International discipline on trade and
competition: an update
Frederic Jenny
Professor of economics ESSEC Business School
Chair, OECD Competition Committee
New Delhi, November 19 2013
Issues to be discussed
Global cartels are alive and well
The Automotive parts cartel
The Cathode Ray Tube and and the LCD display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Major changes in the Potash and Phosphate cartels?
The role of state support for export cartels
Recent trends in the develoment of competition law systems in the last decade
Proliferation of competition laws: is the end in sight ?
The rise of regional cooperation
Conclusions
Automotive parts cartel
A large number of price-fixing investigations have been launched in the past two
years by at least six antitrust authorities around the world targeting industries
manufacturing mechanical and electrical automotive parts.
It appears that roughly 34 separate cartels are under investigation, most of them
global in scope.
More than 80 companies have been identified so far as targets of these probes, with
that number likely to grow as more prosecutions are finalized.
As of September 2013, a total of almost $2.0 billion in corporate fines have been
imposed. At the rate these cases are evolving, there is a good chance that monetary
penalties eventually may climb to $5 billion or more. The DOJ has so far indicted 21
auto-parts executives, of which 17 have agreed to prison sentences totaling 233
months.
John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust
Institute
Automotive parts industry : a global industry
The auto industry is the prototypical “global industry.” That is, its sourcing
methods are virtually identical across markets with significant auto
assembly: North America, the EU, Japan, China, Brazil, and others.
Auto parts are bought through Requests for Proposals (i.e., “tenders”)
issued by the automakers.
These RFPs contain tight quality and design specifications. When a proposal (a
bid) was submitted, virtually the only consideration was price.
The RFPs imposed product homogeneity, thus eliminating one potential
factor that tends to frustrate the formation and smooth operation of
cartels.
In short, bid rigging was made easier. Once a bid was accepted, supply
contracts typically lasted for several years (until a car model was totally
redesigned), which also prevents entry.
John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust
Institute
Automotive parts cartel:
are scructural screen useful?
For the products alleged to have been price-rigged, there are few suppliers
that tend to be geographically clustered.
For example, the four Japanese suppliers of Auto Lighting Products control well
over 90% of U.S. national supply. Similarly, the top four wiring harness suppliers
control 77% of the global market (Sedgwick 2013).
To some extent, automakers’ policies of running qualification programs
for suppliers created barriers to entry and ultimately contributed to a high
degree of supplier concentration for assembly plants in most markets.
John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust
Institute
Automotive parts cartel:
Role of international cooperation
(…) In February 2010 three antitrust authorities conducted coordinated raids
worldwide. The DOJ, EC, and JFTC raided manufacturers of three types of
auto parts: Wiring Harnesses, Fuel Senders, and Instrument Panel Clusters.
Perhaps aided by Amnesty-Plus programs, further cartels were investigated:
Aftermarket Sheet Metals in 2010; Aftermarket Auto Lights in July
2010;;Occupant Safety Systems and Auto Refrigerants in February 2011; Auto
Bearings, Aftermarket Auto Lights, and Small Electric Motor Components in July
2011; New Auto Lights in March 2012; Thermal Systems in July 2012; and Auto
Marine Shipping in September 2012. The Canadian Competition Bureau also
joined in fairly early. By 2012, the Mexican and South Korean antitrust
authorities were cooperating with the first four. And the German Federal Cartel
Office unearthed two auto-parts cartels on its own territory.
Clearly, close cooperation and coordination among these far-flung
antitrust authorities has greatly aided in the rapid dissemination of
information needed to begin the multiple investigations.
John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust
Institute
Automotive parts cartel:
Are BRICS countries affected ?
In March 2013, the Indian Competition Commission began an investigation
into whether 17 auto manufacturers were colluding on the sales of car
parts to independent dealers (Vyas and Thakkar 2013).
In August 2013, speculation began to mount that the new China antitrust
authority was soon going to investigate price fixing in the automobile
industry. However, this investigation seems to be directed at whole finished
imported vehicles, not parts (Telegraph 2013).
John M. Connor, Is Auto Parts Evolving into a Supercartel?, November 7, 2013 American Antitrust
Institute
Issues to be discussed
Global cartels are alive and well
The Automotive parts cartel
The Cathode Ray Tube and and the LCD display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Major changes in the Potash and Phosphate cartels?
The role of state support for export cartels
Recent trends in the develoment of competition law systems in the last decade
Proliferation of competition laws: is the end in sight ?
The rise of regional cooperation
Conclusions
Cathode Ray Tube cartels
December 5 2012
The European Commission fined, on 5 December, seven companies (LG
Electronics, Philips, Samsung, Panasonic, MTPD (a subsidiary of Panasonic),
Toshiba and Technicolor) that have taken part in two distinct cartels in the
cathode ray tube sector, one relating to TV sets and the other to
computers.
It imposed a total fine of €1.47 billion for breaking the Community's
competition rules for a period of ten years, from 1996 to 2006.
