International antitrust negotiations and the false hope of the WTO

Harvard International Law Journal

Volumn 48, Issue 2, 2007, Pages 383-439

  Bradford, Anu ^a  

^a HARVARD LAW SCHOOL   (United States)

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EID: 34548625649     PISSN: 00178063     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (221)

1. For a good overview of the various proposals for including antitrust in the WTO, see, for example, PHILIP MARSDEN, A COMPETITION POLICY FOR THE WTO (2003);
2. Julian L. Clarke & Simon J. Evenett, A Multilateral Framework for Competition Policy?, in THE SINGAPORE ISSUES AND THE WORLD TRADING SYSTEM: THE ROAD TO CANCUN AND BEYOND (State Secretariat of Econ. Affairs, Switz. & Simon J. Evenett eds., 2003), available at http://www.evenett.com/chapters/wtoguidecompetition.pdf;
3. Eleanor M. Fox, Toward World Antitrust and Market Access, 91 AM. J. INT'L L. 1 (1997).
4. See discussion infra p. 384, 388 (noting that there have been few examinations of the strategic situation characterizing international antitrust regulation in the existing literature).
5. See Henrik Horn & James Levinsohn, Merger Policies and Trade Liberalization 1 (Nat'l Bureau of Econ. Research, Working Paper No. 6077, 1997).
6. Andrew T. Guzman, The Case for International Antitrust, in COMPETITION LAWS IN CONFLICT, ANTITRUST JURISDICTION IN THE GLOBAL ECONOMY 99, 101 (Richard A. Epstein & Michael S. Greve eds., 2004).
7. Id. at 108-09. "Optimal" antitrust laws would be globally efficient as no state would engage in over- or under-enforcement but would choose the same antitrust laws as they would absent trade flows.
8. Id.
9. Id. at 109-10.
10. Andrew T. Guzman, Antitrust and International Regulatory Federalism, 76 N.Y.U. L. REV. 1142, 1156-58 (2001). Negotiating parties may seek "strategic linkages" to broaden the scope for an acceptable compromise in situations where gains within a given issue area are asymmetrically distribured and, consequently, where no agreement can be reached on a single issue alone.
11. See Steve Charnovitz, Triangulating the World Trade Organization, 96 AM. J. INT'L L. 28 (2002);
12. David W. Leebron, Linkages, 96 AM. J. INT'L L. 5 (2002);
13. Joel P. Trachtman, Institutional Linkage: Transcending "Trade and . . .", 96 AM. J. INT'L L. 77 (2002).
14. But see Wolfgang Kerber & Oliver Budzinski, Competition of Competition Laws: Mission Impossible? in COMPETITION LAWS IN CONFLICT: ANTITRUST JURISDICTION IN THE GLOBAL ECONOMY, supra note 4, at 31, 44 (suggesting by way of a brief reference that the current decentralized antitrust regime resembles a Prisoner's Dilemma ("PD"));
15. Oliver Budzinski, Toward an International Governance of Transborder Mergers? Competing Networks and Institutions between Centralism and Decentralism, 36 N.Y.U. J. INT'L L. & POL. 1, 6-8 (2004) (arguing that a non-coordinated merger control regime can be characterized as a PD).
16. It is outside the scope of this Article to discuss the type of international cooperation that could take place in the antitrust realm. Cooperation could entail, for instance, some degree of harmonization of substantive antitrust laws, agreement on minimum standards, allocation of jurisdiction, or centralized enforcement. In general, the word "cooperation" is used here to imply the achievement of greater coherence and policy convergence and thus the reduction of negative externalities that arise when domestic antitrust laws govern global markers. This Article also uses the term "coordination" to refer to situations where states pursue cooperation in a strategic setting that can be modeled as a "coordination game." See discussion infra at the beginning of Part III.A (on coordination games and how they differ from collaboration games).
17. Raquel Fernandez & Dani Rodrik, Resistance to Reform: Status Quo Bias in the Presence of IndividualSpecific Uncertainty, 81 AM. ECON. REV. 1146, 1146 (1991).
18. James D. Morrow, Modeling the Forms of International Cooperation: Distribution Versus Information, 48 INT'L ORG. 387 (1994).
19. See infra text accompanying note 94 (discussion on informal international cooperation in the antitrust domain).
20. See Guzman, supra note 4; see also Horn & Levinsohn, supra note 3, at 1-2; John O. McGinnis, The Political Economy of International Antitrust Harmonization, in COMPETITION LAWS IN CONFLICT: ANTITRUST JURISDICTION IN THE GLOBAL ECONOMY, supra note 4, at 126-27. Neither Horn and Levinsohn nor McGinnis advocate the WTO as a solution, but each acknowledges the premises of the debate on the interface between trade liberalization and antitrust laws.
21. Guzman, supra note 4, at 101-04.
22. Id. at 100.
23. Id.
24. Id. at 101-04, 108-09.
25. Id. at 101.
26. Guzman, supra note 8, at 1158.
27. See Kerber & Budzinski, supra note 9, at 44-45. Unlike Guzman, who finds that "optimal strategic antitrust policy" can be rigid or lenient depending on a country's terms of trade, Kerber and Budzinski refer only to "deliberate toleration of market power" and hence lax antitrust enforcement as a country's dominant strategy in a PD, ignoring the possibility that strategic antitrust policy can also comprise excessive antitrust enforcement vis-à-vis foreign competitors. Id. at 41-42. See also Budzinski, supra note 9, at 6-8.
28. States are assumed to face a choice between enacting globally optimal and globally sub-optimal (yet domestically advantageous) antitrust laws. The numbers in the four cells of the payoff matrix represent four different possible outcomes in the game. The payoff available for State 1 is given first, followed by the payoff available for State 2. The 2 x 2 payoff matrix naturally simplifies the strategic situation involving numerous interacting states. For the purpose of illustrating the basic argument, an n-person game would be more accurate but significantly more complex.
29. Kenneth W. Abbott, Modern International Relations Theory: A Prospectus for International Lawyers, 14 YALE J. INT'L L. 335, 356, 359 (1989).
30. This first assumption is not unique for a PD and generally holds for any type of game between rational actors.
31. In comparison, according to Kerber and Budzinski, the dominant strategy for each state would be to lower its antitrust standards. See supra text accompanying note 21.
32. Abbott, supra note 23, at 362.
33. Kerber & Budzinski, supra note 9, at 44-45.
34. Abbott, supra note 23, at 358-59.
35. McGinnis, supra note 14, at 136.
36. Michael J. Trebilcock & Edward M. Iacobucci, National Treatment and Extraterritoriality: Defining the Domains of Trade and Antitrust Policy, in COMPETITION LAWS IN CONFLICT: ANTITRUST JURISDICTION IN THE GLOBAL ECONOMY, supra note 4, at 168-69. Guzman might argue that he does not refer to overall trade flows but trade flows in "imperfectly competitive markets" when developing his theory. The criticism levied against his theory seems valid nonetheless. Trade balances regarding the "relevant goods" (i.e., goods sold in imperfectly competitive markets) can similarly fluctuate. In addition, their portion of the country's GDP is inevitably even smaller than that of the overall trade deficit or trade surplus of the country.
37. Furthermore, some examples Guzman cites in support of his theory are difficult to justify empirically. For example, Guzman asserts that "developed countries tend to export goods in imperfectly competitive markets, while developing countries tend to import those goods," which leads him to argue that "[d]eveloped countries would be opposed to an international agreement because they prefer a relatively weak set of international antitrust rules. Developing countries, on the other hand, prefer the adoption of international antitrust policies that are relatively strict." Andrew Guzman, International Antitrust and the WTO: The Lesson from Intellectual Property, 43 VA. J. INT'L L. 933, 946 (2003). First, generally categorizing developed countries as net exporters and developing countries as net importers is unlikely to be accurate. Second, if developed countries were indeed predominantly net exporters, why do they generally have stricter antitrust rules in place (or at least enforce their laws more strictly) than developing countries? Finally, developed countries have been most vocal in expressing fears about "watered down" international antitrust rules while it is difficult to find examples of developing countries that have rallied for strict WTO rules on antitrust. See discussion infra p. 412.
