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An international multilevel competition policy system

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Abstract

This paper develops a proposal for an international multilevel competition policy system, which draws on the insights of the analysis of multilevel systems of institutions. In doing so, it targets to contribute bridging a gap in the current world economic order, i.e. the lack of supranational governance of private international restrictions to market competition. Such governance can effectively be designed against the background of a combination of the well-known nondiscrimination principle and a lead jurisdiction model. Put very briefly, competition policy on the global level restricts itself to the selection and appointment of appropriate lead jurisdictions for concrete cross-border antitrust cases, while the substantive treatment remains within the competence of the existing national and regional antitrust regimes.

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Notes

  1. Although it must be emphasised that the problem of an ostensibly unregulated competition among banks and on financial markets is part of the discussion.

  2. Or, in some exceptional instances, the domain of confederations of nation states (like the European Union).

  3. This elaborate discussion cannot be reported here in detail, see instead Budzinski (2008a: 10–150) and the literature quoted therein.

  4. See Barros and Cabral 1994; Head and Ries 1997; Kaiser and Vosgerau 2000; Tay and Willmann 2005; Haucap, Müller and Wey 2006.

  5. See e.g. Jacquemin 1995; Fox 2000; Klodt 2001; ICN 2002; Budzinski 2003a: 4–10; Jenny 2003a, 2003b.

  6. See e.g. Hauser and Schoene 1994; Smets and Van Cayseele 1995; Budzinski 2003a: 11–18; Epstein and Greve 2004; McGinnis 2004; Stephan 2004.

  7. “My overall view is that for a system of antitrust enforcement to remain dynamic, overcentralization must be avoided and some degree of chaos tolerated” (First 2003: 24).

  8. The characterisations ‘upward’ and ‘downward’ do not imply assessments of importance or superiority versus inferiority. In particular, no prejudice about the competence (neither in a positive nor in a normative sense) of a level to exert jurisdiction over an antitrust case is implied. In the context of this paper, top-down only means from centralised to decentralised, e.g. from global to local.

  9. Imagine, e.g., the question of competence allocation between the EU (supranational but regionally limited level) and Canada (national level but not within the regional scope of the EU).

  10. However, the regime is asymmetric. If the government authorities decide not to challenge an arrangement or practice — on whatever grounds — no court supervision occurs.

  11. The European Central Bank represents the most comprehensive example of an independent agency. In competition policy, such a far-reaching independency does not exist, although the Federal Cartel Office of Germany possesses a significant amount of independence (albeit limited by the conditional competence of the Ministry of Economic Affairs to overrule its decisions). In contrast, the EU Competition Directorate is an integral part of the European Commission without formal independence.

  12. The inclusion of consumers represents an important extension of the trade-oriented variant of the nondiscrimination concept.

  13. This represents a modified version of the suggestion by Campbell and Trebilcock (1997: 110–112).

  14. Note that they remain involved in the course of their consultation and cooperation with the appointed lead jurisdiction.

  15. See for an elaborate theoretical analysis Budzinski (2008a: 156–160, 178–217).

  16. The set of possible options is ex ante always indetermined because of the creative abilities of human agents to create formerly unknown — because non-existent — modes of behaviour and institutional arrangements (Wegner 1997; Budzinski 2003b).

  17. For instance, the general necessity of an external monitoring of activities of downward level jurisdictions in an otherwise federal or decentralised regime is also emphasised by Figueiredo and Weingast (2005).

  18. My intention is not focused on names. Any other denomination of this agency would also be fine as long as it is equipped with the described competences.

  19. It remains within the competencies of the decentralised competition policy regimes to develop an institutional solution, which heals the discrimination problem.

  20. Claiming jurisdiction without a sufficient nexus to the respective arrangement can be interpreted as representing an indirect kind of discrimination. It is necessary to include the nexus issue in the supervision and sanction mechanism with respect to competition policy competences on national and subnational-regional levels.

  21. The self-assessment by the enterprises should not entail dangers of forum shopping because when assessing the cross-border effects, the respective enterprises are not choosing between different competition laws (since this decision is made by the ICP). Moreover, an ICP pre-notification of an anticompetitive arrangement or practice without considerable cross-border effects does not generate significant harm because the competence to substantially deal with the arrangement is allocated downwards anyhow. If only one downward level jurisdiction is really affected, the selection of a ‘lead’ jurisdiction is rather simple and indisputable.

  22. Such cases are likely to occur only infrequently. If an arrangement affects more than one decentralised competition policy regime, the participating agencies are required to notify to more than one agency — and, at the same time, they experience the incentive to make use of the one-stop shop via an ICP pre-notification.

  23. However, two decades ago the comprehensive independence of Central Banks in each EU member state would also have been deemed to be unrealistic.

  24. Next to inhabiting the regional gravity of the aggregate turnover of the participating enterprises, a qualification to become appointed lead jurisdiction requires the absence of discriminatory provisions and practices as well as the proven willingness and experience to employ a world welfare standard (see above). This implies that some of the above mentioned countries might face a long way to go until they meet these criteria. Note, however, that the possibility to qualify as lead jurisdiction can entail important incentives to develop national competition policy regimes according to the modern international standards.

  25. The same delimitation of competences could be applied if a vertical (and diagonal) interrelation between a supranational-regional and national regimes exists, like for instance in the EU (common EU competition policy and Member State competition policies).

  26. The Draft International Antitrust Code (DIAC) was presented by the so-called Munich Group in 1995 as a full-fledged proposal for a comprehensive international competition order in the context of the WTO. See for the original proposal Fikentscher and Immenga (1995) as well as for applications inter alia Drexl (1999, 2003) and Podszun (2003: 247–312).

  27. Maybe with the exception of Scherer (1994), whose proposal contains considerable enforcement competences of his International Competition Policy Office (ICPO) in the long run.

  28. Obviously, there is no guarantee that the hurdle does not remain at a prohibitive size and probably some will remain pessimistic about the realisability of the proposal. However, it is less ambitious than other proposals in this regard. Like in the past, significant steps forward in international governance probably need the right ‘window of opportunity’.

  29. Instead of truly highlighting the benefits, these proposals sometimes are rather motivated by the expectation that nothing more than cooperation can be realised.

  30. Case-by-case (bilateral) cooperation is unlikely to remedy these effects: “It seems over-optimistic to imagine that a world-wide framework for competition policy could be built up piecemeal from a network of bilateral agreements. (…) [I]t would be virtually impossible to ensure that all the agreements were compatible with each other” (Meiklejohn 1999: 1247).

  31. I owe the inspiration for the following discussion to two anonymous referees.

  32. If a leniency program is viewed to be an effective cartel detection tool, then the ICP is likely to experience incentives to use its rather limited scope of choice (see section 3.2) to assign a lead jurisdiction that possesses a leniency program because any other practice will effectively undermine the benefits of leniency programs (and deter further whistle blowers). If the rules for allocating competence only allow for non-leniency jurisdictions (for instance, because of the geographical gravity of the cartel in question), then a potential whistle blower is likely to anticipate this.

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Acknowledgements

This contribution is part of the refereed research project International Competition Policy—A Decentralised System of International Merger Control funded by the Volkswagen Foundation, priority area Global Structures and Governance. I thank two anonymous referees for valuable and very helpful comments

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  1. Campus Esbjerg, Department of Environmental and Business Economics, University of Southern Denmark, Niels Bohrs Vej 9-10, DK-6700, Esbjerg, Denmark

    Oliver Budzinski

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Budzinski, O. An international multilevel competition policy system. Int Econ Econ Policy 6, 367–389 (2009). https://doi.org/10.1007/s10368-009-0143-2

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