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Announcement

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Second International Seminar on Competition Policy

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On September 3 (Wednesday), 1997, the Fair Trade Commission (FTC) and the Korea Institute of Industrial Economics and Trade (KIET) co-hosted the second international seminar on competition policy under the theme of "Prospects of an International Cartel Code and its Impacts." In this international seminar held at the Korea Chamber of Commerce and Industry (KCCI), some 300 perople from the academic, business and government circles participated.

A keynote address was made by Professor F. M. Scherer, a world-reknown authority on competition policy, followed by presentations by four experts from Korea and abroad. After each presentation, there was a panel discussion session and a comprehensive discussion session at the end concluded the entire seminar.

The purpose of the seminar was to provide the government and the businesses with a chance to prepare proper measures against the recommendations and bilateral agreements regarding cartels at the OECD which are considered a first step toward the international codification of competition policy (the so-called Competition Round, or CR).

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< Summary of Presentations>

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Professor F. M. Scherer argued that the Kodak-Fuji dispute between the US and Japan stemming from the anti-competitive distribution market in Japan, coupled with other international disputes relating to competition were compelling the WTO to intervene in the competition policy area. Moreover, he maintained that it was high time that the WTO established specific standards for anti-competitive measures.

Regarding the Boeing-McDonnell Douglas merger, Professor Scherer said that if the EU had chosen to impose surcharges against the merger for reasons of violating merger regulations, it would have led to an international dispute as the US would have filed a suit at the WTO. Moreover, he warned against international friction relating to competition law and policy by saying, "A train wreck was avoided today, but we have many more trains We may have avoided one train collision today, but many more trains are coming down the track."

He also claimed that international competition policy agreements would have positive impacts on national welfare of each member and the economic growth of the developing members. He added that although pro-competitive market structure will not come without additional costs, that countries should strive to establish such a market structure.

Further, he said that it would be difficult to produce an international competition policy code in the short run due to the conflict of opinions between competition policy makers and trade policy makers; however, in the end, the benefits of international harmonization of competition policies are expected to outweigh the costs. He also said that the leading countries should take the lead in narrowing the gap in opinions.

Mr. Terry Winslow (Advisor, OECD Secretariat) introduced some of the issues being raised in talks of prohibiting hardcore cartels at the OECD and called for international convergence of competition laws and cooperation between competition authorities.

Businesses operating in countries without competition laws or with insufficient competition laws either erect or maintain entry barriers by engaging in anti-competitive acts, which can have a negative impact on businesses and consumers in other countries.

At the same time, when businesses are exposed to different competition laws and regulations, they have the effect of incurring unnecessary costs and reduce efficiency.

In international competition cases, one cannot but rely on foreign countries for crucial information; however, various practical and legal barriers to overseas information access often block international cooperation. Thus, international cooperation is needed to overcome such barriers.

Dr. Shin Kwang Shik at the Korea Development Institute (KDI) said that Korea needs to thoroughly prepare against the establishment of international codes relating to cartels and reinforcement of international cooperation since they will have a significant impact on the Korean economy in which market intervention under industrial policy and anti-competitive business practices are widespread.

Not only cartels covered by other laws and exempt from application of the Korean competition laws, but also those which are tacitly encouraged and overlooked will need to be reduced.

Korean businesses and trade associations will increasingly be exposed to international enforcement of competition laws by foreign countries.

Also, Korea may run into conflict with advanced nations regarding the appropriateness of enforcement of the Korean competition laws. What is more, there will be increasing requests from the US and EU for information to be used as evidence in investigations of cartels and institution of suits against cartels.

Mr. Makoto Kurita, Director of Coordination at the Fair Trade Commission of Japan described the reinforced enforcement of laws against cartels in Japan.

Since the 1980's, during the course of Japan-US trade negotiations and deregulation efforts, competition laws and policies became stronger and enforcement on cartels were reinforced.

