One way to achieve this would be to permit the merging parties to file with a disinterested clearinghouse on the day of the first filing. Alternatively, if the first filing is in a mature antitrust jurisdiction and covers international markets where all or most of the impacts would occur, all interested nations would be bound to accept the first filing as their first and basic information about the merger. The notified centre or jurisdiction would announce the filing to member nations (or to interested or potentially interested nations). The recipient agencies would be bound to use the information only for merger review. Any country receiving the announcement that believes its system requires notification of the transaction could request a copy of the notification. A copy of this request would go to the merging parties who could contest the jurisdiction of a requesting country before the filing is sent to that country.
My Separate Statement cross-references to the ICPAC Report, p. 64, Chap. 2, footnote 72, which reads as follows: Advisory Committee Member Eleanor M. Fox calls attention to the problem of clashes where one nation decides that a merger is anticompetitive and should be enjoined and another nation decides that a merger is procompetitive and should be allowed. In the absence of formal protocols for resolving the clash, the more restrictive nation always prevails. This member suggests that development of rules of priority in deciding to enjoin or not to enjoin and international merger may be needed. To be entitled to exercise such right of priority, however, the privileged jurisdiction would be required to accept the mantle of parens patriae for world competition. Accordingly, it would be obliged to count not only the net benefits within its borders, but all of the merger’s costs and benefits to competition (under whatever neutral framework for analysis it applies). See Eleanor M. Fox, Extraterritoriality and Merger Law: Can All Nations Rule the World? Antitrust Report 2, Dec. 1999.
[Footnote 7 in Separate Statement of Eleanor M. Fox:] One appropriate “higher” solution would provide for international dispute resolution. The panel would begin to resolve the dispute by choice of law based on centre of gravity. Thus, in Boeing/McDonnell Douglas, the panel would apply the U.S. rule to the true market.
60
61
62
63
64
within its borders. This approach arguably is superior to an approach in which each jurisdiction analyzes the effects of a proposed transaction within its own borders and ignores the harms or the benefits that the transaction may generate elsewhere. Multimarket assessment would position the coordinating jurisdiction to account for what had previously been viewed as externalities, thereby enabling it to assess the net effects of the proposed transaction (under a neutral welfare standard) on a global scale. The coordinating jurisdiction could then design remedies to address the concerns of all interested jurisdictions.60
For my own part, as a member of ICPAC, I suggested two further initiatives; one to put a check on over regulation, and one to provide a path to resolve system clashes. I quote below from the relevant portion of my Separate Statement.61
Over regulation: Globalization has put pressure on our system in which the laws of numerous nations apply to the same conduct or transaction. The pressure comes especially at the point at which competition law is regulatory rather than liberalizing; paradigmatically, premerger notification filing-and-waiting regimes. In this area, sound regulation requires coordination, and modes adopted by the European Union for its internal market are often instructive. I would go further than the Advisory Committee to propose an opportunity for mutual recognition of premerger notification filings when the market of a would-be regulating nation is subsumed by the broader global market.62
System clashes: We must find international solutions for systems clashes, probably with international dispute resolution. Actual cases provide helpful laboratories. Boeing’s acquisition of McDonnell Douglas - which the U.S. cleared and the EU threatened to enjoin [and which nearly erupted into a trade war] - is such a case. . . .
There are various possible agreements that nations might consider that would keep an international merger on track as a competition case and prevent diversion into a trade war. The Advisory Committee has proposed several progressive measures, on the order of transparency.
I believe that we must move further, in view of the need for a world view and in view of the fact that conflict will otherwise always be resolved in favor of the nation that imposes the most aggressive remedies. In the absence of international rules and dispute resolution, we may eventually find it necessary to give the nation at the centre of gravity a trumping right to enjoin or allow the merger (while other interested nations might retain the right to implement more modest, tightly tailored relief). But if any nation is, legitimately, to wear the mantle of parens patriae for the world, it would be obliged to count all costs of the merger, even those outside of its borders, as if they fell within its borders.[63] Indeed, we may reach the point — not just in merger law — at which counting all costs is an important obligation of all competition authorities vetting international transactions.
If national authorities do not broaden their perspectives to count all costs of conduct or transactions by their firms, we will probably move to international antitrust sooner rather than later, for these problems are world problems.[64]
Finally, as reflected above, many potential clashes can be diffused. The best way to diffuse them is not to decree comity or convergence but to solidify norms of talking, listening, reasoning and engaging. When authorities appear to be reaching different evaluations, e.g., of whether a multinational merger is anticompetitive, the authorities should explore and then pin-point for one another exactly where their differences lie, identifying inferences, presumptions, premises, and critical evidence. By that means, they may be able to resolve differences. If not, they should be able to understand the basis of divergence.
11
I propose that the AMC consider recommending that the following three norms be adopted by competition authorities and, where appropriate, commissions and courts. The norms could be adopted in the context of ICN.
(1) In matters involving cross-border spill-overs, competition authorities and courts should be sensitive to the perspectives of other enforcing nations that have ruled on or are addressing substantially the same problem. Where consistent with their law and goals, they should sympathetically consider integrating other nations’ perspectives or relevant acts into their own thinking and analysis.
(2) They should recognize existing relief decreed by another
jurisdiction as contextual background, and strive to avoid unnecessary regulation.
(3) In the event that a second nation takes jurisdiction over conduct or structure roughly within pronouncements of a jurisdiction that proceeds first, the decision-maker should write a reasoned opinion that engages with the first nation’s perspective. By attentive and engaged process, some divergent outcomes may be avoided, and others legitimized.
Draft 12 August 2016
Fordham Antitrust Conference 2016
European experience on convergence of antitrust laws
by John Temple Lang
Introduction
What is now the Treaty on the Functioning of the European Union came into force in
1958 and included an Article on restrictive agreements and practices and an Article on abuse
of dominant positions. These two Articles applied throughout the then six Member States:
on paper, they had a single antitrust law.
After the adoption of the first EU Regulation in 1962 giving the European
Commission procedural powers in antitrust cases, EU antitrust rules were applied primarily
by the Commission until the 1990s. There was little need for convergence of national laws or
procedures, since those that existed were relatively inactive. However, by 2000, the situation
had changed. By that time, all the EU Member States had adopted national antitrust laws and
merger control laws, and had set up national antitrust authorities to apply them. The
Commission had advised all the newer Member States to adopt antitrust laws on the lines of
EU law, and most of the States that had been in the EU for longer had chosen to do so. The
three new Member States, Austria, Finland, and Sweden had previously been in the European
Economic Area and before that in the European Free Trade Area, and had therefore already
adopted national legislation that was similar to European law. Germany, France and the UK
had not yet copied the EU provisions, but it was considered that the economic effects of those
States’ laws were similar, and the UK finally adopted legislation corresponding to the EU
Articles. The three EFTA States that had formed the European Economic Area, Iceland,
Norway and Liechtenstein, had accepted competition rules corresponding to those in the EU.
On paper, there was substantial similarity in legislation in all the jurisdictions involved (now
thirty-three in total: the 28 EU States, the three EEA States, the European Commission and
Court of Justice, and the EFTA Surveillance Authority and the EFTA Court).
