The US and EU competition policies: cooperate or compete? Alix Grassin Christin Fröhlich

Agenda Reasons for cooperation Scopes Restraints Practical examples Conclusion

Reasons for cooperation Increase of cross-border trade and transnational business activities  doctrine of extraterritorial effect Necessity of sharing information Common objectives and similar anititrust law

Scopes of cooperation 3 agreements concluded (1991, 1998, 2002): voluntary exchange of information, coordination of antitrust enforcement and regular bilateral meetings considering the interests of the other party when enforcing its competition rules each party may ask the other to take enforcement action review of individual merger cases in close cooperation, with a similar timetable for investigations, exchange of information and joint interviews with the mergers

Scopes of cooperation Anti-competitive agreements Convergence: Commission followed US example  became more vigorous, setting higher fines case of heat stabilisers/impact modifiers: prosecution of the cartels involved almost simultaneous surprise visits to companies in the EU and US Weakening cooperation: risk of discovery of EU corporate leniency statements and its use by US courts for civil litigation

Scopes of cooperation Merger control Divergent results because of different information supplied by merging firms? Possibility of joint meetings between mergers and authorities Boeing/McDonnell Douglas: competition authorities played against each other, US lobbied Commission

Abuse of market power Difficulty of distinguishing between exclusionary and pro-competitive behaviour Article 82 of EC treaty: firm is abusing its dominance even if it does not gain more economic power Market share indicating dominant position EU: 50% or more as clear indicator for monopoly power; under 25% safe harbour US: two-thirds of a market; under 40-50% safe harbour Commission more vigorous stance than US? Scopes of cooperation

Restraints to cooperation Reasons Sovereignty and national interests: - benefit first their consumers - protect their industries - protect them from foreign take-overs Different visions of competition policies: - regulatory vs. market-based economy policies - turning point with Commissioner Monti Institutional divergences

Practical examples GE/Honeywell merger with conglomerate effect Different viewpoints about the merger of two American firms EU ruling: GE  dominant position in the large jet craft engines market Honeywell  large part of the avionics and non-avionics aerospace component market Possible effects: bundling, leverage and vertical effects US ruling: merger efficiency based on lower prices leads to pro-competitive behaviour

Practical examples Microsoft Significant divergence of interpreting the similar antitrust laws US ruling: disclosure of source codes, granting of non-discriminatory licensing to independent software vendors and allowing the removal of its software EU ruling: 497 million fine, changes of server operating system to allow competitor’s access and obliged Microsoft to offer a Windows version without the Windows Media Player

Practical examples Reasons for divergence: Political pressures: at beginning of investigations the DOJ, under Clinton administration, announced heavy fines and a splitting of the company. Final decision made under the rather business-friendly Bush administration Different nature of sanctions due to authorities analysing different issues (US: licensing and the removal/altering of programs; EU: emphasis on the bundling itself)

Weak points: Domestic reasons (culture and history, economic strategy and theory, political behaviour) constitute obstacles Particularly diverge when defining abuse of market power or assessing effects of mergers, especially when national champions are involved Not compulsory Conclusion - +

Advantage: Mechanisms established to better understand each other’s competition policy regimes Strong convergence  Remarkable degree of cooperation in competition policy,natural tensions exist Conclusion - +