38. McGinnis, supra note 14, at 134-35.
39. Joern Kleinert, Growing Trade in Intermediate Goods: Outsourcing, Global Sourcing, or Increasing Importance of MNE Networks?, 11 REV. INT'L ECON. 464, 464 (2003).
40. With the exception of some industry exemptions or the exemption of export cartels from antitrust scrutiny, antitrust laws apply equally to all industries and cannot be industry-specifically tailored to be strict with tespect to the goods that the country predominantly imports and lenient with respect to goods that the country primarily exports. While Guzman's theory focuses on the overall effect of trade flows (e.g., whether a country's imports generally exceed its exports when the net effect of all sectors are taken into account), it seems that a country could more effectively maximize its overall gains by adjusting its antitrust enforcement to take into account its sector-specific and often contradictory incentives. This type of "tailored" bias would more successfully advance the interests of both net exporter and net importer industries. An industry-specific bias of this kind could at least in theory be assumed to be feasible thorough selective, case-by-case enforcement bias. A country could hence be arguably better off having generally "optimal" antitrust laws, combined with both selective over-enforcement (e.g., more enforcement activity vis-à-vis industries in which the country is a net importer) and selective underenforcement (e.g., less enforcement activity vis-à-vis industries in which the country is a net exporter).
41. This would suggest that antitrust authorities, who are specifically entrusted with the task of protecting consumers, would strike the balance between maximizing consumer and producer surplus in favor of the latter. This seems unlikely unless antitrust agencies can be assumed to be captured by trade interests.
42. Among the tools available within the antitrust domain, only the exemption of export cartels would seem to have the effect of advancing domestic producers' interests without simultaneously impeding the interests of domestic consumers, as discussed below.
43. See EINER ELHAUGE & DAMIEN GERADIN, GLOBAL ANTITRUST LAW AND ECONOMICS 1101 (2007).
44. Antitrust can in this respect be contrasted with corporate law, where the internal affairs of the corporation are regulated exclusively by the laws of the state where the corporation was established. This creates very different dynamics and incentives for regulatory competition.
45. The United States and the EU in particular have applied their antitrust laws to the conduct of foreign corporations as long the conduct has had an "effect" on their domestic marker. See, e.g., U.S. v. Alcoa, 148 F.2d 416, 443-44 (2d Cir. 1945); Case T-102/96, Gencor Ltd v. Comm'n, 1999 E.C.R. II-0753, ¶¶ 89-92; infra text accompanying note 92. Many other nations also recognize the legitimacy of applying their antitrust laws to the conduct of foreign firms as long as some anticompetitive effect is felt on the market of the country exercising jurisdiction. See RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED STATES § 415 reporters' note 9 (1987).
46. This assumes that foreign antitrust agencies have adequate enforcement capacity, including access to evidence, which is not always the case.
47. See ELHAUGE & GERADIN, supra note 37, at 1101-02. U.S. and EU antitrust laws both embrace a consumer welfare standard rather than a total welfare standard. According to Elhauge and Geradin, the case for a consumer welfare standard is even stronger internationally than domestically because in the international situation it is less likely that increases in producer welfare will benefit consumers as employees, shareholders or taxpayers. See id. at 1103.
48. See id. at 1101-02.
49. See id. at 1102, 1188-1202.
50. Guzman, supra note 4, at 101.
51. It is outside the scope of this Article to provide a detailed discussion of state preferences in antitrust matters and how they are formed. See brief discussion infra Parts III.B.2 (discussing uncertainty relating to the formation of preferences at the domestic level) and IV.A (contrasting the domestic political economy considerations underlying the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPs Agreement") with those characterizing international antitrust negotiations).
52. Governments devising antitrust laws are assumed to be motivated by both public welfare and public choice considerations. While policymakers are expected to care about how any given regulatory measure affects the economic welfare of the country, they are not likely to disregard pressures or constraints arising from the domestic political economy. Guzman recognizes this by noting that a government that is sensitive to public choice considerations can adjust the general level of antitrust enforcement to take trade flows and public choice bias into account. See Andrew T. Guzman, Is International Antitrust Possible?, 73 N.Y.U. L. REV. 1501, 1529-31 (1998). However, it seems that a government that is responsive to domestic interest groups could more successfully respond to their demands through biased case-by-case enforcement. Modifying the general level of antitrust regulation cannot effectively incorporate the demands of various organized interest groups, some of which might be exporters, while others might be import-competing industries. Nevertheless, it may be more feasible to favor domestic corporations by adopting generally strict antitrust laws that favor consumers but resorting to selective non-enforcement when "would-be defendants" are domestic corporations.
53. "Export cartel" refers to an agreement or other arrangement between two or more firms to charge a specified export price or to divide export markets among themselves. Unlike a normal cartel, an export cartel's collusive behavior is restricted to goods or services that are exported to foreign markets.
54. See Margaret C. Levenstein & Valerie Y. Suslow, The Changing International Status of Export Cartel Exemptions, 20 AM. U. INT'L L. REV. 785, 800-06 (2005). Levenstein and Suslow examine exemptions of export cartels in fifty-five countries, including all OECD countries, EU countries, and selected developing countries. Of the fifty-five countries surveyed, seventeen were found to have explicit exemptions (including the United States, Canada and Australia), thirty-four had implicit exemptions (including the EU and almost all EU Member States), and four (including Russia) had no statutory exemptions.
55. Trebilcock & Iacobucci, supra note 30, at 152. See also Guzman, supra note 4, at 100 (referring to export cartels as the "most obvious example" of states' biased application of their antitrust laws). In addition to a small number of domestic antitrust statutes that contain an explicit exemption for export cartels, we might find some evidence of statutory bias in the form of exemptions of certain economic sectors from antitrust scrutiny altogether. However, these industry-wide exemptions also apply to foreign producers should they compete in the same market. Thus, such exemptions can only be seen to reflect national bias to the extent that the exempted sectors consist of industries in which the host country is a significant producer and where there is little inbound trade.
56. ELHAUGE & GERADIN, supra note 37, at 1101. This argument, however, assumes that the importing country is vested with adequate enforcement capacity and can hence be problematic if the prosecution of the export cartel requires evidence that is located in the exporting jurisdiction or if the importing jurisdiction cannot impose effective remedies.
57. In addition to export cartels, international antitrust cooperation is pursued with respect to, inter alia, prosecution of international cartels (not limited to exports), control of anticompetitive conduct by global monopolies, regulation of exclusive arrangements that deter entry to foreign markets, and regulation of cross-border mergers and acquisitions.
58. In addition, some have questioned the anticompetitive propensities of export cartels. While the per se anticompetitive nature of export cartels is often assumed, proponents of export cartel exemptions argue that they are predominantly formed to create export opportunities for small and medium sized companies who would not have the resources to engage in export activity alone. Hence they argue that export cartels generate new trading opportunities and enhance (instead of diminish) competition in markets where exporters would otherwise not compete at all. The United States, for example, defended the Webb-Pomerene Act and the Export Trading Company Act in the WTO in 2003 by arguing that these exemptions "were conceived as mechanisms for domestic entities that lacked the resources to engage in effective export activity acting individually." See WTO Working Group on the Interaction between Trade and Competition Policy, Note by the Secretariat: Report on the Meeting of 20-21 February 2003, ¶ 37, WT/WGTCP/M/21 (May 26, 2003). See also Spencer Weber Waller, The Failure of the Export Trading Company Program, 17 N.C. J. INT'L L. & COM. REG. 239, 250 (1992) ("[Today] the ETC program has been used almost exclusively by small export intermediaries and by trade associations focusing on a small group of products, industries and markets") and 251 ("[T]he history of Webb-Pomerene Act suggests that few export associations will have sufficient global market power to exploit foreign markets").