National merger control legislation was similar to the EU Merger Regulation, which
came into force in 1989, except in Germany, France and the UK, which had rather different
2
rules. However, the Merger Regulation gave the Commission exclusive jurisdiction over all
large mergers, so the need for convergence of substantive rules resulted only from the
anomalies that would result if the differences between the principles under the Merger
Regulation and the national law principles, or the differences between the national laws
themselves, were too great.
Regulation 1/2003 – decentralization
Regulation 1/2003 revolutionised the situation, in relation to restrictive agreements
and abuse of dominance (now under Articles 101 and 102). Notifications to the Commission
were ended. National authorities and national courts were given power to apply Article
101(3), which allows restrictive agreements to be justified if certain conditions are met. The
Regulation required national antitrust authorities to apply EU rules on restrictive agreements
and dominant companies, in all cases in which there was an effect on trade between EU
Member States. Since the decisions of national authorities, when they apply EU law, are
subject to review by national courts on EU law grounds, and national courts are bound by
judgments of the ECJ, the overall effect is further convergence. The Regulation required
national authorities to be given powers to adopt interim measures, to impose fines for
infringements of EU law, and to accept commitments, just as the Commission was
empowered to do. The Commission, to guide national authorities and to help lawyers
advising companies, adopted a series of group exemption Regulations and interpretative
Notices.
Essentially, the decentralization Regulation required national authorities to apply only
EU law to all restrictive agreements liable to affect trade between Member States: they are
not allowed to apply stricter or less strict national laws to those agreements. However,
national laws may include stricter rules on unilateral conduct, and they may make antitrust
infringements criminal. In its Report on the Functioning of Regulation 1/2003 in 2009 the
Commission said1:
1 Communication from the Commission, Report on the Functioning of Regulation 1/2003,
COM (2009) 206. See also; Commission Staff Working Document, Ten years of Antitrust Enforcement under Regulation 1/2003, SWD (2014) 230/2, Accompanying Communication, Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM (2014) 453, SWD (2014) 231.
3
“The divergence of standards regarding unilateral conduct was commented on
critically by the business and legal communities which consider that the diverging standards
fragment business strategies that are typically formulated on a pan-European or global basis”.
Differences between national laws mean that companies doing business throughout
Europe are likely to need advice on the basis of several bodies of law, and not just one.
National competition authorities are required to send drafts of their decisions to the
Commission. It is not clear how far the Commission comments on them. Certainly some
national authorities’ decisions are very odd indeed, but it is not clear whether the
Commission merely failed to look carefully at the drafts, or decided that the defect was due to
incorrect or unconvincing findings of fact proposed by the national authority, which the
Commission, not having investigated the facts, felt unable to question. The Commission has
power to take over a case from a national authority, but apparently has never done so.
In addition, to make the decentralization Regulation work more smoothly, the
European Competition Network, consisting of senior officials of the national antitrust
authorities and the Commission, was set up. The ECN regularly discusses current general
issues. The Advisory Committee, composed of representatives of the same bodies, which had
originally been set up in 1962 to discuss the Commission’s individual decisions, continues to
do so. An Association of European Competition Law Judges was set up, to share experiences
and to help judges with less experience of antitrust law to adapt to their responsibilities. In
short, there was a great deal of less formal cooperation. There were also non-governmental
activities all tending to promote convergence: the College of Europe in Bruges, the
Consultative Commission of the European Bars and Law Societies, and the Fédération
Internationale pour le Droit Européen, as well as small groups of lawyers making
recommendations to the Court of Justice and to the European Commission. There are many
conferences on competition law in Europe, of which the annual St Gallen conference is
probably the most important.
It should be noted that there was one thing that did not happen, but which would have
led directly or indirectly to convergence if it had happened. Europeans are less litigious than
Americans, and there has been relatively little litigation of the kind this would have raised
issues and clarified the law. Because the law on many questions was unclear, and because of
4
the “loser pays all legal costs” rule, many cases were settled. Private claims for damages, in
particular, were very slow to develop.
The decentralization Regulation allowed the Commission to intervene in cases before
national courts. If that had been done frequently, it would have been an additional influence
favouring convergence, but the Commission has intervened very rarely, although it has
replied to questions asked by national courts in a number of cases.
Mergers
During the same period, but without any single radical legislative step, national
authorities began to apply their national merger control laws, and on occasion to transfer
merger cases to the Commission and to ask for cases to be transferred to them by the
Commission. It was assumed by implication, reasonably but without complete justification,
that the substantive results would be the same whether the case was decided by the
Commission or by the national authority, unless the circumstances in the market of the
Member State in question were different. But the European Court of Justice ruled in the
Royal Philips case2 that the transfer of a merger case from the Commission to a national
authority could be challenged on the grounds that the procedural rights of the company were
altered.
The European Court of Justice
Even since the European Treaties came into force in 1958, national courts have had
power to refer questions of European law (of course not only antitrust law) to the ECJ. Both
the court that asked the question, and all other national courts, are bound by the ruling of the
ECJ. The effect, of course, is convergence on a uniform interpretation, at least in relation to
cases with the same or similar facts. National courts are required by EU law to give
“effective” protection to rights given by EU law, including thorough judicial review of
antitrust authorities’ decisions, and the right to compensation for loss caused by infringement
of EU antitrust law. The Court even gave rulings on questions of national law, if the law was
2 Case T-119/02, Royal Philips Electronics, EU : T :2003 :1433.
5
designed to be interpreted in the same way as EU law: the Leur Bloom judgment in 19973
confirmed this.
The European Convention on Human Rights
All the European States in question are parties to the European Convention on Human
Rights, which gives a right to a fair trial (and therefore to thorough judicial review of antitrust
authorities’ decisions) and to privacy (and therefore to a right to be protected against
unjustified searches). There have not been many judgments of the European Court of Human
Rights in antitrust cases, but the judgments that have been given are important.4
The Treaty of Lisbon included the European Charter of Fundamental Rights, which is
binding on all EU Member States, and which goes further than the European Convention.
The European Economic Area and the EFTA Court
The three States Iceland, Norway and Liechtenstein, together with the EU, make up
the EEA. One of the main aims of the EEA is to create conditions for competition throughout
the EEA that correspond to those in the EU. For this purpose, the EEA adopts measures
corresponding to EU directives and regulations. The role of the EFTA Court in the EEA
corresponds to the role of the ECJ in the EU: it hears appeals from decisions of the EFTA
Surveillance Authority, and answers questions sent to it by national courts. It has adopted
fewer judgments in antitrust cases than the ECJ, largely because the Surveillance Authority
has been less active than the European Commission, but the judgments that the EFTA Court
has given, notably Posten Norge5 are impressive and authoritative. The EEA Agreement
makes it clear that the purpose of the EEA is to ensure “homogeneity”, that is, alignment of
EEA rules with EU measures on the single market, including antitrust rules. The EFTA
Court ensures convergence of EEA law and EU law generally, and not only in the sphere of
antitrust law.
3 Case C-28/95, Leur Bloom EU: C:1997:4161. 4 See in particular the judgments of the European Court of Human Rights in Colas Est v.
