Conference Panel: Avoiding Potential Enforcement Clashes in Trans-border Merger and Dominance Cases

Chris Martin
Assistant Deputy Commissioner of Competition, International Affairs
Competition Bureau

 

Insight Conference
Montreal, Quebec
June 16, 2005

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ICN Bonn Outcomes

Last week in Bonn, the International Competition Network (ICN) held its fourth annual conference.  I have been asked to provide you with some of the highlights of the conference.  I will focus mainly on the work of the Mergers Working Group, but will also touch on developments concerning cartels, telecommunications and younger agencies.

For those of you unfamiliar with the ICN, it was formed in 2001 as a project-oriented and consensus based organization. Its membership includes nearly all the world's competition agencies – currently some ninety-odd members – of which 82 were represented in Bonn.  Non-governmental advisors, of which there were over 100 in Bonn, work with ICN members to produce recommended practice proposals and substantive reports to promote convergence among the laws, processes and policies of different authorities.  Recommended practices are non-binding but, once adopted by the ICN, they form a baseline for sound antitrust policy and enforcement throughout the world.

Mergers

Notification and Procedures Subgroup (N&P)

Over the past few years, we have developed eight guiding principles as well as thirteen recommended practices for merger notification and review procedures, designed to facilitate global convergence in order to promote more efficient and effective domestic and cross-border merger review.  In the short time I have today, I won’t cover those which were previously approved.  However, the latest two recommended practices endorsed in Bonn relate to remedies and agencies’ enforcement powers.

On remedies, the ICN recommends that:

- a remedy should address the identified competitive harm arising from the proposed transaction;

- the merger review system should provide a transparent framework for the proposal, discussion, and adoption of remedies;

- procedures and practices should be established to ensure that remedies are effective and easily administrable; and finally,

- appropriate means should be provided to ensure implementation, monitoring of compliance, and enforcement of the remedy.

On competition agency enforcement powers, the ICN recommends that:

- competition agencies should have the authority and tools necessary for effective enforcement of applicable merger review laws;

- agencies should have sufficient staffing and expertise to discharge their  enforcement responsibilities effectively; and finally,

- agencies should have sufficient independence to ensure the objective application and enforcement of merger review laws.

The N&P subgroup also presented a study of the underlying rationale, content and use of waivers and included several model waivers of confidentiality for the reference of ICN members.  This will be especially beneficial for those members who have little or no experience in the use of waivers.

The subgroup has dedicated considerable time and energy to promoting successful implementation of the recommended practices by ICN members, as well as by non-members considering adopting new merger review rules.  Following on an initial informal benchmarking project to measure conformity with the Recommended Practices (RPs) conducted in 2003, the subgroup established a project dedicated to implementation.   The report presented in Bonn provides many examples of where and how countries and agencies have implemented the RPs, and constitutes a useful reference guide to promote the ICN’s work.  The document provides highlights by country of merger reforms and proposed reform by recommended practice.  During his presentation, Randy Tritell, the Chair of the subgroup, indicated that over half of the jurisdictions represented in the ICN have made or have proposed changes to their systems to move closer to the RPs.  He also noted that the ABA recently reviewed China’s proposed competition law using exclusively ICN-endorsed standards.  Let there be no mistake, the ICN’s work in this area has established the international norm and has started to lead to real convergence of approach, not only at the national level, but multilaterally. In this regard, I simply refer you to the recent OECD Council Recommendation on Merger Review. 

Investigative Techniques Subgroup

ICN members approved a preliminary draft of the Merger Guideline Workbook developed by the Investigative Techniques Subgroup.  During a breakout session, I heard delegates from Brazil and Zambia note that the workbook has already proven to be a useful sourcebook that provides a framework for analyzing the competition effects of mergers.   The document contains five of the anticipated eight worksheets covering market definition, market structure and concentration, unilateral effects, coordinated effects and entry and market expansion.  There are plans to add worksheets on efficiencies, the failing firm defence and vertical mergers to the document over the next year.  The document will help provide a common understanding of the basis for, and content of, merger guidelines as an important tool in improving consistency of analysis and decision-making internationally.

The ICN also approved a handbook on investigative techniques, which is the result of a three-year effort by subgroup members.  I found it particularly interesting to hear Mark Pearson from the ACCC indicate that they have used this handbook not only as an internal training tool, but on a daily basis in their enforcement work.

Analytical Framework Subgroup

And finally, the third subgroup on analytical framework presented a study on merger remedies that outlines key principles and the range of tools in the use of merger remedies, based on and illustrated by remedy practice in a variety of jurisdictions.  

Work Leading to Cape Town

Insofar as future work is concerned, the notification and procedures subgroup will continue to promote conformity with the guiding principles and recommended practices through a variety of means, including encouraging private sector advocacy.  And it is continuing to gather data on agencies’ experience with the RPs.  There are also plans to hold a workshop in the spring of 2006 in Washington, D.C. to promote understanding and implementation of its work.

