The case of export cartel exemptions: Between competition and protectionism

Journal of Competition Law and Economics

Volumn 3, Issue 1, 2007, Pages 97-126

  Becker, Florian ^a  

^a UNIVERSITY OF ABERDEEN   (United Kingdom)

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EID: 34047211272     PISSN: 17446414     EISSN: 17446422     Source Type: Journal    
DOI: 10.1093/joclec/nhl024     Document Type: Article

References (177)

1. See, for example, paras. 1 and 2 of the preamble to GATT 1947.
2. See on this M. Trebilcock and R. Winter, The law and Economics of Canadian Competition Policy (University of Toronto Press, Toronto, 2002), 507.
3. P. Krugman, Strategic Trade Policy and the new International Economics (MIT Press, Cambridge, MA, 1995)
4. an overview over some relevant books can be found in J. Richardson "The Political Economy of Strategic Trade Theory," International Organization 107 (1990)
5. see also P. Krugman "Increasing Returns, Monopolistic Competition, and International Trade," JIEL 469 (1979)
6. K. Lancaster "Intra-industry Trade Under Perfect Monopolistic Competition," JIEL 151 (1980).
7. Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations (1776), Volume I: Book I, Chapter X, p. 82.
8. Smith, Volume II: Book IV, Chapter IV, p. 1.
9. Id.
10. P. Stephan "Competitive Competition Law?," University of Virginia School of Law, Law and Economics Research Paper (03-3) (2003), 5.
11. Id. at 14, 25.
12. See R. Hudec "Private anticompetitive behavior in world markets," Antitrust Bull 1048 (2003).
13. WTO Panel Report, Japan-Measures Affecting Consumer Photographic Film and Paper (WT/DS44/R)
14. on this M. Matsushita, "Basic Principles of the WTO and the Role of Competition Policy," Wash U Global Stud L Rev 369 (2004).
15. Critical C. Chinkin, "A critique of the public/private dimension" (1999) 387.
16. But see now the WTO Panel Report, Mexico - Measures Affecting Telecommunications Services (WT/DS204/R)
17. see also E. Fox "The WTO's First Antitrust Case - Mexican Telecom: A Sleeping Victory for Trade and Competition." JIEL 271 (2006).
18. For the purpose of this article, the competition policy of the EU will be treated as a national policy.
19. See J. Basedow "Entwicklungslinien des internationalen Kartellrecht," Neue Juristische Wochenschrift 627 (1989).
20. See the relevant entry in R. S. Khemani and D. M. Shapiro, Glossary of Industrial Organisation Economics and Competition Law (1993) (http://www.oecd.org/dataoecd/8/61/2376087.pdf last visited 30 August 2006).
21. See the accepted description of a hard core cartel in: OECD (ed.) Hard Core Cartels (2000) 6.
22. US v Minnesota Mining & Manufacturing Co, United States v. Minnesota Mining & Manufacturing Co., 92 F. Supp. 947 (D. Mass. 1950).
23. M. Trebilcock and R. Howse The Regulation of International Trade, 3rd edn (Routledge, London, 2005), 263.
24. For the sake of clarity, we assume in the following text that such conduct is exempted that could not be legal in the domestic competition order; for example under the exceptions of Article 81(3) TEC.
25. See on the reasons for this distinction between international cartels and single country cartels: S. Weber Waller, "The Ambivalence of United States Antitrust Policy Towards Single-Country Export Cartels," Nw J Int'l L&Bus 98 (1989/90).
26. PICJ, The Case of the S.S. "Lotus" 1927 PCIJ, Series A, No. 10.
27. American Banana Co v United Fruit Co, 213 U.S. 347 (1909).
28. US v American Tobacco Co, 221 U.S. 106 (1911)
29. see also: US v Sisal Sales, 274 U.S. 268 (1928)
30. US v National Lead Co, 332 U.S. 319 (1947)
31. US v Timken Roller Bearing Co, 341 U.S. 593 (1951)
32. US v General Electric Co, 82 F Supp 753 (DNJ 1949)
33. Continental Ore Co v Union Carbide and Carbon Corp, 370 U.S. 690 (1962).
34. M. Levenstein and V. Suslow, "The Changing International Status of Export Cartels," Am U Int'l LR 789 (2004/5).
35. D. Larson, "An Economic Analysis of the Webb-Pomerene Act," JL Econ 46 (1970)
36. S. Weber Waller, "The Failure of the ETC Program," NCJ Int'l L & Com R 239 (1992).
37. 15 U.S.C. § 61-64.