France, Case 37971/97, April 16, 2002; Canal Plus v. France, Case 29408/08, December 21, 2010; Primagaz v. France, Case 29613/08, December 21, 2010; Bernh Larsen v. Norway, Case 24117/08, March 14, 2013; Menarini Diagnostics v. Italy, Case 43509/08, September 27, 2011.
5 Case E-15/10, Posten Norge, 2012 EFTA Court Report 246.
6
Convergence in Europe is due to a number of measures
It will be seen that the relatively high degree of convergence that has occurred in
European antitrust law is the result of a number of different features of the situation, rather
than the result of a single policy. Convergence is the incremental result of many influences,
and has occurred without a very precise overall vision of the objective to be achieved.
The most important features are, of course, the rulings of the ECJ, both in cases in
which Commission decisions have been challenged and in cases referred to the Court by
national courts. Cases referred from national courts cannot be planned. The ECJ has no
control over the questions sent to it. But the effect of these questions is that any widespread
difficulty or doubt felt by national courts is likely to be raised before the ECJ sooner or later.
The next most important feature is the decentralization Regulation, and the large
packages of group exemptions, Notices and explanatory documents adopted by the
Commission to make the Merger Regulation and Regulation 1/2003 work smoothly. These
have been revised and improved from time to time, and issues that have arisen are dealt with.
Regulation 1/2003 led to a great deal of convergence that had not occurred previously, and
which would not otherwise have occurred. Much of the convergence that has been achieved
has been due to the willingness of national antitrust authorities to follow the Commission’s
Notices and other non-binding statements. Neither the ECJ nor national courts are bound by
Commission Notices, but this has not given rise to conflicts or to serious differences in
national practices. The ECJ is clearly not following the Commission’s “Guidance” document
setting out its priorities in applying Article 102 to exclusionary abuses, but the undoubtedly
unsatisfactory state of the law under Article 102 TFEU (discussed in the Fordham antitrust
conference in 2014) is not due to institutional problems.
No efforts to harmonise procedures
No serious formal efforts have so far been made to harmonise the procedures of the
national antitrust authorities, other than the introduction of the national authorities’ powers
that were required by Regulation 1/2003.6 The Commission may have wanted to see how the
Regulation would work in practice before proposing further harmonization. It may have been 6 The ECN produced an Investigative Powers Report and Decision Making Powers Report, 31st
October 2012 (http://ec.europa.eu/competition/ECN/documents.html) and made various non-binding Recommendations.
7
reluctant to appear to dictate to authorities such as the German BundesKartellamt, the
prestige of which is comparable to that of the Commission. No doubt the Commission was
aware that its own procedure is unsatisfactory, for reasons explained below, and that the
Commission was not well placed to propose improvements to others. In any case, the
Commission had its hands full with price-fixing cases resulting from its immunity and
leniency policy, and its obligations to deal with notifications of mergers. Instead of
proposing harmonization of national authorities’ procedures, the Commission concentrated
on persuading the other EU institutions to adopt a directive on private claims for damages for
breach of price fixing and similar agreements.7 This directive did not deal with injunctions,
and left a broad discretion to national legislatures.
The result has been that suggestions for harmonization of national procedures have
been made by the heads of the French and German authorities.
The situation today in Europe
Today the great majority of all decisions applying EU antitrust law are adopted by
national authorities, not by the Commission or the EFTA Surveillance Authority. The
practice of antitrust authorities in Europe has now led to a number of situations involving
convergence issues.
It must be remembered that the biggest national authorities are very much larger than
the smallest. The situations are very different in the different Member States.
The Commission has taken almost no decisions on vertical agreements since
Regulation 1/2003. These cases have been left almost entirely to the national authorities, and
there has been no significant effort to coordinate or harmonise their approaches to them. This
is unfortunate, because divergences have become apparent in connection with restrictions on
electronic commerce and internet distribution between e.g. the strict view of the German
competition authority and the less strict views of other authorities. Divergences have arisen
over what are said to be price fixing agreements concerning hotel reservations.
7 Directive 2014/104/EU on certain rules governing actions for damages under national law for
infringements of the competition law provisions of the Member States and the EU, OJ. No.L.349/1, December 5, 2014.
8
The Commission has developed a practice of dealing with what are said to be abuse of
dominance cases under Article 102 by accepting, and in some cases applying pressure on
companies to provide, commitments. This practice is open to serious criticism, as was
pointed out at the 2014 Fordham antitrust conference. Its relevance here is that commitments
are negotiated pragmatically, and they do nothing to clarify the law in what is by any
standards the least satisfactory area of European antitrust law, and therefore do nothing to
promote convergence.
Although all national authorities now have leniency/immunity policies that seem to be
successful in getting participants in price fixing and market sharing agreements to confess
their activities, the national leniency programmes have not been coordinated or harmonized.
One unfortunate result is that a leniency application made to the Commission does not
automatically act as an application to any national competition authority. The ECJ in the
DHL case in 20168 said, with what may lawyers thought was excessive formalism, that
leniency applications to different authorities serve different purposes. The result is that a
leniency applicant must not only gather the evidence available as quickly as possible, but
must write leniency applications in as many languages as are needed to apply in each
Member State concerned. In such situations other companies may be the first to apply for
leniency to national authorities: companies that need to apply to only one authority have an
advantage.
Other complications arise when several competition authorities carry out parallel
investigations. In particular, difficulties arise if the Commission considers that there has been
one price fixing agreement covering several Member States, but one of the national
authorities concludes that in its jurisdiction a separate infringement was committed.
Not all national antitrust authorities are equally active or equally professional, so the
degree of convergence of antitrust enforcement in practice is less than the degree of
convergence on legislation and procedural rules. This difference is hard to measure, but it
undoubtedly exists. Some authorities are clearly under-resourced. The Commission did not
start to assess the resources of national authorities until the question was raised in the 1998
conference of the Fédération Internationale pour le Droit Européen (FIDE) in Stockholm,
when the background to what became the decentralization Regulation was discussed. Since
8 Case C-428/14, DHL Express v. Autorĭtà Guarante, EU: C:2016.
9
then the independence of some national competition authorities, and the resources available
to others, have become a concern for the Commission.
It is not clear that there are still strong reasons for having different national
competition laws. Companies would be greatly helped if every State adopted a competition
law exactly corresponding to EU law, of course without the requirement of an effect on trade
between Member States.
Some convergence in the practice of companies has come about because in many
cases e.g. patent licences and distribution agreements have been carefully drafted to come
entirely within the terms of a group exemption. This avoids the need to decide whether an
additional or unusual clause is restrictive and, if so, whether it fulfills the conditions of
Article 101 (3).
What still needs to be done
Although there has been a great deal of convergence, much remains to be done to
reach a really satisfactory degree of convergence of national antitrust law and practice in
Europe9.
The most important tasks seem to be:
- the two unsatisfactory features of the European Commission’s procedure should be
corrected. They are that the same officials write both the Statement of Objections and the
final decision, and that the decision is finally adopted by Commissioners who have not read
the documents or attended the hearing. (These features were criticized at the 2014 Fordham
Conference, and on many other occasions by many lawyers). Insofar as the procedures of
some national competition authorities are open to the same objections, they should also be
corrected. The first of these defects could be corrected without any change in the relevant
Regulations being needed.10
9 The Commission’s Report on the functioning of Reg. 1/2003 mentioned several questions
requiring consideration. The Commission mentioned in particular strict national laws on unilateral conduct, and divergences in national enforcement systems on a number of issues. That Report was written in 2009: since then the only step taken to resolve these issues is the Directive on private claims.