For almost ten years ( from 1996 to 2006) they fixed prices, shared markets,
allocated customers between themselves, coordinated output capacity
and exchanged commercially sensitive information. They worked out the
nature of their concerted action during green meetings', so called because
they took place around a game of golf. Preparation and implementation were
then carried out through lower-level meetings, often referred to as glass
meetings', on a quarterly, monthly or even weekly basis in various locations
in Asia (Taiwan, Korea, Japan, Malaysia, Indonesia, Thailand, Hong Kong,
etc) and Europe (Amsterdam, Budapest, Glasgow, Paris or Rome).
Europolitics, ‘COMPETITION : RECORD FINE FOR CATHODE RAY TUBE CARTEL”,
décembre 2012,
7
Cathode Ray Tube cartels
December 5 2012
The two cartels are among the most organised cartels that the Commission has
investigated.
The cartelists also monitored the implementation, including auditing compliance with the
capacity restrictions by plant visits in the case of the computer monitor tubes cartel.
Cathode ray tubes constitute a very important component in the making of television
and computer screens, accounting for 50 to 70% of the price.
LCD panels cartel case ( US)
Executives from AU Optronics Corporation (“AUO”), a Taiwanese manufacturer of LCD
panels participated in a series of meetings in Taiwan with Korean and Taiwanese
manufacturers of LCD panels, at which participants were found to have exchanged
information on future pricing strategy and discussed ways to stabilize prices for LCD
panels incorporated into notebook computers and desktop monitors.
After an 8-week trial in San Francisco, AUO, its U.S. subsidiary, and two former senior
executives were convicted of participating in an illegal price-fixing conspiracy.
The trial judge imposed a fine on AUO of US$500 million and ordered it to implement
an “effective compliance and ethics program.” The trial judge sentenced each of the
convicted executives to serve three years in prison and to pay a US$200,000 fine.
LCD Panel case, US District Court Issues,
July 16, 2013
The Department of Justice (“DOJ”), prosecuting for the U.S.
government, contended that a foreign agreement to fix prices, no matter
how reasonable, is an automatic violation of U.S. antitrust law, requiring
proof of neither an intent to curb competition nor an anti-competitive
effect. AUO disagreed, arguing that the U.S. antitrust law prohibits only
foreign conduct that was specifically intended to substantially affect American
commerce and did have a substantial effect on U.S. commerce.
AUO also argued that it should be entitled to present arguments that its
conduct was justified under the “rule of reason.”
The trial court rejected AUO’s arguments, which will now be raised in the
court of appeals.
LCD Panel case, US District Court Issues,
July 16, 2013
AUO has argued on appeal that it did not import any products directly; it only
produced overseas a component that was incorporated into finished products
(the notebooks, flat-panel TVs and monitors), which were imported by others.
Under AUO’s interpretation, price-fixing activities in foreign markets for
components that are used in other countries to manufacture finished
products that may be later imported into the U.S. should not be subject
to U.S. price-fixing laws. The DOJ disagrees, arguing that the U.S. antitrust
law applies to conduct in other countries intended to affect U.S. commerce,
and which did have a substantial effect on U.S. commerce. According to the
DOJ, the U.S. law applies, not just to the conduct of direct importers of a
product, but also to the conduct of overseas manufacturers of
components who know that their products will be incorporated into
finished goods sold in the U.S.
Further, many countries in Asia have similar regulations, ranging from the
more established antitrust regulations found in Korea and Japan (which
continue to be enforced and interpreted aggressively) to the more recent
regulations in China, Singapore and Hong Kong.
China sanctions an international cartel for the
first time (January 4 2013)
China's National Development and Reform Commission (NDRC) imposed fines
of RM 353 million (approximately USD 56 million) on six international
manufacturers of liquid crystal display (LCD) panels for price-fixing in
connection with the so-called LCD cartel.
The sanctioned LCD panel maker are: Samsung and LG of Korea, and Chimei,
AU Optronics, Chunghwa Picture Tubes and Hannstar of Chinese Taipei.
They met almost monthly in Taiwan or Korea between 2001 and 2006.
During 53 so-called "Crystal Meetings," the companies exchanged market
information and discussed prices for LCD panels. Over 5 million LCD
panels were sold in China during this time period by the cartel.
NDRC ordered the six companies to pay a total fine of RMB 144 million
(approximately USD 23 million). In addition, it ordered them to pay RMB 172
million (approximately USD 27 million) in restitution to Chinese TV makers,
corresponding to the amount such customers overpaid due to higher
prices imposed by the cartel Finally, NDRC ordered the confiscation of the
cartel's illegal gains of RMB 36.75 million (approximately USD 5.7 million).
Interest rate cartel
BRUSSELS, Belgium (Reuters
EU antitrust regulators will levy a record fine of at least €1.5 billion ($2.02 billion) on
six financial institutions, including Barclays and Royal Bank of Scotland, for rigging the
yen LIBOR interest rate benchmark, a banking industry source said on Wednesday
[Nov. 6 2013].
