Assessing the Strategic Situation Underlying International Antitrust Cooperation

• Publication year: 2022

Assessing the Strategic Situation Underlying International Antitrust Cooperation

Weimen Shen

ASSESSING THE STRATEGIC SITUATION UNDERLYING INTERNATIONAL ANTITRUST COOPERATION

Weimen Shen^*

ABSTRACT

This Article disputes the widely held view that the strategic situations underlying antitrust cooperation among developed antitrust regimes and developing antitrust regimes are similar, particularly the conclusion that the current set of policy options to address private and hybrid public-private restraints of trade is feasible in all situations. This Article utilizes an empirical inquiry into trade flows that affect the general level of antitrust regulations in open economies (here, Japan and China). Based on this empirical foundation, the current set of policy options are explored, including the extraterritoriality of U.S. antitrust law, Section 301's competition-related clause, the World Trade Organization dispute settlement, and bilateral cooperation mechanisms. This Article contends that each policy option is feasible only to address competition-related trade concerns in developed antitrust regimes, but is ill-equipped to address competition-related trade concerns in emerging market economies that are in the process of developing antitrust regimes. Thus, when one compares the successful cooperation and convergence in developed antitrust regimes with the failed attempts to increase cooperation and convergence in emerging market economies, it indicates that the existing paradigm in antitrust cooperation is less likely to preempt the need to resort to a multilateral framework. The comparison further suggests that the optimal antitrust regime for a global integrated economy is to strengthen a network of bilateral agreements, supplemented by efforts toward a multilateral agreement.

[Page 484]

TABLE OF CONTENTS

INTRODUCTION.............................................................................................484

I. THE THEORETICAL AND EMPIRICAL FOUNDATIONS OF TRADE FLOW BIAS IN DOMESTIC ANTITRUST LAWS.....................................492

A. Reasons for Seeking Increased Cooperation and Convergence ............................................................................. 492
B. Linkages Between Changes in Trade Flows and Changes in Domestic Antitrust Laws........................................................... 495

II. THE DESIRABILITY AND THE CAPACITY OF THE CURRENT POLICY OPTIONS.............................................................................................500

A. A Historical Dimension: Weighing Trade and Antitrust .......... 501

1. The Japanese Export Cartels and Extraterritorial Application of U.S. Antitrust Law ....................................... 501
2. Competition Clause of Section 301 .................................... 504
3. WTO Dispute Settlement and Competition Issues .............. 506

B. Why the Current Set of Policy Options Is Likely To Be Limited ...................................................................................... 510

1. The Chinese Export Cartels and Extraterritorial Application of U.S. Antitrust Law....................................... 510
2. Other WTO Cases on China's Export Restrictions ............ 518
3. Section 301 and China's Anti-Monopoly Law.................... 521

III. WHAT WORK IS LEFT FOR BILATERAL COOPERATION MECHANISMS?................................................................................... 525

A. Information Sharing ................................................................. 525
B. Positive Comity......................................................................... 528

1. Illegality in the Requested Country .................................... 530
2. Confidence among Competition Authorities ....................... 532
3. The Reciprocity Problem .................................................... 533

CONCLUSION.................................................................................................535

INTRODUCTION

Antitrust laws shape the market order and define the power that large companies should have in society and the extent to which the state is active in regulating economic participants.¹ This task has become increasingly difficult in the wake of globalization and economic interdependence.² There is ample

[Page 485]

evidence that private barriers to trade are replacing the progress made by the World Trade Organization (WTO) in eliminating government-sponsored barriers to trade.³ Entrenched businesses and states themselves face perverse motivations to rebuild barriers for private and national purposes.⁴ Some critics argue that trade liberalization has laid the foundation for private and mixed abuse.⁵ Other critics of globalization claim that countries have lowered their regulatory standards to improve their relative competitive position in the global economy.⁶

International organizations such as the WTO, the Organization for Economic Cooperation and Development (OECD), and bilateral intergovernmental groups have actively debated the appropriate national or international policy responses.⁷ At the European Union's request, the WTO established the Working Group on Interaction between Trade and Competition Policy at its WTO Ministerial