10 Temple Lang, Three possibilities for Reform of the Procedures of The European Commission in competition cases under Regulation 1/2003, in Baudenbacher (ed.), Current Developments
10
- the level of fines imposed by national courts and by the Commission should be
harmonized. It is unsatisfactory that the amount of a fine can depend on whether a case is
dealt with by the Commission or by a national authority. This would probably mean, in
practice, lowering the fines imposed by the Commission, and increasing the fines imposed by
some national authorities. This would also involve coordination of “settlements”,
Commission and national procedures by which companies get reduced fines in return for
accepting that they have committed infringements.
- a leniency application made to the Commission should automatically act as a
leniency application to the national authorities in the Member States where the infringement
occurred, provided of course that sufficient information is given about the circumstances in
each State.
- almost certainly, the national legislation implementing the directive on private
claims for damages will need to be coordinated
- on issues on which clear differences of opinion have already arisen between national
authorities, such as e-commerce and hotel reservations, common positions need to be worked
out.
- further steps should be taken to standardize and simplify merger notifications, and to
reduce the amount of information that must be provided in the beginning of the procedure.
Merger procedures are unnecessarily complicated.
- parallel investigations need to be more closely coordinated, and better arrangements
made for avoiding conflicting views on whether a cartel is a single Europe-wide agreement or
a series of national agreements. If procedures and fines were harmonized, this would make
less difference.
- more broadly, the procedures of national authorities should be harmonized, so that
they can cooperate more easily and so that results will be similar.
- the Commission’s Manual of Procedure should be completed (several chapters that
were promised have never been published, and other chapters are seriously inadequate). If
in European and International Competition Law, 17th St. Gallen International Competition Law Forum 2010 (Helbring Lichtenhahm ) 219- 256.
11
the Manual were altered to take account of the improvements in the Commission’s procedure
mentioned above, it could be useful to all the national competition authorities.
- several European States, in particular Germany and the UK, apply merger controls
to the acquisition of shareholdings which falls short of control. The EU Merger Regulation
does not apply in such circumstances. This may be an issue on which convergence would be
desirable.
- the sensitive issue of criminal penalties for antitrust violations in some Member
States needs to be tackled. Instead of making the laws in question stricter, criminal penalties
can create difficulties for enforcement, because of the stricter burdens of proof on the
prosecuting authorities. Criminal penalties in some Member States and not in others
complicate leniency cases.
- to encourage voluntary compliance, serious consideration should be given to
extending legal privilege under EU law to employed lawyers, provided that they are subject
to substantially the same systems of ethics and discipline as independent lawyers. For this
purpose, national lawyers’ organisations should be asked to confirm that it is unethical to
mislead a court or competition authority, and unethical deliberately to help a client to break
the law.
An important unresolved issue concerns the interpretation of Article 102 TFEU on
abuse of dominance. This cannot be dealt with by convergence, because there is no officially
accepted interpretation, for the reasons given at the Fordham 2014 conference.11
Another issue concerns the States in which constitutional law requires certain antitrust
decisions to be taken by courts and not administrative authorities. This has led to surprisingly
little difficulty, but it should be mentioned.
11 Temple Lang, Exclusionary Abuse, the Rule of Law, and The Effectiveness of the European
Commission, 41 European Law Review (2016) 243-251; Temple Lang, After Forty Years : the development of European Competition law - Views from Fordham, in Hawk (ed.), 2014 Competition Law Institute : International Antitrust Law and Policy (2015) 556 - 626, at pp. 592-610, 647-651.
12
The 2016 FIDE Congress
One of the subjects discussed at the Congress of FIDE, the Fédération Internationale
pour le Droit Européen, in Budapest in 2016 was private enforcement and collective redress
in European competition law. This is one of the less developed areas of EU competition law,
which is no doubt why the subject was chosen, and some aspects of it are being harmonised
by Directive 2014/104/EU, the EU Directive on private claims for damages. Nevertheless,
although the topic is a narrow one, it is useful to comment on the discussions at the FIDE
Congress, from the standpoint of convergence.
The FIDE volume on this subject consists of a General Report, an Institutional report
on the EU, and national reports. The General Report pointed out that the Directive does not
deal with certain issues such as collective redress, the definitions of causality and culpability,
the right of access to the files of national competition authorities, or the protection of
confidential information by the national courts. The General Report then went on to
summarise and comment on the information given in the national reports.
Even before the adoption of the Directive, EU law gave a right to claim compensation
for loss caused by breach of EU competition law. However, the numbers of private
enforcement cases differ considerably between EU Member States, even allowing for the
different sizes of the States in question. Widespread difficulties in making such claims are
due to burden of proof issues and the difficulty of proving causation and the amount of loss.
Other difficulties are said to be the cost of litigation, the duration of proceedings, and the
absence of a legal culture encouraging follow-on actions. Stand-alone actions are of course
less common than follow-on actions. All Member States apply the “loser pays” principle,
and as the law is still unclear on many issues, this must certainly discourage claims, or lead to
settlements, although this point is not stressed. Rules on limitation periods differ to a
remarkable degree, according to the General Report: These issues are addressed by the
Directive. Delays of litigation are attributed to the workload of the courts, inadequate case
management, and the novelty of many of the issues arising. So far only Hungary has adopted
a presumption that price fixing has raised prices by ten percent. The European Commission’s
soft law Practical Guide to quantifying loss in damage actions has had limited use, although it
is one of the few measures (other than the Directive) that was designed to bring about
convergence.
13
In many respects the Directive confirms rather than altering the existing national law
e.g. allowing the passing-on defence. This is based on the principle that a claimant must not
be overcompensated. In this respect, a degree of convergence existed already. Most Member
States expect that courts will follow the judgment of the Court of Justice in the Kone case12
that a cartel can be liable for loss due to umbrella pricing by non-members of the cartel, an
example of convergence not due to the Directive.
Collective redress has not dealt with the Directive, and has been addressed by the
Commission only in its Recommendation 2013/396/EU, another bit of soft law. No national
report mentions a successful collective action for damages for breach of competition law,
although cases are pending.
National courts have tended to ask the commission, rather than their national
competition authorities, for information and opinions about the application of EU competition
rules. More importantly, the General Report gives a long list of competition cases referred by
national courts to the Court of Justice. Regulation 1/2003 confirms previous case law ruling
that national courts may not adopt decisions running counter to a decision of the Commission
dealing with the same agreement or practice. All this case law was the most important reason
for convergence of national competition laws, before the adoption of the Directive.
The ways of obtaining evidence on which to base claims are different in different
Member States. This is because the procedures involved are the normal procedures, not
adopted for the purposes of competition law. The result, although this is not stressed in the
General Report, is that there is considerable scope for forum shopping. Different conclusions
were reached in different Member States as to the effects of the Directive on the national
rules on disclosure of evidence: the national reports were written before all the legislation
implementing the Directive was published or adopted.