The fines, against six banks, are expected to be announced within the next month, one
official said, bringing to an end a more than two-year antitrust investigation by Brussels
competition authorities into whether banks colluded to manipulate widely used
benchmarks, such as the London interbank offered rate, or Libor, and its lesser-known
cousin, the euro interbank offered rate, or Euribor.
The penalties are likely to be in the hundreds of millions of euros for individual banks,
with penalties possibly approaching 1 billion euros ($1.35 billion) for large banks that
competition regulators believe were heavily involved in rate rigging, the officials said.
That would likely make the penalties among the largest ever imposed by EU regulators
Fixing the interest rates (Libor, Euribor etc....)
According to the Justice Department, a Rabobank employee trying to
manipulate Libor boasted to a colleague in an email: "Don't worry mate-there's bigger crooks in the markets than us guys." That assertion may
be about to be tested.
Interest rate cartel
BRUSSELS, Belgium (Reuters)
Mr. Almunia called the allegations about banks' behavior "shocking. "Speaking in
Brussels last month, Mr. Almunia said the probe of the interest-rate cartels was "very
well advanced" and said there would be news soon."This is a case of primary
importance," he said.
Almunia wants to hand out the fines by the end of the year, reinforcing his emerging
legacy as a firm penalizer of banks' wrongdoing since the financial crisis struck five years
ago. His investigators say interest rate derivatives' traders colluded to rig the LIBOR
and Euribor benchmarks, using advanced knowledge of the cost of borrowing to
bolster their profits. Such cartels are illegal.
LIBOR is based on a survey of what banks would charge each other for loans. Other
regulators have already found that traders colluded on answers that could nudge the
reported rates by amounts that were tiny but translated into big profits
Rigging the rates on the currencies market
(October 16 2013)
The investigation (of the UK Financial Conduct Authority (FCA)) is said to be
focusing on the so-called “WM/Reuters" rates that are used by investors as a
benchmark to work out what they pay for currencies and the day-to-day value
of their portfolios.
Due to the size of the foreign exchange market, even tiny changes in the
recorded rates could affect the value of investment funds, as well as pensions
and savings.
The US Department of Justice has already confirmed it is investigating
potential currency market manipulation, while the European authorities have
launched their own antitrust review.
Foreign exchange manipulation
Some of the world's biggest banks have suspended more than a dozen of their star
traders in New York, London and Tokyo as the investigation into manipulation of
the $US5.3 trillion ($5.6 trillion)-a-day global foreign currency market heats up.
The investigation has been focusing on electronic chat rooms with names such as
The Cartel and The Bandits' Club in which traders appeared to swap marketsensitive information with their competitors while joking about their ability to
influence exchange rates. Their banter also reportedly contains frequent
references to drug use and sexual acts.
A key issue in the probe is whether traders tried to manipulate currency "fixes"
by pushing through trades before and during the 60-second windows when
currency benchmark rates are set. These benchmark rates – published hourly for
160 currencies and half-hourly for the 21 most-traded currencies – determine
what investors and businesses pay for their foreign exchange.
7 november2013, Banks set to pay up for misdeeds , The Australian Financial Review
Issues to be discussed
Global cartels are alive and well
The Automotive parts cartel
The Cathode Ray Tube and and the LCD display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Major changes in the Potash and Phosphate cartels?
The role of state support for export cartels
Recent trends in the develoment of competition law systems in the last decade
Proliferation of competition laws: is the end in sight ?
The rise of regional cooperation
Conclusions
Issues to be discussed
Global cartels are alive and well
The Automotive parts cartel
The Cathode Ray Tube and and the LCD display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Major changes in the Potash and Phosphate cartels
The role of state support for export cartels
Recent trends in the develoment of competition law systems in the last decade
Proliferation of competition laws: is the end in sight ?
The rise of regional cooperation
Conclusions
India cuts phosphate and potash subsidies
May 2 2013: India is cutting subsidies on phosphate and potash fertilizers
in fiscal year, which began in April, in an effort to cut fiscal deficit. “According to
the new rates, the total subsidy for potash and phosphate fertilizers for the
financial year 2013-14 would be reduced by around 15%,” said finance minister
P. Chidambaram...
Jul. 25th, 2013: Depreciation of the Indian currency and reduced government
subsidies have made imported phosphate and potash fertilizer more expensive
for manufacturers and farmers.
The unfavourable conditions in India could last up to a year, or until after the
next general election, when it may be easier for the government to re-balance
fertilizer subsidies, said Mosaic chief executive officer Jim Prokopanko.
“They know they’ve got a deficit that has to be tamed, and they’ve chosen, if
ham-handedly, to reduce payments for potash and phosphate imports.”Mosaic
estimated current quarter potash prices at $330 to $360 per tonne, compared
with an average of $368 last quarter.