The Analytical Framework and Investigative Techniques Subgroups have been merged to form the Merger Investigation and Analysis Subgroup.  In addition to finalizing the Merger Guidelines Workbook, the subgroup plans to arrange regional workshops on investigative techniques. It may also hold a thematic workshop, perhaps on remedies or economic evidence, that would deepen participants’ acquaintance with specific analytical issues in merger review.

I will now touch briefly on some of the other developments.

Cartel Working Group

ICN members established the Cartel Working Group at the 3^rd Annual Conference in Seoul, Korea in 2004 to help expand the opportunities for sharing anti-cartel enforcement expertise, experiences and good practices. A lot has been accomplished in only one year and the year ahead promises to be just as productive.  

The General Framework Subgroup presented a report on building blocks for effective anti-cartel regimes, which focuses on defining hard-core cartel conduct, effective institutions and effective penalties.  The report sets out some of the experiences of agencies with a substantial level of anti-cartel enforcement and will no doubt be very useful for agencies that are currently contemplating enhancement of their anti-cartel programs.

The issue of effective penalties proved to be a hot topic for participants at the conference as members debated the merits of corporate versus individual penalties and the necessity of incarceration to effectively deter cartels. A few of the issues raised in this debate were the following:

- The possibility of fines being so high that companies risk financial viability;
- Cultural and social impediments to imposing criminal penalties for cartel conduct; and
- The importance of individual responsibility to avoid corporations paying fines on behalf of employees. 

Enforcers were interested in exploring further what other options are available to more effectively deter cartels, including rebalancing of public and private enforcement and barring companies from bidding on contracts or individuals from holding certain positions in a corporation.

The General Framework Subgroup work plan for this year is quite ambitious and includes projects on obstruction, international cooperation and exchange of information, and the interaction of public and private enforcement.

The Enforcement Techniques Subgroup presented the first two chapters of its Anti-Cartel Enforcement Manual on Searches, Raids and Inspections and Implementing an Effective Leniency Program. 

The manual was well received and members see it as a valuable tool for the conduct of their own investigations.  Denyse MacKenzie, Senior Deputy Commissioner of the Criminal Matters Branch and Co-Chair of the subgroup, gave a short presentation on the issue of solicitor client privilege in the context of searches.  She referred to some good practices that could help to guard against inadvertent review and use of solicitor client materials, as well as some of the implications for cooperation in multi-jurisdictional cartel investigations. 

The subgroup will further develop the chapter on leniency over the next year by identifying good practices for the drafting and implementation of effective leniency programs and will prepare a new chapter on electronic evidence gathering. 

One of the challenges for the Cartel Working Group as it heads into its second year relates to its need to find ways to obtain the kind of invaluable input from NGAs that has been so effective in the mergers working group.  To date, NGAs have had limited involvement in the Cartel Working Group given the sensitivities of some members.  We in the Bureau will continue to seek opportunities to include appropriate NGA  participation. 

New initiatives

A new initiative approved in Bonn was the establishment of a Working Group on the Telecommunications Services Sector, which will be co-chaired by Sheridan Scott.  We’re very excited about this new work.  I encourage those interested in learning more about its planned program of work to visit the ICN Web site.

Establishing the Telecommunications Working Group was first proposed by David Lewis, Chair of the South African Competition Tribunal.  He felt it would be a worthwhile project that could be of immediate benefit to members from developing economies.  And for the first time during one of our annual conferences, we held a panel focusing exclusively on the interests of such younger members.  This led to a lively discussion involving a range of subjects, including the following:

- Developing mentoring and internship programmes;
- Studying the anti-competitive nature of international trade policy instruments, including the issues of government subsidies and exemptions for export cartels;
- Reorienting a lot of the efforts of the ICN towards technical assistance;
- Establishing a working group on abuse of dominance or monopolization;
- Rethinking the virtual nature of the ICN; and
- Revising the ICN’s language policy.

Although panellists generally took quite a positive view of the ICN's considerable achievements to date and its efforts to draw in members from developing jurisdictions, the Chair of the Steering Group, Ulf Böge from the German Bundeskartellamt, indicated in his closing remarks that addressing a number of these issues would change the fundamental nature of the network.  From the panel discussion, it was clear that ICN leadership from mature agencies has been challenged to think about how the ICN could assist members from developing countries to leverage the greater experience and skills base of their counterparts in developing countries.

During the post-conference Steering Group meeting that followed, I can report that this “intergenerational” challenge has been taken up and you may anticipate seeing early and concrete action on the subjects of mentoring and internships in the near future.

In conclusion, I am happy to say that although it has only been three and a half years since its creation, the ICN is on the verge of spanning the globe in its coverage.  It has taken up two of the three pillars of competition policy.  I think we can anticipate the third pillar --  monopolization/dominance -- will be taken up soon. We have now confirmed Annual Conference Hosts through 2009; after Cape Town, South Africa, the hosts will be agencies from Russia, Japan and Switzerland. Workshops in Korea, Washington, D.C., Paris and regionally are also planned in the coming year.  All in all, this is pretty good for a virtual network that Dr. Böge is fond of saying “doesn’t really exist.”
 
I look forward to discussing any questions the panel or audience may have on the recent ICN conference.