An “International Sheriff” to enforce fairness in worldwide competition
Marc Ivaldi, Olivier Bertrand
With regards to competition policy, the EU collaborates using its principal trade partners with a hodgepodge of bilateral and multilateral agreements. An improved idea is always to create a fresh supranational structure grouping your competition authorities from countries like the European Union, america and Japan.
Brussels’ attempts this season to crack down on collusion have lit a fuse. On February 21 st , the European Commission imposed an archive fine of € 992m on makers of elevators and escalators – accusing the world’s four largest of price-fixing. By the end of January, twelve electronics manufacturers found themselves facing a € 750m penalty for acting as a cartel. German heavyweight Siemens was hit with the biggest fine ever levied against a person company, an impressive €418m. Each is spectacular victories in the international fight anticompetitive behaviour. Nevertheless, these individual successes actually underscore the proliferation of illicit deal-making, especially across national borders.
Since it stands today, when ostensibly rival firms consent to split the market so as to spread higher prices to consumers, the potential punishments they face vary greatly, depending both on the countries where the infractions occur and on the nationalities of the firms. Multinationals can, because of this, strategically locate their subsidiaries so as to make the most of authorities’ investigative and jurisdictional limits. Conducted in a piecemeal way, the prosecution of companies guilty of anticompetitive behaviour, be it collusion or abuse of a dominant position, is quite inefficient and, for the time being, provokes serious political tension among governments who accuse one another of negligent inaction.
Faced with this example, the EU collaborates using its principal partner countries with a hodgepodge of bilateral and multilateral agreements. But conflicts arise frequently. For instance, when American firms setup export cartels, American authorities are obviously suspected to do something consuming conflicting motives. Do they place an increased priority on defending the free market or their own national interests? Analogously, American economists call into question the impartiality of the European Commission. Such conflicting incentives clearly manifested themselves during the mergers between Boeing and MacDonnell Douglas, in the late 90s, and between General Electric and Honeywell, in the first 2000s. Frequently, the stance taken by American authorities has been completely different from that taken by their European counterparts. Another well-known example is that of Microsoft. As the software giant was dealt stiff fines by the European Commission, it emerged nearly unscathed from the case brought against it by the American government.
These conflicts will be avoidable, somewhat, if the various competition authorities had a common framework for considering such cases, and if indeed they had an identical group of instruments at their disposal. Thus may be the objective of some large institutions like the OECD, UNCTAD and international forums just like the “International Competition Network”, a casual network of competition authorities from almost 80 countries. There were mutterings of expanding the role of the World Trade Organization (WTO) into this area, however the idea is risky. The WTO oversees negotiations among states seeking to reduce tariffs, mainly so as to promote business’ interests. It pays hardly any attention to defending the buyer, and the politicised nature of its debates undermines its efficacy. An improved idea is to make a new supranational structure grouping together the already-existing competition authorities from principal countries, or at least, as an initial step, to create a kind of institutionally-sanctioned collaboration among a small amount of important players like the European Union, america and Japan.
As a result of weight of the three with regard to international investment and trade, mutual cooperation on the part will be sufficient to control nearly all private actors all over the world. It could also enable credible cases to be brought against large multinationals, even those located in developing countries or in emerging ones such as for example Russia, China, India, Brazil or South Africa. It could enable the intensification of the fight cartels and illegal agreements, while also making certain the ever-growing number of cross-border mergers and acquisitions be achieved for legitimate reasons. As well, the quantity of states involved would remain small enough to limit both coordination problems and the expenses connected with a fresh bureaucratic structure.
This first rung on the ladder towards the creation of a “competition sheriff” will be a decisive one; furthermore, it’s much less unrealistic as some may be inclined to think. Confronted with an evergrowing cost of inaction, developed countries will have no choice but, sooner or later, to go over the creation of an embryo of world economic governance.
Editor’s note: This article appears in French on our Consortium partner site Telos, see “Pour un Interpol de la concurrence mondiale.”