WTO and Competition Law: Interconnected

Sudeep Dilip Kothavade,

Chattrapati Shivaji Maharaj University

In today's highly globalized world, businesses operate in many overseas markets. Competition policies have become increasingly important in overseeing these mergers. The set of rules known as competition law is intended to prevent market distortion caused by corporations engaged in anti-competitive activities. Competition law tries to establish a fair marketplace for producers and consumers by prohibiting unethical actions aimed at gaining a larger market share than would be possible via honest competition. Anti-competitive acts have a multitude of negative effects on a market, including reduced innovation, increased consumer costs, and worse service or entrance obstacles for small enterprises. Other examples of anti-competitive behavior include bid rigging, in which competitors collude to predict who will win a contract ahead of time, predatory pricing, in which a monopoly or oligopoly charges an exorbitant price for a good that the consumer is forced to buy, price fixing, and dumping, in which a good is sold at such a low price that smaller businesses are unable to compete and risk being driven out of the market. Such practices are usually illegal by competition law, albeit the particular restrictions differ from nation to country.

Need for International Competition Agreement:

Given the difficulties of maintaining different competition regimes in an increasingly globalized world of worldwide mergers and cross-border transactions, a uniform competition agreement among nations may have certain advantages. Addressing advantages, the first one among them is binding international legal instrument which addresses transnational competition issues, guides nations towards proper implementation of local competition rules in foreign transactions.

Second, an international competition policy might address market access problems because multilateral rules would promote more equal conditions of competition world-wide.

Thirdly,a single international competition agreement, such as a merger, will be reviewed by multiple competition authorities in different jurisdictions and these authorities may impose conflicting responsibilities on the parties to the said agreement.

Competition Policy and WTO

World Trade Organization (WTO), which was founded in 1994, did not provide any particular legally enforceable regulations to address competition-related concerns in global commerce; rather, measures mentioned below were included in many WTO agreements' clauses and instruments. While there were plans to establish a competition agreement, it was pointed out that many Developing Country members had no national competition policy at all since they lacked the necessary resources and experience and certain Developed Countries (DC) members had a variety of national competition rules.

The WTO Working Group on Trade and Competition Policy (WGTCP) was established during the 1996 WTO Ministerial Conference in Singapore and the said group was tasked with collecting data from member countries and assessing potential areas for international cooperation and  "To study issues raised by Members relating to the interaction between trade and competition policy, including anti-competitive practices, in order to identify any areas that may merit further consideration in the WTO framework,"[1]

However, due to political issues within the parties to the WTO, the Cancún Ministerial Conference in 2003 postponed competition policy discussions. The WTO General Council in 2004 notified that “Competition policy will not form part of the Work Programme set out in that Declaration, and therefore no work towards negotiations on any of these issues will take place within the WTO during the Doha Round.[2]"

Competition provisions in existing WTO agreements

Various sections of WTO agreements, such as GATT 1994, TRIPs, and GATS, can be used to prohibit anti-competitive behaviors that restrict trade, notably in the field of market access.

Agreement On Trade-related Aspects Of Intellectual Property rights (TRIPs Agreement): The TRIPS agreement includes a competition policy. According to the provision , Members who are parties to said agreement are authorized to take reasonable action to prevent right holders from abusing their intellectual property rights. However, because these measures must be consistent with other portions of the agreement, their scope is limited. According to Article 40, competition authorities in Member States may "control certain licensing agreements on competition grounds". Article 40.2 specifies further practices that may constitute breaches.

The General Agreement on Trade in Services (GATS) agreement primarily addresses regulatory concerns, as seen by its treatment of monopolistic service suppliers. Monopolies must not misuse their market strength by competing in services beyond their monopoly rights. Monopolies can hinder trade in service industries by reducing competition. According to Art. VIII, WTO members must guarantee that any monopoly supplier of a service in their territory does not violate their duties under Article II or special commitments when providing such service in the relevant market.

Is the WTO the appropriate forum for converging Competition policies?

While there are advantages of a worldwide competitiveness pact, there are others who question whether the World Trade Organization is the ideal platform to implement such an agreement. As mentioned earlier, the WTO's separate competition policy accord discussions came to a standstill during the 2003 Cancún Ministerial Conference.

The WTO was created to promote trade liberalization and is primarily a forum for trade-related issues. The Japan-Film and Telmex cases, which dealt with activities leading to foreclosure of market access, demonstrate that the WTO is ill-suited to deal with anti-competition issues, despite the fact that competition policy and international commerce are linked. The WTO, as an organization primarily concerned with business, is created to address trade-related issues, which may disregard competition law's welfare-maximizing factors. If the WTO tackled trade-related concerns in addition to competition-related ones, there would undoubtedly be a policy clash, with the WTO favoring a trade-centric solution. It is also possible that competition law issues are too complex to be bound by an international regime and enforced by a dispute settlement body. Organizations such as the OECD, UNCTAD, and ICN have substantially greater expertise in this field.

Conclusion:

The said discussions made it clear that while a harmonized competition agreement could be beneficial in simplifying cross-jurisdictional issues and saving time, money and effort in these transactions, as well as clarifying competition rules, the implementation of such harmonization through the WTO is discouraged. Groups like the OECD or UNCTAD, with their knowledge of the subject, may be better able to bring together opposing policies  to form a more acceptable agreement. Furthermore, it would cost less  than changing the basic principles of the WTO  to make way for a competition agreement. Furthermore, the Doha negotiations revealed a serious lack of political consensus among Members. Therefore, it is best if the WTO is not responsible for harmonizing competition regulations.

References:

https://www.wto.org/english/tratop_e/comp_e/history_e.htm

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779229

http://www.wto.org/english/thewto_e/minist_e/min96_e/min96_e.htm

[1] WTO, Singapore Ministerial Declaration, Conference Doc WT/MIN(96)/DEC/W 13

December 1996, 96-5315, para 20, at

http://www.wto.org/english/thewto_e/minist_e/min96_e/min96_e.htm

[2] WTO, The General Council’s post-Cancun decision, the “July 2004 package”,

WT/L/579 2 August 2004, at para (g), at

http://www.wto.org/english/tratop_e/dda_e/draft_text_gc_dg_31july04_e.htm