International legal convergence for business: mergers and cartels

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BRIEFING NOTE

International cooperation in competition law enforcement

 

Source:

Capobianco, A., Davies, J. and Ennis, S. (2016) "The Need for International Cooperation in Merger Enforcement", European Competition Law Annual, 2013, ed. P. Lowe, M. Marquis and G. Monti, Hart Publishing, 2016. (Re-publication in Comparative Competition Policy, ed. Beth Farmer, Edward Elgar 2020.) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2450137

 

Executive Summary:

This OECD working paper explores the growing need for international cooperation in competition law in the face of globalized markets and the proliferation of antitrust authorities. It highlights the challenges and costs of disagreements between jurisdictions, particularly in the context of cross-border mergers and the fight against international cartels. The paper also traces the evolution of such cooperation , highlighting the role of the OECD and other organizations, and suggests ways to improve the effectiveness of competition law enforcement worldwide.

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Key words:

International cooperation

Competition law

Cross-border mergers

International cartels

Law enforcement

International Cooperation and Competition Law

 

Introduction:

This working paper explores the evolution, challenges, and prospects for international cooperation in competition law. It highlights the challenges of enforcing antitrust laws in the context of globalized and interconnected economies, with a particular focus on cross-border mergers and international cartels. The role of the OECD and other international organizations in facilitating such cooperation is also discussed.

 

1. Necessity and Challenges of International Cooperation:

 

The increasing globalization of trade and investment (illustrated by rising exchange values ​​and FDI flows, see Figures 2-4) and the increase in cross-border mergers and acquisitions (see Figures 5-8) make international cooperation on competition matters increasingly crucial.

 

The number of jurisdictions with competition laws and authorities has exploded (see Figure 9), complicating the regulatory landscape and increasing the potential for disagreements and duplication in investigations.

 

Cooperation is a continuing challenge for the antitrust community, hampered by differences in substantive laws, competitive conditions, assessments, and objectives of national authorities.

 

2. Historical Evolution of Cooperation:

 

The OECD has played a pioneering role in promoting international cooperation on competition matters for over 50 years.

 

Renewed interest in international cooperation has led to the creation of the International Competition Network (ICN), a platform for the exchange of experiences and best practices between competition authorities.

 

The principle of "committee" (taking into account the important interests of other countries when applying the law) and "positive committee" (request from one jurisdiction to another to take enforcement action) are important foundations of cooperation. "Positive committee" is increasingly being incorporated into bilateral agreements.

 

Multilateral attempts to integrate binding competition law disciplines within the WTO have failed to achieve consensus.

 

3. Current State of Cooperation:

 

Cooperation today is multidimensional, involving multilateral (OECD, ICN, UNCTAD) and regional (European Competition Network, Andean Community, etc.) organizations, as well as bilateral agreements.

 

These bilateral agreements vary in scope and in the cooperation tools they provide (for example, the exchange of confidential information is not always possible with all the authorities involved).

 

Despite cooperative efforts, there is no systematic attempt to streamline law enforcement and reduce duplication at the global level (with some notable exceptions at the regional level such as the EU).

 

4. Costs of Law Enforcement Disagreements: Mergers and Cartels:

 

Cross-Border Mergers: * There is a risk of disagreement over international mergers due to differences in substantive rules ("different substantive analysis rules"), competitive conditions ("different competitive conditions"), and valuation ("different valuation"). * Disagreements entail significant costs for companies (high administrative costs, delays, etc.) and authorities. * "Moreover, because a blocking decision by a major jurisdiction effectively constitutes a veto on a global merger, mergers involving the world's largest companies will likely become increasingly difficult, as multiple separate approvals are required and the merger must satisfy the most cautious investigating authority." * The application of the strictest standard ("Strict standard will prevail") is a consequence of disagreements. The examples of the GE-Honeywell and Glencore-Xstrata cases illustrate this point. * Obtaining multiple, independent clearances reduces the overall likelihood of global merger approval, even if authorities apply the same standards ("Difficulty of obtaining multi-jurisdictional clearances"). This can potentially discourage mergers that are beneficial to economic welfare.

 

Cross-Border Cartels: * There is potential for cooperation to combat cross-border cartels, including through the exchange of information and the simultaneous execution of searches. * Lack of cooperation can lead to negative consequences, such as the inability of some countries to prosecute cartels that have caused harm within their territory due to lack of access to evidence. * Cooperation is not without risks, including excessive enforcement (e.g., fines based on worldwide revenues or multiple prison sentences for the same offenses) and the disclosure of confidential business information. * Figures 10 and 11 illustrate the increase in the number of cross-border cartels revealed and the total amount of fines. Figures 14 to 20 show the evolution of cartel enforcement by the European Commission and the U.S. Department of Justice, highlighting the increasingly international dimension of these cases.

 

5. Gaps in International Governance:

 

There is a governance gap regarding international cooperation in merger review, cartel investigations and abuse of dominance/unilateral conduct cases.

 

"A governance vacuum appears to exist both with regard to international cooperation in merger review and cartel investigations, and in abuse of dominance/unilateral conduct cases."

 

6. Future Developments and Trends:

 

Cooperation problems are expected to become less severe in the future due to greater convergence of standards and practices, increased mutual trust, and a greater willingness of new competition authorities (particularly in emerging economies such as China and India) to become more active and impose remedies with global consequences.

 

However, the relative decline in the share of global GDP of the three major economies with competition laws (the United States, EU, and Japan) (see Figure 21) means that cooperation with an increasing number of jurisdictions, including new ones, will be necessary to cover a significant share of global economic activity.

 

"In 2014, this same trilateral cooperation would cover less than half of global GDP. Reasonable projections suggest that by 2030, these three economies will account for only 35 percent of global GDP. Beyond 2030, at least five jurisdictions would need to cooperate to reach the proportion of global GDP that could be achieved with trilateral cooperation alone in 1995."

 

7. Areas for Improving Cooperation:

 

Improving bilateral cooperation (e.g., exchange of confidential information).

 

Development of standards for legislative and regulatory frameworks facilitating information sharing.

 

Development of common waiver forms.

 

Increased use of positive committee clauses.

 

Streamlining merger notification and review systems.

 

Development of work-sharing arrangements.

 

Mutual recognition of fines and prison sentences.

 

Conclusion:

International cooperation in competition matters is essential to address the challenges posed by globalization. Although significant progress has been made, obstacles remain due to legal, economic, and political differences between jurisdictions. Strengthened bilateral and multilateral cooperation, the gradual harmonization of standards, and greater mutual understanding are necessary to ensure effective enforcement of competition laws worldwide and avoid the costs associated with disagreements. The changing global economic landscape makes the need for broader and more effective cooperation even more imperative.

 

Paper Summary Initial Draft By NotebookLM