The General Report also mentions the Eco-Swiss Judgment, ruling that national courts
must be able to review arbitral awards and set them aside if they are contrary to public policy
rules, including ECL competition law rules. This is another influence leading towards
convergence.
12 Case C-557/12, Kone, EU: C: 2014
14
The General Report concludes that “the overall picture regarding the current state of
private enforcement and collective redress in antitrust law is a mixed one”. Some aspects are
generally satisfactory: other aspects are problematic. The duration of proceedings is often
very long. The training of judges “receives mixed reviews from national rapporteurs”.
Proving the extent of harm is often difficult (though this is probably a difficulty not easily
solved by legislation. Access to the files of national competition authorities is often difficult.
The Directive will solve some, but not all, of these issues. “On a final note, the Directive
does certainly not provide for a level playing field for the participants in the whole internal
market due to the many remaining particularities of the national jurisdictions”.
The FIDE Reports, and in particular the valuable General Report, show that in spite of
all the influences encouraging or requiring convergence, many significant differences
between national laws and practices existed before the Directive was adopted. A
considerable number of differences will remain even after the Directive has been
implemented. It is unfortunately not clear how far the national authorities implementing the
Directive are coordinating their drafting.
The Commission's views on convergence of powers and procedures
During 2016 the Commission expressed concern because in several Member States
the independence of the national competition authorities was being reduced, and in some
States the authorities have not got all the legal powers necessary to be effective.
Unfortunately, the Commission did not balance these views with the comparable statements
of concern about rights of the defence. At the time of completing this paper, the Commission
had not proposed new measures for reforming or adding to Regulation 1/2003.
Influences favourable to convergence in Europe
In drawing conclusions from the European experience of trying to encourage
convergence of antitrust laws, procedures and practices, it must be remembered that it took
place in the context of the European Union, a politically important regional economic
integration organization, set up in 1958, responsible for promoting harmonization of laws on
a great variety of economic matters, with a considerable degree of public approval. Antitrust
law was never dealt with in isolation. National governmental authorities were accustomed to
being encouraged or obliged by the European Commission to harmonise legislation. There
were many influences favorable to convergence which would be unlikely to exist elsewhere.
15
National authorities were aware of EU State aid rules, and saw that antitrust law was part of
an overall European policy on competition. The European Parliament consistently advocates
harmonisation.
Even in this context, which was certainly favorable to convergence, the three greatest
influences for convergence (apart from the Treaty Articles themselves) were
Regulation 1/2003, the ECJ’s replies to the questions of national courts, and the Merger
Regulation. These all were, in effect, packages of measures that provided substantial benefits
for Member States in general (in the case of the ECJ) and for national antitrust authorities (in
the case of Reg. 1/2003). Convergence would be more difficult to bring about if it were
pursued in isolation. Convergence, in itself, does not necessarily attract much support: it is
most effectively brought about as part of larger packages clearly offering other benefits. The
effect of the Merger Regulation was indirect: it provided an example for national merger
control laws, and involved national authorities in economic analysis when they were advising
the Commission on its merger decisions. In effect, it led to greater and more widespread use
of economic analysis than would otherwise have occurred. The benefits of convergence for
companies are clear, but national authorities need to be convinced that it offers them benefits
also. The principal benefits are that it facilitates cooperation and exchanges of experience
and ideas. These are particularly important for new, small or inexperienced authorities.
Unless there is pressure for convergence, national authorities will not seek it unless they have
their own reasons for doing so. Convergence always simplifies things for companies, but
competition authorities need to understand clearly how it benefits them. Convergence
provides access to experience, improves efficiency of analysis, facilitates cooperation, avoids
mistakes and unnecessary duplication, promotes foreign direct investment, and makes each
competition authority part of an international team. Convergence also helps to deal with new
kinds of problems such as those involving digital evidence.
Convergence was facilitated because EU antitrust law is stated in a relatively small
number of documents: the Treaty Articles, Regulations, one directive, Commission Notices,
and similar Commission “soft law” documents. Judgments of the ECJ are important (and the
small number of judgments of the EFTA Court are extremely important) but lawyers do not
need to read a large number of judgments in order to understand the basic principles of the
law. In other words, it is easier for a new EU Member State to adopt the whole body of EU
antitrust law than it would be to adopt the whole body of US antitrust law.
16
Other influences in Europe
It should be recognized that convergence is more difficult if the courts and authorities
involved already have established practices and traditions, which they may be reluctant to
change. Much of the success in achieving convergence in Europe has been due to the fact
that many of the newer authorities involved had not got established practices and traditions in
the antitrust sphere, and so were open to suggestions that they should follow the
Commission’s practices. The Member States with the longest competition law traditions,
Germany and the UK, have been the slowest to accept convergence.
There are too few lawyers and economists in the European Commission who have
experience in private practice or in private industry. This contributed to the fact that the
Commission has not always seen the practical consequences of the reforms that it had
adopted or was proposing. This led to divergences that could have been avoided. For
example, it was always clear that there would be a conflict between the Commission’s
leniency policy (which needed to encourage companies to report their participation in cartels)
and its policy of encouraging private claims for compensation for loss due to cartels (which
led to claimants’ demands to obtain documents submitted in leniency applications). This
conflict has not yet been resolved: the directive on private claims makes it clear that leniency
applications should not be disclosed, but national courts have been given no guidance on
ordering disclosure of pre-existing documents that are submitted together with leniency
applications. This is a guarantee of forum shopping. It illustrates the fact that the
Commission has not had a clear policy of encouraging and facilitating voluntary compliance
by companies: this is shown most clearly by its resistance to recognizing confidentiality and
legal privilege for employed lawyers.
Implications of the European experience for convergence elsewhere
Few if any of the influences and institutional arrangements that facilitated
convergence in Europe have parallels elsewhere in the world. National competition
authorities in most other States are not supposed to be applying a single set of antitrust rules,
with the leadership of a Commission and under the supervision of a single Court, and they are
not concerned with the application of a single Regulation on the control of mergers or on the
procedure of a central body. The influences that tend to encourage convergence between
non-European authorities, insofar as they already exist, are different.
17
There is now an international consensus on the need for competition laws, and on the
economic harm that results from price-fixing and market allocation, which did not exist in
Europe in 1958. There is the International Competition Network, the purpose of which is to
encourage and facilitate cooperation and convergence. There are many relatively new and
inexperienced competition authorities, and they can draw on the accumulated experience of
decades of antitrust enforcement if they wish to do so. Globalisation has resulted in most
serious cartels being international cartels, which need to be dealt with by more than one
competition authority. Globalisation has also led to the same or similar situations arising
everywhere, and this often means that a remedy in one jurisdiction will have consequences in
others. There are antitrust lawyers and economists, of whom William Kovacic and Eleanor
Fox are probably the best known, who have discussed antitrust issues all over the world.
Several members of the Irish competition authority have come from North America, and an
Irish economist became the head of the UK Office of Fair Trading (as it then was). Antitrust
law and economics is discussed and taught on what is essentially a comparative basis almost
everywhere.