38. US v United States Alkali Export Assoc, 325 US 196 (1945)
39. Export Trading Company Act of 1982, 15 U.S.C. §4001.
40. D. Lewis, "The Proposed Export Trading Company Act of 1980," J Int'l L & Econ 465 (1981) (with further refs).
41. See on this rationale: Den Norske Stats Oljeselskap As v Heere Mac, 241 F.3d 420, 431 (5th Cir. 2001) (Higginbotham, J., dissenting).
42. Chase Econometrics/Interactive Data Corporation The Macroeconomic Impact of Authorizing US Export Trading Companies (1981).
43. Weber Waller (note 25), 239.
44. But parties injured by the conduct may sue for actual damages on the ground that the conduct does not comply with the statutory criteria.
45. §7 Sherman Act, 15 U.S.C. §6a.
46. National Bank of Canada v Interbank Card Assoc, 666 F.2d 6 (2d Cir. 1981).
47. Pfizer Inc v Government of India, 434 US 308 (1978).
48. G. Garvey, "Exports Banking and Antitrust The Export Trading Company Act," Nw J Int'l L. & Bus 833 (1984).
49. S. F. Halabi, "The 'Comity' of Empagran," HJIL 288 (2005).
50. Id. at 280.
51. Joined cases 40-48, 50, 54-56, 111, 113 and 114/73, Coöperatieve Vereniging "Suiker Unie" UA et al v Commission [1975] ECR 1663, para. 596-601
52. see also CFI, Joined cases T-25/95, T-26/95 et al, Ciminteries CBR et al v Commission [2000] ECR II-491, para. 3785.
53. Joined cases 29/83 and 30/83, CRAM SA and Rheinzink GmbH v Commission [1984] ECR 1679, para. 24-30.
54. Commission Decision 75/94/EEC of 19 December 1974, OJ 1975 L 38/10, para. 8.
55. Case C-306/96, Javico v Yves Saint Laurent Parfums SA [1998] ECRI-1983, para. 10-24 (para. 19).
56. Commission Decision 71/22/EEC of 23 December 1970 (Supexie), OJ L 10/12 (no English version).
57. Commission Decision 85/202/EEC of 19 December 1984 (Woodpulp), OJ L 85/1
58. ECJ, Case 22/71, Beguelin Import Co v S.A.G.L. Import Export [1971] ECR 949, para. 14.
59. In ECJ, joined cases C-89, 104, 114, 116, 117 and 125 to 129/85, Woodpulp, [1988] ECR 5193, the Court preferred an "implementation test," which is inspired by the effects test and will probably always lead to the same outcomes.
60. The CFI in M&A cases, again, explicitly refers to the likelihood of anticompetitive "effects" Case T-102/96, Gencor Ltd v Commission [1999] ECR II-753, para. 78.
61. ECJ, Case 174/84, Bulk Oil (Zug) AG v Sun International Limited and Sun Oil Trading Company [1986] ECR 559
62. see also Commission Decision 77/100/EEC of 21 December 1976, OJ 1977 L 30/10, para. 24.
63. See the statement of the Representative of the European Community and its member States as reported in the Report of the Meeting of 2/3 October 2000 of the WTO Working Group on the Interaction between Trade and Competition Policy (WT/WGTCP/M/12) 10.
64. Comprehensive overview: R. Whish, Competition Law, 5th edn (LexisNexis, London 2003), 427.
65. See on the following V. Lowe, "Jurisdiction," in M. D. Evans (ed.), International Law, 2nd edn (Oxford University Press, Oxford, 2006), 342.
66. United States v Aluminium Company of America, 148 F.2d 416 (2d Cit. 1945)
67. see for the UK Rio Tinto Zinc Corp v Westinghouse Electric Corp (1978) All ER 434 (HL)
68. critical, however, Timberlane v Bank of America, 549 F.2d 597 at 611. (1970)
69. more recently Den Norske Stats Oljeselskap As v HeereMac, 241 F.3d 420 (5th Cir. 2001)
70. on the one hand and Kruman v Christie's Intl, 284 F.3d 384 (2d Cir. 2002)
71. on the other hand and finally F. Hoffmann-La Roche Ltd. v. Empagran S.A., 123 S. Ct. 2359 (2004).
72. American Banana Co v United Fruit Co, 213 U.S. 347 (1909).
73. U. Immenga, "Export Cartels and Voluntary Export Restraints between Trade and Competition Policy," Pacific Rim Law & Policy Journal 96 (1995).