Sanctions against cartel activities became more severe and the Japanese Diet recently passed a bill aimed at reducing the scope of cartels exempt from application of competition laws.

Also, bid-rigging is widespread in Japan and such acts are suspected of raising prices between 10 and 20 % compared with those in a pro-competitive market.

Dr. Shim Yong Sup at KIET emphasized that the areas exempt from application of competition laws need to be reduced not only from the competition policy perspective, but also from trade policy perspective.

Considering the fact that the standards for exemption of competition laws differ from country to country, international discussions currently underway at the OECD to regulate hardcore cartels are highly commendable.

Among the underlying principles in competition laws, there are those which coincide with those of trade policies, such as non-discrimination, prohibition of predatory and abusive acts, access to essential facilities and so on. Therefore, Korea should steadily strive to reduce areas exempt from application of competition laws.

If exemption is inevitable, transparency and consistency should be secured in its procedures and implementations.

In the end, the expansion of the scope of competition laws should serve as a tool for resolving market access issues and enhance the usefulness of competition laws.

In preparation for the international codification of cartels, which is considered the first step toward the CR, the FTC is actively reviewing cartels which are exempt from application of the competition laws and establishing plans to reduce and overhaul provisions relating to cartels with a view to maintaining and authorizing exemptions to only those which are internationally justified.

Moreover, the commission intends to dramatically reduce and readjust the regulatory functions and authorities granted or delegated to trade associations and actively improve anti-competitive practices by them.

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Second International Training Program on Competition Policy

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The Fair Trade Commission and the Korea Development Institute (KDI) co-hosted an International Training Program on Competition Policy in Seoul between August 4 (Monday) and August 8 (Friday), 1997, focusing on the developing countries among the APEC members.

The 24 participants in this program included officials responsible for competition policies in 11 APEC countries, including China, Malaysia, and Thailand, and those from Russia.

The speakers and discussants at the program included five foreign experts, namely Mr. F. Jenny (Chairman, CLP, OECD), Mr. Geoff Connor (Advisor, Ministry of Commerce, New Zealand), Mr. Massimiliano Gangi (Advisor, UNCTAD), and Mr. Makoto Kurita (Director of Coordination, Fair Trade Commission of Japan), as well as Dr. Shin Kwang-Shik of KDI, Dr. Lee Nam-Kee (Standing Commissioner)and Mr. Sang Yong Park, director of International Affairs Division ˘ş at the Fair Trade Commission of Korea.

They discussed major issues relating to competition laws and each participant introduced relevant cases from his/her country. The Korean experience in enforcing competition laws and policies was also a topic of discussion.

Mr. F. Jenny gave a presentation under the title, "the Interface between Competition policy and Trade, Investment and Economic Development " in which he underlined the significance of competition policy in economic development.

Moreover, he pointed out the worldwide trend toward less government intervention and more competition policy enforcement through regulatory reform efforts, and said that what triggered such trends were declining efficiency of industrial policies, weakened competitiveness of businesses due to government intervention, and reduction of the real income of the general public.

He also cited examples from Asia and Europe to explain that industrial policies based on government intervention were only effective at certain stages of economic development.

Mr. Jenny also emphasized the positive effects trade liberalization has on economic development and added that the removal of anti-competitive acts which impede on trade was crucial in maintaining such positive effects.

According to him, that is precisely why an international codification of competition laws is necessary.

Dr. Lee Nam-Kee, Standing Commissioner at the Korea Fair Trade Commission, gave a presentation under the theme of "Basic Korean Fair Trade Policy Directions and what it suggests".

He explained the achievements the Korea Fair Trade Commission has made since the introduction of the competition law in its efforts to establish a pro-competitive market structure by rectifying monopolistic and oligopolistic market structures and correcting unfair trade practices.

Furthermore, other themes presented and discussed at the program included such key issues relating to competition laws as "Types of and Criteria for Cartels," "Market Definition and Abuse of Monopolistic and Oligopolistic Position," and "Types of Vertical Restraints and Restraint on Competition."