It must be recognized that even if the influences that are favourable to convergence
prove to be strong enough, it is unlikely to happen, and certainly will not be strongly based,
unless some essential conditions are fulfilled. The first is that each competition authority is
genuinely independent, and is not merely an agent of a Ministry of Industry or Economic
Affairs. This means, among other things, that if a competition authority is significantly
influenced by the industrial policy of its State, the scope for convergence will be limited, and
the value of what can be achieved will be less. No competition authority is likely to want to
cooperate with another authority which is primarily concerned to promote its nation’s
industrial policy rather than competition. The second condition is that each competition
authority must have, and must be seen to have, fair procedures for finding facts, for assessing
economic evidence, and for answering legal questions. Due process and fair procedures are
even more important than legal and economic expertise: all cases require impartial
consideration, but only a minority require sophisticated economics. These two features are
linked: it is very much more difficult to ensure due process and fair procedures if antitrust
decisions are influenced by industrial policy.
A useful, but not essential, result of convergence is the willingness of the competition
authorities involved to allow other authorities to take the lead on individual cases, most
18
obviously in merger cases, but sometimes also in price fixing cases where most of the
economic harm may have been done in one State, or in abuse of dominance cases in which a
remedy in one country will automatically benefit others, or at least can be followed and
copied elsewhere. The “leader” authority need not be (and certainly should not always be)
the largest authority in the group. But it is essential that the results in all jurisdictions would
be the same or similar, and that all the authorities involved have sufficient confidence in one
another to enable them to leave the result in the hands of whichever authority is chosen. For
this, of course, genuine independence and genuinely fair procedures in all of the participating
bodies are essential, as well as close cooperation between the authorities involved.
Another factor that encourages convergence and cooperation is that the authorities
involved usually follow formal procedures, and do not make frequent use of negotiated
commitments. It is difficult to cooperate with an authority that is negotiating rather than
following clear principles. Too frequent use of negotiated settlements reduces the scope for
convergence, since the basis for convergence cannot be clear.
It is important to recognise that while convergence on substantive rules is possible
only if legislation allows it, convergence on procedures should be easier to arrange.
OECD discussion of enhanced cooperation
Some similarity or convergence is needed for cooperation between competition
authorities, and the greater the similarity, the easier and more effective the cooperation can be.
In a discussion in OECD on enhanced cooperation13, a number of advantages of enhanced
cooperation were pointed out, whether it is arranged by having a one-stop-shop or by closer
cooperation. It was pointed out that cooperation can minimize duplication and maximize
efficiency, avoid imposing unnecessary costs on companies, facilitate agreement on priorities,
and make the most effective use of available resources. But uniform results cannot be
guaranteed: the facts may be different in different jurisdictions.
Cooperation makes it necessary to ensure that applications for immunity or leniency
are not disclosed to claimants, since that would make the immunity/leniency policy
ineffective. There must be similar and clear rules on identification and protection of
13 See Temple Lang, Aims of enhanced international cooperation in competition cases, working
party on cooperation and enforcement, OECD, DAF/COMP/WP3 (2014) 7.
19
confidential information, including communications protected by legal privilege. There
should also be agreement to respect the principle of proportionality: official action must not
impose cost or inconvenience that is unnecessary or inappropriate to the problem, or which
imposes more cost or inconvenience than is necessary to achieve the result required.
Coordination and convergence is desirable in connection with analysis and theories of
harm, disclosure of information, and remedies. Harmonisation of procedures should always
be a long term objective, because without it, cooperation will always be more difficult,
time-consuming and unsatisfactory than necessary. There is rarely any strong reason why
coordination of procedures (as distinct from harmonization of substantive law) is impossible.
It is very difficult, and usually undesirable, for a competition authority that has fair
procedures and due process to cooperate with an authority that does not. Companies and
other authorities cannot be expected to have confidence in any national competition law if
either the agency or the courts in the State concerned are regarded as superficial, inefficient,
unreliable, or corrupt. The rule of law and fair procedures (not the same thing) are
prerequisites for effective cooperation between competition authorities.
A model law on procedure in competition cases would be valuable. This is a task for
OECD, or for the International Competition Network.
Implemented jointly by ICTSD and the World Economic Forum, the E15Initiative convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business, and civil society geared towards strengthening the global trade and investment system for sustainable development.
Implemented jointly by ICTSD and the World Economic Forum, the E15Initiative convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business and civil society geared towards strengthening the global trade system.
Terry Calvani practices antitrust law in the Washington, D.C., office of Freshfields Bruckhaus Deringer US LLP. Previously he served as Commissioner of the U.S. Federal Trade Commission (1983–1990), where he was acting chairman during 1985 and 1986, and later was a member of the board of directors of the Irish Competition Authority, where he held the criminal investigations portfolio. During that period, he was an active member of advisory committees for the EU Competition Directorate. Following his graduation from the Cornell Law School, where he was articles editor of the Law Review, he practiced with Pillsbury, Madison & Sutro. From 1974 to 1983, Mr. Calvani was professor of law at Vanderbilt School of Law teaching courses on antitrust law. Following his term on the FTC, he returned to private practice with the Pillsbury firm until his appointment in Ireland. In addition to Vanderbilt, he has taught antitrust law at Duke University School of Law; Harvard Law School; Trinity College, Dublin; and Cornell Law School, and he is currently a Lecturer in Law at Columbia University School of Law where he will teach antitrust this spring term.
Mark Cohen is Senior Counsel, China at the U.S. Patent and Trademark Office, where he leads a team of 2- people in Washington, D.C., Beijing, Shanghai, and Guangzhou. The team collectively has approximately 200 years of experience on Chinese IP matters. He previously served as a visiting professor at Fordham Law School (2011–2012), and he is currently an adjunct professor teaching Chinese Intellectual Property Law. Mr. Cohen has also served as director of International Intellectual Property at Microsoft Corporation, of counsel to Jones Day’s Beijing office, senior intellectual property attaché at the U.S. Embassy in Beijing (2004–2008), general counsel to a mid-sized pharmaceutical company in Europe (1998–2000), and a Fulbright Professor in Eastern Europe (1993–1995). He was one of the first Western lawyers to work with China’s State Council in making its legislative work known to the public in 1983. In total, Mr. Cohen has over 30 years of private, public sector, in-house, and academic experience in China and transition economies, with a focus on technology trade and monetizing intellectual property.
Eleanor M. Fox is the Walter J. Derenberg Professor of Trade Regulation at New York University School of Law. Before joining the faculty of NYU Law, she was a partner at the New York law firm Simpson Thacher & Bartlett. She has served as a member of the International Competition Policy Advisory Committee to the Attorney General of the US Department of Justice (1997–2000) and as a commissioner on President Carter’s National Commission for the Review of Antitrust Laws and Procedures (1978–1979). She has advised numerous younger antitrust jurisdictions,
including South Africa, Kenya, Egypt, Tanzania, The Gambia, Indonesia, Russia, Poland and Hungary, and the common market COMESA. Professor Fox received an honorary doctorate degree from the University of Paris-Dauphine in 2009. She was awarded an inaugural Lifetime Achievement award in 2011 by the Global Competition Review for “substantial, lasting and transformational impact on competition policy.” Her books include The Design of Competition Law Institutions: Global Norms, Local Choices, with Michael Trebilcock (Oxford 2013), U.S. Antitrust Law in Comparative Context, cases and materials (3rd ed. West/Reuters 2012), and books on European Union law and on developing countries and competition. Her recent articles include “Extraterritoriality and Input Cartels: Life in the Global Value Lane—The Collision Course with Empagran and How to Avert It,” CPI Antitrust Chronicle (Jan. 2015-2), “When the State Harms Competition – The Role for Competition Law,” with Deborah Healey, 79 Antitrust L.J. 769 (2014), “Monopolization and Abuse of Dominance: Why Europe Is Different,” 59 Antitrust Bull. 129 (2014), and “The Efficiency Paradox” in How the Chicago School Overshot the Mark: The Effect of Conservative Economic Analysis on U.S. Antitrust (Pitofsky, ed., Oxford 2008).