74. ECJ joined cases 89, 104, 114, 116, 117 and 125 to 129/85, Ahlström et al v Commission ("Woodpulp") [1988] ECR 5193, para. 19
75. on the economic aspects of sovereignty see S. Weber Waller and A. Simon, "Analyzing Claims of Sovereignty in International Economic Disputes," NW J Int'l L & Bus 1 (1985/86)
76. idem. "A Theory of Economic Sovereignty," Stan JIL 347 (1986).
77. On the notion of compulsion see J. Griffin, "Special International Antitrust Doctrines and Defenses," Antitrust LJ 546-547 (1991-2).
78. Interamerican Refining Corp v Texaco Maracaibo Inc, 307 F Supp 1291, 1298 (D Del 1970)
79. ECJ joined cases 89, 104, 114, 116, 117 and 125 to 129/85, Ahlström et al v Commission ("Woodpulp") [1988] ECR 5193, para. 20.
80. On the cases of "Government Action defences" see A. Lowenfeld, International Economic Law (Oxford University Press, Oxford, 2002), 366.
81. See Article 2(1) UN-Charter.
82. Bartolus de Saxoferrato, Tractatus represaliarium (1354), Qu. I/3, § 10.
83. See H. Fox, "Restraints on the exercise of jurisdiction by national courts," in M. D. Evans (ed.), International Law, 2nd edn (Oxford University Press, Oxford 2006), 374.
84. Id. at 361-2.
85. According to the foreign sovereign compulsion doctrine a state may not require anyone outside its territory to do an act that would violate the law of the place where the act would be done (cf Lowe, "Jurisdiction," 354).
86. Immenga, "Export Cartels and Voluntary Export Restraints," 112.
87. This is not in accordance with the fact that under the U.S. Foreign Sovereignties Immunity Act (FSIA; 82 U.S.C. § 1130, 1332(a), 1391(f), 1441(d), 1602-11) generally the nature of the conduct, but not its purpose is the decisive factor.
88. Scrutinizing the nature of the transaction (cf Siderman de Blake v Argentina, 965 F.2d 699, 708 (9th Cit. 1992)
89. disqualifies any state conduct in which a private person could engage from state immunity (cf Texas Trading & Milling Corp v Nigeria, 647 F.2d, 300, 309, 2d Cir. 1981).
90. See the Mission statement at www.opec.org (last visited 3 August 2006)
91. see also Article 2 of the OPEC Statute: "(A.) The principal aim of the Organization shall be the co-ordination and unification of the petroleum policies of Member Countries and the determination of the best means for safeguarding their interests, individually and collectively. (B.) The Organization shall devise ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations. (C.) Due regard shall be given at all times to the interests of the producing nations and to the necessity of securing a steady income to the producing countries; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on their capital to those investing in the petroleum industry." (http://www.opec.org/library/opec%20statute/pdf/os.pdf; last visited 3 August 2006).
92. See A. Udin, "Slaying Goliath: The Extraterritorial Application of U.S. Antitrust Law to OPEC," Am ULR 1321 (2001).
93. International Association of Machinists & Aerospace Workers v OPEC, 477 F Supp 553 (CD Cal 1979).
94. This decision is somewhat inconsistent with Westinghouse Elec. Corp v Rio Algom Ltd (In re Uranium Antitrust Litigation), 617 F.2d 1248 (7th Cir. 1980), where the conservation and exploration of the uranium also served an important purpose of foreign governments' economic policy;
95. see Immenga, "Export Cartels and Voluntary Export Restraints," 109-110.
96. ECJ, Case C-41/90, Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] ECR I-1979, para. 21
97. See also C-244/94, Fédération française de sociétés d'assurance [1995] ECR-I 4013.
98. ECJ, joined cases C-159/91 and C-160/91, Christian Poucet v Assurances Générales de France and Caisse Mutuellee Régionale du Languedoc-Roussillon [1993] ECR I-637)
99. Case C 35/96, Commission v Italian Republic [1998] ECR I-3851.
100. Case C 35/96, Commission v Italian Republic [1998] ECR I-3851, para. 54.
101. Stated by the representative of the United States, see WTO Report on the Meeting of 20-21 Feb 2003 (WT/WGTCP/M21, May 2003) 15.
102. M. Levenstein and V. Suslow, "Contemporary International Cartels and Developing Countries," Antirust LJ 845 (2003-4).