59. As most countries do not require registration or notification of export cartels, it is difficult to draw any wide-reaching conclusions from the available data. There are few public records indicating how widespread export cartels are. In addition, export cartels can also operate based on an implicit exemption in national law. See Levenstein & Suslow, supra note 48, at 794, 796; see also F.M. SCHERER, COMPETITION POLICIES FOR AN INTEGRATED WORLD ECONOMY 46 (1994). Research by Scherer supports findings that the amount of trade covered by export cartels has dropped dramatically. His information is already somewhat dated but shows a downward trend even two decades ago when export cartel exemptions wete more prevalent. At their peak in the 1930s, about 19 percent of U.S. exports were originated by export cartels compared to less than 2 percent in 1981. Id. Similarly, export cartels accounted for approximately 2 percent of German exports in the 1980s. Id.
60. Levenstein & Suslow, supra note 48, at 793.
61. Id.
62. Id. at 793, 806, 816-18 (Table 1).
63. See Levenstein & Suslow, supra note 48, at 792, 816-18 (Table 1); Export Trading Company Act of 1982, 15 U.S.C. §§ 4001-21 (2000); Webb-Pomerene (Export Trade) Act of 1918, 15 U.S.C. §§ 61-66 (1994). Even in the United States, however, the export cartels currently in effect are unlikely to cover more than a trivial part of the total export activity.
64. Levenstein & Suslow, supra note 48, at 792, 816-18 (Table 1).
65. Guzman, supra note 4, at 100; see also Kerber & Budzinski, supra note 9, at 41-44; Fred S. McChesney, Debate: Public Choice: Do Politics Corrupt Antitrust Enforcement? Economics versus Politics in Antitrust, 23 HARV. J.L. & PUB. POL'Y 133 (1999) (analyzing how domestic antitrust enforcement can become susceptible to bias); McGinnis, supra note 14, at 128-29, 134.
66. Kerber & Budzinski, supra note 9, at 45-46. This kind of case-by-case pressure by powerful interest groups leading to enforcement bias seems in theory more feasible than any overarching ex ante pressure resulting in statutory bias. See infra p. 429.
67. McGinnis, supra note 14, at 134-35.
68. See Commission Decision 97/816 of 30 July 1997, Case No. IV/M.877 - Boeing/McDonnell-Douglas, 1997 O.J. (L 336) 16; Boeing Co., et al., Joint Statement Closing Investigation of the Proposed Merger, 5 Trade Reg. Rep. (CCH) ¶ 24,295 (July 9, 1997).
69. Kerber & Budzinski, supra note 9, at 42.
70. See Press Release, U.S. Dep't. of Justice, Justice Department Requires Divestitures in Merger Between General Electric and Honeywell (May 2, 2001), available at http://www.usdoj.gov/atr/public/ press_releases/2001/ 8140.htm; Commission Decision 2004/134 of 3 July 2001, Case No COMP/ M.2220 - General Electric/Honeywell, 2004 O.J. (L048) 1 [hereinafter General Electric/Honeywell].
71. See, e.g., John R. Wilke, U.S. Antitrust Chief Criticizes EU Decision to Reject Merger of GE and Honeywell, WALL ST. J., July 5, 2001, at A3 (quoting Assistant Attorney General Charles James: "Clear and longstanding U.S. antitrust policy holds that the antitrust laws prorect competition, not competitors . . . [The EU decision] reflects a significant point of divergence.").
72. The extent to which antitrust enforcement is actually characterized by parochial bias is highly debatable and always difficult to substantiate. Antitrust agencies and courts' published decisions can be reviewed, but we often have no information on cases that have not been published nor even pursued. The decision not to investigate a case involving domestic corporations can reflect national bias as much as a decision to prosecute anticompetitive practices by foreign corporations. Any conclusions about the extent to which enforcement is in fact characterized by national bias must hence be approached with caution.
73. See European Comm'n, European Merger Control - Council Regulation 139/2004 - Statistics, http://ec.europa.eu/comm/competition/mergers/statistics. pdf (last visited Apr. 4, 2007).
74. For a comprehensive list of Commission merger control decisions since 1990, see European Comm'n, Merger Cases, http://ec.europa.eu/comm/competition/ mergers/cases/ (last visited Apr. 4, 2007) (the identification of the parties to the transaction allows for the determination of the nationality of the corporations in each case, which enables the compilation of the statistics regarding the existence of possible parochial enforcement bias).
75. See General Electric/Honeywell, supra note 64; Commission Decision 2003/790 of 28 June 2000, Case COMP/M.1741 - MCI WorldCom/Sprint, 2003 O.J. (L 300) 1 [hereinafter MCI WorldCom/ Sprint]. Note that the MCI WorldCom/Sprint merger was also challenged in the United States. The General Electric/Honeywell merger was approved subject to limited undertakings in the United States.
76. More elaborate analysis would require the breakdown of the data based on whether the U.S. company in any given transaction was the target or the acquirer. However, this information was not possible to extract from the available data.
77. As the market failures stemming from decentralized antitrust enforcement have been a subject of extensive discussion elsewhere, they are only briefly touched on below.
78. But see infra note 120 (noting the developing countries' limited ability to free ride on, and hence benefit from, the over-enforcement by developed countries).
79. See, e.g., United States v. General Electric Co., 869 F. Supp. 1285, 1300-01 (S.D. Ohio 1994). The court entered a judgment of acquittal in the GE/De Beers cartel case. The court cited the inability of the government to obtain more complete evidence from abroad as an important reason for the acquittal. See also Joel I. Klein, Acting Assistant Att'y Gen., U.S. Dep't of Justice, A Note of Caution with Respect to a WTO Agenda on Competition Policy, Address at the Royal Institute of International Affairs (Nov. 18, 1996), available at http://www.usdoj.gov/atr/public/speeches/0998.htm.
80. In particular, the government's toleration of vertical distribution systems in Japan has often been alleged to restrict trade. See, e.g., WTO Dispute Panel Report on Japan-Measures Affecting Consumer Photographic Film and Paper, WTO Doc. WT/DS44/R (Mar. 31, 1998).
81. See, e.g., cases cited supra notes 62 and 64. See also ABA & INT'L BAR ASSOC., A TAX ON MERGERS?: SURVEYING THE TIME AND COSTS TO BUSINESS OF MULTI-JURISDICTIONAL MERGER REVIEWS (June 2003) [hereinafter MULTI-JURISDICTIONAL MERGER SURVEY]; discussion infra p. 404.
82. Over-enforcement which increases transaction costs and legal uncertainty is also possible in case of multiple simultaneous investigations on the alleged abuse of dominance. See, e.g., Commission Decision of 24 Mar. 2004, Case COMP/C-3/37.792 - Microsoft, available at http://ec.europa.eu/comm/ competition/antitrust/cases/decisions/37792/en.pdf (imposing a fine after concluding that Microsoft had abused its dominant position in violation of Art. 82 EC); New York v. Microsoft Corp., No. 98-1233 (D. D.C. Nov. 1, 2002) (memorandum order endorsing the settlement between plaintiff states and Microsoft.); United States v. Microsoft Corp., No. 98-1233 (D. D.C. Nov. 1, 2002) (memorandum order endorsing the settlement between the United States and Microsoft).
83. ELHAUGE & GERADIN, supra note 37, at 1100-01.
84. This Article uses the term "coordination" when it discusses states pursuit of cooperation in the Deadlock. While the CGDC is a more traditional representation of a coordination game, "the model [describing the Deadlock] is consistent with, but not identical to, other international relations models of coordination." See DANIEL DREZNER, ALL POLITICS IS GLOBAL 53 (2007).
85. Abbott, supra note 23, at 357.
86. While game theotetic models can be helpful in clarifying complex interactions by focusing on the very essence of a social situation, the analytical rigor they offer comes at a cost. Any given model inevitably represents a highly simplified account of the reality and can never be complete in the sense that it would successfully capture every relevant social setting. Any specified "game" always assumes away factors that arguably would be necessary to include in the analysis to provide a more complete description of a situation. The narrative of this Article therefore has its limitations, some of which will hopefully be mitigated by other scholars who will challenge and further develop the claims outlined in this Article.