Scott D. Hammond is a partner in the Washington, D.C., office of Gibson, Dunn & Crutcher and co-chair of the firm’s Antitrust and Competition Practice Group. He brings exceptional experience to companies and executives subject to cross-border investigations by the U.S. Department of Justice’s Antitrust Division and the world’s other major competition enforcement authorities. Before joining Gibson Dunn, Mr. Hammond served as the Antitrust Division’s Deputy Assistant Attorney General for Criminal Enforcement — the highest ranking career lawyer in the Antitrust Division. In that capacity, he was responsible for supervising all of the Department of Justice’s domestic and international criminal antitrust investigations as well as overseeing all of the criminal antitrust litigation nationwide. Mr. Hammond was also the principal point of contact for cartel matters with senior competition officials abroad and oversaw the Department’s coordination of joint investigations with more than a dozen jurisdictions in Europe, Asia, Oceania and Latin America. As a result, he is well versed in the anti-cartel enforcement investigative powers as well as the policies and practices of every major competition enforcement authority. His experience allows clients to create a comprehensive and integrated global strategy to avoid and defend against exposure to criminal, civil and administrative sanctions by enforcement agencies working in tandem across the globe. Mr. Hammond provides clients with know-how on the Department of Justice’s latest strategies for monitoring and uncovering antitrust and related federal violations which
Speaker Biographies
can also be employed by companies to design effective compliance programs as well as to ensure early detection of violations. Timely detection can result in a complete pass from prosecution for companies and their executives under the Antitrust Division’s Corporate Leniency Program that Mr. Hammond helped design and that he oversaw while at the Department of Justice. In addition, Mr. Hammond was instrumental in the creation and implementation of similar leniency programs in dozens of jurisdictions around the world.
H. Stephen Harris Jr., is a partner in the Antitrust Practice Group of Winston & Strawn, based in Washington, D.C. He has represented companies in antitrust class action litigation, the defense of cartel investigations, and antitrust merger reviews under the laws of the U.S., the UK, the EU, and numerous other jurisdictions. Mr. Harris has represented companies in numerous industries, including consumer products, electronics, computer hardware and software, health care, insurance, and commodities of various kinds. He has written and lectured frequently on antitrust topics. He was editor-in-chief and co-author of the first edition of the ABA two-volume treatise, Competition Laws Outside the United States, and also co-authored Anti-Monopoly Law and Practice in China (Oxford), Intellectual Property Competition Law and Economics in Asia (Hart) and the Global Antitrust and Compliance Handbook (Oxford). Mr. Harris is a member of the International Task Force of the ABA Section of Antitrust Law, and he formerly served in the Section as a member of the governing Council and as the Section’s International Officer. He is admitted to practice in the District of Columbia, Georgia, New York, and England & Wales. He is also admitted to the bar of the U.S. Supreme Court, the Supreme Court of England & Wales, and the bars of numerous U.S. Circuit Courts of Appeal and U.S. District Courts. He received his B.A. with honors from Cornell University and his J.D. from Columbia University School of Law, where he was a Harlan Fisk Stone Scholar. He was certified with honors by the Parker School of Foreign and Comparative Law at Columbia.
Felipe Irarrázabal is the national economic prosecutor for the Fiscalía Nacional Económica of Chile. He was appointed in April 2010 by the then-President of the Republic Don Sebastian Pinera Echenique, after public competition under the system of the High Public Management, and in August 2014 President Michelle Bachelet Jeria renewed his appointment for an additional period of four years. He is holds a Bachelor of Law and Social Sciences in Free Competition and Regulatory Law from the University of Chile and an LL.M. from Yale Law School. Before becoming National Economic Prosecutor, he served as a member of Philippi, Yrarrázaval, Pulido & Brunner study. He also worked in the New York Office of Cleary, Gottlieb, Steen & Hamilton, and the Ministry of Education. Since 2000 he
is professor of Economic Law at the Faculty of Law of the University of Chile and teaches postgraduate courses at several universities.
Dina Kallay is director for Intellectual Property and Competition at Ericsson, Inc. From 2006 to 2013, she served as counsel for Intellectual Property and International Antitrust at the U.S. Federal Trade Commission, where she worked on antitrust-intellectual property, including standard-setting, policy and enforcement matters, and Asian competition matters. Earlier on, Ms. Kallay practiced antitrust and intellectual property at law firms and in-house, and she clerked at the European Commission Directorate General for Competition. She holds a doctorate from the University of Michigan Law School, and she is a frequent speaker on international antitrust, intellectual property, and standards policy topics.
Johannes Laitenberger is the director-general of the European Commission’s Directorate-General for Competition. He took office on 1 September 2015. Under the political guidance of Commissioner Vestager, he manages the Directorate-General within the framework set by its mission statement and work program. He has been deputy director-general of the Commission’s Legal Service (2014-2015), head of cabinet of President Barroso (2009–2014), spokesperson of the European Commission (2005–2009) and head of cabinet of Commissioner Reding (2003-04). Mr. Laitenberger started his career in the European Institutions in 1996 as an adviser in the General Secretariat of the Council. In 1999, he joined the commission as a case handler in the Directorate-General for Competition and soon became a member of Commissioner Reding’s cabinet (1999–2003). He studied Philosophy at the Portuguese Catholic University in Lisbon, and law at the Rheinische Friedrich-Wilhelms-Universität, Bonn. He qualified as a German lawyer.
John Temple Lang was in the European Commission from 1974 till 2000. He was a director in the Competition Directorate General, having previously been in the Legal Service. From 2000 until early in 2016 he was in the Brussels office of Cleary Gottlieb Steen & Hamilton LLP. He has spoken many times at Fordham antitrust conferences, and he has published more than 300 papers on European law. He is a Senior Visiting Research Fellow in Oxford, and a professor in Trinity College Dublin.
Andreas Mundt has been president of the German Bundeskartellamt (Federal Cartel Office) since December 2009. In September 2013 he was elected as the Steering Group Chair of the International Competition Network and was re-elected for a second term in May 2015. Since 2010, Mr. Mundt has been a member of the Bureau of the OECD Competition Committee. After qualifying as a
lawyer following studies at the University of Bonn and the University of Lausanne, Switzerland, he entered the Federal Ministry of Economics where he worked from 1991 to 1993. He then joined the staff of the Free Democratic Party in the German Parliament from 1993 to 2000, where he was in charge of the portfolio of labour and social law. In 2000, Mr. Mundt joined the Bundeskartellamt as rapporteur, with responsibility for banking and card payment systems issues. He was head of the International Section of the Bundeskartellamt from 2001 to 2005 and director of general policy from 2005 to 2009.