[Page 486]

Conference in Singapore to discuss the interaction between trade and competition policy.⁸ The tasks of the Working Group, which were analytical and exploratory, did not produce any definite agreement.⁹

The Fourth Session of the Ministerial Conference held in Doha initially included antitrust on its negotiating agenda.¹⁰ However, at the 2003 Cancun Ministerial Meeting, WTO Members failed to reach an explicit consensus for two notable reasons.¹¹ First, many developing countries asserted that they were not ready to negotiate the WTO antitrust agreement due to insufficient resources or legal and economic expertise to enforce antitrust laws.¹² They also raised concerns about whether a multilateral framework agreement for antitrust is beneficial to their national interests.¹³ Second, and more importantly, the United States took a pessimistic stance on further incorporating antitrust issues into the WTO agenda.¹⁴ The United States was especially worried about the inability to overcome existing national differences in antitrust regimes.¹⁵ The United States

[Page 487]

was also concerned that this possible future role of the WTO would lead to a weak and ineffective regime.¹⁶

Such failures to negotiate an agreement on antitrust and other Singapore Conference issues resulted in the collapse of the Cancun Ministerial Conference.¹⁷ Following the collapse of negotiations in Cancun, the WTO General Council decided to drop antitrust policy from the Doha Development Agenda.¹⁸ Few have suggested that WTO antitrust negotiations will be revived soon.¹⁹

The United States traditionally considers both trade and antitrust policy options to overcome anticompetitive practices around the world that inhibit access to markets and trade.²⁰ Such alternative policy tools include extraterritoriality of U.S. antitrust law, Section 301's competition-related clause, and the WTO dispute settlement process.²¹ These policy options have been suggested in response to the claims of many American companies that their access to and expansion into Japanese markets have been blocked by both public and private restraints of trade which might at least partially boost the U.S. trade

[Page 488]

deficit.²² The United States has implemented these policy tools in the Japanese context, however, without much success.²³

For these reasons, positive comity is a substantial development. The United States decided to seek strategies that require as little cooperation as possible while still achieving a reasonably efficient regulatory outcome.²⁴ The U.S. antitrust authorities made efforts to enter into bilateral antitrust cooperation agreements with foreign counterparts, calling for day-to-day enforcement relationships of trust to benefit both parties.²⁵ The United States has also taken initiative by leading discussions on positive comity within the OECD to build consensus on an international agreement on positive comity.²⁶ The general U.S. position is that cooperative arrangements among antitrust authorities are superior solutions to initiating a WTO action.²⁷

All the above policy options have been considered in response to the recent restraints on trade—both private and a hybrid of public and private—applied in China.²⁸ With respect to Section 301, aggressive unilateralism has not been a viable option since China joined the WTO in 2001.²⁹ The pursuit of trade sanctions could lead to counter-suits against the United States.³⁰ With respect to

[Page 489]

the WTO, the current rules offer only fragmentary coverage of competition-type concerns.³¹ The WTO can at most examine trade effects of a few antitrust violations, with only uncertain prospects of success.³²

The concept of extraterritoriality has always been a highly controversial issue.³³ In particular, three similar antitrust cases were brought before U.S. courts against Chinese export cartels.³⁴ These cases are unusual because the Chinese defendants did not deny they fixed prices and limited output; instead they moved to dismiss the suits on the basis that they should be exempt from antitrust liability since the Chinese government had compelled them to do so.³⁵ As all three cases were progressing in U.S. district courts, China received another blow on the trade front.³⁶

The decisions flowing from these parallel proceedings have created glaring contradictions in their findings of the relationship between the Chinese government and its exporters, leading to conflicting positions expressed by the U.S. executive and judicial branches.³⁷ These decisions triggered even larger controversy because three district courts have responded to the tension between domestic antitrust law and WTO law in three different ways.³⁸ In addition, these cases indicate that...