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An International Multi-Level System of Competition Laws: Federalism in Antitrust

Wolfgang Kerber ()

No 2003-1-1065, German Working Papers in Law and Economics from Berkeley Electronic Press

Abstract: Since the 1990s, an intensive discussion on the necessity and the potential design of international competition policy has developed. As a preliminary result, some general tendencies can be observed: Many states (including the U.S. and the EU) and most antitrust experts hold the opinion that the traditional system of national competition laws (including their extra-territorial application) is not sufficient for the protection of competition in the new millennium. Therefore, some kind of international arrangement in regard to competition rules seems to be necessary. The introduction of substantive international competition rules with an international competition authority and a corresponding court (in analogy to the supranational European competition law) is not seen as feasible and/or desirable. Thus the solution should not be sought in centralised global competition rules but be based primarily upon national competition laws and authorities. Consequently, the main thrust of the discussion has shifted from the idea of a larger harmonisation and convergence of national competition laws to the problem of better international enforcement of these laws. Although bilateral cooperation between national competition authorities have become an increasingly important issue, bilateral cooperation agreements are considered only a first step to a more preferable multilateral (or plurilateral) solution (e.g. within the WTO). Generally, the path to international competition rules is seen as a pragmatic, step-by-step approach, which can achieve its aim only in the long run. The currently favoured informal network approach, which remains without commitment and emphasizes primarily the gathering, discussion and exchange of information between national competition authorities, is in line with such a pragmatic approach to the incremental evolution of international competition rules. How can we describe the present situation from a global perspective? We have a multitude of national competition laws and enforcement agencies (competition authorities, courts) with more or less different substantive and procedural rules. Different competition laws and enforcement agencies can also exist within a (kind of) federal system, as to some degree within the U.S. and to a larger extent within the EU, where European competition rules and national competition laws coexist on two different levels. Since the competencies of these competition laws and enforcement agencies overlap, many external effects and conflicts can emerge. Up to now we cannot reasonably argue that this complex structure of competition laws forms an integrated system for protecting competition in international markets. The establishment of international competition rules (as well as the less ambitious international network approach), which on one side should help to solve the problems of the current situation, can, on the other side, increase the complexity of the system, because an additional vertical regulatory level in regard to competition rules would be introduced – including new potential conflicts of competencies. But what are the long-term perspectives of this situation? What can an international system for protecting competition look like in the long run? Two basic perspectives can be outlined: One perspective is that such a pragmatic approach, which fosters the discussion between different countries and their competition authorities, eventually will lead to a uniform global competition law or – at least – to a quasi-harmonisation of national competition laws. If the differences between the competition laws disappeared, many of the current problems would vanish. From this perspective, the current situation with many different competition laws on two or three different levels does constitute only an intermediate phase, which in the long run would be replaced by one quasiuniform set of global competition rules. Another perspective proceeds from the more sceptical assumption that it will not be possible for all countries to agree on one uniform set of competition rules, even in the long run. There will always be different objectives of competition laws and different theories about what competition is and what rules are necessary for the protection of competition. Therefore, the coexistence of different competition laws should be seen as a permanent feature of an international system of competition laws, implying that substantial decentralisation and variety will remain a major characteristic of such an international system, also in the long run. This paper will focus on the second perspective, which can be characterised as an evolutionary one: The objectives of competition policy in different countries might change and remain different; competition theories mightevolve through academic progress; the rules for the protection of competition might have to change due to new anticompetitive business practices or new technology (such as the Internet). From this evolutionary perspective, it is crucial that an international system for the protection of competition should also include the long-term capability of adapting quickly to new competition problems, particularly by fostering legal innovations for improving the protection of competition. One important argument for a more decentralised international system of competition laws will be that decentralisation will increase the capability of the system for innovation and learning in regard to the development of effective legal rules for the protection of competition. But what can a workable international system with different competition laws and enforcement agencies on different levels, i.e., a decentralised international system of competition laws, look like? This paper can only present some considerations about this problem. But its goal is to outline an analytical framework, which can be used for designing a workable multi-level system of competition laws. The main idea is that we should apply economic theories about federalism and the advantages and disadvantages of centralisation and decentralisation to develop arguments about the appropriate institutional structure of an international multi-level system of competition laws. The theories that are used in this paper are the economic theory of federalism, the attempts to apply the concept of federalism to legal rules as well (legal federalism), and the theories of interjurisdictional and regulatory competition. The paper is structured as follows. In section II it is shown that the present situation can be interpreted as being already rather close to a kind of threelevel system of competition laws and that many current issues in European and international competition policy can be interpreted as discussions about problems of the horizontal and vertical delimitation of competencies within such a three-level system. In the main section III an analytical framework concerning the potential advantages and disadvantages of centralisation and decentralisation of competition policy will be developed on the basis of economic theories of federalism and regulatory competition. This will include a (still incomplete) set of criteria for regulatory federalism in competition law. Some conclusions for reconstructing international competition policy as a multi-level system of competition laws are presented in section IV.

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