87. There have been several attempts to create an international regulatory framework for antitrust laws since the adoption of the Havana Charter in 1948. See, e.g., MARSDEN, supra note 1, at 45-66; Nataliya Yacheistova, The International Competition Regulation - A Short Review of a Long Evolution, 18 WORLD COMPETITION L. AND ECON. REV. 99, 99 (1994).
88. Most recently, the WTO negotiations on antitrust were stalled in Cancun in 2003 due to the resistance of the developing countries. On August 1, 2004 the WTO General Council decided to officially drop antitrust policy from the Doha Round negotiation agenda ("July Decision"). See General Council Decision, Doha Work Programme WT/L/579 (Aug. 2, 2004) and infra discussion accompanying note 121.
89. See, e.g., WTO Working Group on the Interaction Between Trade and Competition Policy, Communication by the European Community and its Member States, WT/WGTCP/W/62, at 12-13 (Mat. 5, 1998); International Antitrust Working Group, Draft International Antitrust Code, 5 WORLD TRADE MATERIALS 126, Sept. 1993; MARSDEN, supra note 1; Robert D. Anderson & Peter Holmes, Competition Policy and the Future of the Multilateral Trading System, 5 J. INT'L ECON. L. 531 (2002);
90. Eleanor M. Fox, Antitrust and Regulatory Federalism: Races Up, Down, and Sideways, 75 N.Y.U. L. REV. 1781 (2000); Guzman, supra note 4; Ernst-Ulrich Petersmann, Competition-Oriented Reforms of the WTO World Trade System - Proposals and Trade Options, in TOWARDS WTO COMPETITION RULES 43, 48-49 (Roger Zäch ed., 1999);
91. Leon Brittan, A Framework for International Competition, Address at World Competition Forum (Feb. 3, 1992), reviewed by J. David Richardson, The Way to Compete, 3 INT'L ECON. INSIGHTS 21 (1992).
92. DREZNER, supra note 78, at 53.
93. Id.
94. Id. at 52-53.
95. Id.
96. See, e.g., Guzman, supra note 4, at 100; McGinnis, supra note 14, at 127.
97. See MULTI-JURISDICTIONAL MERGER SURVEY, supra note 75.
98. Id. at 4. If a second request is issued by an antitrust authority, the costs were found to increase dramatically, amounting to average external costs of €5.4 million, or, in case of major deals, to over €10 million.
99. It can, however, be assumed that relatively small-value transactions are disproportionately impacted by the prospect of a costly multi-jurisdictional review.
100. The USITC statistics evaluate the relative harmfulness of various NTBs that are expected to impede the free flow of goods and services, based on preliminary information reported by the U.S. Trade Representative ("USTR"), the EU, and the WTO. The study compiles data from fifty-three economies, dividing the information into fifteen categories of NTBs, "anticompetitive practices/competition policy" being one of them. "Anticompetitive practices/competition policy" as a category was reported second to last in terms of the relative frequency of the NTBs. Similarly, "anticompetitive practices/competition policy" was also second to last in terms of the number of economies in which the measure was reported. See Diane Manifold & William Donnelly, A Compilation from Multiple Sources of Reported Measures Which May Affect Trade, in QUANTITATIVE METHODS FOR ASSESSING THE EFFECTS OF NON-TARIFF MEASURES AND TRADE FACILITATION 41-50 (Philippa Dee & Michael Ferrantino eds., 2005).
101. See, e.g., Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796 (1993); Joined Cases 89, 104, 114, 116, 117 & 125-129/85, Ahlström v. Comm'n, 1988 E.C.R. 5193 [hereinafter "Wood Pulp"]. Obviously, the status quo option entails some transaction costs (including the possibility of enforcement conflicts akin to the GE/Honeywell case).
102. See, e.g., Corrigendum to Decision 95/145, ECSC of the Council and the Commission of 10 April 1995, Concerning the Conclusion of the Agreement between the European Communities and the Government of the United States of America Regarding the Application of their Competition Laws, 1995 O.J. (L 131) 38. In addition, the United States has concluded bilateral antitrust cooperation agreements with Australia, Brazil, Canada, Germany, Israel, Japan, and Mexico. The EU has also concluded a bilateral agreement with Canada and Japan.
103. The ICN is a voluntary network among the worlds' antitrust agencies with the objective of facilitating procedural and substantive convergence in antitrust enforcement and developing best practices. Together with the OECD, it has been the most prominent antitrust network among domestic regulators since its initiation in October 2001. See, e.g., Oliver Budzinski, The International Competition Network: Prospects and Limits on the Road Towards International Competition Governance, 8 COMPETITION & CHANGE 223 (2004);
104. Anu Piilola, Assessing Theories of Global Governance: A Case Study of International Antitrust Regulation, 39 STAN. J. INT'L L. 207, 235-36 (2003);
105. Frederic Jenny, International Cooperation on Competition: Myth, Reality and Perspective, 48 ANTITRUST BULL. 973 (2003).
106. Because the costs of non-compliance are high, states negotiate each provision more cautiously when they know that they will be legally bound by the agreement. In addition, the approval of a binding international agreement often requires domestic ratification, further adding to the contracring costs.
107. Alan Beattie, Doha Talks Bring Engagement but No Broad Accord, FIN. TIMES (London), Feb. 27, 2007, at 8;
108. Alan Beattie, The Doha Round: The Rising Risk of a Backlash Against Free Trade, FIN. TIMES (London), Sept. 12, 2006, at 5;
109. Free Trade's Best Defence Is the Truth, FIN. TIMES (London), July 25, 2006, at 16.
110. For instance, it is difficult to imagine that the EU corporations would face more significant market access problems than U.S. corporations when trying to enter foreign markers or that they would meet more burdensome merger notification requirements than the U.S. corporations. It is also doubtful that the EU Commission's capacity to apply EU competition law extraterritorially would in practice be significantly more limited than that of the United States. Accordingly, the payoffs for both states could be expected to be roughly symmetrical.
111. See, e.g., Douglas Melamed, Principal Deputy Assistant Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Antitrust Enforcement in a Global Economy, Address at the Fordham Corporate Law Institute 25th Annual Conference on International Antitrust Law and Policy (Oct. 22, 1998), available at http:// www.usdoj.gov/atr/public/speeches/2043.htm;
112. Mario Monti, European Commissioner for Competition Policy, Address at the European Competition Day Conference: A Global Competition Policy? (Sept. 17, 2002), available at http://ec.europa.eu/comm/competition/speeches/ index_speeches_by_the_commissioner.html; Working Group on the Interaction between Trade and Competition Policy, Communication from the European Community and Its Member States, W/WGTCP/W/115 (May 25, 1999).
113. See Joel I. Klein, Assistant Atty' Gen., Antitrust Div., U.S. Dep't of Justice, Address at the EC Merger Control 10th Anniversary Conference: Time for a Global Competition Initiative?, (Sept. 14, 2000), available at http://www.usdoj.gov/atr/public/speeches/6486.htm.
114. See Antitrust Div., U.S. Dep't of Justice, Final Report of the Int'l Competition Advisory Comm. to the Att'y Gen. and Assistant Att'y Gen. for Antitrust (2000), available at http://www.usdoj.gov/atr/
115. William J. Kolasky, Deputy Assistant Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Address at the American Bar Association Fall Forum: Global Competition: Prospects for Convergence and Cooperation (Nov. 7, 2002), available at http://www.usdoj.gov/atr/public/speeches/200446. htm.
116. Examples include the United States's refusal to join the Kyoto Protocol on Climate Change, the Rome Statute of the International Criminal Court, and the Landmine Treaty, in addition to unilateral withdrawal from the Anti-Ballistic Missile Treaty. In the human rights area, the United States has been hesitant to ratify several international treaties, including the most widely accepted human rights treaty, the Convention on the Rights of the Child. See Andrew Moravcsik, Why Is U.S. Human Rights Policy So Unilateralist?, in MULTILATERALISM AND US FOREIGN POLICY: AMBIVALENT ENGAGEMENT 345, 361-69 (Shepard Forman & Patrick Stewart eds., 2002).
