1. IMPLEMENTATION COSTS AND BURDEN OF INTERNATIONAL CLP AGREEMENTS UNCTAD-IDRC: Competition Provisions in RTAs Yeditepe University – Istanbul, Turkey 31 July, 2006 Barbara Rosenberg Fundação Getúlio Vargas – Law School/SP

2. Scenario Situation: Low level of implementation of competition provisions in international agreements (either ATA’s or RTA’s) Situation: Low level of implementation of competition provisions in international agreements (either ATA’s or RTA’s) Cause: Either costs are to high or benefits are not perceived Cause: Either costs are to high or benefits are not perceived Scope: Evaluate benefits and burdens for implementing competition law and policy provisions encompassed in international agreements Scope: Evaluate benefits and burdens for implementing competition law and policy provisions encompassed in international agreements

3. Increase of International Competition Agreements Proliferation of competition laws: approximately 90 countries have some kind of competition law (60 of those codes took effect during the past 15 years). Proliferation of competition laws: approximately 90 countries have some kind of competition law (60 of those codes took effect during the past 15 years). As a consequence, a variety of international agreements that include or relate to competition law and policy issues have become more common, serving different purposes, depending on the objectives involved As a consequence, a variety of international agreements that include or relate to competition law and policy issues have become more common, serving different purposes, depending on the objectives involved Types of Agreements Types of Agreements [a] bilateral or plurilateral cooperation treaties among countries with existing competition framework (Agency-to-Agency Agreements) and mutual legal assistance treaties (MLAT’s) [b] competition chapter on trade agreement (either a regional trade agreements or a customs union agreement)

4. Bilateral or Plurilateral Cooperation Agreements (ATA’s) Increasing number of cross-border transactions and of anticompetitive behavior that impact more than one jurisdiction lead to ATA’s Increasing number of cross-border transactions and of anticompetitive behavior that impact more than one jurisdiction lead to ATA’s –Allegedly increase the efficiency and effectiveness of enforcement between the authorities –Reduce risks of conflicting/incompatible decisions in individual cases Key elements of a bilateral or plurilateral cooperation agreement : Key elements of a bilateral or plurilateral cooperation agreement : –Information sharing (normally non-confidential data) –Coordination of enforcement activities through numerous commitments, either positive or negative; and, in some cases –Technical cooperation

5. ATA’s Costs and Burdens Generally speaking, ATA may have two effects: Generally speaking, ATA may have two effects: [a] to effectively implement enforcement cooperation activities between two countries where transnational activities are involved; and/or [b] serve as instrument to foster capacity building to one of the countries, which happens when the level of development of the parties to the agreement are uneven; and/or The extent to which parties will effectively be able to coordinate their actions and exchange data through such instruments will depend the institutional development of the countries involved The extent to which parties will effectively be able to coordinate their actions and exchange data through such instruments will depend the institutional development of the countries involved For purposing of evaluating costs and burdens, two subsets of ATA’s: For purposing of evaluating costs and burdens, two subsets of ATA’s: –Countries with different levels of institutional development –Countries with similar stages of institutional development

6. ATA among countries with uneven levels of institutional development Agreements less ambitious, concentrate on exchange of limited type of information and no mandatory notification Agreements less ambitious, concentrate on exchange of limited type of information and no mandatory notification Benefits: may achieve important capacity building results (less mature agency profits from the maturity of the other country’s agency by better understanding its enforcement policies and activities). Benefits: may achieve important capacity building results (less mature agency profits from the maturity of the other country’s agency by better understanding its enforcement policies and activities). Costs and burdens: associated with human resources, communication, paper exchange, travel etc. Costs are differently perceived by each country, depending on its institutional framework and on the resources available. Costs and burdens: associated with human resources, communication, paper exchange, travel etc. Costs are differently perceived by each country, depending on its institutional framework and on the resources available.

