Brunei Darussalam
May 27-28, 2000

Submission of the United States

Approaches to Promoting Cooperation and Communication among APEC Economies' Competition/Regulatory Authorities

Introduction

An important focus of this year's workshop is the implementation of the APEC Principles to Enhance Competition and Regulatory Reform. This paper focuses on implementation item 10, which advocates that APEC economies "[D]evelop effective means of cooperation between APEC economy regulatory agencies, including competition authorities, and ensure that these are adequately resourced."

The U.S. has a good deal of experience with various kinds of communication and cooperation between its own competition agencies and those of other economies. This paper describes and discusses U.S. approaches to cooperation and communication, including bilateral, regional, and multilateral arrangements, focusing in particular on the types of information and assistance that can be provided under each approach, as well as the objectives, requirements and limitations of each approach. It concludes with a discussion of the insights the U.S. experience offers into the process of enhancing cooperation between and among competition/regulatory authorities of APEC economies.

I. Bilateral Approaches to Cooperation and Communication Among Antitrust Authorities

A. Informal sharing of public information

The simplest approach to cooperation and communication among antitrust authorities consists of informal bilateral contacts occurring outside the context of any formal agreement or legislation. The importance of these kinds of contacts should not be underestimated. Both the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") frequently receive ad hoc requests for publicly available information from foreign competition authorities. The types of information sought and the reasons for the requests are diverse. For example, over the past several years, officials of nascent competition authorities in other economies have asked the DOJ and FTC for information on their organization and procedures, including staffing and budgetary statistics, organization charts, administrative staff manuals, and rules of practice and procedure that could assist those authorities in setting up an administrative enforcement agency. Others contemplating the adoption or amendment of a pre?merger notification program have contacted the FTC and DOJ for copies of U.S. legislation, implementing regulations, staff speeches, reports to Congress describing the U.S. program, and recent enforcement activities. The two agencies have also provided economies undertaking regulatory reform with examples of advocacies before federal or state regulatory bodies, economic studies, or Congressional testimony by agency officials on issues pertaining to the deregulation of such industry sectors as transportation, electricity and telecommunications.

As these examples illustrate, some requests could be characterized as a type of technical assistance. However, requests for public information are often received from antitrust officials of some of the United States' major trading partners. These officials are seeking to keep abreast of current developments or to increase their understanding of U.S. procedures and substantive standards, sometimes with a view to refining or amending their own procedures and standards. Foreign antitrust authorities also seek publicly available information from U.S. authorities in support of their investigation and prosecution of cases that involve issues, such as market definition, that have been litigated in the United States. The sharing of such information promotes consistency in the definition of markets and in approaches to other enforcement issues. The sharing of public information on enforcement policies, analytical frameworks, adjudicative decisions and emerging enforcement issues is a particularly valuable form of cooperation which often does not require a formal request.

Both the DOJ and the FTC disseminate public information by various means including, most importantly, through the Internet. Each agency's home page provides access to a wealth of information, including press releases and annual reports on enforcement actions, speeches, administrative guidance (business review letters and advisory opinions), and other documents explaining how and why the agencies acted against alleged anticompetitive conduct, including the rationale for proposed settlements. In addition to being comprehensive, the information on the agencies' home pages is also very current.

B. Technical assistance

In recent years, the DOJ and the FTC have been active in providing technical assistance to economies establishing or revitalizing antitrust regimes in Central and Eastern Europe, the economies of the former Soviet Union, Latin America, Africa and Asia. Most of the funds for these efforts are provided by the U.S. Agency for International Development ("USAID"). The objective of these activities is to assist the responsible authorities in the relevant economies in their efforts to promote development of a competition culture and, more specifically, in establishing the legal and institutional framework for ensuring that markets function competitively. FTC and DOJ attorneys and economists have, among other things, worked with foreign antitrust officials on developing policies, drafting new antitrust laws or amendments to existing laws, analyzing individual cases, and providing advice on a wide range of issues or problems confronting their agencies.

Such technical assistance efforts have encompassed both short?term missions and assignments lasting several months, working in the economy's antitrust agency. During these missions, U.S. staff have, among other things, explained the structure and administration of the DOJ and the FTC, U.S. investigative techniques, and legal and economic analyses of a wide spectrum of antitrust issues (e.g., market definition, market dominance, horizontal and vertical agreements, merger review and privatization). In addition to working through these USAID-funded programs, FTC and DOJ advisors have participated in various conferences addressing competition issues, such as those sponsored by the Organization for Economic Cooperation and Development ("OECD"), as part of their technical assistance work.