117. See also the general discussion on U.S. unilateralism and its resistance to sign international treaties in, for example, John G. Ikenberry, Is American Multilateralism in Decline?, 1 PERSP. ON POL. 533 (2003). In contrast, the United States has been more willing to acknowledge the benefits of international rulemaking in trade areas, being the strongest advocate for creating the WTO and dispute settlement within the WTO. The United States also actively endorsed the signing of the North American Free Trade Agreement. The United States, however, has also pursued unilateralist courses in trade, monetary, and financial policies. In trade, for instance, the United States has frequently made use of Section 301 of the 1974 Trade Act, which allows it to impose unilateral trade sanctions against alleged unfair practices of its trading partners.
118. See, e.g., Roger Van den Bergh, The Difficult Reception of Economic Analysis in European Competition Law, in POST-CHICAGO DEVELOPMENTS IN ANTITRUST LAW 34, 46-50 (Antonio Cucinotta et al. eds., 2002) (attributing the EU-U.S. divergence in antitrust partly to EU's obsession with predictability).
119. For an example of the EU's preference for clear ex ante rules and the United States's inclination to write more open-ended laws which leave case-by-case assessment to the courts see, for example, U.S. DEP'T OF JUSTICE & FED. TRADE COMM'N, ANTITRUST GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY (1995), available at http://www.usdoj.gov/atr/public/guidelines/0558.pdf; Commission Regulation 772/ 2004, 2004 O.J. (L 123) 11. These types of doctrinal differences, however, might be less significant when agencies' decisions are examined in practice. See, e.g., ELHAUGE & GERADIN, supra note 37, at 208-32.
120. In contrast, it can be argued that the EU was originally more opposed to the formal codification of the WTO than the United States and also initially resisted the enforcement mechanism that the Uruguay Round instituted.
121. See, e.g., Melamed, supra note 98. See also Spencer Weber Waller, National Laws and International Markets: Strategies of Cooperation and Harmonization in the Enforcement of Competition Law, 18 CARDOZO L. REV. 1111, 1123 (1996).
122. This question relates to the "substantive linkage" between trade and antitrust policies, which can be distinguished from "strategic linkage," discussed supra note 8. Substantive linkage refers to connecting norms that are so closely related that they ought to be resolved together. Claims for linkage in such cases are based on the need to facilitate coherence between closely correlated norms or to ensure that the application of one set of rules does not interfere with the goals of another set of rules. See Leebron, supra note 8, at 11-12. Trade and antitrust norms are considered to enhance interconnected goals as both seek to facilitate economic transactions by ensuring that markets are open and free. Trade and antitrust policies, however, can also be mutually conflicting if applied inconsistently. The EU's endorsement of WTO rules on antitrust, for instance, largely hinges on the idea that an international antitrust agreement is necessary to complement the goals of trade liberalization and prevent inconsistencies.
123. The contest manifests itself in the form of antitrust advocacy as both the United States and the EU actively offer technical assistance and advice to developing countries and transition economies willing to adopt antitrust laws. See, e.g., Fox, supra note 82, at 1799 (2000).
124. Id. This is especially true with respect to countries which have close trading relationships with the EU and which aspire to eventually join the union. Adopting EU-style antitrust regimes has been made a precondition for membership in the EU. The EU model also often seems more appealing to developing countries and transitional economies as it embraces a broader set of goals and offers more flexibility in implementation than U.S. antitrust laws, which focus exclusively on enhancing efficiency.
125. See ELHAUGE & GERADIN, supra note 37, at 1209. However, this presumption is complicated by the fact that while the EU is moving toward the U.S. model, the rest of the world is moving toward the more "traditional EU model." Waiting may thus not guarantee an international antitrust agreement at the United States's preferred point of coordination as the majority of nations will, most likely, have EU-style antitrust laws in place at that point.
126. Weber Waller, supra nore 104, at 1122-24 (noting that while the DOJ opposes the WTO agreement on antitrust, the USTR supports it).
127. Id. at 1123-24. However, the argument about the internal power struggle in the EU can be questioned in light of the recent active efforts on behalf of the EU to decentralize its antitrust enforcement powers and expand the role of the individual member states in applying EU antitrust laws.
128. While there are areas of international cooperation where a hegemon alone is able to supply the regime, in the antitrust domain, the EU cannot, for example, declare itself to be an "international clearinghouse" for mergers or claim "international discovery rights" that would enable it to conduct dawnraids and seize documents in foreign jurisdictions when seeking to prosecute international cartels. The EU possesses no "go-it-alone" power as the United States can form a blocking coalition and thereby prevent the negotiations from taking place. See generally LLOYD GRUBER, RULING THE WORLD: POWER POLITICS AND THE RISE OF SUPRANATIONAL INSTITUTIONS (Princeton University Press 2000) (discussing the "go-it-alone power" and its limits).
129. BERNARD M. HOEKMAN & MICHEL M. KOSTECKI, THE POLITICAL ECONOMY OF THE WORLD TRADING SYSTEM 115-16 (2d ed. 2001).
130. When the Global Competition Forum's data on existing antitrust laws is cross-referenced with the World Bank's classification of developing countries, it appears that seventy-three out of 152 developing countries have adopted domestic antitrust laws. See Global Competition Forum, Home Page, http:// www.globalcompetitionforum.org (follow "Laws" hyperlink) (last visited Apr. 4, 2007);
131. World Bank, Key Development Data & Statistics, http://www.worldbank. org/data/countrydata/countrydata.html (last visited Apr. 4, 2007).
132. Furthermore, seven developing countries report that they are in the process of enacting laws protecting competition. The information listed in the Global Competition Forum database might not be completely accurate due to difficulties in obtaining data from all developing countries, but it is the most comprehensive data available. Regarding the World Bank's country classification, countries are considered "developing" if they are classified by the World Bank as "low income," "lower-middle income," or "upper-middle income" countries. " Developed" countries are classified as "high income countries." World Bank, Data - Frequently Asked Questions, http://www.worldbank.org/ data/countrydata/countrydata.html (follow "FAQ" hyperlink) (last visited Apr. 4, 2007).
133. Ross C. Singleton, Competition Policy for Developing Countries: A Long-Run, Entry-Based Approach, 15 CONTEMP. Econ. Pol. 1, 5 (1997).
134. See also Ajit Singh & Rahule Dhumale, Competition Policy, Development, and Developing Countries, in WHAT GLOBAL ECONOMIC CRISIS? 122 (Philip Arestis, Michelle Baddeley & John McCombie eds., 2001).
135. Occasionally, developing countries have adopted antitrust laws voluntarily, believing that laws serve their interests and make their businesses and markets more robust. At times, however, the adoption of antitrust laws has taken place more coercively. Indonesia, for instance, adopted antitrust laws in 1999 as a condition to obtaining rescue funds from the International Monetary Fund. See Fox, supra note 82, at 1784.
136. William E. Kovacic, Getting Started: Creating New Competition Policy Institutions in Transition Economies, 23 BROOK. J. INT'L L. 403, 404-05 (1997).
137. See supra p. 405 and note 92. See also Margaret Levenstein & Valerie Y. Suslow, Contemporary International Cartels and Developing Countries: Economic Effects and Implications for Competition Policy, 71 ANTITRUST L.J. 801, 801-03 (2004).
138. Levenstein & Suslow, supra note 117. Levenstein and Suslow have examined the economic effects of international cartels in developing countries. Analyzing a sample of over forty successfully prosecuted international cartels in the 1990s (consisting of close to all price-fixing cartels prosecuted by the United States and the EU in that decade), they found that in the year 1997, developing countries imported $51.1 billion worth of goods from industries that were affected by cartel activity during the 1990s, representing 3.7 percent of all imports to developing countries that year and 0.79 percent of their combined GDP. Id. at 805, 816. Though their data must be interpreted with considerable caution due to difficulties in compilation, the total figure of $51.1 billion is staggering, especially considering that official foreign aid to all developing countries in 1997 amounted to $39.4 billion.