The potash trade
Russia
Canada
Potash.Corp
Mosaic
Agrium
Silvinit
Belarus
Uralkali
Belaruskali
IPC
BPC
Canpotex
World market share 35%
US
Canada
Other importers
China
India
Brazil, Malaysia, Indonesia
Etc..
World market share 30%
The international potash cartel in difficulties,
September 2013
Uralkali announced pulling out of the international cartel named Belarus
Potash Company (BPC).
BPC used to market potash for Uralkali and Belaruskali and Canpotex for three
Canadian producers -- Potash Corporation of Saskatchewan, Mosaic and
Agrium.
Together, BPC and Canpotex monopolised the potash business.
The international potash cartel in difficulties,
September 2013
This happened at a time when global potash capacity was increasing
against less robust consumption growth ( in particular lower demand due
to the falling Indian rupee)
As a result, the potash market became more competitive with certain
producers acting aggressively to gain a larger market share, which
resulted in price decline in all major markets.
In December 2012 there appeared a decree by the Belarusian president,
which cancelled the exclusive right of BPC to export Belarusian potash.
Following the issue of the decree, Belaruskali has made a number of deliveries
outside BPC.“
Sunday 10 November 2013
The international potash cartel in difficulties,
September 2013
“Against such environment and Belaruskali's behaviour, Uralkali had to revise
its strategy and maximise output selling it through its own trader, as we
believe that Uralkali is most favourably positioned in such conditions being the
lowest-cost producer and having the opportunity to launch new capacities at
the minimal cost," the spokesman said.
"Being the lowest-cost producer with highest potash capacity, having
the ability to supply to China by rail, we hope to increase our share in all
major markets, above all in China, India and Brazil."
Starting from August, Uralkali is going to use 100pc of its mine capacity, which
could produce 13m tonnes a year.
"Apart from enabling us to increase our share in key markets, high capacity
utilisation will result in economy of scale," Uralkali said.
Sunday 10 November 2013
The international potash cartel in difficulties,
September 2013
.
The move was likely to result in global potash prices plunging from the
current $400 (£263) a tonne to about $300 in the second half of the year,
according to Vladislav Baumgertner, Uralkali's chief executive.
Note that in the pre-crisis commodity boom, potash prices hit $1,000 a tonne.
"Uralkali used to be the most disciplined potash producer sticking to ‘price over
volume strategy'," a spokesperson for Uralkali told The Daily Telegraph. “
Sunday 10 November 2013
India bags good deal in potash as cartel falls
apart, September 2013
India contracted potash imports at $375 a tonne for August-January shipments.
This translates into a huge discount of $52 a tonne on prices earlier
charged by two largest potash suppliers, Uralkali of Russia and
Belaruskali of Belarus.
Earlier, the contracts were at $427 a tonne for shipments round the year.
The cartel then refused to cut prices. By July end Indian had already
imported 1.8 million tonnes at the old price out of the total contracted
3.48 million tonnes for 2013. The remaining 1.68 million tonnes would
come at the discounted price.
Taking advantage of the split in the potash cartel, Indian negotiators pushed
hard over the past few days to get the discount in the net rate, which includes
the cost of potash, insurance, freight and handling.
The discount includes a $3 a tonne incentive on importing all the contracted
potash. India would also gain from 180-day credit, apart from an additional $35 a tonne discount on incidental charges.
Financial Chronicle, 23 septembre 2013
The international potash cartel in difficulties,
September 2013
"We have discussed Uralkali's new strategy with industry consultants Ferteco,"
City broker Liberum said. "We expect lower potash prices in the short-term
but expect an accelerated path to a tighter supply-demand balance as
expansions are delayed and demand is restimulated. We are not
changing our long-term potash price assumption of $400 a tonne but are
cutting our 2014 and 2015 potash price assumptions to $300 to 350 a
tonne.“
Sunday 10 November 2013
Short term gain but for how long ?
Lukashenko lambasted Uralkali, saying, "Only an idiot will work against his
own interests. Our re-merger with the Russian company will raise prices
for potash fertilizers. Separation will definitely bring the prices down.“
Globes' correspondent, 29 septembre 2013, Israel Business Arena
Note: The break-up of the Uralkali-Belaruskali export alliance, which controlled
more than 40 percent of the world potash market, is predicted to push global
potash prices down 20 percent and result for Belarus in a loss of some $890
million in export proceeds this year (2013). Potash reportedly accounts for
about 10 percent of the nation’s total export earnings and 12 percent of
government revenue.
Investors react positively to the restoration of
the Russian potash cartel
In the stock market, Israel Chemicals Ltd. (TASE: ICL) rose 5.8%, for the
biggest gain among Tel Aviv 25 shares, and on the day's biggest turnover of
NIS 89.4 million, after Belarus President Alexander Lukashenko basically
said that the Russian potash cartel would be restored. Parent company
Israel Corporation (TASE: ILCO) rose 4.4%.