Hideo Nakajima is secretary general of the Japan Fair Trade Commission. He joined the commission in 2005 and has served as deputy secretary general for international affairs, Secretariat (2005-2008); director general for the Trade Practices Department (2008-2009); director general for the Investigation Bureau (2009-2012); and he directed international cartel cases including auto parts. Previously he worked in various bureaus of the Ministry of Finance, including the International Finance Bureau and Finance Bureau, and he was as Director General for Budget, Personnel & Management System Department of Asia Development Bank in Manila.
Alejandra Palacios Prieto was appointed Chairwoman of the Mexican Federal Economic Competition Commission in September 2013 for a four-year term. Ms. Palacios holds a Master’s Degree in Business Administration and a Bachelor’s Degree in Economics from the Instituto Tecnológico Autónomo de México. She also holds a Master’s Degree in Public Administration and Public Policy from the Centro de Investigación y Docencia Económica. Prior to her appointment to the COFECE, she was the Director of Good Governance Projects at the Mexican Institute for Competitiveness, a Mexican public policy think-tank, where she was responsible for research projects in the economic regulation, public procurement and telecommunication areas, among others. Ms. Palacios also served as a consultant of the former Federal Telecommunications Commission and the Mexican Institute for Social Security, mainly focused on carrying out research and evaluation projects derived from collaboration agreements among these institutions and the OECD. She has been a Lecturer and Academic Coordinator of the Economics Department at the ITAM
Edith Ramirez was sworn in as a commissioner of the U.S. Federal Trade Commission in April 2010 and became chairwoman of the FTC in March 2013. At the FTC, Chairwoman Ramirez has focused on promoting competition and innovation in the technology and healthcare sectors, protecting consumers from deceptive and unfair practices, and safeguarding consumer privacy. Before joining the FTC, Chairwoman Ramirez was a partner in the Los Angeles office of Quinn Emanuel Urquhart
& Sullivan, LLP, where she litigated complex business disputes, including intellectual property, antitrust, unfair competition, and advertising matters. She is a graduate of Harvard Law School, where she was an editor of the Harvard Law Review, and Harvard College.
Han Li Toh is the chief executive of the Competition Commission of Singapore. From 2009 to Sep 2013, Mr. Toh was the Assistant Chief Executive (Legal & Enforcement) at CCS. During his term, both the Competition Bar and Competition Law jurisprudence developed significantly with major legal precedents being established in the area of anti-competitive agreements, abuse of dominance, and financial penalties. Mr. Toh has represented CCS as its counsel in every appeal before the Competition Appeal Board. He is a Singapore Legal Service officer. Prior to being seconded to CCS in 2009, he served in various positions in the public sector, including as a justices’ law clerk to the Chief Justice and the Court of Appeal of Singapore, deputy public prosecutor and state counsel, senior assistant registrar at the Supreme Court and Registrar, and district judge of the Subordinate Courts. Mr. Toh also serves on several tribunals including the Military Court of Appeal and the Copyright Tribunal. He read law at Cambridge University on a President cum Overseas Merit Scholarship, obtained his Masters of Laws from the University of Chicago, and holds a Masters in Public Management from the Lee Kuan Yew School of Public Policy. He is admitted to practice law in Singapore, England, and New York. In 2010 he was conferred the Public Administration Medal (Silver) in recognition of his contribution to Public Service.
Randy Tritell is the director of the Federal Trade Commission’s Office of International Affairs, where he is responsible for coordinating the FTC’s international antitrust and consumer protection policies and the FTC’s involvement in cases that raise international issues. He represents the FTC in multilateral fora including the International Competition Network, in which he serves on the Steering Group, and the OECD Competition Committee. Mr. Tritell is responsible for the FTC’s negotiation and implementation of bilateral international cooperation agreements and the competition and consumer protection provisions of U.S. free trade agreements. Prior to joining the FTC in 1998, Mr. Tritell was a partner with Weil, Gotshal & Manges LLP, practicing in the firm’s New York office and opening the firm’s Brussels office in 1992. Mr. Tritell began his career at the FTC, where he served in several positions including Assistant to Bureau of Consumer Protection Director Timothy Muris, Attorney Advisor to Commissioner Terry Calvani, and Executive Assistant to the Chairman. Mr. Tritell obtained his law degree from the University of Pennsylvania Law School, where he was an Editor of the Law Review, and his B.A. from Stony Brook University. Mr. Tritell is active in the American Bar Association’s Section of Antitrust Law, in
which he co-chairs the International Task Force and serves on the advisory board of the Journal of Antitrust Enforcement and of the Fordham Corporate Law Institute. He is a frequent lecturer and author on international antitrust issues.
Elizabeth Xiao-Ru Wang is a senior vice president at the Boston office of Compass Lexecon. She is also a senior research fellow and economist at the Competition Law Centre of the University of International Business and Economics in China. Dr. Wang has provided economic analyses on issues of merger review, government investigation, commercial disputes, and assessment of damages, especially in cross-border matters. She has been involved in casework in a variety of industries, including high tech, health care, financial markets, pharmaceutical, airlines, and consumer products. Dr. Wang has submitted reports to antitrust government agencies in the United States and in China, and she has frequently published and spoken on antitrust and intellectual property issues. She has testified at a U.S. congressional hearing on antitrust issues in China. Dr. Wang is active in the American Bar Association, serves as co-chair of the China Committee and a vice chair of the American Bar Association Section of International Law’s International Antitrust Committee. Dr. Wang won the ABA International Law Section award of 2014 Outstanding Collaboration between Committees, and her article won an award in the 2016 Antitrust Writing Awards. She is also named to the 2016 International Who’s Who of Competition Economists list.
Koren W. Wong-Ervin is director of the Global Antitrust Institute and an adjunct professor of law at George Mason University’s Antonin Scalia Law School. Previously, she served as counsel for intellectual property and international antitrust in the Office of International Affairs at the U.S. Federal Trade Commission, where she focused on issues at the intersection of antitrust and intellectual property. She also served as an attorney advisor to Federal Trade Commissioner Joshua D. Wright. Prior to working at the Commission, Ms. Wong-Ervin spent almost a decade in private practice, focusing on antitrust litigation and government investigations with a particular focus on issues affecting clients in the technology and financial industries. She is a frequent author and speaker on issues at the intersection of antitrust and intellectual property. She currently serves on the American Bar Association Section of Antitrust Law’s International Task Force and Due Process Task Force, and she was previously co-chair of the ABA’s 2016 Antitrust in Asia Conference. From 2012 to 2015, she served as a vice chair of the Intellectual Property Committee within the Section of Antitrust Law. Prior to that, she served on the editorial boards of Antitrust Law Developments (7th edition), the leading two-volume antitrust treatise, and the 2003 Annual Review of Antitrust Law Developments, an annual supplement to the fifth edition of the treatise. Ms. Wong-Ervin is also co-editor of Competition Policy International‘s North America Column. She graduated second in her class from the University of California–Hastings College of Law, where she was associate editor of the Hastings Law Review. She earned her B.S. in Political Science magna cum laude from Santa Clara University.
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