139. Jenny, supra note 94, at 991-93.
140. Arguably, developing countries can at times "free ride" on developed countries' enforcement efforts even in the absence of any international coordination. As long as an international merger, for instance, would have negative effects both on the U.S. market and on some developing country markets, the developing countries could benefit from the possible prohibition or concessions demanded by the U.S. antitrust authorities. However, when only developing country markets are affected, developing countries cannot expect the United States or the EU to pursue a transaction that does not impede competition on their respective home markets. It is in these latter types of situations where an international regime could be highly beneficial for the developing countries.
141. See, e.g., Taimoon Stewart, The Fate of Competition Policy in Cancun: Politics or Substance?, 31 LEGAL ISSUES OF ECON. INTEGRATION 7, 7 (2004);
142. WTO, DAY 5: CONFERENCE ENDS WITHOUT CONSENSUS, http://www.wto.org/english/thewto_e/minist_e/min03_e/ min03_14sept_e.htm (last visited Mar. 19, 2007).
143. Stewart, supra note 121, at 7-11. Linking antitrust negotiations to other "Singapore issues" (consisting of trade facilitation, investment protection, and transparency in government procurement in addition to antitrust policy) was arguably one reason for the failure to launch negotiations on antitrust.
144. Adjustment costs could be expected to be significant in the case of antitrust, especially considering that many developing countries do not have any pre-existing regulatory infrastructure in place. In addition, building the capacity to administer and enforce a highly complex regulatory area like antitrust, which assumes sophisticated economic expertise, would be costlier than establishing regulatory capability in a less technical area.
145. Developing countries also failed to see the agreement on antitrust as a development priority in light of more pressing socioeconomic problems that would need to be addressed. See Editorial, The Real Lesson of the Cancun Failure, FIN. TIMES (London), Sept. 23, 2003, at 16 ("It is absurd to push, as the EU has done, to impose rules in complex areas such as competition and investment on countries so poor that some cannot even afford WTO diplomatic representation.").
146. Reciprocity in the WTO framework can operate both intra-issue and inter-issue: intra-issue reciprocity entails the exchange of identical concessions (e.g., matching tariff concession regarding the same product) whereas inter-issue reciprocity refers to an exchange of dissimilar concessions (e.g., removal of agricultural subsidies against a commitment to ensure effective protection of intellectual property rights). When concessions are reciprocated, they result in equal trade flows, maintaining the terms-of-trade unchanged. In other words, when a country agrees to increase the flow of imports by lowering its trade barriers, it receives concessions in return that offset the increase of imports by an equal value of new export opportunities. ROBERT Z. LAWRENCE, CRIMES AND PUNISHMENTS? RETALIATION UNDER THE WTO 21, 23-24 (2003).
147. Id. at 22.
148. While the Doha Declaration of the WTO Ministerial Conference incorporated a commitment to offer Technical assistance for developing countries to help them build antitrust enforcement capacity, (See Ministerial Conference, Fourth Session, Doha, Qatar, November 9-14, 2001, Ministerial Declaration, ¶ 24, WT/MIN(01)/DEC/1, (Nov. 14, 2001)) the developing countries' disappointment with the 1980 U.N. Set of Mutually Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices may, however, have made them skeptical about the materialization of any promised technical assistance. See SUSAN K. SELL, POWER AND IDEAS: NORTH-SOUTH POLITICS OF INTELLECTUAL PROPERTY AND ANTITRUST 141, 158 (1998).
149. See Arthur A. Stein, Coordination and Collaboration: Regimes in an Anarchic World, in INTERNATIONAL REGIMES 115, 127-32 (Stephen D. Krasner ed., 1983) (discussing the diffetence between coordination and collaboration games). In a coordination game the parties have an incentive to avoid a particular outcome whereas in a collaboration game the parties have an incentive to ensure a particular outcome. Id. This has led Stein to characterize the two types of games as dilemmas of common interests (collaboration game) versus dilemmas of common aversions (coordination game). Id. at 120-32.
150. Collective action problems are often erroneously characterized as a PD without carefully examining that their underlying strategic structure is actually captured by that particular formalization. Thus, research programs in international relations have been biased toward examining situations of market failure that focus on examining institutional solutions for curtailing cheating at the expense of coordination games. See Stephen D. Krasner, Global Communications and National Power: Life on the Pareto Frontier, 43 WORLD POL. 336, 361-64 (1991);
151. Duncan Snidal, Coordination Versus Prisoners' Dilemma: Implications for International Cooperation and Regimes, 79 AM. POL. SCI. REV. 923, 924 (1985).
152. Simple or pure coordination games must be distinguished from a CGDC. Simple coordination games that present no disttibutional consequences are relatively easy to solve as long as parties can communicate. In such a setting neither player has a dominant strategy nor does either of them prefer a single outcome. There exist two Pareto-efficient outcomes that both players value equally and two Pareto-deficient outcomes that both players want to avoid. Coordination is required as the players' strategies are contingent on each other's moves. However, as both parties are indifferent as to the choice between the two possible equilibria, the coordination is expected to be relatively smooth. In contrast, in a CGDC players hold different preferences as to the actual point of coordination. Coordination is more complicated as players agree on mutually undesirable outcomes (non-coordination) but disagree as to which of the two Pareto-efficient equilibria to coordinate on (focal point of coordination).
153. It might, of course, be that one state attempts at some later point to deviate from the commonly agreed solution in an effort to shift the point of coordination to its preferred equilibrium. See discussion infra p. 436 and note 191.
154. Krasner, supra note 128, at 340. Krasner has distinguished a CGDC from a collaboration game by noting that in a CGDC "[t]he problem is not how to get to the Pareto frontier but which point along the frontier will be chosen." Id.
155. Lisa L. Martin, Interests, Power, and Multilateralism, 46 INT'L ORG. 765, 775 (1992).
156. There are various examples of this game, including one where a husband (player 1) and wife (player 2) prefer spending their vacation rogether. They have two choices for the destination: they can go to the mountains ("strategy A") or to the ocean ("strategy B"). The husband would prefer vacationing in the mountains and the wife by the ocean, but it is more important to both of them to spend their vacation together than to end up vacationing in the destination they individually would prefer. See, e.g., Krasner, supra note 128, at 339.
157. See discussion supra Part II.A.2.
158. See discussion supra p. 408 and notes 106-07.
159. This postulation tests on the presumption that the status quo of the domestic antitrust regime represents the domestic political equilibrium on this particular issue. While this model does not explicitly address the costs of coordination, the conjecture that the United States's and the EU's preferences for an international antitrust regime are the function of their current domestic antitrust laws is also supported by the fact that the adjustment costs of the state (and its corporations) are minimized when the domestic model of that particular country is internationalized. See DREZNER, supra note 78, at 46-47, 52-53.
160. eu)EU].
161. See, e.g., Jenny, supra note 94, at 1000; Charles A. James, Assistant Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Antitrust in the Early 21st Century: Core Values and Convergence, Address at the Program on Antitrust Policy in the 21st Century (May 15, 2002), available at http://www.usdoj.gov/atr/ public/speeches/11148.pdf;
162. Neelie Kroes, European Comm'r for Competition Policy, Developments in Anti-Trust Policy in the EU and the US, Speech at the C. Peter McColough Series on International Economics, The Council on Foreign Relations (Sept. 15 2006), available at http://europa.eu/rapid/press ReleasesAction.do?reference= SPEECH/06/494&format=HTML&aged=0&language=EN&gui-Language=EN.
163. us.
164. See discussion supra p. 401.
165. While this argument would suggest that the United States and EU would agree on the need for an international regime and the form it ought to take, this Article has sought to show above that considerations other than the level of economic development of a country also influence its perception of its potential payoffs. Yet if the United States were to endorse an international agreement and it was not able to internationalize its own regime, it could be expected to prefer the kind of an agreement that resembles more closely the proposal of the EU than that of the developing countries.