Aviv Levy and Globes' correspondent, 29 septembrer2013, Israel Business Arena
China’s strategy: vertical integration
China has acquired a 12.5 percent stake in Russian potash producer
Uralkali in a deal that could help Beijing secure stable supplies of the soil
nutrient, put new pressure on prices and reduce the chances of a RussiaBelarus cartel being revived.
The investment by China’s US$575 billion sovereign wealth fund, China
Investment Corp, is the latest twist in a saga that began when the world’s
leading potash producer quit the lucrative sales partnership with Belarus in July
and led to the company’s chief executive being jailed.
*
The deal is a rare example of China, the world’s largest consumer of
potash, acquiring direct ownership of Russian natural resource assets,
although it is only the latest of several commodity-related investments by
CIC.
September 25 2013
Issues to be discussed
Global cartels are alive and well
The Automotive parts cartel
The Cathode Ray Tube and and the LCD display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Major changes in the Potash and Phosphate cartels
The role of state support for export cartels
Recent trends in the develoment of competition law systems in the last decade
Proliferation of competition laws: is the end in sight ?
The rise of regional cooperation
Conclusions
Issues to be discussed
Global cartels are alive and well
The Automotive parts cartel
The Cathode Ray Tube and and the LCD display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Major changes in the Potash and Phosphate cartels
The role of state support for export cartels
Recent trends in the develoment of competition law systems in the last decade
Proliferation of competition laws: is the end in sight ?
The rise of regional cooperation
Conclusions
The world market for phosphate
Rock Reserves Are Geographically Concentrated
The basis for success in the phosphate business is access to lower-cost
phosphate rock, a resource that is geographically concentrated. China, the US
and Morocco together account for approximately two-thirds of world rock
production and Morocco alone typically supplies more than one-third of global
exports.
Phosphate Product Export Distribution
With access to large, high-quality reserves, Morocco is the largest exporter
of phosphate rock and phosphoric acid. Office Chérifien des Phosphates
(OCP) has announced plans to increase its capability to produce and export
fertilizer products such as DAP and MAP. Industry consultants forecast
that this increased processing capability could result in reduced exports
of phosphate rock and phosphoric acid, tightening supply of these products
for non-integrated phosphate producers.
The U.S. is a net exporter of phosphorus, accounting for 35 percent of
world exports
India’s phosphate imports
India is the second largest global consumer of phosphates. With very limited
indigenous rock supplies, it must import phosphate rock and phosphoric acid to
produce DAP domestically. As a result, it is the top importer of these raw materials,
accounting for approximately one quarter of world rock imports and almost half of
phosphoric acid trade.
On May 2, 2013 India cut its subsidies on phosphate fertilizers in an effort to cut
fiscal deficit. “According to the new rates, the total subsidy for potash and
phosphate fertilizers for the financial year 2013-14 would be reduced by around
15%,” said finance minister P. Chidambaram...
India's phosphate imports look to fall to between 4 million and 5 million tonnes in
2013, from last year's level around 6 million tonnes.
The demise of the phosphate fertilizer cartel
(October 2013)
The end of the Phosphate Chemicals Export Association, or PhosChem,
which has had a dominant position in North American exports of the $30bn
global phosphates market, comes after Uralkali, the leading potash group,
broke up the Belarusian Potash Company cartel in July.
PhosChem - which exports phosphates produced by PotashCorp of
Saskatchewan and Mosaic – operates under the Webb-Pomerene Act of 1918,
which relieves some US industries from antitrust laws, allowing them to negotiate
prices together to promote exports.
The break-up of Phos -Chem and BPC highlights the diverging interests of
various fertiliser groups. Mosaic formed a phosphate joint venture with
Saudi Arabian mining and metals company Ma'aden and petrochemical
company Saudi Basic Industries Corp, putting itself and its partners in
competition with PhosChem, said industry executives.
The end of PhosChem signalled the end of the North American industry's
influence in the phosphates market, said analysts.
End of cartel brings further shake-up in fertiliser market; COMMODITIES, Emiko Terazono , 3 october
2013
History of the Webb-Pomerene Act
The Webb-Pomerene Act was passed "to aid and encourage our
manufacturers and producers to extend our foreign trade." H.R.Rep. No.
1118, 64th Cong., 1st Sess., 1 (1916). Congress felt that American firms
needed the power to form joint export associations in order to compete with
foreign cartels. But while Congress was willing to create an exemption from the
antitrust laws to serve this narrow purpose, the exemption created was carefully
hedged in to avoid substantial injury to domestic interests. Congress evidently
made the economic judgment that joint export associations could increase
American foreign trade without depriving American consumers of the main
advantages of competition.
United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States
v. Phosphate Export Assn. - 393 U.S. 199 (1968)
History of the Webb-Pomerene Act
It is clear what Congress was doing; it thought it could increase American
exports by depriving foreigners of the benefits of competition among
American firms, without in any significant way injuring American
consumers. .