One beneficial consequence of explaining our legal and economic antitrust analysis to others is that we enrich our own understanding of how antitrust law works in various settings around the world. Our experience in providing technical assistance has confirmed the general applicability of the legal and economic principles applied in the United States to the analysis of competition issues in economies that are very different from our own. However, we also have learned the importance of being -- and to be -- sensitive to and account for the specific conditions in a given economy before reaching conclusions about how broad enforcement priorities should be set or applicable legal and economic principles should be applied in a particular case. We have also found that the communication that takes place among enforcers in the course of providing technical assistance leads to a clearer and more practical understanding of mutual goals and concerns in the application of antitrust laws and policies. The more closely and frequently we work with our counterparts, the more a consensus develops concerning the appropriate goals and methods of antitrust law enforcement.

C. Bilateral cooperation agreements

The United States has entered into bilateral agreements on antitrust cooperation with Germany (1976), Australia (1982), the European Communities (1991), Canada (1995), Israel (1999), Japan (1999), and Brazil (1999). These agreements have been motivated by a mutual desire to cooperate and coordinate more closely in antitrust enforcement and to avoid or manage possible conflict arising from the application of antitrust laws to international business conduct.

Under U.S. law, these bilateral agreements are "executive agreements." Although they represent formal and binding international agreements for the U.S. authorities, they do not have the legal status of treaties in the U.S. system. As a result, the agreements do not supplant domestic laws that, for example, prohibit sharing confidential information without the submitter's consent. Thus, these "first generation" agreements may simply codify informal cooperation among competition agencies that frequently deal with each other on antitrust matters. However, the DOJ and the FTC have found that the agreements provide a catalyst for broader and deeper cooperation with the foreign antitrust agencies.

While there are some variations among these agreements, they generally provide for the following types of communication and cooperation: (i) notification to the other party of an enforcement investigation or proceeding that may affect its important interests; (ii) sharing information relevant to each other's investigations or proceedings to the extent permitted by domestic law; (iii) coordination of parallel investigations, for example, when each party is investigating the same firm, conduct, or transaction; and (iv) consultation to resolve issues arising from enforcement activities or any other matter arising from the agreement. The 1991 EC and 1995 Canada agreements provide for meetings to exchange information on the parties' current enforcement activities and priorities, economic sectors of common interest, policy changes under consideration, and other matters of mutual interest relating to the application of antitrust laws. Although, in practice, much of this occurs informally at the staff level, our experience has been that the operation of the agreements facilitates communication and cooperation in ways that increase the effectiveness of enforcement and foster an informal convergence of approaches.

The recent worldwide merger boom has provided many opportunities to cooperate closely with other competition authorities. In a typical global transaction that raises competition issues, the process of cooperation begins with the notification of the authority of another economy in which a party or important evidence or assets are located. If another economy is also reviewing the transaction, our staffs communicate regularly, often daily. The communications consist of, for example, sharing views on relevant market definition, analysis of competitive effects, the investigatory process, deadlines, publicly available industry information, and potential remedies. If the parties under review seek to settle a case in more than one economy (e.g., through a divestiture), we often coordinate with the other competition authority to arrive at compatible remedies -- an approach which can benefit the parties as well as the enforcement agencies. Recent examples of such cooperation include the DOJ's collaboration with the European Commission in the MCI/WorldCom, Dresser/Halliburton and Imetal/English China Clays mergers; the FTC's collaboration with the Canadian, Mexican, Australian, and EC competition authorities to fashion compatible relief in the Guiness/Grand Metropolitan merger; and the FTC's cooperation with British, French, German and Italian antitrust authorities in developing a compatible settlement in the Federal-Mogul/T&N merger. Outside the merger area, the DOJ and the European Commission worked together to develop identical settlements in a 1995 action against certain licensing practices by Microsoft. Cooperation does not, of course, guarantee that authorities will always reach the same conclusion, even in the same matter, as the U.S. and EC experiences in the Boeing/McDonnell Douglas merger illustrates. It should be expected that differences in laws and policies will occasionally lead to such differing results. This does not in any way detract, however, from the major benefits of cooperation in most cases.