7. ATA among countries with uneven levels of institutional development Balance: if parties effectively exchange information in a specific case, avoiding duplication of efforts and conflicting decisions - and, therefore, an investigation is successfully concluded - the costs are fully justified. Balance: if parties effectively exchange information in a specific case, avoiding duplication of efforts and conflicting decisions - and, therefore, an investigation is successfully concluded - the costs are fully justified. Technical assistance projects frequently produce satisfactory results, especially if customized to the needs of the recipient Technical assistance projects frequently produce satisfactory results, especially if customized to the needs of the recipient Exs.: US-Mexico, US-Israel, US-Brazil Exs.: US-Mexico, US-Israel, US-Brazil

8. ATA among countries with similar levels of institutional development Benefits tend to be higher as authorities are more likely to effectively coordinate enforcement activities, making the antitrust enforcement more efficient and effective in certain cross-border cases Benefits tend to be higher as authorities are more likely to effectively coordinate enforcement activities, making the antitrust enforcement more efficient and effective in certain cross-border cases –Frequently notifying enforcement activities that may affect the other party’s market –Reduce conflicts with respect to enforcement actions –Give access to a wider variety of data. Costs tend to be outset by effective results Costs tend to be outset by effective results Exs.: US-EC, US-Australia (with exchange of confidential information), Plurilateral Nordic Cooperation Agreement (Sweden, Norway, Denmark and Iceland) Exs.: US-EC, US-Australia (with exchange of confidential information), Plurilateral Nordic Cooperation Agreement (Sweden, Norway, Denmark and Iceland)

9. Net effects of ATA’s Not a single answer Not a single answer ATA’s may be valuable tools if fosters a closer work among agencies reducing duplication and increasing the amount of data available. More importantly, those agreements grant officials an adequate framework for exchange information. ATA’s may be valuable tools if fosters a closer work among agencies reducing duplication and increasing the amount of data available. More importantly, those agreements grant officials an adequate framework for exchange information. Benefits from mandatory notification and from the implementation of positive commity only make sense in specific situations Benefits from mandatory notification and from the implementation of positive commity only make sense in specific situations

10. Competition Provisions in RTA’s ATA’s have as a basic assumption the existence of competition agencies to coordinate actions, in RTA’s is possible that members to a trade agreement have neither a competition law nor an enforcement agency. ATA’s have as a basic assumption the existence of competition agencies to coordinate actions, in RTA’s is possible that members to a trade agreement have neither a competition law nor an enforcement agency. Thus, the whole set of benefits and burdens are to be analyzed in a wider sense, not limited to competition issues Thus, the whole set of benefits and burdens are to be analyzed in a wider sense, not limited to competition issues –Within a trade agreement, competition law and policy provisions aim at guaranteeing that liberalization will not be undermined by anti-competitive business practices within member countries –Avoid that private parties cut off benefits of tariff reduction by means of anticompetitive practices

11. Competition Provisions in RTA’s Competition provisions within RTA’s are more generic than cooperation agreements Competition provisions within RTA’s are more generic than cooperation agreements –Usually do not encompass operational procedures for coordinated enforcement and are not directly concerned with the day-to-day enforcement activities Possibilities: Possibilities: [a] require the existence of law and authority to nationally apply the law (ex.: NAFTA, US-Chile proposed model for FTAA and WTO); [b] create a supranational-type of law to be applied by a supranational authority in trade related cases (ex.: EC, Andean Community, Caricom) What is the better model to compensate burdens? What is the better model to compensate burdens?

12. Competition Provisions in RTA’s Adopt rules that are compatible with needs and with effective possibility of implementation Adopt rules that are compatible with needs and with effective possibility of implementation –CARICOM: “supranational” model, may be adequate as does not require national institutional commitments –MERCOSUR: model proposes national authorities deciding together cases with effects on the region (did not work due to the lack of local laws and authorities) => model was not modeled to reality To which extent local law and authority are needed? To which extent local law and authority are needed? –Usually local authorities contribute for “competition advocacy”, indicating benefits of competition policy –But are not a requirement according to the model adopted

13. Balancing costs and burdens If model is adequate, cooperation agreements and competition provisions in RTA’s should bring net positive effects (costs not outweighing benefits), thus fostering the level of implementation If model is adequate, cooperation agreements and competition provisions in RTA’s should bring net positive effects (costs not outweighing benefits), thus fostering the level of implementation If costs seem/are too high, it might be that in fact the model in not appropriate in the first place If costs seem/are too high, it might be that in fact the model in not appropriate in the first place While costs seem to be higher, no efforts would be put on its implementation While costs seem to be higher, no efforts would be put on its implementation Challenge is to find models that are adequate to each reality, as there is no “one size fits all” Challenge is to find models that are adequate to each reality, as there is no “one size fits all” –Evaluate nature and possible impacts of (cross-border) anticompetitive conducts on trade –Evaluate institutional capacity and (real) national interests

14. Thanks! Barbara Rosenberg barbara@fgvsp.br