United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States
v. Phosphate Export Assn. - 393 U.S. 199 (1968)
History of the Webb-Pomerene Act
During the hearings on the bill, one Congressman, Charles C. Carlin of
Virginia, stated clearly what was later to be one of the dominant themes of the
floor debate. In a question addressed to the Chairman of the Federal Trade
Commission, who was testifying in support of the bill, he said:
"I am frank to say that, personally, I have no sympathy with what a foreigner
pays for our products; I would like to see the American manufacturers get
the largest price possible, but if, by indirection, we are going to set up a
system which is going to fix a higher price eventually at home, through a
combination as suggested in this bill, I think you can very well see that such
a system is a very dangerous one.“
United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States
v. Phosphate Export Assn. - 393 U.S. 199 (1968)
History of the Webb-Pomerene Act
Hearings before the House Committee on the Judiciary on H.R. 16707, 64th
Cong., 1st Sess., 7 (1916).
. Senator Pomerene said bluntly,
"[W]e have not reached that high plane of business morals which will permit
us to extend the same privileges to the peoples of the earth outside of the
United States that we extend to those within the United States.“
55 Cong.Rec. 2787 (1917)
Congressman Webb declared,
"I would be willing that there should be a combination between anybody or
anything for the purpose of capturing the trade of the world, if they do not
punish the people of the United States in doing it."
55 Cong.Rec. 3580 (1917).
United States Alkali Export Assn. v. United States, 325 U. S. 196, 325 U. S. 211 (1945) United States
v. Phosphate Export Assn. - 393 U.S. 199 (1968)
Waning support for Webb Pomerene
Associations
Economic research demonstrates that the adverse economic effects of
anticompetitive practices by Webb-Pomerene export associations generally far
outweigh any benefits. The American Bar Association proposed in the 1990s that all
countries agree to repeal statutes granting immunity to export cartels.
A consensus has therefore developed among the legal-economic community that
export associations are generally undesirable. To date, the FTC has issued automatic
annual approvals to export associations. A lack of enforcement action by the agency
is troubling, particularly in light of its authority to oversee xport associations under
Webb-Pomerene and the pressing competitive questions raised by PhosChem. For
example, have PhosChem’s members PotashCorp and Mosaic harmed the competitive
position of smaller phosphorus firms in the domestic market? Moreover, must small
non-integrated fertilizer blenders in the domestic market for wholesale and retail sales
refrain from domestic or foreign competition in order to obtain phosphorus inputs?
Finally, can two globally dominant firms achieve any meaningful efficiency gains or
countervailing power that is in the public interest, foreign or domestic? These
questions deserve further scrutiny and should not be restricted to members of
PhosChem, or even phosphorus. Rather, antitrust scrutiny should also extend to all
producers and potash, nitrogen, and even sulfur.
AAI
Issues to be discussed
Global cartels are alive and well
The Automotive parts cartel
The Cathode Ray Tube and and the LCD display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Major changes in the Potash and Phosphate cartels
The role of state support for export cartels
Recent trends in the develoment of competition law systems in the last decade
Proliferation of competition laws: is the end in sight ?
The rise of regional cooperation
Conclusions
52 new competition regimes since 2000
2000
Armenia
Indonesia
Ghana
2001
Jersey
Malta
Slovakia
2002
Latvia
Macedonia
Papua
New Guinea
2003
Ethiopia
Namibia
Tanzania
Barbados
2004
Bosnia
Herzegovina
Lithuania
Jordan
Lao RDP
Saudi
Arabia
2005
Montenegro
Singapore
Egypt
Madagascar
Honduras
2006
Russia
Qatar
Nicaruaga
Honduras
Guyana
2007
China
Nepal
Gambia
Mauritius
Swaziland
2008
Faroe Islands
Syria
Dominican
Republic
Ecuador
Bolivia
2009
Botswana
Seychelles
Columbia
2010
Burundi
2011
Malaysia
2012
2013
Mozambique
Paraguay
Kazakhstan
Antigua
Berbuda
Vietnam
El Salvador
Uruguay
Dominican
Republic
Issues to be discussed
New developments with respect to international cartels
The Automotive parts cartel
The Cathode Ray Tube and and the LCD Display cartel
The Foreign Exchange cartel
The Libor and Euribor cartels
Significance of the new developments regarding the Potash and Phosphate cartels
State support for export cartels
Trends in the develoment of competition law systems in the last decade
At the national level
At the regional level
Conclusions
Caricom Competition Commission 2001
inaugurated 2008
The CARICOM Competition Commission was established under Article 171 of
the Revised Treaty of Chaguaramas; and was inaugurated on January 18, 2008.