166. See ELHAUGE & GERADIN, supra note 37, at 1206-07 (considering these possibilities, but concluding that theory and empirical evidence fail to support these claims).
167. See discussion supra pp. 398, 404.
168. Bernard M. Hoekman & Kamal Saggi, International Cooperation on Domestic Policies: Lessons from the WTO Competition Policy Debate, in ECONOMIC DEVELOPMENT AND MULTILATERAL TRADE COOPERATION 439, 446 (Simon J. Evenett & Bernard M. Hoekman eds., 2006).
169. Singh & Dhumale, supra note 114, at 124-28.
170. See Levenstein & Suslow, supra note 48, at 796.
171. See Singh & Dhumale, supra note 114, at 127.
172. See, e.g., OECD Joint Group on Trade and Competition, The Role of "Special and Differential Treatment" at the Trade, Competition and Development Interface, COM/TD/DAFFE/CLP(2001)21/FINAL (Dec. 4, 2001), available at http://www.oecd.org/dataoecd/49/37/2072318.pdf.
173. Stewart, supra note 121, at 7. 150. The developing country position was forcefully shaped by the views and advice of the NGO community. See id. at 9-11; see also Martin Khor, Third World Network, No Consensus on Competition in WTO, According to Many Developing Countries (Jun. 6, 2003), http://www.twnside.org.sg/title/ twninfo23.htm (last visited Apr. 4, 2007).
174. Daniel Drezner, Globalization, Harmonization, and Competition: The Different Pathways to Policy Convergence, 12 J. EUR. PUBL. POL'Y. 841, 842 (2005) (footnote omitted).
175. See, e.g., ANDREAS HASENCLEVER ET. AL., THEORIES OF INTERNATIONAL REGIMES 86-104 (1997) (discussing hegemonic stability theory).
176. Sylvia Ostry, Convergence and Sovereignty: Policy Scope for Compromise?, in COPING WITH GLOBALIZATION 52, 58-59 (Aseem Prakash & Jeffrey A. Hart eds., 2000) (discussing business-driven convergence and self-regulation of international financial markets).
177. Drezner, supra note 151, at 849-50.
178. Naturally, some degree of uncertainty underlies many international negotiations. Uncertainty can, for instance, relate to scientific evidence or other contested facts relevant to the content of the agreement, the ptesence of asymmetrical information, the monitoring and enforcement of the agreement, or the magnitude or the distribution of gains available. However, this Article claims that uncertainty is particularly pronounced in the international antitrust context and hence prone to impede coordination.
179. Barbara Koremenos has empirically shown that states respond to distributional uncertainty by making agreements more flexible, essentially by limiting their duration and including provisions allowing for renegotiation once the effects of the agreement have become clearer. However, states integrate renegotiation provisions into the agreement only when "the value to them of reducing ex ante variance of the outcome stemming from agreement uncertainty is large relative to the cost of renegotiating." Barbara Koremenos, Loosening the Ties That Bind: A Learning Model of Agreement Flexibility, 55 INT'L ORG 289, 290, 296 (2001). There are clear limitations to introducing flexibility and renegotiations provisions to WTO agreements. Considering the rapid changes in many markets and economic theories pertaining to antitrust laws, any agreement with meaningful provisions would most likely need to be renegotiated frequently. This would be particularly costly considering the WTO's broad membership. Flexibility in the circumstances has therefore been sought through various soft law mechanisms that facilitate internarional cooperation.
180. Fernandez & Rodrik, supra note 11, at 1146-55. Status quo bias ("SQB") in policy making is likely to emerge as long as winners and losers of a contemplated reform cannot be identified ex ante. In these situations, governments often fail to adopt efficiency-enhancing reforms, even when they are assumed to be rational, forward looking, and risk neutral. Fernandez and Rodrik further demonstrate that the SQB persists even assuming that the reform would have received adequate popular support ex post. Id. at 1152 - 55. The individual-specific uncertainty hence prevents the governments from pursuing policies that would be consistent with aggregate preferences.
181. But see GEOFFREY BRENNAN & JAMES M. BUCHANAN, THE REASON OF RULES: CONSTITUTIONAL POLITICAL ECONOMY 30 (1985). Geoffrey Brennan and James M. Buchanan claim that the "veil of uncertainty" makes a potential agreement more rather than less likely. Id. Brennan and Buchanan argue that "[t]o the extent that a person faced with constitutional choice remains uncertain as to what his position will be under separate choice options, he will tend to agree on arrangements that might be called 'fair' in the sense that patterns of outcomes generated under such arrangements will be broadly acceptable, regardless of where the participant might be located in such outcomes." Id. In other words, in the presence of uncertainty, individuals (or states) forgo pressing for particularistic interests and distributive advantages and choose rules that enhance general welfare. See also Oran R. Young, The Politics of International Regime Formation: Managing Natural Resources and the Environment, 43 INT'L ORG. 349 (1989) (arriving at a similar conclusion).
182. HOEKMAN & KOSTECKI, supra note 112, at 122, 124. Even though it might be difficult to accurately predict how a certain tariff reduction will affect economic welfare in the future (including effects on future trade flows, domestic production, and prices), negotiators use various methods that allow them to quantify the effects of the proposed reduction. For instance, using the "trade coverage" method, if a tariff is reduced by 15 percent (e.g., from 50 percent to 35 percent) with respect to a product that is currently imported worth $10 million, the trade coverage of the reduction is $1.5 million (0.15 X $10 million). This figure is then used as a benchmark against which a country evaluates whether a concession that is offered in return is balanced.
183. Id. at 133-34.
184. Identifying the existence and quantifying the severity of trade-restricting anticompetitive behavior across markets is also challenging due to the lack of information about all the anticompetitive practices that exist. The information available is limited to anticompetitive practices only to the extent they are being investigated, prosecuted, and lead to a final decision. The extent of established antitrust violations, however, is unlikely to accurately estimate the actual number of antitrust violations that may resrrict rrade. The rigidity of antitrust enforcement is dependent on the resources available to the government as well as on their willingness to pursue anticompetitive behavior. If the government was to engage in lax, selective, or discriminatory enforcement, it would be unlikely that we would obtain information about the cases that "should have been pursued," especially if no complaint has been filed or if records on complaints are not kept or made publicly available.
185. Sophisticated econometric models exist to measure the effects any particular restrictive agreement, unilateral conduct, or transaction has on the price or the quantity of the goods available on the market. However, the effects would most likely be completely different if a similar agreement was concluded in another market where the conditions for competition were different, or if the transaction were consummated in a year's time when new entrants have changed the competitive dynamics on the market. The effects of restrictive business practices are hence intrinsically dependent on the specific market context in which they take place. Extending the analysis conducted in connection with an individual case to measure the aggregate effect that anticompetitive practices of all kinds have across various economic sectors in any given economy would therefore be a daunting task.
186. Contrary to NTBs that in all cases restrict trade, few business practices that governments allegedly tolerate have this type of inherently trade-restrictive propensity. For instance, if a government employs a lax antitrust policy toward vertical restraints in general, there is a risk that some agreements that restrict trade and competition escape antitrust scrutiny. It cannot, however, be implied that all distribution agreements that are not prohibited by that government constitute an NTB. Some agreements might have restrictive propensities that also hinder market access, while others have neither the object nor the effect of restricting trade. Similarly, some practices may be considered to violate antitrust laws but at the same time have trade enhancing properties (e.g., a domestic cartel that maintains the price above a competitive level might encourage rather than deter entry as potential competitors can enter and win customers by offering a lower price. If the cartel, however, is supported by exclusive practices, it may constitute a market barrier).
187. Justice Stewart has suggested that companies may use cartel profits earned in the developing countries to subsidize fines imposed on them in developed countries. See Pfizer, Inc. v. Gov't of India, 434 U.S. 308, 315 (1978) ("[P]ersons doing business both in this country and abroad might be tempted to enter into anticompetitive conspiracies affecting American consumers in the expectation that the illegal profits they could safely extort abroad could offset any liability to plaintiffs at home.").