103. F. Hoffmann-La Roche Ltd. v. Empagran S.A., 123 S. Ct. 2359 (2004).
104. Citing the example of Canada: Levenstein and Suslow "The Changing International Status of Export Cartels," 800;
105. see also A. Bhattacharyca, "Export Cartels," JWT 336 (2004).
106. See Levenstein and Suslow (note 24) 786-7
107. also significant voices within the scholarly discussion demand the abolishment of these exemptions in particular with regard to LDC as target States: E. Fox "International Antitrust and the Doha Dome," VJIL 928 (2003)
108. J. Drexl, "International Competition Policy after Cancun," 450 (2004)
109. A. Guzman "The Case for International Antitrust," Berk JIL 372 (2004).
110. Stated by the Representative of the United States, see Report on the Meeting of 20-21 Feb 2003 of the WTO Working Group on the Interaction between Trade and Competition Policy (WT/WGTCP/M21) 15.
111. OJ 2003 L 1/1.
112. In this see the references in note 53.
113. See A. Bhattacharyea, "The case for a Multilateral Agreement on Competition Policy," JIEL 303 (2006)
114. criticizing the methods used in a case studies by S. Evenett for the WTO Secretariat Study on Issues Relating to a Possible Multilateral Framework Agreement on Competition Policy (2003, WT/WGTCP/W/228) 79
115. see also Levenstein and Suslow (note 70) 836.
116. Trebilcock and Howse (note 18) 602.
117. R. Anderson and P. Holmes "Competition Policy and the Future of the Multilateral Trading System," JIEL 541 (2002).
118. Stephan (note 7) 15.
119. Critical: A. v. d. Heyden Das Exportkartell (Lang, Bern, 1972), 30.
120. See the overview offered by J. Basedow, Welkartellrecht (Mohr Siebeck, Tübingen, 1998), 27
121. W. Moeschel, "Internationale Wettbewerbsbeschränkungen," in H. Leßmann (ed.), Festschrift für Rudolf Lukes (Köln, Heymann, 1989), 467.
122. Comprehensively on this: Stephan (note 7) 7
123. A. Guzman, "Is International Antitrust Possible?," NYULR 1512-18 (1998)
124. Levenstein and Suslow (note 70), 818
125. Bhattacharyea (note 72), 347.
126. J. Davidow and H. Shapiro, "The Feasibility and Worth of a World Trade Organization Competition Agreement," JWT 66-7 (2003).
127. A. Dick "Are Cartels Efficiency Enhancing or Monopoly-Promoting," 2 (1989) (UCLA Economics Working Papers No. 601; http://www.econ.ucla.edu/ research/workingp.html; last visited 29 July 2006).
128. See on this WTO Report of the Working Group on the Interaction between Trade and Competition Policy to the General Council (WT/WGTCP/7 July 2003), 14.
129. Levenstein and Suslow (note 24), 795
130. Weber Waller (note 25), 250.
131. See on this Bhattacharyea (note 72), 339-40.
132. See http://www.trade.gov/td/oetca/teamup.html (last visited 24 July 2006).
133. These, however, should continue to lose their significance with the further advancement of the WTO-system. This will also make national monopolies less threatening, because being subjected to international free trade diminishes domestic market power and makes markets contestable.
134. E. Günther, "Wettbewerbspolitik in einer freien Gesellschaft," Wirtschaft und Wettebwerb 118 (1964).
135. Immenga (note 52), 126.
136. Bhattacharyea (note 72), 350.
137. Levenstein and Suslow (note 70), 820.
138. For the U.S. Brown Shoe Company v U.S., 370 U.S. 294, 320 (1962)
139. the ECJ has not been similarly clear, but in publications of the Commission similar statements are made: "consumers end up paying more for less quality. That is why cartels are illegal under EU competition law" (see Commission EU competition policy and the consumer - a new brochure describing the basic concepts of European competition policy (2004; http://ec.curopa.cu/comm/competition/publications/consumer_en.pdf; last visited 24 Aug 2006); emphasis added).
140. Because most of the efficiency benefits mentioned are more or less specific to each exporting country, pure export cartels will regularly be made up of companies from a single country only, but it is also noteworthy that according to standard cartel theory one should assume that multi-market cartels will be more stable than single country markets. Here, companies have multiple contracts going beyond one single market and are therefore in a position to punish cheaters much more effectively.