The following are among the main functions to be performed by the Commission:
- to apply the rules of competition in respect of anti-competitive cross-border
business conduct
- to promote and protect competition in the Community
- to monitor anti-competitive practices of enterprises operating in the CSME
- to investigate and arbitrate cross-border disputes
- to keep the Community Competition Policy under review and advise and make
recommendations to COTED to enhance its effectiveness
- to provide support to Member States in promoting and protecting consumer
welfare
- to develop and disseminate information about Competition Policy and
Consumer Protection Policy
By virtue of Article 174 (6) Member States are required to enact legislation to
ensure that determinations of the Commission are enforceable in their
jurisdictions.
2002 Southern African Customs Union (SACU)
The process of considering competition issues within SACU is driven by the
Article 40 and Article 41 of the 2002 SACU Agreement. Article 40 deals with
competition policy and the requirement for Member States to all have
competition policies as a pre-requisite for a SACU wide cooperation
mechanism. The cooperation mechanism should also point out the process
with respect to the enforcement of competition policies and regulations within
SACU.
Article 41 requires that policies and instruments be developed to address unfair
trade practices between Member States and for these to be annexed to the
SACU Agreement.
When the new SACU Agreement came into effect in 2004, the process of
developing annexes to these articles started with an initiative by the Trade and
Industry Liaison Committee work on the development of an Annex on Unfair
Trade Practices as contained in Article.
The draft annexes to the 2002 SACU Agreement on unfair trade practices and
cooperating mechanisms on competition policy, competition law and
regulations are currently being finalized on in terms of Article 40 and Article 41.
WAEMU Competition law and policy 2002
The UEMOA Community’s competition law is based on three Regulations and
two Directives that were introduced in 2002, and that came into effect on 1
January 2003.
The three Regulations cover concerted anti-competitive practices, abuses of a
dominant market position, and state aid respectively. The two Directives apply
to (1) transparency in nfinancial relations between Member States and public
enterprises, and between Member
States and foreign or international
organisations; and (2) cooperation between the UEOMA Commission and
national competition authorities.
In the UEMOA competition scheme, jurisdictional reach is limited only to
anticompetitive practices capable of distorting competition within the Union
market as a whole or within a “substantial part” thereof. Substantively, the
scheme follows a familiar pattern found in most competition laws in the
developed world—i.e., its chief focus is aimed at: (1) agreements and
concerted practices in restraint of trade; (2) mergers and acquisitions; and (3)
monopolization-i.e., abuse of dominant market position.
The UEMOA competition framework also regulates government-induced
market distortions such as state aid and anticompetitive market conduct of
state-owned enterprises.
Comesa Regional Competition Law, Dec 2004
In 2004, the Common Market of Eastern and Southern Africa (COMESA)
has adopted a regional competition law, the COMESA
Competition
Regulations, under Article 55 of the treaty establishing the organization. The
regional law is implemented by the COMESA Competition Commission, a
corporate body with a legal framework.
The law addresses competition issues of a regional nature – involving or
having an impact in more than one COMESA member State. The COMESA
Competition Regulations provide for mergers and acquisitions and their
notification and control, control of anticompetitive business practices, and
have strong consumer protection provisions.
The COMESA Competition Regulations also encourage cooperatioon
between COMESA member states in the form of notification, exchange of
information, coordination of
action and consultation among member
states.30
Andean Community 2005
The Commission of the Andean Community approved in March 2005 Decision
608 on “Rules for the protection and promotion of competition in the Andean
Community”.
The decision introduced a
regional law on competition applicable to
anticompetitive practices and abuse of dominant positions.
All sectors of the economic activity are
Commission decides to exclude a specific
request from a member State.
covered except if the CAN
sector following a supported
Furthermore, Decision 616 (July 2005) enables Ecuador to apply Decision
608 when anticompetitive practices are originated in an Ecuadorian territory
or practices originated in a third country affecting the Ecuadorian territory.
Both Bolivia and Ecuador may temporarily apply Decision 608 while they
adopt a national competition law
Asean Competition Policy 2007
Institutions and laws related to competition policy have recently been
established in some (Indonesia, Malaysia, Singapore, Thailand and Viet Nam)
ASEAN Member Countries.
There is currently no official ASEAN body for cooperative work on CPL to
serve as a network for competition agencies or relevant bodies to exchange
policy experiences and institutional norms on CPL.
Actions:
i. Endeavour to introduce competition policy in all ASEAN Member Countries
by 2015;
ii. Establish a network of authorities or agencies responsible for competition
policy to serve as a forum for discussing and coordinating competition
policies;
iii. Encourage capacity building programmes/activities for ASEAN Member
Countries in developing national competition policy; and
iv. Develop a regional guideline on competition policy by 2010, based on
country experiences and international best practices with the view to creating
a fair competition environment.
Ecowas: Establishemlent of the Regional
Competition Authority 2008
THIRTY-FIFTH ORDINARY SESSION OF THE AUTHORITY OF HEADS
OF STATE AND GOVERNMENT
Abuja 19 December 2008
SUPPLEMENTARY ACT A/SA.2/06/08 ON THE ESTABLISHMENT,
FUNCTION OF THE REGIONAL COMPETITION AUTHORITY FOR
ECOWAS
2009 Southern African Development
Community (SADC)
The SADC Declaration on regional cooperation in competition and consumer
policies (was adopted in 2009. It was based on article 25 of the SADC Protocol
which calls for member states to implement measures within the Community
that prohibit unfair business practices and promote competition.
