Bilateral and Plurilateral Cooperation in

Competition Cases

Russell W. Damtoft

United States Federal Trade Commission

Sao Paulo, BrazilApril, 2003

The views reflected herein are those of the speakers and do not necessarily reflect the views of the United States, the US Federal Trade Commission, or any official thereof.

The Need for Cooperation Markets are increasingly

cross-border, regional, and global.

Local or national markets can have cross-border implications as well.

Anticompetitive practices and mergers more often affect more than one country.

General Principles of Effective Cooperation Respect national sovereignty

Respect the jurisdictional rules of the countries involved

Respect important interests

Protection of confidentiality

Confidentiality A key to successful cooperation

Enforcement is more effective when businesses cooperate

Businesses won’t cooperate if they fear that confidential information will be compromised

Successful cooperation requires knowing that confidences will be maintained

Requires high degree of trust between authorities

Foundation of Competition Cooperation Relationships

Formal Instruments Bilateral Agreements Multilateral Agreements Trade Agreements

Informal Relationships

Bilateral Agreements United States has bilateral

cooperation agreements with eight jurisdictions

Multilateral Agreements 1995 OECD

Recommendation Concerning Cooperation between Member Countries on Anticompetitive Practices Affecting International Trade

Provisions are similar to bilateral antitrust cooperation agreements

Cooperation in Trade Agreements

Cooperation encouraged by: NAFTA U.S./Chile agreement Other bilateral agreements FTAA draft agreement

But day to day cooperation usually takes place between authorities under bilateral or informal mechanisms, not trade agreement

Cooperation Among NAFTA Partners Principle of cooperation in Article 1501(2):

“Each Party recognizes the importance of cooperation and coordination among their authorities to further effective competition law enforcement in the free trade area. The Parties shall cooperate on issues of competition law enforcement policy, including mutual legal assistance, notification, consultation and exchange of information relating to the enforcement of competition laws and policies in the free trade area.”

A Trio of Bilateral Agreements

2003 Agreement1999 Agreem

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Informal Cooperation Where there is good will, trust,

and a desire to work together, most cooperation does not require formal instruments or the exchange of confidential information

The most important instruments are the telephone and e-mail!

“Getting to know each other” matters

What really matters A relationship

based on mutual trust is what makes cooperation work.

Typical Contents of Formal Cooperation Agreements

Notification Enforcement Cooperation Coordination Referral of Cases Involving Both

Countries (Positive Comity) Avoidance of Conflicts Confidentiality Consultations

Notification Originally a defensive measure in

case one Party's enforcement was perceived to infringe the other’s national sovereignty

Today its purpose is more as an instrument of cooperation to make sure other Party knows what it needs to know

Formal Notification Typically Required When: Relevant to other country’s important

interests Investigation of:

anticompetitive practices carried out in the other country

Merger involving firm from the other country Conduct thought to be approved by the other

country Remedies may be directed at conduct or

assets in the other country’s territory Information sought from other country

Notification Does Not Replace Informal Contacts Not all cases of interest will be subject to

formal notification For example, multinational merger between

two firms from third (or fourth) countries with impacts in both countries

Investigating country may be unaware of impacts in other country

Regular informal contacts keep everyone “in the loop.”

Notification and Confidentiality Notification of identity of firms being

investigated is sensitive Harm to reputation of those later found to have

been acting legally Misuse of information for personal gain (stock

market manipulation?) Potential to compromise notifying country's

investigation

Confidentiality must be assured if notification is to serve its purpose

Enforcement Cooperation In principle, effective enforcement

cooperation would benefit from common interest in sharing of information about: Investigative facts Theories about markets Remedies

But cooperation is subject to national confidentiality laws

Therefore, there are practical limits on cooperation.

Cooperation Within the Limits of Confidentiality Confidential information usually can be

shared when: firms agree to waive protection of

confidentiality laws, or Information is confidential only as a matter of

agency practice, not legal requirement Theories and conclusions about market

definition, competitive effects, and possible remedies can be shared if it does not reveal protected information

Enforcement Assistance Agreements Separate from normal bilateral

cooperation agreements Competition Legal Enforcement

Assistance Agreements Criminal Mutual Legal Assistance

Treaties (MLATs)

Competition Legal Assistance Agreements U.S. International Antitrust

Enforcement Assistance Act authorizes reciprocal agreements for authorities to share information (including confidential information) and gather evidence for each other

Stringent conditions on confidentiality and usage

Only One Agreement Has Been Reached Thus Far U.S./Australia

Agreement (1999) Other agreements

may be reached in the future

Coordination Can apply when both countries are investigating

related or the same matters Formal factors to consider:

whether both parties will achieve objectives abilities to obtain required information possible reduction of cost potential advantages of coordinated remedies

Main issue in practice is whether providers of confidential information will consent to the sharing of such information

Positive Comity Conduct affecting both countries One country can effect a remedy

that serves all One country requests the other to

take enforcement action against conduct that is affecting its important interests

Rarely invoked formally

Positive Comity Example Alleged exclusionary

conduct by airline computer reservation system with impact on both U.S. airlines and European consumers

U.S. referred to E.C. E.C. took action; U.S.

deferred to E.C.

Enhanced Positive Comity Agreement U.S. - E.U. agreement Adds to positive comity provision in

bilateral cooperation agreement Referring party presumptively defers

to the other when certain conditions are met

Party receiving reference keeps referring Party informed

Avoidance of Conflicts If other elements are observed, this

usually takes care of itself "Be a good neighbor” Consider how law enforcement actions

may be implemented so as to avoid harming other Party’s important interests

Central issue is usually remedies that have cross border effect

Other features of cooperation agreements Confidentiality Consultations Direct communications between

competition authorities No binding dispute settlement

mechanisms

Cooperation In Practice: the U.S. Experience Common markets

make U.S./Canada relationship the most active in the hemisphere

Cooperation in both merger and non-merger cases (including cartels)

Cooperation With Other Nations is Increasing Active

U.S./Mexico cooperation

U.S./Brazil cooperation is strong; formal agreement took effect last month

Cooperation in Merger Review Notification Early and frequent contacts between staff Discussions about relevant market, theory

of anticompetitive harm, potential remedies

Extensive use of waivers to facilitate the exchange of confidential information

Attend meetings with merging parties Coordination of remedies

Challenges Sharing information while respecting

confidentiality obligations

Different timelines and stages of Investigation

Dealing with strategic behavior by firms

Lessons Learned Cooperation important and necessary Requires high degree of trust Regular and frequent contacts Earlier the better Respect for each other's interests Information sharing at all stages when possible Informal as important as formal Confidence in safeguards to protect confidential

information Can help stretch resources

Issues for Cooperation in the Multilateral Context Doha Ministerial provides that WTO WG to look at,

among other things: “modalities for voluntary cooperation”

How can mutual trust and close working relationships be realistically built and sustained with all countries?

What kinds of cooperation lend themselves to a multilateral context?

What if fundamental changes occur in one country? Need to distinguish between enforcement

cooperation and technical assistance?