141. Immenga (note 52), 124.
142. Id. at 96.
143. Trebilcock and Winter (note 2), 675.
144. Immenga (note 52), 125.
145. S. Diamond, "The Webb-Pomerene-Act and Export Trade Associations," Columbia LR 827 (1944).
146. Bhattacharyea (note 72), 332-3.
147. Commission Decision 77/100/EEC of 21 December 1976, OJ 1977 L 30/10, para. 24.
148. This overarching discussion cannot even be touched here; see as a starting point, for example, Fox (note 73), 911
149. Guzman (note 73), 355
150. more reluctantly P. Stephan "Global Governance, Antitrust and the limits of International Cooperation," Cornell ILJ 173 (2005).
151. Decision Adopted by the General Council on 1 August 2004 (WT/L/5792), August 2004.
152. WTO Panel Report Japan - Measures Affecting Consumer Photographic Film and Paper (WT/DS44/R); on this M. Matsushita, "Basic Principles of the WTO and the Role of Competition Policy," Wash U Global Stud L Rev 369 (2004).
153. Overviews, for example, in Matsushita (note 10), 364
154. Trebilcock and Howse (note 18), 593. An important example for this development can be found in the GATS, where Article VIII imposes a duty on each Member State to "ensure that any monopoly supplier of a service in its territory does not, in the supply of the monopoly service in the relevant market, act in a manner inconsistent with that Member's obligations under Article II and specific commitments" (para. 1) including cross-subsidization (para. 2). Article IX(1) GATS in particular states "that certain business practices of service suppliers, other than those falling under Article VIII, may restrain competition and thereby restrict trade in services." Thus, according to Article IX(2), Member States must enter into negotiations with other Member States to eliminate these practices.
155. S. Dillon, International Trade and Economic Law and the European Union (Hart, Oxford, 2002), 103.
156. In a recent dispute, a Panel again had to deliver a detailed analysis distinguishing private measures from state measures to establish the state's indirect responsibility for the subsidy in question; WTO Panel Report, United States - Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea (WT/DS296/R), para. 7. 10;
157. see also the Appellate Body Report, para. 106.
158. See, for example, Trebilcock and Howse (note 18), 597.
159. E. Iacobucci "The Interdependence of Trade and Competition Policies," World Comp Law & Econ Rev 20-21 (1997).
160. Trebilcock and Howse (note 18), 598.
161. See GATT Panel Report (adopted on 23 October 1958) on Italian Discrimination against Imported Agricultural Machinery (L/833 - 7S/60), http://www.wto.org/english/tratop_e/dispu_e/gt47ds_e.htm), para. 12
162. see also European Communities - Regime for the Importation, Sale and Distribution of Bananas, Appellate Body Report (WT/DS27/AB/R, 9 September 1997), para. 220;
163. Canada - Certain Measures Affecting the Automotive Industry, Appellate Body Report (WT/DS139/AB/RWT/DS142/AB/R, 31 May 2000), para. 149
164. United States - Tax Treatment for "Foreign Sales Corporations," Appellate Body Report (WT/DS108/AB/RW, 14 January 2002), paras. 209-10.
165. E. U. Petersmann and L. Ehring, "WTO Dispute Settlement and Competition Law," FordJIL 1522 (2002/3) (note 33)
166. A. Guzman, "Antitrust and International Regulatory Federalism," NYU LR 1162 (2001), discusses NTP in relation to export cartels though not under the auspices of GATT, but rather as an element of a WTO competition agreement to come.
167. This is emphasized with regard to export cartel exemptions in particular by: P. Holmes and J. Mathis, EU-India Study Report on Competition Policy (2003), 16 (note 21) (http://www.alexandria.unisg.ch/Publikationen/ 22221; last visited 24 August 2006).
168. P. Holmes and J. Mathis, "The EU and India on Competition Policy at the WTO," in L. Winters and P. Metha (eds), Bridging the Differences (CUTS, Jaipur, 2003), 69.
169. Trebilcock and Howse (note 18), 599, 601.
170. Dillon (note 108), 200.
171. Hudec (note 9), 1057-8 (note 15)
172. doubtful, however, Dillon (note 108), 41.
173. Hudec (note 9), 1057-8 (note 15).
174. Reluctant concerning the use of NVC to scrutinize for competition law rules: F. Roessler, "Should Principles of Competition Law be incorporated into WTO Law through Non-Violation Complaints," 413-21 (1999)
175. more sympathetic towards the concept: Hudec (note 9), 1059.
176. Id. at 1049.
177. Id. at 1059.