The purpose of the SADC Declaration was premised on the recognition that:
– “competition and consumer protection laws are national but the relevant
markets can extend beyond national boundaries”;
– there is a need for increased regional cooperation in addressing cross-border
anti-competitive practices.”
– there is a need to formalise a system of cooperation between national regimes
that can harness the collective efforts of relevant national authorities and add
value to national enforcement efforts in the face of problems affecting more than
one country.”
2009 Southern African Development
Community (SADC)
The SADC Declaration deals specifically with the issue of effective cooperation
and provides, amongst others, for the establishment of:
– a system for effective cooperation;
– a transparent framework that contains appropriate safeguards to protect the
confidential information (own emphasis) of the parties.
The SADC Secretariat has embarked on a project to implement the SADC
Declaration through the development of a harmonization framework of national
competition laws and policies in the SADC Region.
Eurasian Model Competition Law 2013
On 10 October 2000, the Treaty on the establishment of the Eurasian
Economic Community (EurAsEC) was signed by five CIS countries: Russia,
Belorussia, Kazakhstan, Kyrgyzstan and Tajikistan (Uzbekistan joined the
Community in 2006 but suspended its membership in 2008).
Russia, Belorussia and Kazakhstan signed the Treaty on Eurasian Economic
Commission on 18 November 2011. These acts (the Treaties) outlined the
legal skeleton of so called Eurasian integration which became the key factor
in the member states’ economic and political development.
The period of 2012-2013 is the breakthrough in the Eurasian law. The main
development areas in the EurAsEC legal framework were: (i) institutions; (ii)
tariff and non-tariff regulation of the external trade; (iii) technical regulation;
(iv) competition; (v) external competence; and (vi) case law. Institutions:
Eurasian Model Competition Law 2013
Protection of competition has been recognised as a vitally important
instrument.
For this purpose the Agreement on unified principles and rules of competition
took effect in December 2012 together with the Rules on procedures for
investigation and examination of cases regarding violation of competition and
the Rules for calculation and imposition of penalties for violation of the
EurAsEC competition rules.
Hence, the Commission has become the supranational regulating authority in
the field of competition and merger control.
In May 2013, the Commission formed a Department for antitrust regulation
which is now responsible for carrying out antimonopoly investigations.
Further, the Commission has launched the process to elaborate a member
states’ Model Law on Competition. It is still under discussion.
TTIP European proposal 2013
The TTIP (…) provides the parties with a unique opportunity to jointly
articulate the shared values and affirm the existing practices and procedures
which they adhere to.
In light of the global context and the objectives set out above, the TTIP should
include provisions with anti-trust & merger disciplines. These provisions
should reflect the shared global interests and concerns and thereby constitute
a platform for further development of competition disciplines and cooperation
of interest also for other economies and markets. In this context, the EU and
the US may wish to address anti-competitive behaviour that should be
disciplined, the legislative and institutional framework for the enforcement of
these disciplines that contain provisions on cooperation and exchange of
information.
The TTIP could also address rules and principles aiming at ensuring
competitive neutrality by envisaging enforcement of competition laws on all
enterprises.
TTIP European proposal 2013
the provisions on antitrust and mergers could address the following issues:
- Recognition of the benefits of free and undistorted competition in the trade
and investment relations;
- Consideration of best practices and of the possibility to consolidate some of
them;
- A commitment to maintain an active enforcement of antitrust and merger
laws, with a generally worded description of the types of anti-competitive
behaviour it should cover;
- A commitment to ensure that competition policy is implemented in a
transparent and nondiscriminatory manner, in the respect of the principle of
procedural fairness, irrespective of the ownership status or nationality of the
companies concerned;
-
TTIP European proposal 2013
The provisions on antitrust and mergers could address the following issues:
-Provisions regarding the application of antitrust and merger rules to state owned
enterprises (SOEs) and enterprises granted special or exclusive rights or
privileges (SERs), save for narrowly defined legitimate exceptions (e.g.
“Services of General Economic Interest” in the EU);
- Moreover, to address specifically the bilateral cooperation aspects between the
EU and the US, the TTIP could include provisions on cooperation between the
competition agencies of the parties, reflecting and building on the current
practice under the existing EU-US cooperation agreements.
-In addition, it could be explored whether the parties could address the possibility
for a further deepening of the cooperation arrangements in case related work in
the future, such as creating a framework allowing for the exchange of
confidential information in the absence of confidentiality waivers between
competition authorities when they are investigating the same or related cases
(while barring the use of this information for criminal sanctions).
- A commitment to cooperate in multilateral forums with the aim of promoting
convergence of antitrust and merger rules at a global level.
Conclusions