Of course, confidentiality protections can place an important limitation on the extent to which authorities can cooperate under bilateral agreements. For example, we cannot divulge any information submitted pursuant to our pre?merger notification process, nor can we share most information provided during investigations without the submitter's consent. However, parties sometimes waive their confidentiality rights in order to facilitate, and expedite, the review and settlement process, particularly of mergers for which prior approval is a pre?condition to closing. Thus, the parties in all of the cases referred to in the previous paragraph granted confidentiality waivers to facilitate cooperation between the relevant agencies.

Any sharing of confidential information is based on a commitment by the party receiving the information to protect its confidentiality. Bilateral agreements facilitate such waivers by requiring maintenance of the confidentiality of information provided by and to each party to the agreement. The successful use of this provision is predicated on mutual trust that the commitment will be honored and that each party's laws enable the agencies to preserve the confidentiality of such information to the fullest extent. Confidence in the ability of the agencies to protect the confidentiality of shared information is a precondition to parties' grants of confidentiality waivers.

D. Positive comity agreements

The bilateral agreements with the European Communities, Canada, Israel, Japan and Brazil contain a provision on "positive comity" which goes beyond traditional notions of cooperation and coordination. Under these provisions, one party can request that the other party investigate and act against anticompetitive conduct taking place in the latter's territory that affects the important interests of the requesting party. This could arise, for example, where firms in Economy A are engaged in anticompetitive conduct that excludes competing firms in Economy B from Economy A's market, or where a cartel in Economy A also injures consumers in Economy B. If the competition authority in Economy A accepted the referral from Economy B, it would conduct its own investigation of the matter and take whatever action it found appropriate. Economy B could then accept these results or take appropriate action under its own laws.

In June 1998, the United States and the EC entered into a new agreement elaborating on the positive comity provisions of the 1991 agreement. The new agreement clarifies the circumstances under which the parties will refer cases of anticompetitive activities to each other, and sets forth the circumstances under which one party normally will defer to the other to investigate alleged anticompetitive practices in the other's territory. It spells out the obligations that the antitrust authorities undertake in handling these cases, while preserving the right of each authority to act independently. The agreement excludes mergers because of the short time frames in which they must be reviewed and because statutory obligations to review certain mergers preclude deferring to the other economy's authority. In addition, the agreement allows the parties to pursue separate enforcement activities where -- as in the case of international cartels -- anticompetitive conduct affecting both economies justifies the imposition of penalties in both.

The principle of positive comity is based on the recognition that even though an economy may have jurisdiction to investigate and act against anticompetitive conduct taking place abroad, there may be cases in which it is more efficient or appropriate to defer, at least in the first instance, to a foreign competition authority. A case may be referred because, for example, a foreign antitrust agency may be better placed to obtain necessary evidence or may be in a better position to impose an effective remedy. In addition, use of positive comity may avoid tensions arising from so?called extraterritorial application of antitrust laws.

Positive comity can be a useful tool in some cases, particularly where the respective antitrust agencies have had the opportunity to develop a relationship of sufficient trust and confidence in each other's ability and commitment to enforce their antitrust laws soundly and effectively. Laws and regulations need not be identical, but a commitment to non-discrimination in the application of antitrust principles, adequate investigative and remedial powers, and sufficient independence of antitrust authorities are among the necessary underpinnings of an effective positive comity agreement.

The United States has had limited practical experience to date with positive comity provisions. There has been one case formally referred by the DOJ to the European Commission under the 1991 agreement, involving allegations that anticompetitive conduct by European airlines prevented entry by U.S.?based airline computer reservation systems; last year, the European Commission issued a Statement of Objections with respect to some of the alleged conduct in question. There has been no case to date under the 1998 agreement. Some cases have also been handled informally following positive comity principles. The FTC decided not to take any action against a group of Italian Parma ham producers who had agreed on a production quota limiting exports because the Italian antitrust authority was investigating the matter and eventually imposed an effective remedy. The DOJ, in late 1996, closed its investigation into the way AC Nielsen Co. contracted its services for tracking retail sales because the company had reached an agreement with the European Commission that alleviated any anticompetitive concerns.