188. HOEKMAN & KOSTECKI, supra nore 112, at 133-34. See also discussion supra note 158 regarding the possibility that uncertainty could actually facilitate rather than impede the conclusion of an international agreement. Should that be the case, the agreement would most likely reflect vague, "fair for all" provisions, thus codifying little more than the "lowest common denominator" among the WTO members.
189. In antitrust negotiations, the bargaining takes place not only among governments but also among different stakeholders within societies. While the actual WTO negotiations are carried out among the states (agents), the true forces driving or resisting outcomes are the domestic actors (principals) that stand to win or lose from a possible agreement. See the pioneering work on the concept of "two-level games" by Robert D. Putnam, who has argued that The politics of many international negotiations can usefully be conceived as a two-level game. At the national level, domestic groups pursue their interests by pressuring the governments to adopt favorable policies, and the politicians seek power by constructing coalitions among those groups. At the international level, national governments seek to maximize their own ability to satisfy domestic pressures, while minimizing the adverse consequences of foreign developments.
190. Robert D. Putnam, Diplomacy and Domestic Politics: The Logic of Two-Level Games, 42 INT'L ORG. 427, 434 (1988). This Article does not carry our a formal agent-principal analysis but focuses on domestic interest group dynamics in shaping states' preferences, thereby conceptualizing the negotiations as a "two-level game" only in a loose sense of the word.
191. Fernandez & Rodrik, supra note 11, at 1458-59.
192. James E. Alt et al., The Political Economy of International Trade: Enduring Puzzles and an Agenda for Inquiry, 29 COMP. POL. STUD. 689, 709 (1996).
193. See, e.g., International Chamber of Commerce & Business and Industry Advisory Committee to the OECD, ICC/BIAC Comments on Report of the US International Competition Policy Advisory Committee (ICPAC) 2, 6, 10 (June 5, 2000), available at http://www.biac.org/statements/comp/00-06- ICC-BIAC_ comments_on_ICPAC_report.pdf (while the International Chamber of Commerce ("ICC") and Business & Industry Advisory Committee ("BIAC") support some degree of substantive and some procedural harmonization and convergence of domestic merger regimes, "ICC and BIAC agree that the WTO is not an appropriate forum for review of private restraints and that the WTO should not develop new competition laws under its framework at this time.").
194. Putnam, supra note 166, at 445.
195. It is considerably easier to engage in policy debates and form intuitive opinions on less "technocratic" matters, such as product safety (including, for example, genetically modified food), tobacco, privacy, and other consumer protection issues that do not require the same level of technical knowledge and analytical rigor as the debate on the welfare effects of various international regulatory models for antitrust. See Kal Raustiala, Form and Substance in International Agreements, 99 AM. J. INT'L. L. 581, 600 (2005) (noting that informal cooperation mechanisms emerge in the areas of "technocratic cooperation" where domestic interest groups are less active, mentioning antitrust laws as an example of an area where "Technocratic cooperation" is dominant and domestic interest groups less active).
196. MULTI-JURISDICTIONAL MERGER SURVEY, supra note 75, at 5. (Noting that 56 percent of the businesses see scope for improving and harmonizing merger notification processes); see also International Chamber of Commerce & Business and Industry Advisory Committee to the OECD, supra note 169.
197. See, e.g., Jenny, supra note 94, at 995. Corporations can, however, be expected to prefer coordination among antitrust agencies regarding the remedies imposed.
198. The majority of firms can, however, be assumed to find it easier to define their interests case by case rather than ex ante predict the frequency at which they would benefit from lax antitrust laws allowing them to engage in anticompetitive behavior versus stricter antitrust laws preventing their competitors from engaging in anticompetitive behavior.
199. Corporations are also likely to form their opinions differently if they themselves are merging or engaging in collusive behavior than if those with whom they have relationships (such as customers or suppliers) are under antitrust investigation for similar transactions or behavior.
200. See also discussion on the interest group dynamics in case of the TRIPs Agreement infra p. 434.
201. See Morrow, supra note 12.
202. Id. at 395.
203. The WTO member states have incurred considerable sunk costs in establishing the organization. Thus, it is rational for the states to remain involved with an existing regime as opposed to cteating a new institution (such as a stand-alone international antitrust authority), which would generate significant replacement costs. This tendency also leads to path dependence, as increasing returns on scale can be exploited by adding more issues to an existing institution with a relatively good track record of facilitating international economic cooperation. See, e.g., Jose E. Alvarez, The Boundaries of the WTO: The WTO as Linkage Machine, 96 AM. J. INT'L L. 146, 146-47 (2002);
204. Robert O. Keohane, International Institutions: Two Approaches, 32 INT'L STUD. Q. 379, 389 (1988).
205. Instead of pursuing negotiations on an ad hoc basis, agreements are commonly nested within a more comprehensive regime that covers a range of issues. The regimes are considered particularly useful when a stand-alone agreement is difficult to reach. Many trade-related agreements, for example, have been negotiated under the auspices of the WTO due to the high issue density of the trade regime and the various benefits that the nesting strategy is perceived to convey. The WTO is frequently argued to present a natural forum to host an international antitrust agreement. This perception is to a large exrent attributable to the apparent interdependence between trade and antitrust policies and the need to ensure that the policies are enforced in a consistent way. See Klein, supra note 99.
206. Andrew T. Guzman, International Antitrust and the WTO: The Lesson from Intellectual Property, 43 VA. J. INT'L L. 933, 935 (2003) (arguing that the successful conclusion of the TRIPs Agreement within the WTO provides "especially powerful" lessons for international antitrust as "IP and antitrust have very similar strategic implications for countries' domestic laws and negotiating positions.").
207. Sylvia Ostry, Intellectual Property Protection in the WTO: Major issues in the Millenium Round, Address at the Fraser Inst. Conference 3 (Apr. 19, 1999), available at http://www.utoronto.ca/cis/ ostry/docs_pdf/fraser. pdf.
208. In the case of antitrust, it is not even clear that developed countries should compensate developing countries and not vice versa. Unlike in the case of TRIPs, the direction of the quid pro quo in antitrust would depend on the specific content of the final agreement. See, e.g., Hoekman & Saggi, supra note 144, at 453-54 (noting that developing countries would be required to compensate developed countries in the event of a WTO agreement banning export cartels).
209. Ostry, supra note 153, at 55-57.
210. Ostry, supra note 182, at 2.
211. See discussion supra p. 415.
212. Leebron, supra note 8, at 14. Leebron uses the concept "regime borrowing" when a linkage is formed "to obtain the institutional and procedural benefits of an existing regime." Id. An example of this concept is the linkage of issues to the WTO in order to benefit from its capacity to impose sanctions.
213. Abbott, supra note 23, at 358-59.
214. HOEKMAN & KOSTECKI, supra note 112, at 247-48.
215. This final advantage does not single out the WTO as the only potential regime to host an international antitrust agreement. If the agreement was negotiated in the U.N. Conference on Trade and Development framework, like many developing countries would prefer, the agreement would encompass an even greater number of signatories.
216. Abbott, supra note 23, at 358-59, 363-74. See also Martin, supra note 132, at 776 (noting that this type of departure from the established equilibrium is not comparable to cheating as the deviating state would intentionally make the defection public in order to force other states to move to the new equilibrium).
217. Martin, supra note 132, at 776.
218. Snidal, supra note 128, at 923-26 (discussing how institutions can facilitate cooperation in market failure situations).
219. Guzman, supra note 8, at 1163.
220. See Leebron, supra note 8, at 25. Inclusion of additional issues in the WTO could have the negative effect of undermining the normative framework of the institution and weakening its members' commitment to its original goals. At worst, the mismatch between the WTO's mandate and its capabilities could destabilize the whole trade regime.
221. Raustiala, supra note 171, at 601.