The US and EU competition policies:

cooperate or compete?

Alix GrassinChristin Fröhlich

Agenda

Reasons for cooperation Scopes Restraints Practical examples Conclusion

Reasons for cooperation

Increase of cross-border trade and

transnational business activities

doctrine of extraterritorial effect Necessity of sharing information Common objectives and similar

anititrust law

Scopes of cooperation

3 agreements concluded (1991, 1998, 2002): voluntary exchange of information,

coordination of antitrust enforcement and regular bilateral meetings

considering the interests of the other party when enforcing its competition rules

each party may ask the other to take enforcement action

review of individual merger cases in close cooperation, with a similar timetable for investigations, exchange of information and joint interviews with the mergers

Scopes of cooperation

Anti-competitive agreements Convergence: Commission followed US

example became more vigorous, setting higher fines

case of heat stabilisers/impact modifiers: prosecution of the cartels involved almost simultaneous surprise visits to companies in the EU and US

Weakening cooperation: risk of discovery ofEU corporate leniency statements and its use by US courts for civil litigation

Scopes of cooperation

Merger control Divergent results because of different

information supplied by merging firms? Possibility of joint meetings between mergers

and authorities Boeing/McDonnell Douglas: competition

authorities played against each other,

US lobbied Commission

Abuse of market power Difficulty of distinguishing between

exclusionary and pro-competitive behaviour Article 82 of EC treaty: firm is abusing its

dominance even if it does not gain more economic power

Market share indicating dominant position EU: 50% or more as clear indicator for

monopoly power; under 25% safe harbour US: two-thirds of a market;

under 40-50% safe harbour Commission more vigorous stance than US?

Scopes of cooperation

Restraints to cooperation

Reasons Sovereignty and national interests:

- benefit first their consumers - protect their industries- protect them from foreign take-overs

Different visions of competition policies: - regulatory vs. market-based economy policies- turning point with Commissioner Monti

Institutional divergences

Practical examples

GE/Honeywell merger with conglomerate effect

Different viewpoints about the merger of two

American firms EU ruling: GE dominant position in the large

jet craft engines market

Honeywell large part of the avionics and non-avionics aerospace component market

Possible effects: bundling, leverage and vertical effects

US ruling: merger efficiency based on lower

prices leads to pro-competitive behaviour

Practical examples

Microsoft Significant divergence of interpreting the

similar antitrust laws US ruling: disclosure of source codes, granting

of non-discriminatory licensing to independent software vendors and allowing the removal of its software

EU ruling: 497 million fine, changes of server operating system to allow competitor’s access and obliged Microsoft to offer a Windows version without the Windows Media Player

Practical examples

Reasons for divergence: Political pressures: at beginning of

investigations the DOJ, under Clinton administration, announced heavy fines and a splitting of the company. Final decision made under the rather business-friendly Bush administration

Different nature of sanctions due to authorities analysing different issues (US: licensing and the removal/altering of programs; EU: emphasis on the bundling itself)

Weak points: Domestic reasons (culture and history,

economic strategy and theory, political behaviour) constitute obstacles

Particularly diverge when defining abuse of market power or assessing effects of mergers, especially when national champions

are involved Not compulsory

Conclusion

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Advantage: Mechanisms established to better understand

each other’s competition policy regimes Strong convergence

Remarkable degree of cooperation in

competition policy,natural tensions exist

Conclusion

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