E. MLATs and IAEAA agreements

The United States has also entered into agreements that go beyond "soft" or "first generation" bilateral agreements to enhance antitrust cooperation in international matters. Mutual legal assistance treaties ("MLATs") allow enforcement authorities engaged in criminal investigations to exchange information obtained in those investigations that otherwise would have to be kept confidential and to provide comprehensive law enforcement assistance, including use of each other's compulsory investigatory powers. This information-sharing and assistance are all subject to confidentiality safeguards. The United States currently has more than 30 MLATs in force with other economies, many of which cover assistance in criminal antitrust investigations and proceedings.

The DOJ has sought and received assistance in cartel investigations pursuant to MLATs, particularly under its MLAT with Canada. In recent years, the United States and Canada invoked this MLAT to coordinate investigations leading to the prosecution of cross?border price?fixing in the plastic dinnerware and thermal fax paper industries. In the fax paper case, the Royal Canadian Mounted Police conducted a successful raid in Canada to assist a U.S. grand jury proceeding.

To encourage sound international cooperation in civil and criminal antitrust matters, the U.S. Congress passed the International Antitrust Enforcement Assistance Act of 1994 ("IAEAA"). This legislation authorizes DOJ and FTC to enter into bilateral antitrust mutual assistance agreements with foreign governments that authorize the agencies to share confidential information obtained in the agencies' investigations and to use their respective investigatory powers to gather evidence on behalf of foreign antitrust authorities. The law is conditioned on mutuality ?? both parties must have comparable authority to provide assistance. Congress also required that both parties have laws adequate to protect materials provided in confidence from unauthorized public disclosure. Thus, the law authorizes the FTC and DOJ to withhold from public disclosure any antitrust evidence obtained from foreign antitrust authorities. Information shared pursuant to the statute can be used only for law enforcement purposes. The IAEAA does not cover information provided to the agencies under their pre?merger notification provisions.

To date, the United States has negotiated one agreement under the IAEAA -- with Australia. That agreement entered into force in November 1999. Australia was a logical first economy because its enforcement authority and confidentiality laws fulfilled the mutuality requirements of the IAEAA and because Australia and the United States have developed a cooperative and productive relationship in antitrust cooperation.

II. Regional and Multinational Approaches to Cooperation and Communication

Cooperation and communication are also facilitated by participation in regional and multinational fora, such as the Asia Pacific Economic Cooperation ("APEC") forum, the North American Free Trade Agreement ("NAFTA"), the Free Trade Area of the Americas ("FTAA") initiative, the Competition Law and Policy Committee ("CLP") of the OECD, and the Working Group on the Interaction Between Trade and Competition Policy of the WTO. In meetings conducted under the auspices of these organizations, as well as in conferences sponsored by economies, non?governmental organizations, and private entities, senior antitrust and trade officials have the opportunity to share ideas and learn from one another's experiences in competition law, policy, and enforcement. These meetings and conferences serve to advance understanding of the goals, principles and analytical approaches of the antitrust law regimes of the participating economies, and can result in the adoption of work programs or commitments to promote enforcement cooperation and substantive convergence.

The work done in the APEC competition and deregulation workshop is a clear example of such discussions and their attendant benefits. These workshops serve as a forum for economies of varying sizes and characteristics to share their ideas and experiences. The adoption at last year's Leaders' Meeting of the APEC Principles to Enhance Competition and Regulatory Reform and this year's program addressing the formulation of the means to implement those principles is an example of work attempting to advance the goals of the competition policy regimes -- whatever form they may take -- of participating economies. APEC's annual Partners for Progress meeting on issues relating to competition law and policy is another context in which APEC provides a venue for its economies to exchange views on current issues in these areas.

Another such example is the peer review process in the OECD's CLP reviews of competition law and policy developments in its members and discussions of various important issues in competition law and procedure. A principal goal of its work program is the development and dissemination of key concepts and policy instruments to promote analytical convergence and use of best practices by antitrust authorities. One of the CLP's working parties focuses specifically on strengthening international cooperation in antitrust law enforcement. The OECD's Recommendation on cooperation among members in international antitrust law enforcement, first adopted in 1967 and revised most recently in 1995, was a model for some earlier bilateral cooperation agreements, and is now a plurilateral equivalent of the more recent forms of "first generation" bilateral agreements. The United States cooperates regularly with OECD members pursuant to the provisions of this Recommendation, which include notification, information exchange, and coordination; the Recommendation also provides for positive comity.

In addition, the CLP developed, and the OECD Council in 1998 adopted, a recommendation to encourage members to implement more systematic and effective enforcement against cartels. The new Hard Core Cartel Recommendation encourages OECD members to ensure: that their laws effectively halt and deter hard core cartels; to enter into mutual assistance agreements to permit evidence-sharing with foreign authorities to the extent permitted by law; and to review provisions in their laws that stand in the way of such cooperative efforts. This Recommendation, like all OECD recommendations, is voluntary.

The Hard Core Cartel Recommendation has influenced antitrust authorities beyond OECD members. In October 1998, antitrust officials from eleven of the twelve Western Hemisphere economies with antitrust laws held the First Antitrust Summit of the Americas in Panama. The Summit culminated in a Communique in which the participants pledged, among other things, to cooperate with one another to maximize the efficacy and efficiency of competition law enforcement, particularly in combating hard core cartel practices. The Communique also contains a commitment by the participants to share best practices for the implementation of competition policies.

Other fora that foster communication and cooperation in competition policy include NAFTA, where the United States, Canada, and Mexico promoted mutual understanding of one another's policies in a Working Group on Trade and Competition; the Free Trade Area of the Americas, where thirty?four Western Hemisphere economies participate in the Negotiating Group on Competition Policy which is considering the role of competition policy in a future free trade area; and the WTO Working Group on the Interaction Between Trade and Competition Policy.

III. Lessons from the U.S. Experience for APEC Economies in Developing More Effective Means of Cooperation

The U.S. experience demonstrates that significant benefits accrue from participating in multinational fora. United States participation in the fora described above has deepened and broadened the U.S. understanding of competition policy issues, and undoubtedly has had much the same beneficial effect on the other participants in these fora. The work done in APEC's competition policy and deregulation workshops has contributed to the U.S. understanding of the dynamics of competition policy in economies structured very differently than its own. This workshop has proved an effective forum for analyzing issues such as the benefits and costs of enacting competition laws in developing economies.

APEC -- as the other multilateral fora described in this paper -- has the collective resources to sponsor symposia and other types of programs which facilitate capacity building. It has the resources to engage in various kinds of technical assistance, which might be more difficult for smaller groupings of economies. The U.S. experience also demonstrates that, in addition to providing a forum for information exchange, multilateral fora can provide impetus for positive change -- as with the OECD's anti-cartel recommendation and APEC's Principles to Enhance Competition and Regulatory Reform. In sum, it has been the U.S. experience that participation in competition working groups of multilateral fora serves to foster understanding and cooperation among member competition authorities.

On a bilateral basis, the U.S. experience also demonstrates the great practical value of ad hoc communications. A significant amount of information -- on issues ranging from organizational structure to analytical approach -- can be obtained through a visit, a phone call or an e-mail message. While formal bilateral cooperation agreements do seem to increase the frequency of contacts between the signatory agencies, they do not change the types of information that can be exchanged during such contacts -- that is, even the existence of a formal cooperation agreement does not permit the sharing of confidential information. In sum, informal, ad hoc contacts can be useful from both a technical assistance perspective, and in the context of specific investigations.

Formal MLAT and IAEAA-type agreements also clearly play a very useful role in enhancing cooperation. These are the only agreements which permit the sharing of confidential information. These agreements are of value in obtaining specified information to advance specific enforcement actions of one of the signatory economies. Negotiation of such formal agreements usually presupposes the existence of a productive bilateral relationship.

In sum, the U.S. experience seems to indicate that existing frameworks already provide significant opportunities for enhancing cooperation, and for engaging in technical assistance/capacity building. The value of these existing mechanisms should be recognized and enhanced. Informal, ad hoc contacts should be viewed as the useful opportunities that they are -- and perhaps used more frequently and effectively. Multilateral fora such as APEC should be -- as they clearly are -- recognized as organizations that present opportunities for increased understanding -- and for positive action. They also provide the resources for formal technical assistance. This workshop should continue to foster increased understanding and communication among its members, and maintain the level of educational/technical assistance work it already performs. In addition, it should systematically explore the possibility of combining resources for specific purposes with other multilateral organizations, such as, perhaps, the OECD, to enhance its educational/technical assistance efforts.